One of the main areas to consider in deciding how to treat a deductible expense is whether the cost is revenue or capital in nature. There is no single, simple test that can be applied to decide which items are capital expenditure and which are revenue. This can only be determined by reference to the relevant facts that applied at the time the expenditure was incurred. Capital expenditure cannot be deducted in computing profits, however there are separate reliefs for some capital expenditure.
How would this capital/revenue split apply to the costs of setting up a website?
HMRC's internal guidance says that the costs of bringing an asset into existence or that has an enduring benefit to the trade are capital. Therefore, the regular update costs of the site are likely to be revenue expenses and the original cost of creation, capital.
HMRC’s manuals go on to state an interesting view that, 'the cost of a web site is analogous to that of a shop window. The cost of constructing the window is capital; the cost of changing the display from time to time is revenue'.
Even the unseasonably cold weather does not seem to have stopped people in England getting their first taste of normality for many months as many restrictions were lifted on 12th April 2021.
The full list of changes that came into effect in England from 12 April 2021 are listed on GOV.UK as follows:
- non-essential retail can reopen
- personal care services such as hairdressers and nail salons can reopen, including those provided from a mobile setting
- public buildings such as libraries and community centres can reopen
- outdoor hospitality venues can reopen, with table service only
- most outdoor attractions including zoos, theme parks, and drive-in performances (such as cinemas and concerts) can reopen
- some smaller outdoor events such as fetes, literary fairs, and fairgrounds can take place
- indoor leisure and sports facilities can reopen for individual exercise, or exercise with your household or support bubble
- all childcare and supervised activities are allowed indoors (as well as outdoors) for all children. Parent and child groups can take place indoors (as well as outdoors) for up to 15 people (children under 5 will not be counted in this number)
- weddings, civil partnership ceremonies, wakes and other commemorative events can take place for up to 15 people (anyone working is not included in this limit), including in indoor venues that are permitted to open or where an exemption applies. Wedding receptions can also take place for up to 15 people, but must take place outdoors, not including private gardens
- self-contained accommodation can stay open for overnight stays in England with your household or support bubble
- care home residents will be able to nominate two named individuals for regular indoor visits (following a rapid lateral flow test)
- you should continue to work from home if you can and minimise the amount that you travel where possible
The next major batch of changes are not expected to take place in England before 17 May and will include the opening of more indoor entertainment attractions, overnight hotel stays, increased numbers allowed at life events and the possibility of more international travel.
Regional variations can be viewed on regional government websites.
There have been a significant number of measures introduced to help those experiencing financial difficulties because of coronavirus. Throughout the course of the pandemic, the Financial Conduct Authority (FCA) has sought to ensure that lenders provide tailored support to mortgage borrowers who continue to face payment difficulties due to the crisis.
Since 1 April 2021, suspension on blanket property repossessions where homeowners are significantly in arrears was ended. This change is subject to any government restrictions on repossessions, but lenders may now be able to take steps to enforce a possession order and repossess homes. This should only be done as a last resort and a lender shouldn’t start repossession action unless all reasonable attempts to resolve the position have failed. Prior to 1 April 2021, lenders could only repossess homes with the agreement of the homeowner or if there were other exceptional circumstances.
Lenders have offered options to homeowners such as:
- making no payments for a temporary period
- making reduced payments for a temporary period
- changing the mortgage term to make payments more affordable
The deadline for applying for many of these assistance options ended on 31 March 2021. However, the FCA's updated guidance states that since 1 April 2021, if you are newly affected by coronavirus (or if it starts affecting you again) your lender should provide support tailored to your circumstances, this may include a payment holiday if that is appropriate.
As part of the March 2021 Budget, the Chancellor announced that the temporary £20 weekly uplift in Universal Credits would continue for a further six months, until the end of September 2021. It was also confirmed that Working Tax Credit claimants would receive equivalent support. It appears that it was operationally difficult for this support to be delivered on a periodic basis and the government therefore decided to deliver this support via a £500, one-off payment.
The one-off payment provides extra support following the end of the 2020-21 tax year. It is though that more than a million households up and down the country will be eligible for the one-off payment if, on 2 March 2021, they were getting either:
- Working Tax Credit
- Child Tax Credit and were eligible for Working Tax Credit but did not get a payment because their income was too high to get Working Tax Credit payments
There is no requirement to contact HMRC or apply for the payment.
HMRC will make contact by text message or letter during April to confirm if you are eligible.
If you are eligible, you should get your payment direct to your bank account by 23 April 2021. You will not see the payment on the online tax credit service.
The payment is non-taxable and will not affect your benefits. You do not need to declare it as income on your Self-Assessment tax returns or for tax credit claims and renewals.
Self-employed individuals (including partnerships) who have overclaimed the Self Employed Income Support Scheme (SEISS) must pay back the overpayment to HMRC. The rules for repaying HMRC state that you must tell HMRC if you were not eligible to have claimed the grant.
- for the first or second grant, your business was not adversely affected
- for the third or fourth grant, your business had not been impacted by reduced activity, capacity or demand or inability to trade in the relevant periods
- you did not intend to continue to trade
- you’ve incorporated your business since 5 April 2018
You must also tell HMRC if you:
- received more than we said you were entitled to
- amended your tax return on or after 3 March 2021 in a way which means you’re entitled to a lower grant than you received
If you have overclaimed you must tell HRMC within 90 days of receiving the grant or face additional penalties. If the amount in question is £100 or less then there is no requirement to notify HMRC or pay back any grant received.
All qualifying self-employed businesses can continue to claim SEISS grants until 30 September 2021, if they continue to be adversely affected by the coronavirus pandemic. A fourth grant covers the period from 1 February 2021 to 30 April 2021 and a fifth and final grant will cover the period from May onwards.
The fourth grant will provide support covering 80% of average trading profits, up to a maximum of £7,500 for those who meet the eligibility requirements. The fifth and final grant will see those whose turnover has fallen by 30% or more continuing to receive the full 80% grant whilst those whose turnover has fallen by less than 30% will receive a 30% grant.
HMRC’s new points-based penalty regime for late submission and payment will start from 1 April 2022. The changes will apply in the first instance to the submission of VAT returns for VAT return periods beginning on or after 1 April 2022.
The penalty regime will then be extended to Making Tax Digital (MTD) Income Tax Self-Assessment (ITSA) accounting periods beginning on or after 6 April 2023. This will be in tandem with the extension of MTD (from the same date) for taxpayers with business or property income over £10,000 annually. The penalty scheme will be extended to all other ITSA taxpayers for accounting periods beginning on or after for 6 April 2024.
Under the new regime, taxpayers will incur a penalty point for each missed submission deadline. At a certain threshold of points, a financial penalty of £200 will be charged and the taxpayer will be notified. The threshold varies depending on the required submission frequency (monthly, quarterly, annual). The penalty points will apply separately to VAT and ITSA. The penalty points will be reset to zero following a period of compliance by the taxpayer. There are also time limits after which a point cannot be levied.
In addition, the new system will see the introduction of two new late payment penalties. A first penalty of 2% of the unpaid tax that remains outstanding 15 days after the due date. The penalty increases to 4% of any tax still outstanding after 30 days. An additional or second penalty at a penalty rate of 4% per annum will accrue on a daily basis after 30 days. This additional penalty will stop accruing when the taxpayer pays the tax that is due.
There will be an appeals mechanism for both the late submission and late payment penalties available through an internal HMRC review process and an appeal to the First Tier Tax Tribunal.
The new National Minimum Wage (NMW) and National Living Wage (NLW) rates came into effect on 1 April 2021. The new rate for the NLW is £8.91 which is a 19p increase over last year. The NLW is the minimum hourly rate that must be paid to those aged 23 or over. The NLW used to apply only to those aged 25 and over but from 1 April 2021 has been extended to 23 and 24 year olds for the first time. The threshold is expected to further reduce to 21 by 2024. The increase represents an additional £345 per year for someone working full-time and earning the NLW.
The hourly rate of the NMW (for 21-22 year olds) increased to £8.36 (a rise of 16p). The rates for 18-20 year olds increased to £6.56 (a rise of 11p) and the rate for workers above the school leaving age but under 18 increased to £4.62 (a rise of 7p). The NMW rate for apprentices increased by 15p to £4.30.
It is important that you ensure that you have adopted the new rates as there are significant penalties for employers who are found to have paid workers less that they are entitled to by law.
If you have underpaid an employee, you must pay any arrears immediately. There are penalties for non-payment of up to 200% of the amount owed unless the arrears are paid within 14 days. The maximum fine for non-payment can be up to £20,000 per employee and employers who fail to pay face up to a 15-year ban from being a company director as well as being publicly named and shamed.
The new super-deduction tax break, that will allow companies to deduct 130% of the cost of any qualifying investment from their taxable profits, is available on most new plant and machinery investments that ordinarily qualify for 18% main rate writing down allowances. This means that for every £1 a company invests they can reduce their Corporation Tax bill by up to 24.7p. The new temporary tax relief applies on qualifying capital asset investments from 1 April 2021 until 31 March 2023.
The super-deduction is designed to help companies finance expansion in the wake of the coronavirus pandemic and help to drive growth. This change makes the Capital Allowance regime more internationally competitive, lifting the net present value of the UK’s plant and machinery allowances from 30th in the OECD to 1st.
Commenting on the introduction of the super-deduction, the Chancellor of the Exchequer Rishi Sunak said:
'The super-deduction is the biggest two-year business tax cut in modern British history – driving our economy by helping businesses to invest, grow and support our Plan for Jobs. I urge firms across the UK to invest in our recovery by taking advantage of this great opportunity.'
An enhanced first year allowance of 50% on qualifying special rate assets has also been introduced for expenditure within the same period. This includes most new plant and machinery investments that ordinarily qualify for 6% special rate writing down allowances.
The measures have effect in relation to qualifying expenditure from 1 April 2021 and excludes expenditure incurred on contracts entered into prior to Budget day on 3 March 2021.
An employee can obtain a benefit when provided with an employment-related cheap or interest-free loan. The benefit is the difference between the interest the employee pays, if any, and the commercial rate the employee would have to pay on a loan obtained elsewhere. These types of loans are referred to as beneficial loans.
There are a number of scenarios where beneficial loans are exempt and employers might not have to report anything to HMRC or pay tax and National Insurance. The most common exemption relates to small loans with a combined outstanding value to an employee of less than £10,000 throughout the whole tax year.
The list also includes loans provided:
- in the normal course of a domestic or family relationship as an individual (not as a company you control, even if you are the sole owner and employee)
- to an employee for a fixed and invariable period, and at a fixed and invariable rate that was equal to or higher than HMRC’s official interest rate when the loan was taken out
- under identical terms and conditions to the general public as well (this mostly applies to commercial lenders)
- that are ‘qualifying loans’, meaning all of the interest qualifies for tax relief
- using a director’s loan account as long as it’s not overdrawn at any time during the tax year.
There are important rules that all businesses must follow to keep business and accounting records accessible if requested by HMRC. The exact documentation that must be held and the time limits for doing so can vary significantly. For example, most company records must be held for at least 6 years from the end of the last company financial year they relate to and even longer in some circumstances. Significant penalties can be imposed for failing to keep records or if records are inadequate.
These record keeping requirement include international trade documents.
HMRC publishes specific guidance concerning archiving international trade documents. This includes ensuring that your records are up to date and accurate, are legible, readily accessible and available for inspection at all reasonable times.
HRMC’s guidance states that the archiving period for your records will vary according to the individual procedure. However, in the event of a criminal investigation, traders’ records dating back ten years may be used as evidence. Accordingly, you may decide to retain documents for that length of time. After the date of entry, you can keep your records on a computer.
If these record keeping requirements cause storage issues or undue expense, then HMRC may allow you to reduce the length of time for storing documents.