This edition of the newsletter provides an update on some tax changes as a result of Covid-19
This edition includes articles on the new rules for capital gains tax on property and the shake-up to IR35 rules.
The Summer edition leads on changes to VAT for the construction sector and an article on the potential advantages of deferring your state pension.
The May edition details the changes to Entrepreneurs' Relief and the potential pitfalls when claiming Capital Allowances on some assets.
As part of the Winter Economy Plan the Self-Employment Income Support Scheme (SEISS) will be extended under the name SEISS Grant Extension. The grant:
The scheme will last for six months, from November 2020 to April 2021, and will consist of two grants. The first grant will cover a three-month period from the start of November until the end of January. This initial grant will cover 20% of average monthly trading profits, paid out in a single instalment covering three months' worth of profits, and capped at £1,875 in total. The second grant will cover a three-month period from the start of February until the end of April. The government will review the level of the second grant and set this in due course.
The amount of the first grant under the SEISS grant extension will be significantly less than the grants made under the SEISS. The initial SEISS grant was based on 80% of profits (capped at £7,500) and the second SEISS grant was based on 70% of profits (capped at £6,570).
Internet link: Gov.uk factsheet
Over half a million businesses deferred VAT payments, which were due in March to June 2020, with these payments becoming due at the end of March 2021.
As part of the Winter Economy Plan the government has now announced the option for such businesses to spread their payments over the financial year 2021/22. Businesses will be able to choose to make 11 equal instalments over 2021/22. All businesses which took advantage of the VAT deferral can use the spreading scheme. Businesses will need to opt in and HMRC will put in place an opt-in process in early 2021.
Taxpayers were able to defer the income tax self assessment payment on account for 2019/20, due by 31 July 2020, to 31 January 2021. There are also other amounts due on 31 January 2021 – a balancing payment for the 2019/20 tax year and the first payment on account for the 2020/21 tax year.
Taxpayers with up to £30,000 of self assessment liabilities due will be able to use HMRC's self-service Time to Pay facility to secure a plan to pay over an additional 12 months. This means that self assessment liabilities due in July 2020, and those due in January 2021, will not need to be paid in full until January 2022. Any self assessment taxpayer not able to pay their tax bill on time, including those who cannot use the online service, can continue to use HMRC's Time to Pay self assessment helpline to agree a payment plan.
Internet link: Gov.uk news
The Bounce Back Loan Scheme (BBLS) has provided support to many UK-based small businesses. Loans are between £2,000 and £50,000, capped at 25% of turnover, with a 100% government guarantee to the lender. The borrower does not have to make any repayments for the first 12 months, with the government covering the first 12 months' interest payments. Under a Pay as you Grow scheme businesses will have options to:
The Coronavirus Business Interruption Loan Scheme provides loan facilities to UK-based businesses with turnover under £45 million. The scheme provides loans of up to £5 million with an 80% government guarantee to the lender. The government does not charge businesses for this guarantee and also covers the first 12 months of interest payments and fees.
The government has announced that as part of the Winter Economy Plan it intends to allow CBILS lenders to extend the term of a loan up to ten years.
The government is also extending the CBILS and BBLS to 30 November 2020 for new applications.
Applications for the Coronavirus Large Business Interruption Loan Scheme and the Future Fund will also be extended.
Internet link: gov.uk publications
HMRC has issued detailed guidance on the domestic reverse charge changes scheduled for 1 March 2021.
The reverse charge represents part of a government clampdown on VAT fraud. Large amounts of VAT are lost through 'missing trader' fraud. As part of this type of fraud, VAT is charged by a supplier, who then disappears, along with the output tax. The VAT is thus lost to HMRC. Construction is considered a particularly high-risk sector because of the potential to make supplies with minimal input tax but considerable output tax.
The reverse charge does not change the VAT liability: it changes the way that VAT is accounted for. From 1 March 2021 the recipient of the services, rather than the supplier, will account for VAT on specified building and construction services. This is called a 'reverse charge'.
The reverse charge is a business-to-business charge, applying to VAT-registered businesses where payments are required to be reported through the Construction Industry Scheme (CIS). It will be used through the CIS supply chain, up to the point where the recipient is no longer a business making supplies of specified construction services. The rules refer to this as the 'end user'.
Broadly then, the reverse charge means that a contractor receiving a supply of specified construction services has to account for the output VAT due – rather than the subcontractor supplying the services. The contractor then also has to deduct the VAT due on the supply as input VAT, subject to the normal rules. In most cases, no net tax on the transaction will be payable to HMRC.
The charge affects only supplies at standard or reduced rates where payments are required to be reported via CIS and not to:
Under the scheme a VAT-registered business, receiving a supply of specified services from another VAT-registered business, for onward sale, on or after 1 March 2021:
The supplier should issue a VAT invoice, indicating the supplies are subject to the reverse charge.
An end user should notify its end user status, so the supplier can charge VAT in the usual way.
Businesses in England that are required to shut because of local interventions will now be able to claim up to £1,500 per property every three weeks.
To be eligible for the grant, a business must have been required to close due to local COVID-19 restrictions. The largest businesses will receive £1,500 every three weeks they are required to close. Smaller businesses will receive £1,000.
Payments are triggered by a national decision to close businesses in a high incidence area. Each payment will be made for a three-week lockdown period. Each new three week lockdown period triggers an additional payment.
Internet link: gov.uk news
HMRC has sent letters to VAT-registered businesses in Great Britain trading with the EU, or the EU and the rest of the world. They explain what businesses need to do to prepare for new processes for moving goods between Great Britain and the EU from 1 January 2021.
Measures explained in the letter include:
Internet link: gov.uk letters
The government has announced that residential property transactions rose 15.6% in August following the introduction of a stamp duty holiday.
The government has announced:
New figures show that house sales rose 15.6% in August following the introduction of the stamp duty holiday, helping to protect nearly three quarters of a million jobs in the housing sector and wider supply chain.
The increase follows a 14.5% rise in July. Residential property transactions in August rose a further 15.6% as more people decided to buy a new home or move house. The increase in transactions came after the Chancellor announced a stamp duty holiday at the start of July that will last until March 2021.
The move has helped to protect nearly 750,000 jobs, benefiting businesses across the housing supply chain and beyond, with the Bank of England estimating that households who move home are much more likely to purchase a range of durable goods, such as furniture, carpets or major appliances.
It is expected that, among others, housebuilders, estate agents, tradespeople, DIY stores, removal and cleaning firms could all benefit from the increased activity.
Chancellor Rishi Sunak said:
'Every home sold means more jobs protected – helping us to deliver on our Plan for Jobs.
'But this isn't just about the housing market. Owners doing up their homes to sell and buyers reinvesting stamp duty savings to make their new house feel like a home are also firing up local businesses, supporting, creating and protecting jobs across the country.'
As part of its Plan for Jobs, the government introduced a temporary stamp duty holiday for residential properties worth up to £500,000, effective from 8 July 2020 until 31 March 2021. The holiday means nine out of ten people getting on or moving up the property ladder will pay no SDLT at all. This measure delivers an average saving of £4,500 in SDLT.
Internet link: gov.uk news
On 2 September 2020, the government's £2 billion Kickstart Scheme opened for employer applications.
The scheme is part of the Plan for Jobs announced during Chancellor Rishi Sunak's July Summer Economic Update.
The Kickstart Scheme aims to create work placements for young people who are at risk of becoming unemployed for the long-term. Businesses can join the scheme, with the government paying employers £1,500 to help set up support and training. Funding is available following a successful application process. Applications must be for a minimum of 30 job placements.
Businesses that are unable to offer this many job placements can partner with other organisations to reach the minimum number.
Selected out-of-work young people will be offered six month work placements for at least 25 hours a week to help them gain experience, skills and confidence. The scheme is designed to be a stepping stone to further employment.
Employers will receive funding for 100% of the relevant National Minimum Wage (NMW) for 25 hours a week, plus associated employer national insurance contributions (NICs) and employer minimum auto-enrolment pension contributions.
Chancellor Sunak said:
'This isn't just about kickstarting our country's economy – it is an opportunity to kickstart the careers of thousands of young people who could otherwise be left behind as a result of the pandemic.
'The scheme will open the door to a brighter future for a new generation and ensure the UK bounces back stronger as a country.'
Internet link: GOV.UK
HMRC are inviting those individuals that are self employed or a member of a partnership and have been adversely affected by coronavirus to claim a second grant under the Self Employed Income Support Grant.
Applications for the first grant under the scheme closed on 13 July 2020.
The second and final taxable grant is worth 70% of an individual's average monthly trading profits, paid out in a single instalment covering three months' worth of profits, and capped at £6,570 in total.
Applications for the second and final grant are now open. The grant is only available to businesses that have been adversely affected on or after 14 July 2020. Taxpayers must make a claim for the second grant on or before 19 October 2020.
HMRC will work out businesses' eligibility for the second grant in the same way as the first grant.
Taxpayers are able to make a claim for the second grant if they are eligible, even if they did not make a claim for the first grant.
HMRC have confirmed that taxpayers can:
The grant does not need to be repaid if a taxpayer is eligible, but will be subject to both income tax and self employed National Insurance.
Internet link: GOV.UK SEISS guidance
The fee for plastic shopping bags in England will be doubled to 10 pence and extended to all shops from April 2021.
Small retailers, those employing 250 people or fewer, will no longer be exempt, the Department for Environment, Food and Rural Affairs (Defra) said.
According to Defra, since the charge was first introduced in 2015 it has successfully prevented billions of plastic bags being sold and ending up in the ocean and environment.
Government data shows the current levy, which stands at 5 pence per bag and applies to any retailer employing 250 or more people, has led to a 95% cut in plastic bag sales in major supermarkets since 2015.
Commenting on the announcement, Environment Secretary George Eustice, said:
'We have all seen the devastating impact plastic bags have on the oceans and on precious marine wildlife, which is why we are taking bold and ambitious action to tackle this issue head on.
'The UK is already a world-leader in this global effort, and our carrier bag charge has been hugely successful in taking billions of harmful plastic bags out of circulation. But we want to go further by extending this to all retailers so we can continue to cut unnecessary waste and build back greener.'
Internet link: GOV.UK