Finance Bill 2021 was published on 11 March 2021. The Bill, formally referred to as Finance (No 2) Bill (as it is the second Finance Bill to be introduced in the current parliamentary session), is expected to have royal assent before the parliamentary summer recess in July.
Finance Bill 2021 runs to 132 clauses and 33 schedules, set out over 363 pages.
Measures having effect from April 2021 include:
130% super-deduction for investment in main rate assets (and 50% first-year allowance for special rate assets) and formal extension to 31 December 2021 of the £1m limit on the annual investment allowance;
three-year trading loss carry-back rules extension;
technical changes to the off-payroll working rules, to clarify the definition of ‘intermediary’, facilitate the provision of information to the intermediary and worker, and introduce a targeted anti-avoidance rule where arrangements seek to escape the rules;
increases in the income tax personal allowance, basic rate limit and various national insurance thresholds;
bringing self-employment income support scheme grants into tax in the year of receipt; and
income tax exemption and NICs disregard for employer-provided and employer-reimbursed covid-19 tests extended to the tax year 2021/22 (with exemption for reimbursed tests for 2020/21 also legislated retrospectively).
With effect from 1 April 2023, the bill sets the main rate of corporation tax at 25% and introduces a small profits rate set at 19% for companies with profits up to £50,000, along with associated companies rules. From the same date, the rate of diverted profits tax will increase to 31%, maintaining the current 6% differential.
Various other previously announced measures include:
new penalties regime for late returns and late payment of tax – with further schedules of tables, and consequential changes to the existing tables in FA 2009 Schs 55 and 56;
strengthened sanctions for promoters of tax avoidance schemes;
capital allowances, SDLT and other tax measures for free ports;
extension of the temporary 5% reduced rate of VAT for the hospitality sector until 30 September 2021 and introduction of the new temporary 12.5% rate until 31 March 2022;
temporary SDLT reduced rates for residential property; and
plastic packaging tax – Part 2, which takes up 15% of the entire Bill, introduces the framework for the new tax which will be levied on producers and importers of plastic packaging and is expected to take effect from April 2022.
Explanatory notes to the Bill are available on the UK Parliament website, along with explanatory notes to the Budget resolutions.
Chris Sanger, EY’s head of tax policy, said: ‘Clocking in at around 360 pages and 130 clauses, this year’s Finance Bill is on the shorter side of the Finance Bills from the last decade. Even though this is longer than his first Finance Bill – which stood at just over 200 pages – in comparison to some of his recent predecessors, the chancellor’s legislative appetite is more modest. George Osborne’s Finance Bills averaged around 450 pages.
‘One question for businesses will be how quickly this Bill will make it through parliament,’ Sanger said. ‘There is no set timetable for the Bill as yet, but 30 June will be a key date for many given companies’ reporting cycles. Advance clarity on the full timetable of the Bill would be helpful for companies to understand what “substantively enacted” tax rates to use in their reporting.’
Finance Bill 2021 was published on 11 March 2021. The Bill, formally referred to as Finance (No 2) Bill (as it is the second Finance Bill to be introduced in the current parliamentary session), is expected to have royal assent before the parliamentary summer recess in July.
Finance Bill 2021 runs to 132 clauses and 33 schedules, set out over 363 pages.
Measures having effect from April 2021 include:
130% super-deduction for investment in main rate assets (and 50% first-year allowance for special rate assets) and formal extension to 31 December 2021 of the £1m limit on the annual investment allowance;
three-year trading loss carry-back rules extension;
technical changes to the off-payroll working rules, to clarify the definition of ‘intermediary’, facilitate the provision of information to the intermediary and worker, and introduce a targeted anti-avoidance rule where arrangements seek to escape the rules;
increases in the income tax personal allowance, basic rate limit and various national insurance thresholds;
bringing self-employment income support scheme grants into tax in the year of receipt; and
income tax exemption and NICs disregard for employer-provided and employer-reimbursed covid-19 tests extended to the tax year 2021/22 (with exemption for reimbursed tests for 2020/21 also legislated retrospectively).
With effect from 1 April 2023, the bill sets the main rate of corporation tax at 25% and introduces a small profits rate set at 19% for companies with profits up to £50,000, along with associated companies rules. From the same date, the rate of diverted profits tax will increase to 31%, maintaining the current 6% differential.
Various other previously announced measures include:
new penalties regime for late returns and late payment of tax – with further schedules of tables, and consequential changes to the existing tables in FA 2009 Schs 55 and 56;
strengthened sanctions for promoters of tax avoidance schemes;
capital allowances, SDLT and other tax measures for free ports;
extension of the temporary 5% reduced rate of VAT for the hospitality sector until 30 September 2021 and introduction of the new temporary 12.5% rate until 31 March 2022;
temporary SDLT reduced rates for residential property; and
plastic packaging tax – Part 2, which takes up 15% of the entire Bill, introduces the framework for the new tax which will be levied on producers and importers of plastic packaging and is expected to take effect from April 2022.
Explanatory notes to the Bill are available on the UK Parliament website, along with explanatory notes to the Budget resolutions.
Chris Sanger, EY’s head of tax policy, said: ‘Clocking in at around 360 pages and 130 clauses, this year’s Finance Bill is on the shorter side of the Finance Bills from the last decade. Even though this is longer than his first Finance Bill – which stood at just over 200 pages – in comparison to some of his recent predecessors, the chancellor’s legislative appetite is more modest. George Osborne’s Finance Bills averaged around 450 pages.
‘One question for businesses will be how quickly this Bill will make it through parliament,’ Sanger said. ‘There is no set timetable for the Bill as yet, but 30 June will be a key date for many given companies’ reporting cycles. Advance clarity on the full timetable of the Bill would be helpful for companies to understand what “substantively enacted” tax rates to use in their reporting.’
