Annual Investment Allowance £1m cap extended for a year

The Treasury has confirmed that the annual investment allowance (AIA), designed to stimulate investment in UK manufacturing, is to be extended further for an additional year in a bid to counter the current downturn in activity.

The AIA provides a tax write off against profits for expenditure incurred on plant and machinery by businesses and owners of commercial property.

Businesses, including manufacturing firms, can continue to claim up to £1m in same-year tax relief through the AIA for capital investments in plant and machinery assets until 1 January 2022.

The extension of the temporary £1m cap was originally due to revert to £200,000 on 1 January 2021.

Jesse Norman, financial secretary to the Treasury, said: ‘It is vital that we support business through the difficult months ahead.

‘Extending the AIA’s £1m cap will give businesses the confidence they need to invest into next year, helping them to grow whilst benefitting the wider economy too.’

Self assessment deadline - 31 January 2021

Each year, around 11m people complete a self assessment tax return. You can complete your 2019-20 tax return at any time up to the deadline but HMRC recommends (and we agree) completing it early to allow time to pay the tax bill or set up a payment plan. 

You must complete a self assessment return if you:

  • have earned more than £2,500 from renting out property;
  • have received, or their partner has received, Child Benefit and either of them had an annual income of more than £50,000;
  • have received more than £2,500 in other untaxed income, for example from tips or commission;
  • are a self-employed sole trader whose annual turnover is over £1,000;
  • are an employee claiming expenses in excess of £2,500;
  • have an annual income of over £100,000; or
  • have earned income from abroad that they need to pay tax on.

HMRC’s interim director general of customer services Karl Khan said: ‘HMRC is determined to help people during this difficult time. We know many will have been adversely affected by the coronavirus pandemic, or will need help to spread the cost of their tax bill.

‘That’s why we’ve made it quick and simple to set up a payment plan to spread the costs and help people get back on their feet. It’s easy to do online and there’s no need to call us to set it up.’

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Making Tax Digital for Corporation tax by 2026

HMRC is consulting on how the principles established for Making Tax Digital for quarterly online filing could be implemented for Corporation tax.

Under its ten year tax administration strategy HMRC said it would consult with stakeholders on Making Tax Digital for corporation tax during autumn 2020, and is now seeking feedback to inform the early-stage design and get a better understanding of the transitional and ongoing costs and benefits for companies of different sizes.

Nearly three million businesses and other taxpayers are within the charge to corporation tax, of which around half incur a corporation tax liability every year.

If the principles and design proposed in this consultation are adopted, they would need to maintain their records of income and expenditure digitally; use Making Tax Digital compatible software to provide quarterly summary updates, and provide an annual corporation tax return using their Making Tax Digital compatible software.

The proposed date to commence a voluntary pilot for Making Tax Digital for corporation tax is April 2024 becoming mandatory from 2026 at the earliest.

HMRC refunds - be scam smart

 

Be aware of copycat HMRC websites and phishing scams. Always type in the full online address www.gov.uk/hmrc to get the correct link for filing your self-assessment return online securely and free of charge.

Also be alert if someone calls, emails or texts claiming to be from HMRC, saying that you can claim financial help, are due a tax refund or owe tax. It might be a scam. Check GOV.UK for information on how to a recognise genuine HMRC contact.

IR35 status – Blanket decision-making

Recent guidance from HMRC has clarified the question of blanket decision-making confirming that this is not allowed. The IR35 status of all contractors must be assessed and determinations need to be made on a case-by-case basis.

According to the new HMRC guidance document published 27th February “The client must take reasonable care when determining whether the worker would have been an employee if they were engaged directly.

“If the client fails to take reasonable care, the responsibility for the deduction of tax, NICs and apprenticeship levy and paying these to HMRC will rest with them.” 

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Numerico Chartered Certified Accountants is accredited by the ACCA, which means we are wholly composed of Chartered Certified Accountants and covered by ACCA’s Group Consumer Credit Licence under the terms of the Consumer Credit Act 1974.

 

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