This edition of the newsletter provides a round up of the current Covid-19 financial support.
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.
Chancellor Rishi Sunak has extended the Coronavirus Job Retention Scheme (CJRS) until the end of April 2021.
Businesses adversely affected by the coronavirus (COVID-19) can make use of the CJRS until the end of April, with the government continuing to pay 80% of employees' salaries for hours not worked. Employers will only be required to pay wages, national insurance contributions (NICs) and pensions for hours worked, and NICs and pensions for hours not worked.
Additionally, Mr Sunak stated that he is extending COVID-19 business loan schemes until the end of March 2021. Businesses will be given until the end of March to access the Bounce Back Loan Scheme (BBLS), Coronavirus Business Interruption Loan Scheme (CBILS) and the Coronavirus Large Business Interruption Loan Scheme (CLBILS). These schemes had been due to close at the end of January.
The Chancellor also confirmed that the 2021 Budget will be delivered on 3 March 2021 and will outline the next phase of the government's plan to combat COVID-19 and protect jobs.
The Chancellor said:
'Our package of support for businesses and workers continues to be one of the most generous and effective in the world – helping our economy recover and protecting livelihoods across the country.
'We know the premium businesses place on certainty, so it is right that we enable them to plan ahead regardless of the path the virus takes, which is why we're providing certainty and clarity by extending this support.'
Internet link: GOV.UK news
HMRC has issued some guidance to taxpayers that deferred their VAT payments between 20 March and 30 June 2020 and still have payments to make.
HMRC is advising taxpayers who deferred their VAT payments to:
Taxpayers can pay their deferred VAT in full by 31 March 2021. There is no need to contact HMRC. However, if taxpayers want to use the new payment scheme they will need to opt in. The new online opt in process will be available in early 2021. Taxpayers will need to opt in themselves as this cannot be carried out by tax agents.
Where taxpayers opt in to the VAT deferral new payment scheme instead of paying the full amount by the end of March 2021, they can make up to 11 smaller monthly instalments which are interest free. All instalments of the outstanding amount must be paid by the end of March 2022.
In order for taxpayers to use the scheme they must:
Taxpayers must prepare to opt in by:
Internet link: GOV.UK guidance
HMRC and the Advertising Standards Authority (ASA) have launched a new joint enforcement notice to cut out misleading marketing by promoters of tax avoidance schemes.
The joint enforcement notice aims to disrupt the activity of promoters and protect individuals from being presented with misleading adverts which may tempt them into tax avoidance.
The enforcement notice requires promoters to be clear about the potential consequences of tax avoidance in any online adverts.
Immediate sanctions include having their paid advertising removed from search engines and follow-up compliance action, which can include referral to Trading Standards. The enforcement notice has been published as HMRC launches its 'Tax avoidance: don't get caught out' awareness campaign warning and educating contractors about how to identify if they are being offered a tax avoidance scheme, and the pitfalls of using these schemes.
Jesse Norman MP, the Financial Secretary to the Treasury, said:
'The government has made clear its determination to clamp down on the promoters of tax avoidance schemes.'
'Today HMRC and the ASA are taking an important further step in this direction by action against misleading advertisements by promoters.'
'As always, we would encourage people to pay close attention to HMRC's warnings not to enter tax avoidance schemes. If it looks too good to be true, it almost certainly is.'
Internet link: GOV.UK news
The deadline for submitting your 2019/20 self assessment return is 31 January 2021. The deadline applies to taxpayers who need to complete a tax return and make direct payments to HMRC in respect of their income tax, Classes 2 and 4 National Insurance Contributions (NIC), capital gains tax and High Income Child Benefit Charge liabilities.
There is a penalty of £100 if a taxpayer's return is not submitted on time, even if there is no tax due or the return shows that they are due a tax refund.
The balance of any outstanding income tax, Classes 2 and 4 NIC, capital gains tax and High Income Child Benefit Charge for the year ended 5th April 2020 is also due for payment by 31 January 2021. Where the payment is made late interest will be charged.
The first payment on account for 2020/21 in respect of income tax and any Class 4 NIC or High Income Child Benefit Charge is also due for payment by 31st January 2021.
HMRC revealed that more than 2,700 taxpayers filed their return on Christmas Day. If you would like help with your return or agreeing your tax liability, please contact us.
The Institute of Directors (IoD) has warned the government that a rise in CGT would affect Britain's entrepreneurial spirit.
The business group believes CGT could be targeted by the Treasury and increased in order to help put public finances back on a stable footing following the coronavirus (COVID-19) pandemic.
Tej Parikh, Chief Economist at the IoD, said:
'But any reform would have to be done with extreme care to prevent a knock-on effect. Positive entrepreneurialism will be more important than ever in the months ahead.'
'All told, ramping up CGT will pour cold water over Britain's entrepreneurialism just when we need it most. It's not an answer to the costs of COVID-19, but rather paves the way for a stunted recovery.'
Additionally, increasing CGT 'would only add to the impression held by some that wealth creation is falling down the list of priorities', the IoD said. It has urged the government to consider the UK's international standing as a destination for business, arguing that the UK has 'long held a strong reputation as a place to start, run and grow a company'.
Internet link: IoD news
Action Fraud has warned the public to remain vigilant when making festive charitable donations as the number of scams rises.
Figures published by Action Fraud showed that £350,000 in charitable donations ended up with criminals over the festive period in 2019. It warned that fraudsters often set up fake charities or impersonate well known charitable organisations in order to deceive victims.
Action Fraud has advised individuals to look for the registered charity number on charity websites; check if a charity is registered with the Fundraising Regulator, never click on links or attachments in emails and never respond to unsolicited messages or phone calls.
Pauline Smith, Head of Action Fraud, said:
'Charities do incredibly important work, helping those in need, especially at this time of year. Unfortunately, criminals will try to abuse the generosity and goodwill of others and this can have a huge financial impact on charities and the good causes they support.'
'We would encourage people not to be put off donating to charities, but instead to be vigilant.'
Internet link Action Fraud news
HMRC is advising the self employed that the Self-Employment Income Support Scheme (SEISS) has been extended. Taxpayers who were not eligible for the first and second grant will not be eligible for the third.
To make a claim for the third grant the taxpayer's business must have had a new or continuing impact from coronavirus between 1 November 2020 and 29 January 2021, which they reasonably believe will have a significant reduction in their profits.
The third taxable grant is worth 80% of a taxpayer's average monthly trading profits, paid out in a single instalment covering three months' worth of profits, and capped at £7,500 in total.
The online service to claim the third grant is open. Taxpayers should make their claim from the date HMRC give taxpayers either by email, letter or within the service. Eligible taxpayers must claim the third grant on or before 29 January 2021.
The grant does not need to be repaid, but will be subject to Income Tax and self-employed National Insurance and must be reported on the taxpayer's 2020 to 2021 Self Assessment tax return. Taxpayers must keep evidence to support their claim.
Internet link: GOV.UK guidance
It is time to prepare for the end of the Brexit transitional period.
Whilst the United Kingdom officially left the European Union (EU) on 31 January 2020, this prompted the start of an 11-month transitional period during which time the UK remains part of the Single Market, the EU Customs Union and the VAT Territory. The UK will leave the EU VAT Territory on 31 December 2020. After this date, Great Britain (England, Wales and Scotland) will not be subject to EU VAT legislation. Northern Ireland will remain subject to EU VAT legislation in respect of transactions involving goods, but not for services.
Acquisitions (purchases of goods from EU member states) will be treated as imports. A new system, Postponed Accounting, will be introduced and will apply to imports received from all over the world, with some exceptions such as low-value consignments. The system is intended to mitigate the cashflow disadvantage posed by paying import VAT upfront and waiting to reclaim it in a later VAT return. Under the new system, import VAT can be deferred and declared to HMRC in the VAT return for the period of importation. The VAT can be reclaimed in the same return subject to the normal rules for reclaiming input tax.
Dispatches (zero-rated sales of goods to business customers in EU member states) will be treated as exports. Exports are zero-rated, provided certain conditions are met.
Distance sales (sales of goods to non-business persons in the EU) will also be treated as exports. The EU distance-selling regime and thresholds will no longer apply to UK suppliers.
When the UK leaves the EU Customs Union on 1 January 2021 the UK will operate a full, external border with the EU. New border controls on imports from the EU to Great Britain will be introduced in stages, with customs declarations for goods which are not controlled being delayed until 30 June 2021.
From 1 January 2021, there will be new rates of Customs Duty for imports - called the UK Global Tariff. To check the tariffs that will apply to different categories of imported goods, please see https://www.gov.uk/guidance/uk-tariffs-from-1-january-2021.
It is important to be ready for these changes. Some practical actions to take now include:
If you require more information please contact us to discuss how we can help you move smoothly into 2021.
Internet link: GOV.UK transition campaign
HMRC has confirmed that they will accept a virtual Christmas party as an event which is capable of falling within the tax exemption rules for annual functions.
The Association of Taxation Technicians (ATT) has received the following statement from HMRC:
'Having considered the scope of section 264 ITEPA03 (annual parties exemption), we are pleased to confirm that the exemption will apply to the costs associated with virtual parties in the same way that it would for traditionally held parties.
'Therefore, the cost of providing food, entertainment, equipment and other expenses which may be incurred in hosting a virtual event, will be exempt, subject to the normal conditions of the exemption being met.
'It is important to note that the intention of the exemption is to allow for costs of provision which are generally incurred for the purposes of the event itself, and that the event, along with any associated provision, is available to employees generally. We will be updating our GOV.UK guidance shortly.'
The rules allow employers to spend up to £150 per head (including VAT) towards the costs of an annual function such as a seasonal party, without creating a tax liability.
To qualify the party must be an annual event which is open to all staff generally, or all staff at a specific location, if the employer has more than one location. If the employer has more than one annual event in a tax year, for all the events to be tax-free the combined cost per head must be no more than £150.
Internet link: ATT news
Some employers may wish to give a small gift to their employees. As long as the employer meets the relevant conditions, no tax charge will arise on the employee.
A tax exemption is available which should help employers ensure that the benefits provided are exempt and do not result in a reportable employee benefit in kind. In order for the benefit to be exempt it must satisfy the following conditions:
If any of these conditions are not met then the benefit will be taxed in the normal way subject to any other exemptions or allowable deductions.
One of the main conditions is that the cost of the benefit does not exceed £50. If the cost is above £50 the full amount is taxable, not just the excess over £50. The cost of providing the benefit to each employee and not the overall cost to the employer determines whether the benefit can be treated as a trivial benefit. So, a benefit costing up to £50 per employee whether provided to one or more employees can be treated as trivial. Where the individual cost for each employee cannot be established, an average could be used. HMRC examples consider various gifts including turkeys, bottles of wine and gift vouchers.
Further details on how the exemption works, including family member situations, are contained in the HMRC manual.
However if you are unsure please do get in touch before assuming the gift you are about to provide is covered by the exemption.
Internet link: HMRC manual