Business Tax Briefing

A weekly round-up of corporate, employment and indirect tax news

10/09/2021

Health and Social Care Levy announced; dividend tax to increase

The government has set out its plans for a new Health and Social Care levy and increases to dividend taxation. 

  • For 2022/23 only, the levy will be ‘effectively introduced’ via temporary 1.25% increases to the rates of Class 1 employee, Class 1 employer, Class 1A, Class 1B and Class 4 self-employed NICs.
  • From April 2023 onwards, when HMRC’s systems have been adapted, the 1.25% levy will formally be separated out from NICs as a separate tax. The underlying NICs rates will then return to their previous level. The levy will be separately identified on payslips. Workers who are over the state pension age, who are not currently liable to NIC, will be subject to the 1.25% levy from 6 April 2023 to the extent that their earnings exceed the primary threshold (currently £9,568 per annum). Self-employed individuals with profits exceeding the lower profits limit of £9,568 are similarly affected.
  • From April 2022, there will be corresponding increases to the rates of income tax applicable to dividends by 1.25%, extending the additional tax to some investment income. This change will be legislated for in the next Finance Bill.

There are further details in the policy paper ‘Build Back Better: Our Plan for Health and Social Care’.

A Ways and Means Resolution in connection with the new levy was passed on 8 September 2021. The Health and Social Care Levy Bill has been published, together with Explanatory Notes and a Tax Information and Impact Note. lt will have all its stages in the Commons on Tuesday 14 September 2021. 

Budget will be on 27 October

The Chancellor has confirmed that the Budget will be held on Wednesday 27 October 2021.Spending Review 2021 has been launched and will conclude on 27 October 2021. As previously announced, the Office for Budget Responsibility will prepare an economic and fiscal forecast which will be presented alongside the Budget and Spending Review on 27 October 2021. HM Treasury has issued a press release giving further details of the spending review. HM Treasury has also opened a process for the Spending Review and Budget to allow external stakeholders to submit representations. Representations can be submitted here by 30 September 2021. 

Pensions triple lock to be set aside for 2022/23

Secretary of State for Work and Pensions Thérèse Coffey has confirmed that the state pensions triple lock earnings link is to be set aside for the purposes of calculating the next increase. As a result, state pensions amounts for 2022/23 will increase by the higher of 2.5% or inflation only, with inflation expected to be the higher. The pensions triple lock guarantees that state pensions grow each year in line with whichever is highest out of earnings, inflation or 2.5%. Primary legislation is needed to make this change. The Social Security (Up-rating of Benefits) Bill was published on 8 September 2021. It will apply only for the tax year 2022/23. 

Coronavirus Job Retention Scheme: updated guidance

HMRC have updated their guidance on the Coronavirus Job Retention Scheme (CJRS). The dates in the ‘Details of your/your employer’s claim that will be publicly available’ sections have been updated.

Check if you can claim for your employees' wages through the CJRS

Check if your employer can use the CJRS 

Coronavirus Statutory Sick Pay Rebate Scheme guidance

HMRC have updated their guidance Check if you can claim back Statutory Sick Pay paid to employees due to coronavirus (COVID-19). The changes confirm that employers can only use the Coronavirus Statutory Sick Pay Rebate Scheme to claim for employees who are off work on or before 30 September 2021. 

National Insurance Contributions Bill: Commons stages complete; Lords Bill

The National Insurance Contributions Bill completed its stages in the Commons on 6 September 2021. One amendment was made which corrects a drafting error. The debate is here. The Bill will introduce:

  • Zero-rate of secondary Class 1 National Insurance contributions (NICs) for Freeport employees.
  • Zero-rate of secondary Class 1 NICs for armed forces veterans.
  • Exemption for COVID-19 Test and Trace Support Payments for Class 4 and Class 2 NICs, which are paid by the self-employed.
  • Provisions allowing changes to the Disclosure of Tax Avoidance Schemes regime as it applies to NICs avoidance schemes.

The amended Bill now goes to the Lords for consideration. 

Rating (Coronavirus) and Directors Disqualification etc Bill

The Rating (Coronavirus) and Directors Disqualification (Dissolved Companies) Bill completed its Public Bill Committee stage on 8 September 2021 and had its remaining stages in the Commons on 9 September 2021. Report stage amendments were made to extend its application to domestic rating lists compiled for the purposes of business rates in Wales (as well as lists for England). The Bill gives the Insolvency Service powers to investigate directors of companies that have been dissolved. Extension of the power to investigate includes the relevant sanctions, such as disqualification from acting as a company director for up to 15 years. The Bill will also rule out business rates appeals on grounds of a material change of circumstances where these are related to COVID-19. The Bill will now go to the Lords. 

VAT: interest on historical bad debt relief claims: First-tier Tribunal 

Until 1997, the UK's VAT bad debt relief (BDR) scheme was subject to a ‘property condition’ which denied VAT relief unless title in the goods had passed to the customer. This condition was challenged in the courts, and taxpayers including HBOS and Lloyds submitted historical BDR claims pending the conclusion of the litigation. When the courts eventually ruled in the taxpayer’s favour, HMRC paid historical BDR claims including a payment of £12.2m to HBOS and Lloyds in 2019. However, HMRC only paid statutory interest from the date claims were submitted (in 2007-09) rather than from when the taxpayers should have been able to claim BDR (in the 1990s). The First-tier Tribunal has now endorsed this approach. Statutory interest was due to the extent that an error by HMRC caused a delay in taxpayers’ BDR refunds. The property condition, however, was set out in UK VAT legislation. It was not an error on HMRC’s part, but a deficiency in an act of Parliament. HMRC may have reflected this error in their guidance, but the taxpayers had not submitted claims earlier because they believed that the property condition was legally valid, not because they had relied on the guidance. Therefore, although there had been a delay in the taxpayers’ BDR refunds, it could not be attributed to HMRC and interest was only payable from 2007-09 to 2019.  

VAT: repayment supplement following assignment of input tax credit: First-tier Tribunal 

In 2018, Acepark Ltd bought Toys ‘R’ Us Properties Ltd (TRUP) and transferred its properties to Bollinway Properties Ltd (a new subsidiary) for £355m. Bollinway included an input tax credit of £71m in a VAT return which it filed on 2 November. It asked HMRC to offset the credit against TRUP’s corresponding output tax liability, and, following some enquiries from HMRC and the signing of a letter of authorisation, HMRC credited the input tax to TRUP on 20 December. Bollinway, recognising that this was more than 30 days after it had submitted its repayment return, requested repayment supplement of £3.5m. The First-tier Tribunal has ruled that supplement was not due. Any delay in HMRC processing the repayment was, once time for reasonable enquiries had been factored in, less than 30 days. Even if there had been a longer delay, the Tribunal determined that Bollinway had, by its letter of authorisation, assigned its input tax credit to TRUP. Although the assignment did not take place until after the alleged delay, it extinguished Bollinway’s entitlement to the input tax and also any entitlement to repayment supplement. Bollinway’s appeal was dismissed.