Exchange of joint interests

HMRC’s internal manuals consider the reliefs available where there is an exchange of joint interests in land.

The manuals state that:

The exchange of interests in land which are jointly owned by two or more persons constitutes a disposal by each owner for Capital Gains Tax purposes. In some cases, the exchange is made simply to rationalise the ownership of the land and to make it easier to deal with. The exchange may give rise to a charge to Capital Gains Tax or Corporation Tax on Chargeable Gains, and this is the case even where no money changes hands.

An Extra-Statutory Concession (ESC) – ESC/D26, published in 1984 provided relief in relation to these types of disposals but was withdrawn in April 2010. The ESC was replaced by a modified relief for exchanges on or after 6 April 2010. This relief is provided by way of TCGA1992/S248A-E in the form of roll-over relief in certain circumstances to facilitate rearrangements of holdings of land.

There are five separate conditions that must be met to claim roll-over relief under the applicable legislation. Where the relevant conditions are met then a landowner can make a claim for roll-over relief. 

Business tax cuts from April 2022

A number of business tax cuts came into effect from April 2022. This includes an increase in the Employment Allowance from £4,000 to £5,000.

The allowance enables eligible employers to reduce their National Insurance liability. An employer can claim less than the maximum if this covers their total Class 1 NIC bill. This increase represents a tax boost for around 495,000 small businesses who can claim an increased reduction in their NIC liabilities or even reduce their bills to zero.

The Employment Allowance is only available to employers with employer NIC liabilities of under £100,000 in the previous tax year. Connected employers or those with multiple PAYE schemes will have their contributions aggregated to assess eligibility for the allowance. 

A news release from HM Treasury also highlighted a number of other measures on offer to spur business growth, including:

  • A new 50% business rates relief worth almost £1.7 billion, for eligible high street businesses, subject to a £110,000 cash cap per business.
  • A freeze to the business rates multiplier worth £4.6 billion over the next five years.
  • A temporary twelve-month-long 5p cut to fuel duty.
  • The super-deduction tax break that allows companies to deduct 130% of the cost of any qualifying investment on most new plant and machinery investments that would ordinarily qualify for 18% main rate writing down allowances continues until 31 March 2023.
  • Help to Grow programmes are supporting SMEs to adopt productivity enhancing software and to get mini-MBAs.

Resolving commercial rent debts

A new law that seeks to resolve certain remaining commercial rent debts accrued during the pandemic received Royal Assent on 24 March 2022. The new law introduces a legally binding arbitration process to resolve certain outstanding commercial rent debts related to the pandemic. It is hoped that this new law will help resolve disputes about certain pandemic-related rent debt and help the market return to normal as quickly as possible.

The law applies to commercial rent debts of businesses in England and Wales including pubs, gyms and restaurants which were mandated to close, in full or in part, from March 2020 until the date restrictions ended for their sector. Debts accrued at other times will not be in scope.

Before using the arbitration process, commercial landlords and tenants are strongly encouraged to negotiate agreements using the Commercial rents Code of Practice that was published in November 2021. The Code of Practice applies across the UK.

The general moratorium on commercial evictions and restrictions on Commercial Rent Arrears Recovery (CRAR) in England and Wales also ended on 24 March 2022, but eligible firms remain protected for the next 6 months during which arbitration can be applied for or until the conclusion of an arbitration.

The moratorium provided firms with breathing space to negotiate how to address the cost of commercial rent debts caused by the pandemic before the new law came into place.

Extended loss relief carry-back

A reminder that the temporary extension to the eligible carry back period for trading losses applies for company accounting periods ending between 1 April 2020 and 31 March 2022 and for tax years 2020-21 and 2021-22 for unincorporated businesses. This extended loss relief allows trading losses to be carried back for three years (rather than one).

The extended relief was introduced to help businesses who suffered increased losses as a result of the coronavirus pandemic. Carrying back a trading loss may allow businesses to generate tax repayments from an earlier profit-making period. 

The extension to the relief applies to both incorporated and unincorporated businesses and is subject to a £2,000,000 cap. The £2,000,000 maximum applies separately to unused trading losses made by incorporated companies, after carry-back to the preceding year, in relevant accounting periods ending between 1 April 2020 and 31 March 2021 and a separate maximum of £2,000,000 for periods ending between 1 April 2021 and 31 March 2022.

The £2,000,000 for companies is subject to a group cap for each relevant period. Extended loss carry-back claims must usually be made as part of a company tax return. However, smaller claims below a de minimis limit of £200,000 may be made without having to wait to submit a company tax return.

Check large suppliers payment status

The government has been working for a number of years to combat the problem of large businesses abusing their position by making late payments to small businesses. There is a legal requirement (introduced in April 2017) for large businesses to report publicly on their payment practices.

A large business is defined as a company or limited liability partnership that has at least two of the following:

  • £36 million in turnover
  • £18 million on its balance sheet
  • 250 employees

Large businesses within the scope of the rules must prepare and publish information about their payment practices and performance in relation to qualifying contracts. There are normally two reporting periods within the business’ financial year. The report must be submitted within 30 days of the end of the reporting period. It is a criminal offence by the business, and every director of the company or designated member of an LLP, if the business fails to publish a report containing the necessary information within the specified filing period of 30 days.

For each reporting period, businesses are required to report on the following in relation to qualifying contracts the statistics on:

  • the average number of days taken to make payments in the reporting period, measured from the date of receipt of invoice or other notice to the date the cash is received by the supplier
  • the percentage of payments made within the reporting period which were paid in 30 days or fewer, between 31 and 60 days, and in 61 days or longer
  • the percentage of payments due within the reporting period which were not paid within the agreed payment period.

You can check a large supplier's status payment status at www.gov.uk/check-when-businesses-pay-invoices#more-information.

Government nudges local authorities

The Secretary of State for Business, Energy & Industrial Strategy has written a letter to local authorities in England urging them to help support businesses in the hospitality and leisure sectors as efficiently as possible. 

Just before Christmas, the Chancellor, Rishi Sunak announced a support package for businesses most impacted by the Omicron variant. The biggest single measure was the re-introduction of one-off grants of up to £6,000 for businesses in the hospitality and leisure sectors (in England). It is thought that some 200,000 businesses will be eligible for these new grants.

We are reminding eligible businesses in these sectors that they can apply to their local authority for one-off grants of up to £6,000 per premises, depending on rateable value:

  • Businesses with a rateable value of £51,000 or above: £6,000
  • Businesses with a rateable value between £15,000 and £51,000: £4,000
  • Businesses with a rateable value of £15,000 or below: £2,667

The government also announced that £102 million top-up for discretionary funding would be made available for local authorities to support other businesses outside the hospitality and leisure sectors, for example, suppliers to these sectors.

In the letter, we are told that the Secretary of State for Business, Energy & Industrial Strategy has personally written to those local authorities who have more than 5 per cent of previous funds left over, instructing them to distribute the money to those that need it.

Local authorities have also been told that the sooner applications are processed, and funds are distributed, the sooner the government will be able to provide businesses with the confidence and security they urgently need.

The devolved administrations in Scotland, Wales and Northern Ireland have received an additional £150m through the Barnett formula to offer similar measures. This will see approximately £80 million allocated to the Scottish Government, £50 million to the Welsh Government and £25 million to the Northern Ireland Executive.
 

Omicron funding delivered to local authorities

Just before the Christmas break, the Chancellor announced a new support package for some businesses most affected by the Omicron variant.

The biggest single measure was the re-introduction of one-off grants of up to £6,000 for businesses in the hospitality and leisure sectors many of whom have seen their seasonal trade hugely impacted by this latest COVID-19 variant. It is thought that some 200,000 businesses will be eligible for these new grants. On 7 January 2022, the government delivered funding to councils across England to provide these one-off grants.

This means that firms in the hospitality, leisure and accommodation sectors, many of whom have seen a decline in footfall and increased cancellations due to the Omicron variant, will be able to apply for one-off grants of up to £6,000 per premises depending on rateable value:

  • businesses with a rateable value of £51,000 or above: £6,000
  • businesses with a rateable value between £15,000 and £51,000: £4,000
  • businesses with a rateable value of £15,000 or below: £2,667

The government will also provide for a £102 million top-up for discretionary funding to help local authorities support other businesses outside the hospitality and leisure sectors.

The devolved administrations in Scotland, Wales and Northern Ireland will receive an additional £150m through the Barnett formula to help offer similar measures. This will be allocated with around £80 million going to the Scottish Government, £50 million to the Welsh Government and £25 million to the Northern Ireland Executive.

New £1bn support package announced

The Chancellor, Rishi Sunak has announced a new £1bn support package for businesses most impacted by the highly transmissible Omicron variant that is sweeping across the UK. The biggest single measure is the re-introduction of one-off grants of up to £6,000 for businesses in the hospitality and leisure sectors (in England) many of whom have seen their seasonal trade hugely impacted by this latest COVID-19 variant. It is thought that some 200,000 businesses will be eligible for these new grants.

The main support measures announced on 21 December 2021 are as follows:

  • Businesses in the hospitality and leisure sectors in England will be eligible for one-off grants of up to £6,000 per premises.
  • £102 million top-up for discretionary funding will be made available for local authorities to support other businesses outside the hospitality and leisure sectors.
  • Government will also cover the cost of Statutory Sick Pay for COVID-related absences for small and medium-sized employers across the UK. This applies to businesses with less than 250 employees for up to 2 weeks per employee. Firms will be eligible for the scheme from 21 December and will be able to make claims retrospectively from mid-January.
  • £30 million further funding will be made available through the Culture Recovery Fund, enabling more cultural organisations in England to apply for support during the winter.

The devolved administrations in Scotland, Wales and Northern Ireland will receive an additional £150m through the Barnett formula to help offer similar measures. This will be allocated with around £80 million going to the Scottish Government, £50 million for the Welsh Government and £25 million for the Northern Ireland Executive.

Teesside Freeport open for business

The first of the English Freeports, Teesside, opened operations on 19 November 2021, and is expected to be followed shortly by Thames and Humber. The Teesside Freeport will be at the forefront of local low carbon sector creating thousands of jobs in green energy.

Businesses in Freeport tax sites are able to benefit from tax reliefs including:

  • an enhanced 10% rate of structures and buildings allowance
  • an enhanced capital allowance of 100%
  • full relief from Stamp Duty Land Tax
  • business rates relief on certain business premises within freeport tax sites
  • employer National Insurance contributions relief, subject to Parliamentary process and approval

In addition, local councils will be able to retain 100% of business rates growth generated by the freeport tax sites for the next 25 years, providing them with financial security to invest in regeneration in their local area.

The Teesside Freeport also has a custom's site designation. This is a special kind of port where normal tax and customs rules do not apply. Rather there are simplified customs procedures including tariff suspension, exemption, and deferral available.

In total, the government has committed to the creation of eight Freeport locations across England and at least one Freeport in each of Scotland, Wales and Northern Ireland. 

Reporting COVID support scheme grants to HMRC

Most COVID support scheme grants are treated as taxable income in the same way as other taxable receipts and need to be reported to HMRC. The grants are treated as income where the business is within the scope of either Income Tax or Corporation Tax. This means that if you received a support payment during the COVID pandemic, this may need to be reported on your tax return. This applies to the self-employed, partnerships and businesses.

The treatment extends to support measures including the following:

  • the Self Employment Income Support Scheme (SEISS)
  • test and trace or self-isolation payments
  • the Coronavirus Job Retention Scheme (CJRS)
  • Eat Out to Help Out
  • Coronavirus Statutory Sick Pay Rebate
  • Coronavirus Business Support Grants

HMRC’s guidance is clear that whether or not any tax is paid will depend on the business profits of the grant recipient (taking into account the grant and other business income and expenditure under normal tax rules), any other taxable income they may have and any personal or other allowances to which they are entitled.

HMRC also has the power to recover payments and charge penalties where claimants have made support grant claims that they were not entitled to. There is no requirement to report COVID welfare payments made by a council such as those to help with council tax payments and housing benefit.

Loans, such as Bounce Back Loans or those from the Coronavirus Business Interruption Loan Scheme (CBILS), are not COVID-19 support payments.