The Act received Royal Assent on 22 July 2020. The main features of the Act are:

Corporation Tax

The rate has been frozen at 19% for Financial Year 2020 and Financial Year 2021.

Research and Development Relief for Large Companies

The credit for relief has gone up from 12 % to 13% from 1 April 2020.

Employment Allowance

This has gone up from £3,000 to £4,000 from 1 April 2020. However a business can only claim if their bill in the previous tax year for Employer NIC was less than £100,000.

Note that if there are connected companies, then the total Employer NIC bill for all the connected companies needs to be below the £100,000 limit and only one of the connected companies can apply for Employment Allowance.

Note that from April 2016, the Employment Allowance does not apply to companies with a sole director who is also the sole employee (one-man companies).

Note that there is overlap between the Employment Allowance and Coronavirus Job Retention Scheme (CJRS) payments. If you have claimed the Employment Allowance, then you should not claim the Coronavirus Job Retention Scheme payments to cover the same Employer NIC.

Incorrect claims of CJRS need to be paid back to avoid penalties.

Capital Allowances

As per Budget 2020, the Structures and Building Allowance, originally introduced in October 2018 is increased from 2% to 3%. This is a flat rate claim against the original cost of buildings from the date of first use.

From 1 April 2021:

100% First Year Allowances are allowed only on zero emission cars. Previously, cars with emission of less than 50g/km also qualified for 100% First Year Allowances.

Cars with emissions of 50g/km or less, qualify for annual allowances of 18% (main pool).

Cars with emissions over 50g/km only qualify for annual allowances of 6% (special rate pool)

Annual Investment Allowance

This is a 100% tax allowance for investment in plant and machinery. This is due to be decreased from £1m to £200,000 on 31 December 2020. But in light of current and foreseeable events, the planned decrease may be postponed.

Pensions Annual Allowance

The pension annual allowance restricts the amount of tax relief an individual can receive from pension contributions.

As announced in the Budget, the income thresholds have risen to the effect that for most people, the pension annual allowance is no longer an issue.

Threshold income is now £200,000 (from £110,000) and adjusted income is now £240,000 (from £150,000), allowing more taxpayers greater tax relief. The minimum allowance has been reduced from £10,000 to £4,000.

Homeworking payments

Employers can pay homeworking employees £6 per week (an increase from £4 per week) from April 2020 to cover homeworking expenses, whether the employee works part time or full time at home. This is tax free income for employees.

Entrepreneur’s Relief (renamed Business Asset Disposal Relief)

As announced in the Budget, the lifetime limit has been reduced from £10m to £1m for all disposals on or after 11 March 2020, taking into account earlier disposals.

The reduction also applies to certain disposals entered into but not completed before 11 March 2020 as well as share reorganisations and exchanges. See the technical note issued on 19 March 2020.

Taxation of Self Employed Income Support Scheme Receipts

During 2020/2021 tax year, these receipts from the state under this scheme will be taxable in full as at the date of receipt.

Note that the trading allowance of £1,000 cannot be deducted from the receipts, but is deductible against other trading income.

Overclaims of Coronavirus Job Retention Scheme

Where businesses are aware that they have overclaimed, they must notify HMRC by 20 September 2020. The overclaim is clawed back by an income tax charge equal to 100% of the overclaim.

Failure to notify is treated as a deliberate and concealed failure. This triggers a 100% penalty based on the overclaim.

Crown Preference in Insolvency cases

From 1 December 2020, the Crown (i.e. HMRC) will rank after fixed charges but before floating charges where businesses become insolvent. This is for taxes that have been deducted or collected by the business such as VAT/CIS/PAYE/Employee NIC.

Personal Liability for Directors

There are now 3 situations in which a director (or shadow directors or participator or member of a LLP) can become personally liable for company debts arising after 22 July 2020.

  1. Where the company is involved in tax avoidance or tax evasion
  2. Where the individual has been involved in several companies which have become insolvent whist owing greater than £10,000 or more than 50% of the unsecured creditors to HMRC
  3. Where the company has been penalised under the Facilitation of Tax Avoidance/Evasions rules

A notice is issued by HMRC which makes the director(s) personally liable.

There is a right to have the decision reviewed and a right to appeal.

Principal Residence Relief

For most people, when they sell their home, there is no capital gains tax to pay. This is because of Private Residence Relief which exempts the main home from capital gains tax.

For those who have more than one home, or perhaps have been absent from their house, capital gains tax can be an issue, as period of absences are potentially subject to capital gains tax.

Under previous rules, the last 18 months ownership of a house that has been at some point a residence, was always exempt from capital gains tax.

From April 2020, this has been reduced to 9 months.

Additionally, from April 2020, lettings relief is only available where the owner shares the house with the tenant.