Baxter&Co - 2021 Spring Business Support Guide

6 With Corporation Tax rates dueto increase significantly for most companies from 1 April 2023, it is important to quantify the possible tax savings from the different loss relief options, although in most cases getting immediate tax repayments from the carry-back option will be preferred where a company is currently strugglingfor cash flow. If your company is currently makinglosses, we can quantify the potential tax repayments you might generate andmake sure that you meet all the claim deadlines. Veterans’ NIC relief From 6 April 2021, a new NIC relief came in to encourage businesses to take on new employees who are veterans of HM Armed Forces. This relief, which will apply a zero rate of employers’ NIC up to the upper secondary threshold (£967 per week for 2021/22), is only available for 12 consecutive months from the veteran’s first day of civilian employmentafter leaving the armed services. Employers can claim relief even if the employment starts before 6 April 2021 but will only be able to claim for the remaining qualifying period. From April 2021 to March 2022,employers will need to pay the associated secondary Class 1 NICas normal and then claim them back retrospectively from April 2022onwards. From April 2022 onwards, employerswill be able to apply the relief in real time through PAYE. If you are thinking of taking on an employee who has recently left HM Armed Forces, we can make sure you comply with all the relevant rules to getthis NIC break for a year. Capital expenditure Capital expenditure (CAPEX) is depreciated in the accounts, but this depreciation is not allowable for tax purposes. Instead, businesses can claim specific tax allowances, but these differ considerably for ‘Plant and Machinery’ (P&M) and ‘structures and buildings’, thelatter writing off the asset much more slowly. Indeed, most small business can relieve all their P&M expenditure in the year of acquisition. The definition of P&M is not straightforward and different types canreceive different rates of tax allowance. For companies (but not unincorporated businesses and LLPs) the Chancellor has announced significant additional tax relief for P&M expenditure incurred from 1 April 2021 to 31 March 2023. Notably, this allows most expenditure on new P&M to qualify for 130% relief (i.e. £1,300 for every £1,000 spent) in the year of acquisition. With a 19% Corporation Tax rate, this gives effective tax relief of 24.7% on the amount actually spent, to encourage companies to invest in P&M prior to Corporation Tax rates going up for those with profits above £50,000 in April 2023. This extra tax break has knock-on consequences, in that there is significant extra record-keeping requiredand special rules when the P&M is subsequently sold. Note that, with very limited exceptions (e.g. dual-control cars used by driving instructors and hackney carriages), cars are not eligible for thesenew allowances. Vans, however, are eligible, so the next couple of years could be a good time to renew vans that your companyowns. Tax relief on CAPEX is a complex area, but the speed at which your business or company will get tax allowances may affect your investmentdecisions. Please speak to us to clarify the rules before undertaking any major expenditure on capital items. Travel and subsistence The rules on tax relief for travel and subsistence are completely different depending on whether you are Self- employed or are an employee (or director)of a company. It is easy to misunderstand them, as has been shown in two recent cases at the First-Tier Tribunal (FTT).