Monthly Tax Update

A monthly round-up of corporate, employment and indirect tax issues


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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 was then published, together with Explanatory Notes. The Bill 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. 

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 were off work on or before 30 September 2021. 

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. 

Notification of Uncertain Tax Treatment: HMRC guidance

HMRC have updated their policy paper on large businesses: notification of uncertain tax treatment, which was first published on 20 July 2021. The requirement to notify HMRC of uncertain tax treatment is expected to apply from April 2022. HMRC have also published draft guidance on how the rules will operate. 

Coronavirus Job Retention Scheme: updated guidance

HMRC have updated their guidance on the Coronavirus Job Retention Scheme (CJRS):

Claim for wages through the CJRS

The information in the section 'When the government ends the scheme' has been updated.

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

Check if your employer can use the CJRS

The dates in the ‘Details of your/your employer’s claim that will be publicly available’ sections have been updated. 

Self-Employment Income Support Scheme: updated HMRC guidance

HMRC have updated their guidance on the Self-Employment Income Support Scheme (SEISS) Work out your turnover so you can claim the fifth SEISS grant. The changes include new guidance for subcontractors under the Construction Industry Scheme which has been added to the sections 'How to work out your April 2020 to April 2021 turnover' and 'Find a previous year’s turnover to use as a reference year.' 

Scottish government agreement with Scottish Green Party; tax consultation

The Scottish government and the Scottish Green Party Parliamentary Group (the Green Group) have announced a draft agreement  which commits them to working together in a collaborative way, without entering into coalition, throughout the current  Parliamentary session, and to delivering a shared policy programme. The Scottish National Party won 64 seats in the 2021 Scottish Parliamentary elections, one short of the number needed for a majority, and thus formed a minority government; the Scottish Greens have eight seats. The new agreement commits the Scottish government to consult and collaborate with the Green Group throughout the development and scrutiny of all stages of the annual Budget process. The Green Group has agreed to support the Scottish government in matters of supply, including all matters relating to the Scottish Budget and on Scottish Rate Resolutions. 

The Scottish government has published a consultation document Tax policy and the Budget - a Framework for Tax. This seeks views on the Scottish government's overarching approach to tax policy, through Scotland’s first Framework for Tax.  Views are also sought on how best to deploy devolved tax powers to support the economic recovery from COVID-19. Responses are invited by 26 October 2021. 

Tax Law Review Committee: report on the First-tier Tribunal's Tax Chamber

The Tax Law Review Committee (TLRC),  which was founded by the Institute for Fiscal Studies (IFS) to keep the operation of tax law in the UK under review, has published a report ‘The tax tribunals: the next 10 years’ which examines the Tax Chamber of the First-tier Tribunal (FTT). The main concern among users is delay, which existed before the COVID-19 pandemic. Some users also reported an apparent lack of engagement by some judges during hearings and concerns that cases are sometimes allocated to judges without the appropriate knowledge. Perceived areas of strength include the readiness of judges to assist litigants in person by conducting hearings using an inquisitorial approach. The report suggests that using remote video hearings instead of determining cases on paper without a hearing, and the establishment of a pro-bono advocacy scheme, could improve access to justice by litigants in person. The President of the Chamber, Greg Sinfield, has welcomed the report and commented that, as the report states, the Chamber has already begun to address some of the issues raised. 

New advisory fuel rates from 1 September 2021

HMRC have announced new advisory fuel rates from 1 September 2021. The previous rates from 1 June 2021 can be used for up to one month from the date the new rates apply. Compared to the previous rates, some of the rates have increased by one or two pence and some have decreased by one or two pence.