As firms are fighting back against the coronavirus crisis, let's take stock of the recent tax changes and shed light on the new measures put in place during the lockdown.
The new IR35 rules
The new IR35 rules were discontinued when they were to be applicable. The legislation was indeed postponed for one year, to April 6, 2021. The new rules on payroll deductions have significant repercussions for entrepreneurs, which is why their implementation has been delayed by the government due of the exceptional world situation.
Despite the doubts expressed on these rules it is for the moment a postponement and not a cancellation. It should be noted that a House of Lords sub-committee has urged the government to “completely rethink” the legislation.
With many businesses having already brought in irreversible changes to comply ahead of the former deadline, it seems likely the government will press ahead with the tax change. However, the House of Lords’ feedback may prompt some refinements.
Making Tax Digital for VAT
Another victim of the coronavirus was the digital transmission of Making Tax Digital for VAT. Just two days before its entry into force, the HMRC decided to grant a one-year suspension for the digital submission of transaction data through the MTD for the VAT filing process.
The obligation is to transfer the data digitally and without manual intervention. The software solutions and bridging tools are already deployed, so even if this element of MTD has been postponed for a year, solutions already exist.
Other notable tax delays and changes have been well publicised as part of the Chancellor’s Coronavirus package of emergency measures.
Payments have also been delayed for VAT, through to 30th June 2020. The VAT will be deferred until the 2020-2021 financial year while no interest or default charges will be payable. For the self-employed, self assessment income tax payments on account due in July have been automatically deferred to 31st January 2021.
Finally, another problematic deadline on the horizon is that of Brexit. If it was forgotten due to the Covid-19 pandemic, a major summit must nevertheless take place, and the deadline of June 30 is beginning to approach. This is the cutoff point for a transitional extension that would buy another 1-2 years. Given the context, it is difficult to imagine that the government will not opt for more time.
The framework for any future Brexit agreement is still unknown, let alone the sectoral agreements that will be vital. It seems unimaginable that major announcements, trade deals, legislative and tax changes will be negotiated in the short term, but Brexit will no doubt come back to the fore. This is why you must remain vigilant!