Tax changes outlined in draft Finance Bill 2020 – 2021
Tax changes outlined in draft Finance Bill 2020 – 2021
The Government has unveiled its draft legislation for the 2020 – 2021 Finance Bill (the Bill). The new proposals cover a number of measures that were previously announced in the 2020 Spring Budget.
To help you gain a greater appreciation for potential tax changes on the horizon, we have prepared a summary of some of the key measures outlined in the Bill:
SDLT surcharge for non-UK residents – This new surcharge will add an additional two per cent to all residential rates of Stamp Duty Land Tax (SDLT) where a non-UK buyer purchases residential property in England and Northern Ireland.
This new surcharge will be added to the existing additional surcharges, such as the three per cent surcharge for ‘additional homes’, and will take effect from 1 April 2021.
It will apply to UK residential transactions involving non-resident:
- individuals
- unit trusts
- partnerships
- corporate entities
- beneficiaries under life-interest
- bare trusts and trustees of other types of trust.
This will primarily affect overseas individuals purchasing residential property. However, overseas corporates that bulk-buy residential property will, in most cases, no longer benefit from claiming for multiple dwellings relief, which results in the residential rates applying in place of the bulk-buy commercial rates.
Corporate interest restriction (CIR) –The Bill aims to amend two technical points so that the existing CIR rules work as intended.
The first amendment relates to how the CIR rules interact with the UK real estate investment trust (REIT) rules and deal with potential issues regarding the allocation of a CIR disallowance, where a non-UK company is within the charge to UK Corporation Tax (CT) in respect of a UK property business but its residual business is not within the scope of CT.
The other amendment ensures that no penalties will arise for the late filing of an interest restriction return if there is a reasonable excuse.
New reliefs for housing co-operatives – The draft legislation in the Bill also relieves qualifying housing cooperatives, such as organisations that are neither publicly funded nor social housing cooperatives, from the 15 per cent ‘envelope’ rate of SDLT and the charge to the annual tax on enveloped dwellings (ATED).
The relief for the ATED will be applied retrospectively from 1 April 2020, while the SDLT relief will be introduced following the Autumn Budget later this year.
Amendments to HMRC’s civil information powers – New legislation will give HMRC powers to issue a ‘Financial Institution Notice’, that requires organisations, such as banks, to provide information about a specific taxpayer when requested.
This law will do away with the need for approval from an independent tax tribunal.
The Bill also includes a series of amendments to existing legislature aimed at tackling promoters and enablers of tax avoidance.
Alongside the Bill, the Government also launched several important consultations including:
Business rates review – HM Treasury will carry out a wide-ranging review of the business rates system, including a consideration of the strengths and weaknesses of the current system and the introduction of alternatives, such as dedicated property and online sales tax schemes.
R&D qualifying expenditure – HM Treasury will explore whether the scope of qualifying expenditure could be expanded to include data and cloud computing costs. However, the consultation also asks whether other qualifying expenditure should be restricted as a result to make the tax relief fairer.
Link: Finance Bill 2020-21
HMRC and Companies House have confirmed that from 1 April, all businesses must use compliant, commercial software to file their company’s tax returns. As of 31 March, the free joint online service, commonly known as the CATO portal, from these two Government bodies has been removed and you must now use software to file company tax returns to HMRC. For the time being, you will still be able to file annual accounts at Companies House using third-party software, WebFiling services or paper filing. The decision has been made to end this service as it is “outdated and no longer aligns with modern digital standards”, according to Companies House. This change is in line with the introduction of the Economic Crime and Corporate Transparency Act, which implemented “enhanced corporation tax requirements and changes to UK company law.” It also follows on from a major IT security breach at Companies House, identified in March 2026, that exposed the WebFiling system and allowed some users to potentially access and amend the details of other companies. Although the breach has now been resolved and security strengthened, it has raised concerns about the reliability of GOV.UK One Login service. Can you still amend previous returns using the free service? HMRC and Companies House have confirmed that now that the free filing service has closed, company directors will have to use commercial tax software if they need to make changes to a previously submitted Corporation Tax return or refile a rejected return. From now onwards, any previously filed financial information will no longer be available in the system, as it has not been retained and will need to be entered again. HMRC has said that, for amendments, it will also be acceptable to send a paper return to the Corporation Tax Services office. If you have previously filed financial accounts with Companies House and you want to make changes or corrections, this will also need to be done via commercial software or by sending paper accounts to Companies House via post. Are there any exceptions to this new rule? Companies can file a paper Corporation Tax return only in limited circumstances, such as if they wish to submit it in Welsh or can demonstrate a valid, reasonable excuse to HMRC. Otherwise, returns must be filed online using commercial software. If you are affected by this change and need help choosing and utilising commercial software to complete your Corporation Tax return, please speak to our team.
Capital allowances continue to provide an effective method for businesses to reduce their tax bills, by providing incentives for investment in eligible expenditure – typically plant and machinery. Historically, these reliefs have been subject to change and the 2026/27 tax year is no different, as the Government moves to alter two key reliefs – Writing Down Allowance (WDA) and a new First-Year Allowance (FYA). Reduction of the Writing Down Allowance The WDA will be reduced from 18 per cent to 14 per cent on the main pool of qualifying plant and machinery assets. This change has been introduced on two different dates, starting with companies subject to Corporation Tax on 1 April and followed shortly thereafter by those subject to Income Tax, such as sole traders and partnerships, from 6 April. Businesses with large brought forward main pool expenditures are expected to lose the most from the reduction in the main rate of WDA. In the long-term, the change may also reduce incentives for investment in second-hand assets and cars, which benefited under the previous rules. The new First-Year Allowance To offset some of the impact of the reduction in WDA, a new 40 per cent FYA on main rate expenditure, primarily still covering plant and machinery, will now be available. This new FYA is intended to encourage investment in areas where other FYAs don’t allow, in particular, assets bought by unincorporated businesses and leases. Sole traders and partnerships will, for the first time, be able to get additional support at the point of investment, which means that more businesses will be able to reduce their tax bill in the same year as their investment. This is expected to give a quick cashflow boost to those affected and provide additional support for future investments. However, it is important to note that this FYA does not support investment in second-hand assets, cars or leased assets in other countries. Finally, the Government has also confirmed that small business owners will continue to benefit from tax relief on electric vehicles, as the 100 per cent FYA for zero-emission vehicles and charge points has been extended until 31 March 2027 for Corporation Tax and 5 April 2027 for Income Tax. This gives businesses greater certainty when planning ahead, while also providing a strong financial incentive to invest by reducing tax bills upfront. Want to make more of capital allowances? If you think you may be eligible for capital allowances, either due to the changes outlined in this article or more generally, then it is important that you claim the tax relief available to you. If you would like help reviewing the current capital allowances that your business can claim, please get in touch.
Directors and employees claiming work-from-home tax relief will no longer be able to claim it from the start of the new tax year – 6 April 2026. Why is this relief being taken away? The Chancellor announced the removal of the work-from-home relief as part of her latest Autumn Budget. The main reasoning given for the abolition is that it will support the nation’s deficit reduction. HMRC has also said that it no longer believes it is fit for purpose or easy to police. Who could claim work-from-home relief? Work-from-home relief has been utilised by homeworkers since the early 2000s, helping them offset some of the costs of heating, lighting, broadband and other home-office expenses required to complete their jobs. The relief allowed employees and directors to claim a flat rate of £6 per week or a deduction for actual costs. However, those who do not claim the flat fee were required to provide evidence of the exact costs, such as an invoice or bill. Eligibility for the relief only applied to individuals who had no other choice but to work from home. For instance, where the business did not have an office or the daily commute was not feasible. Individuals who simply preferred to work from home did not qualify. Is there any relief still available for home workers? The only remaining tax-free support will be reimbursements made directly by employers. This applies only where the payments relate to demonstrated additional household costs and where the costs are incurred wholly, exclusively and necessarily for employment duties. For anyone still claiming work-from-home relief, it is worth reviewing your position now to understand how this abolishment will impact your take-home pay.