February 2021 Tax Update

HMRC’s extension to self-assessment filing deadline

After mounting pressure HMRC announced that no late filing penalty would be levied in respect of tax returns which are filed by 28 February. A relief for many individuals who have struggled to collate information whilst working from home and juggling home-schooling. The tax was still due by 31 January and late payment penalties may be applied as well as interest. Filing after 31 January also extends the period within which HMRC can open an enquiry into the return (one year from the quarter-end in which the return was submitted). If you have not already done so we would encourage individuals to file their tax return or at least make payment of tax due.

Capital Gains Tax (CGT)

2019/20 is the final tax year in respect of which UK residents are required to pay CGT on the sale of property (that is not their main residence) through self-assessment. Since 6 April 2020 UK residents who make a capital gain on the disposal of a UK residential property that is not their main home should use the online service to inform HMRC and pay the tax due within 30 days of completion. Non-UK residents disposing of UK land and property should also use the online service, regardless of whether there is a gain or not.
Property disposals should still be included on their 2020-21 tax return together with other chargeable disposals and any payments that have already been made will not be included in the total self-assessment liability.

Changes to Stamp Duty Land Tax (SDLT)

Back in July the threshold at which SDLT normally applies was temporarily increased from £125,000 to £500,000. This is set to come to an end from 1 April 2021 with no announcements regarding an extension.
In addition, from this date non-UK residents purchasing UK property will incur an additional 2% SDLT charge. The residency test in this case is different to that used for assessing liability to income tax and capital gains tax (statutory residence tests). Broadly, being present in the UK for at least 183 days in any continuous 365-day period, a year either side of the date of acquisition, qualify you as UK resident for SDLT.
This charge is on top of the 3% surcharge for acquiring second homes (the first home does not have to be in the UK) and the 15% surcharge for companies acquiring residential property with a value in excess of £500,000.
There are specific SDLT residence tests for companies (similar to assessing status for corporation tax) and trustees (where the beneficiary is resident for absolute/life interest trusts and where the trustees are resident for discretionary trusts).

Annual Investment Allowance (AIA)

In our November newsletter we outlined the possibility that the AIA would reduce from £1m to £200,000 at the end of the year. The government has since announced that this will be delayed to 1 January 2022 in an attempt to encourage investment in qualifying plant and machinery that may have been put on hold due to the effects of Covid-19 and/or Brexit uncertainty.

Companies House Digitisation

As part of the move to become fully digital Companies House has announced that it intends to withdraw paper reminders and is recommending that all companies register for the free email reminder service.
The agency says recent analysis of the reminder service has shown that those companies who have switched to email reminders have improved their compliance rates and, as a result, are less likely to get a penalty for filing their accounts late.
New users will need to register to use the Companies House online filing service and it is possible to register multiple companies concurrently. Furthermore, it is possible to include up to four email addresses to receive a reminder (i.e. an accountant or agent).

If you if you would like to discuss any of the points raised or have other concerns, please contact us for a no obligation discussion about how we may be able to help.

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