March Tax Tips & News

Welcome to the Benedicts Tax Tips & News monthly newsletter, bringing you the latest news to keep you one step ahead of the taxman.

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We’re committed to ensuring none of our clients pay a penny more in tax than is necessary and they receive useful tax and business advice and support throughout the year.

Please contact us for advice on your own specific circumstances. We’re here to help!

Newsletter issue - March 2020.

HMRC have been reminding employers to get ready for changes to the Employment Allowance (EA) that take effect from the start of the new tax year on 1 April 2020.

Most employers with a liability to pay employer (secondary) NIC are eligible to claim the EA, including sole traders, partnerships and companies, charities and those with charitable status such as schools, academies and universities, community amateur sports clubs (CASCs), and employers of care or support workers.

The EA is delivered through standard payroll software and HMRC's real time information (RTI) system. It is not, however, given automatically and must be claimed. Claiming is very straight forward – the employer simply signifies his intention to claim by completing the 'yes/no' indicator just once. Although, ideally, the claim should be made at the start of the tax year, it can be made at any time in the year. The employer then offsets the allowance against each monthly Class 1 secondary NICs payment that is due to be made to HMRC until the allowance is fully claimed or the tax year ends.

The allowance applies per employer, regardless of how many PAYE schemes that employer chooses to operate, so each employer can only claim for one allowance. It is up to the employer which PAYE scheme to claim it against.

The 2020 Budget announced that the maximum Employment Allowance that may be claimed is increasing by £1,000 to £4,000 from April 2020. This announcement is expected to reduce around a further 65,000 businesses’ National Insurance Contributions bill to £0, and further allow small, growing enterprises to take on staff without incurring additional National Insurance Contributions liabilities. This is in addition to the 590,000 businesses whose National Insurance Contributions bill is effectively reduced to nil under the current level of the Employment Allowance (£3,000) in 2019/20).

Two changes apply to the Employment Allowance from 6 April 2020.

Class 1 NIC bill exceeding £100,000

From 6 April 2020, access to the EA is limited to businesses and charities with an employer National Insurance contributions (NICs) bill below £100,000.

In assessing whether the £100,000 limit has been reached, the total liability of all connected employers must be added together. If the total exceeds £100,000 then none of the connected employers will be eligible to claim.

Where employers become connected during the tax year causing the total collective secondary Class 1 liability to exceed £100,000 in that year, they will be eligible to continue claiming for the remainder of the tax year but will cease to be eligible from the start of the following tax year.

Where an employer becomes connected to a group of connected employers whose collective secondary Class 1 liability was in excess of £100,000 in the preceding year, the employer joining the group will no longer be eligible for Employment Allowance in the year in which they join.

State Aid

From 6 April 2020, the EA is operated as de minimis State aid. This means that employers already in receipt of State aid will need to check that they have sufficient headroom to include the EA within their relevant de minimis limit, which will be dependent upon the particular economic trade sector within which the employer operates.

If there is insufficient headroom to claim the full Allowance (even if the employer may not have used the full amount) they will not be eligible to claim. Employers will be required to make a declaration as part of the annual RTI return, confirming that this condition is met.

Newsletter issue - March 2020.

One of the key messages regarding claims for structures and buildings capital allowances (SBAs) is that record keeping and cost segregation will be of paramount importance. In order to claim the allowance, evidence of qualifying expenditure must be produced in the form of an allowance statement, submitted to HMRC. Records can include things like formal contracts, emails or board meeting notes.

Broadly, SBAs may be claimed for qualifying capital expenditure on construction works incurred on or after 29 October 2018. SBA expenditure does not, however, qualify for the capital allowances annual investment allowance (AIA).

The main features of the SBA are summarised as follows:

• The allowance is given at a 2% flat rate over a 50-year period, pro-rated for short tax periods;
• Relief is available for new commercial structures and buildings only, but this can include costs for new conversions or renovations. It may be claimed where all the contracts for the physical construction works were entered into after 28 October 2018;
• Relief is not available for land costs or rights over land;
• The building or structure can be located in the UK or overseas, but the business must be within the charge to UK tax;
• Tax relief is limited to the costs of physically constructing the structure or building, including costs of demolition or land alterations necessary for construction, and direct costs required to bring the asset into existence;
• Relief cannot be claimed for costs incurred in applying for and obtaining planning permission;
• The claimant must have an interest ('the relevant interest') in the land on which the structure or building is constructed;
• Relief is not available for dwelling-houses, nor any part of a building used as a dwelling where the remainder of the building is commercial;
• Business expenditure on integral features and fittings of a structure or building that are allowable as expenditure on plant and machinery, continue to qualify for writing-down allowances for plant and machinery including the AIA, up to its annual limit (£1,000,000 until 31 December 2020); and
• Where a structure or building is renovated or converted so that it becomes a qualifying asset, the expenditure qualifies for a separate 2% relief over the next 50 years.

The structure must be used for a qualifying activity, which is taxable in the UK. Qualifying activities are:

• any trades, professions and vocations;
• a UK or overseas property business (except for residential and furnished holiday lettings);
• managing the investments of a company; and
• mining, quarrying, fishing and other land-based trades such as running railways and toll roads.

The sale of the asset does not result in a balancing adjustment (the purchaser takes over the remainder of the allowances written down over the remainder of the 50-year period).

Claiming SBAs

It is only possible to make a claim from when a structure or building first comes into use.

Broadly, the claimant will need an allowance statement for the structure. Where the claimant is the first person to use the structure, a written allowance statement must be created before making the claim. The allowance statement must include:

• information to identify the structure, such as address and description;
• the date of the earliest written contract for construction;
• the total qualifying costs;
• the date the structure was first used for a non-residential activity.

Where a used structure is being purchased, the claimant can only claim SBA if they obtain a copy of the allowance statement from a previous owner.

For any extensions or renovations that were completed after the structure was first used, the claimant can record separate construction costs on the allowance statement or create a new allowance statement.

Claims are generally made via the self-assessment tax return.

Newsletter issue - March 2020.

Around 31 million taxpayers are expected to benefit from an increase in take home pay from April 2020 when the National Insurance Contributions (NIC) threshold rises from £8,632 to £9,500 per year.

A typical employee will save around £104 in 2020/21, while self-employed people, who pay a lower rate, will have around £78 cut from their bill.

All the other thresholds will rise with inflation, except for the upper NICs thresholds which will remain frozen at £50,000, as announced at Budget 2018.

2020/21 rates and threshold are as follows:

Primary/employee Class 1 NICSs:

Lower earnings limit (LEL):

• £120 weekly
• £520 monthly
• £6,240 yearly

Primary threshold (PT):

• £183 weekly
• £792 monthly
• £9,500 yearly

Upper earnings limit (UEL):

• £962 weekly
• £4,167 monthly
• £50,000 yearly

Rate on earnings up to PT : 0%

Rate above PT: 12% on £183.01 to £962 weekly, 2% on excess over £962 weekly

Reduced rate: 5.85% on £183.01 to £962 weekly, 2% on excess over £962 weekly

Secondary/employer Class 1 NICs:

Secondary earnings threshold (ST)

• £169 weekly
• £732 monthly
• £8,788 yearly

Upper secondary threshold (UST) for under 21s

• £962 weekly
• £4,167 monthly
• £50,000(yearly

Apprentice upper secondary threshold (AUST) for under 25s

• £962 weekly
• £4,167 monthly
• £50,000 yearly

Rate: 13.8% on earnings above the ST/UST/AUST

Employment allowance: £3,000 per year, per employer

Class 2 NICs:

Rate: £3.05 per week

Small profits threshold: £6,475

Class 3 NICs:

Rate: £15.30 per week

Class 4 NICs:

• Annual lower profits limit: £9,500
• Annual upper profits limit: £50,000

Rate on profits between lower and upper limits: 9%

Rate on profits exceeding upper profits limit: 2%.

In announcing the rates, the former Chancellor confirmed the government commitment to keeping tax low to ensure people keep more of what they earn. Ministers have pledged that the rates of income tax, National Insurance and VAT will not rise, and the government has set out an ambition to raise the National Insurance thresholds to £12,500, putting almost £500 a year into people's pockets.

Newsletter issue - March 2020.

HMRC have published Brief 1 (2020): VAT liability of digital publications - Upper Tribunal in News Corp and Ireland Ltd, which confirms that HMRC's VAT treatment of supplies of digital newspapers and other publications has not changed.

Supplies of newspapers are zero rated under UK legislation. HMRC's policy is that the zero rate only applies to the sale of printed matter (that is, supplies of goods). Therefore, the sale of digital newspapers (which are services) has always been treated as standard rated.

In an appeal against the first-tier tribunal (FTT) decision in News Corp UK & Ireland Ltd [2018] TC 06385, the Upper-tier Tribunal (UT) recently ruled in favour of the appellant and reversed the original decision, instead concluding that a digital edition of a newspaper can be zero rated under VATA 1994, Sch. 8, Grp. 3, item 2.

The UT held that:

• group 3 of Schedule 8 is not limited to goods and can include services (such as digital publications);
• the News Corp digital newspapers were essentially the same or at least very similar to the corresponding printed newspapers, fulfilling the same legislative purpose, and falling within the same category of items (or 'genus of facts') that UK legislation has always zero rated;
• the domestic legal principle known as the 'always speaking' doctrine is engaged (essentially, that legislation in certain circumstances should reflect and keep up to date with technological advances); and
• the supply of the digital newspapers in dispute fell to be zero rated within Item 2 (notwithstanding that they did not exist when the zero rates were introduced).

Required action

HMRC have been granted permission to appeal the Upper Tribunal decision to the Court of Appeal.

HMRC have confirmed that as their policy has not changed, any claims made in reliance of the decision in News Corp will be rejected.

Where an organisation considers that the decision in News Corp applies to its own supplies of digital publications it should provide HMRC with full details in writing, including:

• a full description of the supplies for which the claim is being made and which item of Group 3 of Schedule 8 the supplies fall;
• clear reasons why it is considered that the claim should be treated in the same way as the supplies in the News Corp UT decision;
• a breakdown of the amounts of overpaid VAT being claimed by prescribed accounting period and the method by which they have been calculated.

Further information can be found in HMRC Brief 1/20.

Newsletter issue - March 2020.

Q. If I sell a buy-to-let property in July 2020, when will I have to pay the capital gains tax (CGT) arising on the sale?

A. Finance Act 2019 made certain changes regarding payment of CGT, which take effect from April 2020 and broadly align the position of UK residents and non-UK residents.

Subject to certain exceptions, where there has been a disposal of a residential property, payment on account of the CGT will be due on the filing date for the return, which is generally within 30 days of the day after the date the property sale is completed.

The payment on account required is the amount of CGT notionally chargeable at the filing date. This is the tax that would be due if, under the normal rules for calculating chargeable gains for a tax year, the tax year ended at the time the disposal is completed.

In calculating the amount, any unused allowable losses for capital gains purposes incurred by the time the disposal is completed can be used. Available reliefs and the annual exempt amount are applied in the normal way.

The amount of CGT payable on account is the amount after applying the applicable rate of tax to the net gain.

Since the 30-day payment window can make it difficult for some people to provide exact figures, HMRC allow for certain estimates and assumptions to be made. The taxpayer can make a correction once the exact figures are known. If the resulting amount is higher than the amount previously paid, the difference becomes payable to HMRC and interest may be due. If the amount is lower, the difference becomes repayable along with repayment interest from HMRC.

Q. I am thinking of transferring ownership of a rental property to my daughter to help reduce the value of my estate for inheritance tax (IHT) planning purpose. There will be no cash consideration given. What value is used for the gift and what are the CGT implications?

A. For CGT purposes, you are deemed to transfer to your daughter at current market value. So the difference between the market value and the price you originally paid for it will be your capital gain. You will be liable to pay CGT on the gain, even though you have not received any cash for it.

Note that different rules apply for stamp duty land tax (SDLT) - if you gift the property to your daughter for no consideration, there is no SDLT for her to pay.

Q. I work part time and don't earn enough to pay tax, but my husband earns £35,000 a year from his full time job. I have been told that I can transfer some of my personal allowances to my husband so he can save some income tax. Is this true?

A.Claiming the marriage allowance can save married couples or civil partners up to £250 in 2019/20, but it is estimated that more than 2 million couples are missing out.

The allowance was introduced from 6 April 2015, and enables married couples or civil partners to transfer £1,250 of personal allowance (2019/20 rate) from one spouse or partner to the other, provided that the recipient does not pay tax at a rate higher than basic rate.

To process a claim, HMRC will need the national insurance numbers for each spouse/civil partner. In addition, if the claim is made online or by phone, HMRC will have to check the identity of the person making the claim and will ask for information from the claimant such as the last four digits from bank accounts that any state benefits (such as pension or child benefit) are paid into or from bank accounts that pay interest. Alternatively HMRC may ask for information from employment such as information contained on a P60 (the form given to all employees at the end of a tax year).

A claim may be backdated, which means a couple claiming before 5 April 2020 could receive up to £1,150.

Further information can be found at https://www.gov.uk/government/news/spoil-your-loved-one-with-hmrcs-valentines-day-cash-boost.

Newsletter issue - March 2020.

11 - 2020 Budget

19/22 - PAYE/NIC, student loan and CIS deductions due for month to 5/3/2020

Summary

Just one month into his new role as Chancellor of the Exchequer, Rishi Sunak has delivered his first Budget Statement promising 'historic' investment in roads, railways, broadband and scientific research, as the government tries to deliver on its promise to level up the UK. Ahead of the Statement, the Chancellor said that it would be "a Budget for people right across the country - no region will be left behind."

The Chancellor opened the Statement by addressing current coronavirus Covid-19 concerns. He said that there is likely to be a temporary disruption to the economy, but the government will do whatever it takes to support it. On the supply side, the government anticipates that up to a fifth of the working age population could need to be off work at any one time. Business supply chains are currently being disrupted around the globe. The combination of these factors will mean that for a period, UK productive capacity will shrink. There will also be an impact on the demand side of the economy, through a reduction in consumer spending. The Chancellor went on to outline a comprehensive set of measures to support business and households through the coronavirus crisis with business rate relief, time to pay tax deferrals and underwriting the cost of statutory sick pay for smaller businesses. HMRC have also set up a dedicated phone helpline to support businesses and self-employed people concerned about not being able to pay their tax due to covid-19.

Although the personal tax allowance will remain at its current level of £12,500 for 2020/21, the National Insurance Contributions (NICs) primary threshold will rise to £9,500 in April 2020, meaning an average pay increase of £104 for most employees. The government intends that by 2024, the National Living Wage will reach two-thirds of median earnings. On current forecasts, that means a living wage of over £10.50 an hour, but this is to be examined in further detail by the independent Low Pay Commission.

The Chancellor set out several measures designed specifically to help businesses, including enhancements to certain capital allowances and research and development rules. Originally the government intended to cut corporation tax by 2% from April 2020, but this was ruled out after the General Election in December 2019. Keeping the corporation tax rate at 19% is expected to raise some £46bn in year one, rising to £75bn a year by 2024/25.

Following strong lobbying against a possible abolition of entrepreneurs' relief, the Chancellor committed to retaining it for the present time but announced that the lifetime allowance would be reduced from £10m to £1m for qualifying disposals made on or after 11 March 2020.

Green issues also featured heavily in the Budget speech. Privately owned boats and yachts will have to use white diesel instead of the cheaper red diesel in their tanks to curb pollution; there will be further consultation on the proposed plastic packaging tax which will apply a rate of £200 per tonne of plastic packaging which does not contain at least 30% recycled plastic; and the climate change levy on electricity will be frozen from April 2022, and increased on gas. There will be substantial investments in tackling nitrogen dioxide emissions in towns and cities across England, and further support for the rollout of new rapid charging hubs, so that drivers are never more than 30 miles away from being able to charge up their car.

The following paragraphs summarise the key tax points arising from the 2020 Spring Budget based on the documents released on 11 March 2020. Please remember that these proposals are subject to amendment during the passage of the Finance Bill through Parliament. We will, of course, keep you informed of any significant developments.

Individuals

Personal tax allowances and NICs

The personal tax allowance will remain at £12,500 for 2020/21.

The Class 1 National Insurance Contributions (NIC) primary threshold will rise to £9,500 from April 2020 (from £8,632 in 2019/20, which means an average increase in earnings of £104 for employees.

The Budget also contained details of a future consultation on pension tax administration. Those earning around or below the level of the personal allowance and saving into a pension may benefit from a top-up on their pension savings equivalent to the basic rate of tax, even if they pay no tax. Whether they receive this top-up will depend on how their pension scheme administers tax relief.

Implementation of recommendations from the independent review of the loan charge

The government has confirmed that it will implement all but one of the recommendations made by Sir Amyas Morse in his review of the loan charge rules. The legislation will have effect retrospectively to 5 April 2019, which is the relevant date for the purposes of applying the loan charge. However, clauses related to repayments of voluntary payments will have effect on and after the date of Royal Assent to Finance Bill 2020.

Income tax and NI exemptions for bursary payments to care leavers

Statutory income tax and NIC exemptions will apply for the one-off £1,000 bursary paid to care leavers aged between 16 and 24 who enter an apprenticeship.

The measure will have effect after the date of Royal Assent to Finance Bill 2020, once regulations have been laid to specify the details of the bursary payment. For payments that have already been made HMRC will exercise its collection and management discretion and will not collect tax and NICs due on any retrospective amounts.

2020/21 Van benefit and car and van fuel benefits confirmed

The van benefit charge and the car and van fuel benefit charges will rise in line with the Consumer Price Index (CPI) from 6 April 2020. The flat-rate van benefit charge will increase to £3,490, the multiplier for the car fuel benefit multiplier will increase to £24,500, and the flat-rate van fuel benefit charge will increase to £666.

Taxation of company cars using CO2 emissions

As announced at autumn Budget 2017, the carbon dioxide (CO2) emissions figure for the purposes of the company car tax regime and related charges will be based on the Worldwide harmonised Light Vehicle Test Procedure (WLTP) for all new cars registered from 6 April 2020.

For cars measured under WLTP, most appropriate percentages are reduced by 2 percentage points in 2020/21 compared to the current percentages for cars with emissions measured under the New European Driving Cycle (NEDC) to help support the introduction of the WLTP for example, emissions generating a percentage of 8% would have a reduced percentage of 6%. The percentages will then be increased by one percentage point for each of the tax years 2021/22 (for example from 6% to 7%) and 2022/23 (for example from 7% to 8%). In the tax year 2022/23, the increase will bring the percentages back to their published rates in existing legislation.

The measure includes changes to the appropriate percentage figures for all cars classified as being ZEVs under both the NEDC and WLTP test procedures. The appropriate percentage will be reduced to 0% for 2020/21 and will be increased by one percentage point for 2021/22 (to 1%) and 2022/23 (to 2%). In 2022/23, the increase will bring the appropriate percentage back to their published rates in existing legislation which will be sustained throughout the tax years 2023/24 and 2024/25.

For cars registered between 1 October 1999 and 5 April 2020 inclusive, the CO2 emissions figures for company car tax and related charges will continue to be based under the New European Driving Cycle (NEDC) procedure.

Pensions tax changes to income thresholds for calculating the tapered annual allowance

Following an increase in the threshold income and adjusted income, those individuals with a threshold income of between £110,000 and £200,000 and adjusted income between £150,000 and £240,000 will no longer be impacted by the tapered annual allowance.

Broadly, the income limits used in calculating a tapered annual allowance is increased and the minimum tapered annual allowance reduced. The threshold income, which is broadly net income before tax (excluding pension contributions), will rise from £110,000 to £200,000. The adjusted income, which is broadly net income plus pension accrual, will also rise from £150,000 to £240,000.

For individuals who continue to be affected by the tapered annual allowance, the minimum tapered annual allowance will be £4,000 (currently £10,000).

These changes have effect for 2020/21 and will be effective for benefits accrued on or after 6 April 2020.

Tax treatment of the Troubles Permanent Disablement Payment Scheme

An exemption from income tax, inheritance tax and capital gains tax applies for payments made under the Troubles Permanent Disablement Payment Scheme from 29 May 2020.

CGT entrepreneurs' relief - reduction in the lifetime limit

The lifetime limit for capital gains tax (CGT) entrepreneurs' relief is reduced from £10 million to £1 million for qualifying disposals made on or after 11 March 2020.

There are special provisions for disposals entered into before 11 March 2020 that have not been completed.

HMRC have also published a technical note explaining the reduction. View the technical note Reduction in the lifetime limit for Entrepreneurs' Relief - technical note.

Capital gains tax: annual exempt amount

The capital gains tax (CGT) annual exempt amount for 2020/21 will rise from £12,000 to £12,300 for individuals and personal representatives, and from £6,000 to £6,150 for trustees of settlements.

Changes to top slicing relief on life insurance policy gains

An amendment to the legislation will allow the personal allowance to be reinstated within the calculation for top slicing relief (TSR). This will provide additional relief for taxpayers whose entitlement to the personal allowance has been reduced because a gain is included as part of their income. The measure will have effect for all relevant gains occurring on or after announcement at Budget 2020.

Business

Employment Allowance increases for National Insurance

The maximum Employment Allowance that may be claimed by eligible employers will rise by £1,000 to £4,000 from April 2020.

Increase in Structures and Buildings allowance for capital allowances

Businesses that incur qualifying expenditure on the construction, renovation or conversion of non-residential structures and buildings may claim Structures and Buildings Allowances (SBA). From 1 April 2020 for the purposes of corporation tax and 6 April 2020 for the purposes of income tax, businesses may claim an increased annual allowance of 3%.

Some miscellaneous amendments are also being made to the legislation to ensure it operates as intended.

Enhanced capital allowances in Enterprise zones

Enhanced first year allowances for investment in new plant or machinery within designated assisted areas within Enterprise Zones were introduced in 2012 and were initially available for investment over a 5-year period but this was later extended to 8 years. The period commences from when the area is treated as designated.

By 31 March 2020, 8 years will have elapsed since the introduction of these enhanced first year allowances. The government has confirmed that these capital allowances will remain available for expenditure incurred in relation to all areas, whenever designated, until at least 31 March 2021.

Capital allowances: CO2 emissions thresholds for business cars and first year allowances for business cars, zero-emission goods vehicles and equipment for gas refuelling stations

The period for which the 100% first year (capital) allowances (FYAs) are available for this expenditure is extended from April 2021 to April 2025.

In conjunction with this, the CO2 emission thresholds which are used to determine the rate of capital allowances available for business cars are being reduced. This will also reduce the threshold for the lease rental restriction. These changes will also come into effect from April 2021.

Corporation tax rates confirmed

The corporation tax (CT) main rate is set at 19% for the financial year beginning 1 April 2020. This maintains the rate at 19% rather than reducing it to 17% from 1 April 2020.

The charge to corporation tax and the main rate will also be set at 19% for the financial year beginning 1 April 2021.

The measure has retrospective and prospective effect from the date of Royal Assent to Finance Bill 2020.

Corporation tax changes for non-UK resident companies with UK property income

Changes are being made to ensure that Finance Act 2019 rules enacted to bring non-UK resident companies that carry on a UK property business, or have other UK property income, within the scope of corporation tax (CT) from 6 April 2020, work as intended.

Change to R & D expenditure credit rate

The research and development expenditure credit rate for corporation tax purposes will be increased from 12% to 13% in relation to expenditure incurred on or after 1 April 2020.

Corporate capital loss restriction changes

For accounting periods ending on or after 1 April 2020, companies making chargeable gains will only be able to offset up to 50% of those gains using carried-forward (allowable) capital losses.

CT treatment of intangible fixed assets from 1 July 2020

A restriction that exists in relation to pre-FA 2002 intangible assets that prevents some companies from claiming relief for older, well-established intellectual property rights is being removed. This means that corporation tax (CT) relief will be available for the cost of acquiring these assets in circumstances where it wasn't previously and that corporate intangible assets will now be relieved and taxed under a single regime for acquisitions from 1 July 2020.

VAT

Changes of VAT rules for call-off stock arrangements

Changes required by Council Directive (EU) 2018/1910 are being implemented to simplify the VAT treatment of call-off stock moved from the UK to another Member State (MS) or vice-versa.

The changes permit a supplier in the State of origin to remove call-off stock to storage in another State, the destination State, without accounting for VAT on the transaction at that time. The supplier and customer will account for the supply and acquisition when the goods are called-off. This avoids the need for the supplier to register for VAT in the destination State.

The measure, which has a retrospective element, applies to goods removed from a MS of the EU to UK (or vice versa) on or after 1 January 2020.

Indirect taxes

2020/21 APD rates confirmed

The long haul rates of Air Passenger Duty (APD) for 2021/22 will increase in line with the retail price index (RPI) as forecast at Budget 2020. Short haul rates will not rise.

Changes to casino gross gaming yield bands for gaming duty

The gross gaming yield (GGY) bands for gaming duty are rising in line with inflation for gaming duty accounting periods starting on or after 1 April 2020.

2020 landfill tax rates confirmed

As announced at Budget 2018, both the standard and lower rates of landfill tax will increase in 2020 in line with the Retail Prices Index (RPI), rounded to the nearest 5 pence.

2020 CCL rates confirmed

The main rates of climate change levy (CCL) for 2020/21 and 2021/22 have been confirmed. Details of the reduced rates of CCL for qualifying businesses in the Climate Change Agreements scheme have also been announced.

Changes to tax provisions for carbon emissions tax

The government will maintain the carbon emissions tax as a fallback carbon pricing policy and legislate in Finance Bill 2020 to make changes to the tax provisions set out in Finance Act 2019. A consultation will take place later this spring on how the tax would operate if introduced.

Tobacco duty rates confirmed

The duty rate on all tobacco products will continue to increase by 2% above Retail Price Index (RPI) inflation. Hand-rolling tobacco duty will rise by an additional 4%, to 6% above RPI inflation from 6pm on 11 March 2020.

Fuel Duty changes for diesel used in private pleasure craft

Finance Bill 2020 will contain enabling legislation relating to the propulsion of private pleasure craft. Private pleasure craft already pay white diesel rates for their propulsion, even though they are allowed to put red diesel in their tanks. Under this measure, private pleasure craft would have to use white diesel in their propulsion tanks. Craft with a separate fuel tank for domestic use on-board can continue to use red diesel for this purpose. Where craft have one tank for propulsion and heating, the government will explore options that prevent them from having to pay a higher rate of duty on their heating use than they would otherwise have to pay.

The measure was subject to a summer 2019 consultation, a response to which will be published later this year alongside government's consultation on red diesel. Details on implementation will set out in due course.

Plastic packaging tax

The plastic packaging tax will take effect from April 2022 and will apply to plastic packaging produced in, or imported into the UK that does not contain at least 30% recycled plastic.

Plastic packaging is packaging that is predominantly plastic by weight.

It will not apply to any plastic packaging which contains at least 30% recycled plastic, or any packaging which is not predominantly plastic by weight.

Imported plastic packaging will be liable to the tax, whether the packaging is unfilled or filled.

The government has also launched a consultation on the design and implementation of the tax, which will run until 20 May 2020.

Introduction of the Digital Services Tax

From 1 April 2020, the government will introduce a new 2% tax on the revenues of search engines, social media services and online marketplaces which derive value from UK users.

VED rates for cars, vans, motorcycles and motorcycle trade licences from 1 April 2020

The Vehicle Excise Duty (VED) rates for cars, vans, motorcycles and motorcycle trade licences will be uprated by reference to the Retail Prices Index (RPI) from April 2020.

Vehicle Excise Duty rates for zero-emission vehicles from 1 April 2020

All registered zero-emission light passenger vehicles registered from 1 April 2017 until 31 March 2025 will be exempt from the Vehicle Excise Duty (VED) supplement for light passenger vehicles with a list price exceeding £40,000, starting from April 2020.

View HMRC's policy paper Vehicle Excise Duty rates for zero-emission vehicles

VED rates for motorhomes from 12 March 2020

From 12 March 2020, new motorhomes (type approved M1SA) will be included in the Private/Light Goods Vehicle or Private Heavy Goods Vehicle (HGV) Vehicle Excise Duty (VED) class.

Administration and other matters

Income tax automation challenges

A technical change is being made to confirm that processes used by HMRC to carry out certain functions, including the issue of notices to file self-assessment tax returns and notices imposing a penalty for late filing of those returns, may be carried out using a computer or other means, rather than an individual officer.

This measure will apply both prospectively and retrospectively. Although this measure applies retrospectively, it does not introduce any new or additional obligations or liabilities.

Tax treatment of LLPs

A change to the existing rules will provide that in circumstances where a limited liability partnership (LLP) s has delivered an LLP return on the basis of operating 'with a view to profit' and is subsequently found to be operating 'without a view to profit', HMRC can still amend the LLP members' returns based on the LLP return as originally submitted.

The measure has retrospective and prospective effect from the date of Royal Assent to Finance Bill 2020.

Introduction of changes to protect tax in insolvency

From 1 December 2020, when a business enters insolvency, more of the taxes paid in good faith by its employees and customers, and temporarily held by the business, will go to fund public services rather than being distributed to other creditors.

Tax treatment of certain Scottish social security benefits

The tax treatment of three new social security benefits introduced by the Scottish Government is to be clarified.

Legislation for a UK ETS

HM Treasury is to be given power to establish a UK Emissions Trading System (UK ETS), which could be linked to the EU ETS, or a standalone UK ETS. This charging power means that allowances can be auctioned in a UK ETS and that additional market stability mechanisms can be implemented in a standalone UK ETS, to be defined in regulations.

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