Budget 2021: Corporation Tax rise but small business escapes

Chancellor Rishi Sunak announced an increase in Corporation Tax from 2023, with a new rate of 25 per cent, as he looks to address the challenges of the pandemic.

However, in his Budget statement he also revealed that small businesses will not face the increase, with the creation of a ‘Small Profits Rate’, for companies with profits of less than £50,000, which will be kept at the current 19 per cent level.

Mr Sunak said that meant 70 per cent of companies would be “completely unaffected”. He added that only 10 per cent of all companies, with profits of £250,000 or more, would pay the full 25 per cent rate in two years’ time.

The threshold for paying the basic rate of income tax will rise to £12,570 next year. For higher-rate payers, the threshold will be £50,270. Both rates will stay the same until 2026. The VAT registration threshold will remain at £85,000 until 2024.

Mr Sunak also confirmed a further extension of the government’s Coronavirus Job Retention Scheme (CJRS) in his Budget statement this afternoon.

It was part of a host of measures unveiled in a bid to protect jobs and help businesses on their journey out of lockdown.

Mr Sunak told the Commons a “swifter and more sustained recovery than expected” was being forecast with the economy returning to its pre-Covid level by the middle of next year. However, he added that the economy will be three per cent smaller in five years than it would have been.

The CJRS scheme, which was set to have closed at the end of next month, will now continue until the end of September.

Mr Sunak said the scheme – which pays 80 per cent of employees’ wages for the hours they cannot work in the pandemic – would help millions through “the challenging months ahead”.

The extension to furlough, which has been credited for protecting 11 million jobs at risk from the impact of the Covid-19 pandemic since it was launched last March – had been widely reported prior to his address to the Commons this lunchtime.

The government’s contribution to the scheme will start to be reduced, with employers expected to pay 10 per cent towards the hours staff do not work in July.

Employee contributions will rise to 20 per cent in August and September as the scheme is wound down and the UK economy and businesses begin to reopen.

Around 600,000 more self-employed people will also be eligible for government help as access to grants is widened. Support for the self-employed will also continue until September.

The Treasury has said hundreds of thousands more people will be eligible because tax return information for 2019/20 is now available.

A fourth grant from the Self-Employment Income Support Scheme (SEISS) will be available to claim from April, which will be worth 80 per cent of three months’ average trading profits up to £7,500.

A fifth grant, which will be available from July, was also announced. Those whose turnover has fallen by 30 per cent or more will continue to receive the full 80 per cent grant. Those whose turnover has fallen by less than 30 per cent will get a 30 per cent grant.

Mr Sunak announced an extension to the £20 a week top-up to universal credit for another six months. It will be given as a one-off £500 payment.

In an effort to support the struggling high street and hospitality sector, businesses will be able to get a grant from a £5bn fund set up to help them reopen from lockdown.

Non-essential retail businesses will receive grants of up to £6,000 per premises. Hospitality and leisure businesses will get grants of up to £18,000.

The chancellor said the aim of the new Restart Grant was “to help businesses reopen and get going again.”

The business rates holiday for eligible retail, hospitality and leisure companies will be extended through to the end of June.

Mr Sunak said: “For the remaining nine months of the year, business rates will still be discounted by two thirds, up to a value of £2m for closed businesses, with a lower cap for those who have been able to stay open.”

Looking to further protect the hospitality and tourism sectors he confirmed that the five per cent reduced rate of VAT will be extended until the end of September, followed by an interim rate of 12.5 per cent for another six months.

The up-to-£500,000 “nil-rate band” for stamp duty will finish at the end of June, rather than the end of this month.

VAT deferral: New payment scheme announced

Businesses and sole traders that deferred their VAT earlier this year as they battled the Covid-19 pandemic will no longer have to pay a lump sum at the end of March 2021.

The deferral is part of a package of measures taken by the government to support the economy during the ongoing crisis and its impact on businesses.

The Chancellor has now announced that those who deferred VAT due from March 20 to June 30 this year will have the option to pay in smaller payments over a longer period of time.

Instead of paying the full amount by the end of March 2021, they can make smaller payments up to the end of March 2022, interest free.

That means they will be able to spread payment over the financial year 2021-22, in 11 equal instalments

They will need to opt-in to the scheme, and for those who do, it means that their VAT liabilities due for that March-June 2020 period do not need to be paid in full until the end of March 2022.

Those that can pay their deferred VAT can still do so by March 31, 2021. More information will be available from HMRC in the coming months.

Businesses and sole traders that cancelled their Direct Debit to HMRC to take advantage of the deferral will need to set up a new arrangement in time for the first payment after June 30.

Payments due after June 30 must be paid in full as normal and you must continue to file your VAT return on time.

You can pay or make payments towards your deferred VAT now or at any time up to March 31, 2021.

If you need more help to pay your VAT, you may be eligible to get support with your tax affairs through HMRC’s ‘Time To Pay’ service. This allows you to pay off your debt by instalments over a period of time.

More information is available here: https://www.gov.uk/difficulties-paying-hmrc

WNJ is also here to help and support our clients on any aspect of VAT or other tax issues. Please get in touch on 01772 430000.

EU deadline approaches – are you prepared?

As the deadline ticks down to the end of the EU transition period on December 31 businesses are being urged to make sure they are prepared – deal or no deal.

In a bid to ensure as many businesses as possible are ready for the changes, the government has launched an information campaign, involving TV adverts and posters, which proclaim: ‘The UK’s new start: let’s get going’.

The campaign includes a “checker tool” at gov.uk/transition which the government says quickly identifies the necessary next steps needed.

As the deadline approaches, HMRC is stressing that businesses will need an EORI number to move goods between the UK and EU countries from January 1 next year. They may also need one if they move goods to or from Northern Ireland.

Without an EORI businesses may face increased costs and delays. For example, if HMRC cannot clear the goods companies may have to pay storage fees.

The message is, if you haven’t got one already, apply for an EORI number “as soon as possible”.

Businesses will not usually need an EORI number if they only:

• provide services
• move goods between Northern Ireland and Ireland

If you use a post or parcel company, they’ll tell you if you need an EORI number.

You will need an EORI number from an EU country if your business will be making declarations or getting a customs decision in the EU.

Businesses can get this from the customs authority in the EU country where they submit their first declaration or request their first decision.

HMRC says that if you move goods to or from Northern Ireland, from January 1 you’ll need an EORI number that starts with XI to:

• move goods between Northern Ireland and non-EU countries
• make a declaration in Northern Ireland
• get a customs decision in Northern Ireland

To get an EORI number that starts with XI, you must already have an EORI number that starts with GB. If you do not have one, the advice is to apply as soon as possible.

If you do already have an EORI number that starts with GB and HMRC thinks you need one that starts with XI, they say they will automatically send you one in mid-December.

To get advice on moving goods between Great Britain and Northern Ireland sign up for the Trader Support Service (https://www.gov.uk/guidance/trader-support-service)

If you sign up before November 23, this will also ensure you’ll be sent an EORI starting with XI.

If you already have an EORI, from January 1, you’ll need a number that starts with GB to move goods between Great Britain and other countries.

To apply you need your:

• VAT number and effective date of registration – these are on your VAT registration certificate
• National Insurance number – if you’re an individual or a sole trader
• Unique Taxpayer Reference (UTR) – find your UTR if you do not know it
• business start date and Standard Industrial Classification (SIC) code – these are in the Companies House register
• Government Gateway user ID and password

As the transition period ends, businesses will also have to watch the VAT implications – unlike customs duties and rules, rates vary across Europe.

And they will need to ensure products they ship still conform with the safety, security and health requirements of the market they are in.
For more details visit https://www.gov.uk/eori

WNJ is also here to help you on any issues relating to the end of the transition period, please contact us on 01772 43000.

Are you ready for Brexit trading changes?

ALL VAT-registered businesses in the country that trade with the EU are getting letters from HMRC telling them what they need to do to prepare for the end of the Brexit transition period at the end of the year.

The letters explain what actions they should take to prepare for the movement of goods between the UK and the EU from January 1, 2021.

That includes making sure they have a UK Economic Operator Registration and Identification (EORI) number.

Companies must also decide how they will make customs declarations and they need to check if their imported goods are eligible for staged import controls.

From January 1 controls will be placed on the movement of goods between the EU and Great Britain.

The letter points out that that new border controls on imports from the EU to GB will be introduced in stages, and customs declarations for goods which are not controlled can be delayed until June 30, 2021.

From January 1 businesses will have to submit declarations when importing and exporting goods that are categorised as ‘controlled’.

Import processes for non-controlled goods will be introduced in three stages: January, April and July.

HMRC says that businesses should already have an Economic Operator Registration and Identification (EORI) number.

They will need this to complete customs declarations. If they do not yet have one, they can register for free at www.gov.uk/eori

When it comes to customs declarations, HMRC says customs agents, freight forwarders and express operators can help and can ensure businesses are providing the necessary information. For more information, visit www.gov.uk/guidance/appoint-someone-to-deal-with-customs-on-your-behalf

Most traders with a good compliance record will be able to defer import declarations on most goods for up to six months after January 1.For more information, go to www.gov.uk/guidance/using-simplified-declarations-for-imports

Also, from January 1, businesses will be able to use postponed VAT accounting to account for import VAT on their VAT return for goods imported from anywhere in the world.
For more information, go to www.gov.uk/guidance/check-when-you-can-account-for-import-vat-on-your-vat-return

Import VAT will not be due at the border if goods in a consignment do not exceed £135 in value. The only exceptions will be excise goods and gifts. For more information, go to www.gov.uk/government/publications/changes-to-vat-treatment-of-overseas-goods-sold-to-customersfrom-1-january-2021

Business can also Check the Controlled goods list to see if they need to complete declarations from January.

If their goods are not on the list, they can choose to delay import declarations until July 2021.

To check if your imported goods are on the controlled goods list, go to www.gov.uk/guidance/list-of-goods-imported-into-great-britain-from-the-eu-that-are-controlled

From January 1 there will be new rates of customs duty for imports – called the UK Global Tariff. To check the tariffs that will apply to goods you import, go to www.gov.uk/guidance/uk-tariffs-from-1-january-2021

If a business is moving goods between Great Britain and Northern Ireland or bringing goods into Northern Ireland from outside the UK, the free Trader Support Service (TSS) will handle the new processes arising under the Northern Ireland Protocol.

To register your interest in using this service, go to www.gov.uk/guidance/trader-support-service

HMRC says Further information about movement of goods between Great Britain and Northern Ireland will be available soon. TSS is not available for goods moved between GB and the EU.

To keep up to date with the latest EU Transition information go to www.gov.uk/hmrc/business-support and select ‘Sign up to help and support emails from HMRC’.

Temporary hospitality and tourism VAT cut: More details revealed

The government has released more details about the temporary VAT cut announced for hospitality and tourism in response to the massive impact of Covid-19 on businesses in the sectors.

The temporary five per cent rate revealed by Chancellor Rishi Sunak will apply to certain supplies relating to hospitality, hotel and holiday accommodation as well as admission to some attractions.

The taxman says that it will cover supplies that are made between July 15 and January 12, 2021.

HMRC’s guidance also confirms that this reduced rate will apply to the supply of:

• food and non-alcoholic beverages for consumption on premises, for example, in a restaurant, café or pub
• hot takeaway food and hot takeaway non-alcoholic drinks

More information about how these changes apply can be found here:


Hotel and holiday accommodation businesses will also benefit from the temporary reduced rate if they:

• supply sleeping accommodation in a hotel or similar establishment
• offer holiday accommodation
• charge fees for caravan pitches and associated facilities
• charge fees for tent pitches or camping facilities

More information about how these changes apply can be found here:


The reduce rate also applies to admissions to the attractions that are not already eligible for the cultural VAT exemption, such as theatres, cinemas, circuses, fairs and amusement parks, museums, exhibitions concerts and zoos.

If you are a small business using the Flat Rate Scheme to simplify your VAT calculations you should be aware that certain percentages have been reduced in line with the introduction of the temporary reduced rate of VAT.

The guidelines also give information on accounting for supplies that straddle the temporary reduced rate. There may be situations where businesses receive payments or issue invoices before July 15 for supplies that take place on or after that date.

More information on this can be found here:

More details have also been released about how the government’s ‘Eat Out to Help Out’ scheme will operate.

It allows businesses to offer a discount to diners and encourage them to eat at their establishment.

HMRC says business can use the scheme all day, every Monday, Tuesday and Wednesday from August 3 until August 31.

They can offer a 50 per cent discount, up to a maximum of £10 per person, to diners for food or non-alcoholic drinks to eat or drink in.

There is no limit to the number of times customers can use the offer during the period of the scheme.

Customers cannot get a discount for someone who is not eating or drinking and alcohol and service charges are excluded from the offer.

Registration will close on August 31 and you can register if your establishment:

• sells food for immediate consumption on the premises
• provides its own dining area or shares a dining area with another establishment for eat-in meals
• was registered as a food business with the relevant local authority on or before July 7

You cannot register an establishment that only offers takeaway food or drink, catering services for private functions or if you run a hotel that provides room service only. Mobile food vans or trailers are also exempt.

For more details on registration visit:

The Coronavirus Job Retention Scheme – some guidance

HMRC has now issued its guidance on how the Coronavirus Job Retention Scheme will work. It expects the scheme, designed to support employers whose operations have been severely affected by coronavirus, to be up and running by the end of April.

It says employers can use a portal to claim for 80 per cent of furloughed employees’ (employees on a leave of absence) usual monthly wage costs, up to £2,500 a month.

They can also claim the associated Employer National Insurance contributions and minimum automatic enrolment employer pension contributions on that wage.

The scheme is open to all UK employers that had created and started a PAYE payroll scheme on February 28, 2020.

Any organisation with employees can apply. As well as businesses, that includes charities, public authorities and recruitment agencies.

Employees you can claim for

Furloughed employees must have been on the PAYE payroll on February 28, 2020 and can be on any type of contract, including:
• full-time employees
• part-time employees
• employees on agency contracts
• employees on flexible or zero-hour contracts

The scheme also covers employees who were made redundant since February 28 2020, if they are rehired by their employer. Employees hired after that date cannot be furloughed or claimed for.

To be eligible for the subsidy, when on furlough an employee can not undertake work for, or on behalf of, the organisation. This includes providing services or generating revenue.

While on furlough, the employee’s wage will be subject to usual income tax and other deductions.

If an employee is working, but on reduced hours, or for reduced pay, they will not be eligible for this scheme.

HMRC says employers should discuss with their staff and make any changes to the employment contract by agreement.

They may need to seek legal advice on the process and if sufficient numbers of staff are involved, it says it may be necessary to engage collective consultation processes to procure agreement to changes to terms of employment.

When employers are making decisions in relation to the process, including deciding who to offer furlough to, equality and discrimination laws will apply in the usual way.

To be eligible for the subsidy, employers should write to their employee confirming that they have been furloughed and keep a record of this communication. Businesses do not need to place all their employees on furlough.

Employees on unpaid leave cannot be furloughed, unless they were placed on unpaid leave after the February 28 date.

Employees on sick leave or self-isolating should get Statutory Sick Pay, but can be furloughed after this. Those who are shielding in line with public health guidance can be placed on furlough.

If an employee has more than one employer they can be furloughed for each job. Each job is separate, and the cap applies to each employer individually.

What you can claim

Employers need to make a claim for wage costs through the scheme. Fees, commission and bonuses should not be included.

At a minimum, employers must pay their employee the lower of 80 per cent of their regular wage or £2,500 per month.

An employer can also choose to top up an employee’s salary beyond this but is not obliged to do so.

HMRC plans to issue more guidance on how employers should calculate their claims for Employer National Insurance Contributions and minimum automatic enrolment employer pension contributions, before the scheme becomes live.

Employees whose pay varies

If the employee has been employed or engaged by an employment business for a full 12 months prior to the claim, businesses can claim for the higher of either:

• the same month’s earning from the previous year
• average monthly earnings from the 2019-20 tax year

If the employee has been employed for less than a year, they can claim for an average of their monthly earnings since they started work.

If they only started in February 2020, employers can use a pro-rata for their earnings so far to claim.

To claim, you will need:

• your ePAYE reference number
• the number of employees being furloughed
• the claim period (start and end date)
• the amount claimed (per the minimum length of furloughing of 3 weeks)
• your bank account number and sort code
• your contact name
• your phone number

You will need to calculate the amount you are claiming. HMRC will retain the right to retrospectively audit all aspects of the claim.

Employers can only submit one claim at least every three weeks, which is the minimum length an employee can be furloughed for. Claims can be backdated until March 1 if applicable.

Once HMRC has received your claim and you are eligible for the grant, it will pay it via BACS payment to a UK bank account.

You should make your claim in accordance with actual payroll amounts at the point at which you run your payroll or in advance of an imminent payroll.

Employers must pay the employee all the grant they receive for their gross pay, no fees can be charged from the money that is granted.

Employees that have been furloughed have the same rights as they did previously. That includes Statutory Sick Pay entitlement, maternity rights, other parental rights, rights against unfair dismissal and to redundancy payments.

Once the scheme has been closed by the government, HMRC will continue to process remaining claims before terminating the scheme.

Wages of furloughed employees will be subject to Income Tax and National Insurance as usual. Employees will also pay automatic enrolment contributions on qualifying earnings, unless they have chosen to opt-out or to cease saving into a workplace pension scheme.

Employers will be liable to pay Employer National Insurance contributions on wages paid, as well as automatic enrolment contributions on qualifying earnings unless an employee has opted out or has ceased saving into a workplace pension scheme.

Tax Treatment of the Coronavirus Job Retention Grant

Payments received by a business under the scheme are made to offset these deductible revenue costs.

That means they must be included as income in the business’s calculation of its taxable profits for Income Tax and Corporation Tax purposes, in accordance with normal principles.

Businesses can deduct employment costs as normal when calculating taxable profits for Income Tax and Corporation Tax purposes.

For more details visit: www.gov.uk/guidance/claim-for-wage-costs-through-the-coronavirus-job-retention-scheme

Support for the self-employed

The government has announced a new Self-Employed Income Support Scheme to support those who work for themselves as they struggle to cope with impact of the coronavirus crisis.

Unveiling the plan, Chancellor Rishi Sunak said that self-employed people facing financial difficulties would receive a taxable grant based on their previous earnings over the last three years.

It will be worth up to 80 per cent of earnings and it will be capped at £2,500 a month.

The figure will be calculated using average monthly profits over the last three financial years. Support will initially last three months. However, it may be June before people can access the money.

Mr Sunak said that the scheme would only be open to those who are already self-employed and have a self-assessment tax return for 2019. It will apply to those with trading profits up to £50,000 a year.

The government says that 95 per cent of people who are majority self-employed will benefit from the support scheme and he hopes people will be able to access it no later than June. The scheme will be backdated.

The money will be paid in a single lump sum and anyone who missed the January deadline for their tax return will get an extra four weeks to submit.

Self-employed people who are eligible for the new scheme will be able to apply directly to HMRC for the taxable grant, using an online form, with the cash being paid directly into people’s bank account.

To minimise fraud, only those who are already in self-employment and meet the above conditions will be eligible to apply. HMRC will identify eligible taxpayers and contact them directly with guidance on how to apply.

The Chancellor described the scheme as an “unprecedented level of support” and said ministers had worked to ensure it was targeted at those who need it the most.

Unveiling the scheme, he said he was treating the self-employed like the employed and told them: “You have not been forgotten” and he added: “We are all in it together”.

However, he also implied that he was looking to reform the tax system in the future.

He told a press conference announcing the scheme there was “currently an inconsistency” between what the employed and self-employed pay, despite the actions taken “treating them the same”.

Asked about the self-employed and freelancers who don’t have three years’ worth of accounts, Mr Sunak said the Treasury would look at what they do have.

However, those who are recently self-employed and do not have a full year of accounts will not receive any help under this scheme.

Full details of the Self-Employed Income Support Scheme will be announced by the government later.

Other support measures aimed to help the self-employed include changes to sick pay, aimed at giving assistance to sole traders. The Minimum Income Floor in Universal Credit is being suspended ‘for everyone affected by the economic impacts of coronavirus’.

The move means that self-employed people can now access Universal Credit at a rate equivalent to Statutory Sick Pay for employees – approximately £95 a week.

The ‘new style’ Employment and Support Allowance will be payable for people directly affected by COVID-19 or self-isolating according to government advice from the first day of sickness, rather than the eighth day.

People will also be able to claim Universal Credit and access advance payments where they are directly affected by COVID-19 or self-isolating, without the current requirement to attend a Jobcentre.

The Chancellor announced last week that the government would cover 80 per cent of at-risk employees’ salaries for three months, as part of a raft of measures aimed at supporting the economy during the crisis.

Under the Coronavirus Job Retention Scheme, all UK employers will be able to access support to continue paying part of the salary of employees that would otherwise have been laid off.

The scheme will cover 80 per cent of a regular salary up to £2,500 a month, which is just above the median income. All UK businesses are eligible.

To discuss any issues that you are facing as a result of coronavirus and how you can access support please contact WNJ on 01772 430000. We are here for you.

Filing accounts – a three-month extension

Businesses are being given an additional three months to file their accounts as they work to deal with the impact of COVID-19.

The joint initiative between the government and Companies House will mean businesses can prioritise managing the impact of the crisis and it will also help them avoid penalties.

There are approximately 4.3 million businesses on the Companies House register and they must submit their accounts and reports each year.

Under normal circumstances, companies that file accounts late are issued with an automatic penalty.

However, as part of the agreed measures, while companies will still have to apply for the three-month extension to be granted, those citing issues around COVID-19 will be automatically and immediately granted an extension.

Applications can be made through a fast-tracked online system which the government says will take just 15 minutes to complete.

Full guidance on applying for an extension can be found at:


Companies that have already extended their filing deadline, or shortened their accounting reference period may be ineligible for an extension.

The government says the policy will be kept under review and “amended as necessary” in light of the progress of the COVID-19 pandemic.

Companies House chief executive Louise Smyth said: “We recognise that these are uncertain times for businesses and that’s why we’re doing all we can to help.

“By easing the burden, we can help businesses through this period and enable them to thrive in the future. I would encourage companies who believe they would benefit from this new flexibility to make an application in good time.”

The government is also in close consultation with company representative bodies, legal practitioners and others, to look at solutions for the impact COVID-19 may have on companies’ ability to hold Annual General Meetings. And it says that updated guidance on this matter will be published in due course.

To discuss this filing extension and any issues that you are facing as a result of coronavirus and how you can access support please contact WNJ on 01772 430000.

VAT deferral – an update

Businesses and sole traders that make VAT payments to the HMRC by direct debit are being advised to cancel the arrangement to ensure they take advantage of the government’s deferral scheme.

The government is looking to support the economy during the coronavirus pandemic by deferring payments from March 20 until June 30.

VAT-registered businesses and individuals will not need to make a payment during this period and this is an automatic offer with no applications required.

Cancelling any direct debit will ensure that payments aren’t automatically processed. However, they will also need to remember to set up the direct debit for future VAT returns.

And they should also continue to prepare their VAT returns as normal and submit them on time.

VAT-registered businesses and individuals will be given until the end of the 2020 to 2021 tax year to pay any liabilities that have accumulated during the deferral period.

VAT refunds and reclaims will be paid by the government as normal.

For more information about the government’s support for business during the coronavirus crisis visit: www.gov.uk/government/publications/guidance-to-employers-and-businesses-about-covid-19/covid-19-support-for-businesses

To discuss any issues that you are facing as a result of coronavirus and how you can access support please contact WNJ on 01772 430000. We are here for you.