As we neared the end of February, there were burning questions on everyone’s lips as to how the government planned on fuelling economic recovery following the coronavirus pandemic. Was Chancellor Sunak going to raise corporation tax? How could the government provide further support for the self-employed? And were they going to extend furlough for a 3rd time?
Following Chancellor Sunak’s Budget 2021 held on March 3rd, the government announced a number of ways in which they intend to support businesses and jobs throughout the (hopefully!) final stages of the UK lockdown. From coronavirus support for employers and the self-employed; to economy and public finances; health and education support, and changes in taxation – one of the most prominent messages to take from the 2021 budget is the government’s commitment to tackling tax avoidance and evasion.
With the new measures of the 2021 Budget, coupled with the fast-approaching IR35 legislative changes; those who are deemed as introducing contractors to a non-compliant or disguised employment model could be at serious risk of facing up to £1m in penalties for promoting tax avoidance.
So, what can you do to ensure your business’ supply chain is fully complaint?
Incoming measures: what are they?
The Budget 2021 set out several incoming measures surrounding anti-tax avoidance, anti-tax evasion and tax compliance. These proposed measures include:
- Strengthening of existing anti-tax avoidance regimes
- The creation of financial institution notices (FINs)
- Implementation of OECD rules
- Penalties for late payment of VAT and self-assessed income tax
- R&D relief cap for SMEs
Firstly, the government shall implement methods to strengthen existing anti-tax avoidance regimes. These shall be in place to tackle promoters of tax avoidance schemes, allowing HMRC to target these individuals or businesses and issue penalties.
Financial Institution Notices
There will be a drilling down on Financial Institution Notices (FINs); where notices will be given to financial institution requesting specific information and documents for HMRC. This will enable HMRC to obtain information of these businesses relating to tax arrangements – ultimately, allowing tax avoidance and evasion to be combatted.
The budget covers the implementation of OECD rules to allow HMRC to once again, gain further information on digital platforms’ sellers and also information about the seller themselves, in order to prevent tax evasion. Further information can be found here.
A new reformed regime in relation to tax penalties shall also be reviewed in terms of making the penalty regime for submission of VAT and self-assessment income tax fairer and more accurate. Other factors such as interest shall also be reviewed.
Finally, an R&D relief cap of £20,000 plus 300% of a business’s total Pay as you Earn (PAYE) and National Insurance Contributions (NICs) liable shall come into place to combat tax avoidance and evasion through a cap on SMEs claimable tax credit for each year as this is identified by HMRC to be a clear target for fraud and abuse.
Other notable points from the Budget 2021
- Furlough is set to be extended for the 3rd time till the end of September 2021 to support employers. Employers will be asked to top up the wages of furloughed employees by 10% in July and 20% in August and September.
- Support for self-employed extended to September with the help of grants such as the Self-Employed Income Support Scheme (SEISS).
- Minimum wage will increase to £8.91 an hour from April 2021.
- Tax free personal allowance frozen at £12,570 from April 2021 to 2026.
- Apprenticeship incentives for businesses to rise to £3,000 and £126m for traineeships.
To read more on the outcomes from the Budget 2021: you can visit the GOV.UK website here.
How can we help?
With HMRC shifting a heavier focus toward tax avoidance, evasion and non-compliance in response to this years’ budget and upcoming IR35 legislative changes, our range of services here at Bar2 are available to help support and ensure your business demonstrates full compliance and does not incur any financial penalties or debarments. With due diligence essential for your supply chain, now more than ever, our team are available to offer support with ensuring your supply chain is legitimate, protecting your flexible workforce and your business from any financial risk.
For more information or to book an initial consultation with our compliance team: