BUDGET RECAP: The big changes you need to be aware of in 2021

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If you are self-employed landlord, run a company, employ others or simply earn additional income, you should be aware of the changes resulting from the latest budget.

These guidelines are based on English law and are not a definitive interpretation of the law, every case is different and only a court can decide, so always seek expert advice.

The real details of the budget measures only become available as the government publishes its Finance Bill, so some of that detail is spelled out here:

In the budget, Rishi Sunak set out his three-point plan for Britain’s economy post pandemic, which included (1) a major redrawing of the economic map following the government’s major borrowing spree, (2) freezes to the individuals’ personal allowance threshold and a higher tax take from the biggest corporations.

With the highest level of government borrowing since WW2 predicted to peak at 97.1 per cent of GDP in 2023/24, the government has set out a plan of action to reduce this over an extended period of time.

For example, in 2023 the rate of corporation tax, paid on company profits, will increase from its present rate of 19 per cent to 25 per cent.

“Even after this change we’ll still have the lowest corporation tax rate in the G7. We’ll also protect small businesses so only 10 per cent of companies will pay the full higher rate,” Mr Sunak said.

There are a number of tax changes that are now becoming clearer and these are things to be aware of in the future:

The main tax events coming in April/May 2021

01 April – Corporation tax payment for year to 30/6/20 (unless quarterly instalments apply)

06 April – 2020/21 tax year ended on 5th.  2021/22 tax year begins.

New “off-payroll” working rules start.

19 April – PAYE & NIC deductions, and CIS return and tax, for month to 5/04/21 (due 22/04 if you pay electronically)

01 May – Corporation tax payment for year to 31/7/20 (unless quarterly instalments apply)

19 May – PAYE & NIC deductions, and CIS return and tax, for month to 5/05/21 (due 22/05 if you pay electronically)

New personal service company rules to start in April

New “off-payroll” working rules that apply to certain workers supplying their services to clients via their own personal service companies start from 6 April 2021.

Under the new regime end-user businesses will be required to determine whether individuals are treated as an employee or not, if directly engaged. This is likely to be a significant additional administrative burden on the large and medium-sized businesses.

This is a complex area of the law based on several different court decisions. HMRC recommend end user organisations using the CEST (Check Employment Status for Tax) online tool to help with a determination, following which a Status Determination Statement can be issued setting out the reasoning behind the decision issued to any agency supplying the worker, if relevant.

The status determination notifies the agency that PAYE and NIC should be deducted from payments to a worker’s personal service company. That information will be passed down the labour supply chain if other entities are involved, and the ultimate fee payer is liable for making the tax and NIC deductions.

There’s no change for small employers

‘Small’ businesses, the definition of which is based on the existing Companies Act 2006 definition, will be outside of the scope of the new obligations and services supplied to such organisations will continue to be dealt with under the current IR35 rules, with the worker or personal service company effectively self-assessing. This applies to companies with an annual turnover of £10.2million or less, a balance Sheet total of £5.1 million or less, and less than 50 employees.

Employed or self-employed

A recent Supreme Court ruling that drivers for the ride hailing company, Uber are workers not self-employed individuals, and hence are entitled to holiday pay, pension rights and the right to be paid the national minimum wage, has major implications for many businesses.

Tax law doesn’t necessarily follow employment law, and the boundaries are becoming increasingly blurred, making it difficult to determine an individual’s employment status with absolute certainty, so if in doubt seek professional advice.

Super-tax-deduction for equipment

The Chancellor announced a new 130% tax relief for expenditure on new plant and machinery incurred between 1 April 2021 and 31 March 2023. This new tax relief is only available to limited companies and the Finance Bill reveals a nasty sting in the tail. When the equipment subject to the relief is eventually sold there’s a clawback, potentially at the same 130% rate.

If, for example, a new item of plant costs £100,000 the company would be able to deduct £130,000 in arriving at taxable profits, thus saving £24,700 in corporation tax at 19%. If, however, the plant was sold for £80,000 on 1 April 2023, 130% of the proceeds would likely be clawed back and £104,000 added to the company’s taxable profit, resulting in up to £26,000 corporation tax payable at the new 25% rate.

Fortunately, the claw-back rate will be reduced over time from 1 April 2023 onwards, so as to encourage long term asset retention.

The 130% rate does not apply to equipment such as air conditioning and central heating that normally qualify for a 6% writing down allowance. However, such “integral features” qualify for a special 50% first year allowance for the same two-year period.

Enhanced loss relief

In the March Budget it was announced that the normal one-year carry-back for trading losses will be extended to three years. This means that many businesses that have made losses during the pandemic may be able to reclaim a repayment of tax paid in that three-year period. This enhanced carry-back applies to unincorporated businesses as well as limited companies and the details are set out in the Finance Bill.

For corporation tax purposes the loss-making accounting period must end between 1 April 2020 and 31 March 2022 to qualify. For unincorporated businesses, the trading loss must be incurred in 2020/21 or 2021/22.

These new temporary carry back rules will permit losses to be set against trading profits made in the years ended 31 December 2018 and then 31 December 2017.

A Business Rates Review

Among the documents recently published is an interim report on the government’s Fundamental Review of Business Rates

This sets out a summary of responses to last year’s call for evidence and the final report is to be published in the Autumn.

Second Home Owners

The government is to legislate to tighten tax rules for second homeowners, meaning they can only register for business rates (and business rates relief) if their properties are genuine holiday lets.

This measure is intended to close a loophole that allowed some second homeowners to avoid paying council tax on their second property, and it has been revealed that some owners were even claiming coronavirus support grants for their second home “businesses”.

Tax Payment Processes

The Treasury has accepted a number of recommendations by the Office of Tax Simplification (OTS) on simplifying inheritance tax (IHT) reporting meaning that From 1 January 2022 over 90 per cent of non-taxpaying estates will no longer have to complete IHT forms for deaths when probate is required. The government is also considering introducing a new digital system for IHT and probate reporting.

HMRC is also said to be reconsidering the introduction of a “Pay-as-You-Go” system for the self-employed originally proposed 2016.

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LATEST: Rogue tenants who use Covid to avoid eviction are ‘on the rise’ says expert

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Evictions expert Paul Shamplina says his firm has seen an increasing number of rogue tenants use Covid as a ‘get out of jail free card’ during the pandemic, a ploy which is costing some landlords thousands of pounds in lost rent.

The vast majority of tenants who get into arrears have legitimate and understandable reasons for their financial problems, particularly during Covid, but Shamplina says there is a sizeable minority who use ‘having Covid’ as a smokescreen to evade eviction.

The team at Landlord Action recently dealt with an extreme example in the Lincolnshire fishing port of Grimsby.
A landlord in the town had a female tenant who was many months behind in her rent.

Landlord Action issued an eviction notice in the first week of December 2019 and, at a subsequent hearing in February 2020 was granted a three-week adjournment after she persuaded the judge that she had another court hearing on that date, and argued that the property featured unresolved maintenance issues.

Green light

At a subsequent hearing a possession order was granted and the green light given for her eviction to go ahead, only for the bailiff evictions ban to be announced soon afterwards by the government.

The next bailiff appointment had to wait until mid-October as the Covid eviction bans played out, on the day of the eviction, the tenant told bailiffs she had lost her sense of smell and developed a cough, refusing to provide any medical evidence to back her claim despite repeated requests. Bailiffs were also reluctant to enter the property in case her claims were true.

Then, after two more government evictions bans she was able to stay in the property until last week without paying any rent for nearly two years. She has now vacated.

“It is clear from our experiences that this kind of tenant is playing the system and the courts, whose judges tend to back tenants despite often no evidence of tenants having Covid, believing their claims,” says Shamplina (pictured).

“Tenants who suddenly develop Covid on the day of their eviction should have their claims investigated more thoroughly by the courts otherwise, as in this case, landlords stand to lose thousands of pounds with no hope of recovering it.”

Visit Landlord Action.

©1999 – Present | Parkmatic Publications Ltd. All rights reserved | LandlordZONE® – LATEST: Rogue tenants who use Covid to avoid eviction are ‘on the rise’ says expert | LandlordZONE.

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Suspended sentence for banned engineer who issued fake Gas Safe certificate

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A banned boiler engineer has narrowly avoided jail after producing a fake Gas Safe certificate for a landlord.

Jeffrey Lewis, 74, of Ashbourne Road, Cheadle, was asked by a landlord to repair a tenant’s boiler but failed to tell him he had been banned from carrying out gas work in 2015 after the Health and Safety Executive (HSE) investigated his dangerous workmanship.

Instead, Lewis carried out the repairs and produced the fake certificate. However, when the tenant – a woman with two children – continued to have problems, a legitimate Gas Safe engineer inspected the boiler and described Lewis’s work as appalling.

Lewis admitted two charges of contravening health and safety regulations and contravening a health and safety improvement notice.

Craig Morris, prosecuting for the HSE, said: “Lewis undertook the work in breach of the prohibition notice.

“He issued a UK gas safety certificate. It was a fraudulent document because he was not entitled to issue such a document. He put a false gas safety registration number on that, having undertaken the work.”

District Judge Timothy Boswell said he had taken Lewis’s chronic obstructive pulmonary disease and other health issues into account when sentencing him.

Deserved prison

He added: “You deserve to go straight to prison for what you did. However, I have decided in the circumstances it is appropriate to suspend the sentence.

“This all happened nearly three years ago, there have been no problems since, you are a very ill man. The reality is you are not going to be working with gas ever again.”

Lewis was sentenced to 52 weeks in jail, suspended for 18 months, and ordered to pay £1,000 costs and a £140 surcharge. An 18-month prohibition requirement also bans him from doing any gas fitting work, conducting any gas safety checks or issuing any gas safety certificates.

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Suspended sentence for banned engineer who gave fake Gas Safe certificate to landlord

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A banned boiler engineer has narrowly avoided jail after producing a fake Gas Safe certificate for a landlord.

Jeffrey Lewis, 74, of Ashbourne Road, Cheadle, was asked by a landlord to repair a tenant’s boiler but failed to tell him he had been banned from carrying out gas work in 2015 after the Health and Safety Executive (HSE) investigated his dangerous workmanship.

Instead, Lewis carried out the repairs and produced the fake certificate. However, when the tenant – a woman with two children – continued to have problems, a legitimate Gas Safe engineer inspected the boiler and described Lewis’s work as appalling.

Lewis admitted two charges of contravening health and safety regulations and contravening a health and safety improvement notice.

Craig Morris, prosecuting for the HSE, said: “Lewis undertook the work in breach of the prohibition notice.

“He issued a UK gas safety certificate. It was a fraudulent document because he was not entitled to issue such a document. He put a false gas safety registration number on that, having undertaken the work.”

District Judge Timothy Boswell said he had taken Lewis’s chronic obstructive pulmonary disease and other health issues into account when sentencing him.

Deserved prison

He added: “You deserve to go straight to prison for what you did. However, I have decided in the circumstances it is appropriate to suspend the sentence.

“This all happened nearly three years ago, there have been no problems since, you are a very ill man. The reality is you are not going to be working with gas ever again.”

Lewis was sentenced to 52 weeks in jail, suspended for 18 months, and ordered to pay £1,000 costs and a £140 surcharge. An 18-month prohibition requirement also bans him from doing any gas fitting work, conducting any gas safety checks or issuing any gas safety certificates.

©1999 – Present | Parkmatic Publications Ltd. All rights reserved | LandlordZONE® – Suspended sentence for banned engineer who gave fake Gas Safe certificate to landlord | LandlordZONE.

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LATEST: Pandemic persuades more landlords to hold on to their rented properties

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New research has revealed how Covid and rising capital gains tax have persuaded more landlords to hold on to their rented properties than would have otherwise been expected.

Hamptons’ research reveals that 131,900 rental properties were sold during 2020, the lowest figure for seven years, or just 12% of all sales in England and Wales.

But while the ever-changing Covid evictions rules have played a key role in subduing buy-to-let property sales, rising prices mean many landlords face escalating capital gains tax (CGT) bills.

Those who sold up last year in England and Wales realised a pre-tax profit of £82,450 or 42% more than they paid for it after nine years of ownership.

CGT bills for non-corporate landlords vary based on personal circumstances based on value, tax status, when it was bought and whether a landlord has lived in it.

But as a rule of thumb it can be estimated at 20-25% of a property’s sale value.

Top ten gains

The top ten local authorities where landlords made the biggest gains were all in London. 

In Kensington and Chelsea, which topped the list, last year the average landlord sold their buy-to-let for £784,980 more than they paid for it ten years ago. 

Camden, City of Westminster and Hammersmith & Fulham ranked second, third and fourth on the list, all where the average landlord gain exceeded £500,000.

“Landlord sales have been relatively high over the last few years due to tax and regulatory changes that have reduced the profitability for some investors,” says Aneisha Beveridge, Hamptons’ head of research.

“But given tax relief on mortgage interest will be fully phased out from the 20/21 tax year, it seems as though most landlords who would be hit hardest by these changes have already left the sector.”

She says that, although average capital gains have been shrinking, the house price surge during Covid has reversed this trend.

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Build costs for Apartment Block?

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I have just re-mortgaged my property and have taken out a substantial amount for investment and would like some advice about building apartment blocks from the ground up, please.

I understand an architect is needed to draw detailed plans and the builder can give me a breakdown of all costs for labour and materials

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