Volume 1: April 2020

Deferrals of Payments on Account, COVID-19 UK Tax Developments, and Key Takeaways from March 2020 Budget

Introduction to A&M Taxand Scotland team

Following the opening of our new A&M Taxand office in Glasgow on 3 February 2020, we wanted to introduce you to our new team in Scotland. In these difficult times, please reach out to us if you need help or any advice. 

Donald Campbell (Senior Adviser) has more than 30 years of experience advising private businesses and private clients. Donald has spent the past 5 years as Head of Tax at Target Fund Managers and prior to that spent 16 years as a Partner at Deloitte, where he led the firm’s Scottish Private Client Services team. Contact Donald Campbell at dcampbell@alvarezandmarsal.com or +44 (0) 7703 123 121.

Charlotte Walker (Associate) has over 3 years of experience, focusing on tax advisory and compliance work for a range of corporate entities, asset managers, funds and private businesses. Charlotte has joined A&M from EY. Contact Charlotte Walker at cwalker@alvarezandmarsal.com or +44 (0) 7884 698 560.

Jordan Brown (Director) has more than 10 years of experience advising alternative asset managers along with legal partnerships and privately owned businesses. Jordan has joined A&M from EY. Contact Jordan Brown jordan.brown@alvarezandmarsal.com or +44 (0) 7788 402 732.

Deferrals of Payments on Account (“POA”) - due 31 July 2020

HM Revenue and Customs (“HMRC”) have announced that the second POA of Income Tax for UK tax year 2019/20, due on 31 July 2020, can be deferred, and paid instead, on 31 January 2021.

We understand that this deferral now applies to all self-assessment taxpayers and not just self-employed taxpayers as was first announced.

This process will be automatic, and no application is required, although taxpayers can still make a POA of Income Tax on 31 July 2020 if they wish.

A deferral of the 31 July 2020 POA may mean that taxpayers have a larger payment to make on 31 January 2021 with the following payments potentially due:

• The deferred second 2019/20 POA
• Any 2019/20 balancing payment
• Any 2019/20 Capital Gains Tax ("CGT") liability
• The first 2020/21 POA

COVID-19: UK tax developments

There have been several new measures introduced by the UK Government in recent weeks to aid businesses through the COVID-19 pandemic, including:

• VAT payments extensions/deferrals - The time limit to make VAT payments due between 20 March 2020 and 30 June 2020 has been extended and can now be deferred to the end of the 2020/21 tax year (depending on financial year-end). There is no application process for this extension, and no penalties or interest for late payments will be due, although VAT returns still need to be filed. Click here for further details
• Making Tax Digital for VAT - HMRC has just announced that the second phase of Making Tax Digital (“MTD”) for VAT, initially scheduled for April 2020, has been delayed one year and will come into effect on 1 April 2021. Click here for further details 
• Emergency employment measures - The Coronavirus Job Retention Scheme is now available to all UK employers to enable them to access support to pay part of their employees' salaries if those employees would otherwise be made redundant as a result of the crisis. Click here for further details and see our guidance on Job Retention Scheme claims here
• Support for self-employed - Self-employed individuals (including partners of a partnership) can now claim a taxable grant worth 80% of their trading profits up to a maximum of £2,500 per month for the next three months if certain conditions are met. HMRC will use data on 2018/19 UK Self-Assessment Tax Returns already submitted to identify those eligible and then invite them to apply online
• Off-payroll working rules ("IR35 rules") - The introduction of IR35 has been delayed by 12 months until 6 April 2021
• Accounts filing extension - From 25 March 2020, companies will be able to apply for a three-month extension for filing their accounts with Companies House
• UK tax residency considerations - HMRC have updated guidance on what constitutes an "exceptional circumstance" for UK Statutory Residence Test (“UK SRT”) purposes. Therefore, if an individual is unable to travel from the UK due to COVID-19 restrictions implemented in March 2020, a total of 60 days spent in the UK can be disregarded for the UK SRT in determining UK tax residency status. Exceptional circumstances now include where an individual, as a result of the virus:
  • Is quarantined or advised by a health professional or public health guidance to self-isolate in the UK
  • Find themselves advised by official Government advice not to travel from the UK
  • Are unable to leave the UK as a result of the closure of international borders
  • Are asked by their employer to return to the UK

Key takeaways from March 2020 Budget

Details of the five key takeaways are available here. 

For asset managers, key points to note are:

• The lifetime limit on gains eligible for Entrepreneurs Relief on qualifying disposals was reduced from £10 million to £1 million with immediate effect
• The current Corporation Tax rate of 19% is to be retained and will no longer be reduced to 17% as previously announced
• The rate of the Research & Development Expenditure Credit ("RDEC") will increase from 12% to 13% from 1 April 2020