I have summarised all the main tax related updates we have seen this week.
· Electric Company Cars
· Get Ready for Leaving the EU on 1st January 2021
· New Package to Enforce Self Isolation
· Deferral of VAT Payments due to Coronavirus
If you have any queries about this week’s content, please do not hesitate to contact me.
I hope you have a great weekend!
Steven Hillman BSc (Hons) ACA
Tel: 01934 444100
Electric Company Cars
There is currently a zero P11d benefit for the drivers of electric cars in 2020/21. The legislation for this change is included in Finance Act 2020 which also states that the benefit will be 1% of list price in 2021/22 and then 2% in 2022/23.
The zero taxable benefit also applies to hybrid cars emitting no more than 50 grams of CO2 per kilometre with a range using its electric motor of at least 130 miles, but only for cars first registered on or after 6 April 2020. Unfortunately, the range of most plug in hybrids is considerably less than 130 miles. For example, the Mercedes A 250e costing £32,980 emits 26g CO2 but has a PEV range of only 45 miles.
An additional benefit for the business is that motor cars that emit no more than 50g CO2 per kilometre currently also qualify for a 100% first year allowance which means that the full cost can potentially be set off against business profits.
The Mercedes A 250e would currently qualify for a 100% first year allowance but the P11d benefit would be 6% for the employee in 2020/21.
Note however that the 50g CO2 threshold reduces to zero from April 2021 which means that hybrids will cease being eligible for the 100% write off. If the business can afford to do so it’s a good time to buy a plug in hybrid.
Get Ready for Leaving the EU on 1st January 2021
The United Kingdom leaves the European Union at 11pm on 31 December 2020 when the transitional period ends. It is still unclear whether a trade deal will have been agreed with the EU by that date, and such an agreement is looking increasingly unlikely. HMRC have started writing to businesses alerting them to important changes from 1 January 2021 and suggesting that they have new procedures in place if they wish to trade with the EU from that date.
In particular, businesses will need to submit declarations when importing and exporting goods that are categorised as ‘controlled’. Import processes for non-controlled goods will be phased in over a 6 month period. ‘Controlled’ goods include alcohol, explosives and certain drugs.
OBTAIN AN EORI NUMBER
If you have been trading internationally you should already have an Economic Operator Registration and Identification (EORI) number. You will need this to complete customs declarations. If you do not yet have one, you can register for free by going to www.gov.uk/eori
Businesses need to decide how they are going to make customs declarations. Customs agents, freight forwarders and express operators can help with declarations and ensure the business is providing the necessary information.
IMPORTS OF GOODS SUBJECT TO STAGED CONTROLS
Most traders with a good compliance record will be able to defer import declarations on most goods for up to 6 months after 1 January 2021 depending on the nature of the goods.
KEY VAT ISSUES AT THE BORDER
Businesses will need to decide how they will account for import VAT when they make a customs declaration. From 1 January 2021, businesses will be able to use postponed VAT accounting to account for import VAT on their VAT Return for goods imported from anywhere in the world.
They will also need to check if Import VAT is due at the border. Import VAT will not be due at the border if goods in a consignment do not exceed £135 in value. The only exceptions will be excise goods and gifts.
WHAT TARIFFS APPLY FROM 1 JANUARY?
From 1 January 2021, there will be new rates of Customs Duty for imports - called the UK Global Tariff.
The Tariff rates for transactions with the EU will depend upon whether or not a deal is reached. For example, if there is no deal with the EU the Tariff on motor cars will be 10% so many car dealers are suggesting that business should consider acquiring a new vehicle before 1 January. To check the tariffs that will apply to goods you import, go to www.gov.uk/guidance/uk-tariffs-from-1-january-2021
New Package to Enforce Self Isolation
People will be required by law to self-isolate from 28 September, supported by payment of £500 for those on lower incomes who cannot work from home and have lost income as a result. New fines for those breaching self-isolation rules will start at £1,000 – bringing this in line with the penalty for breaking quarantine after international travel - but could increase to up to £10,000 for repeat offences and for the most egregious breaches, including for those preventing others from self-isolating.
For example, this could include business owners who threaten self-isolating staff with redundancy if they do not come to work, sending a clear message that this will not be tolerated.
A number of steps will be taken to make sure that people are complying with the rules, these include:
· NHS Test and Trace call handlers making regular contact with those self-isolating, with the ability to escalate any suspicion of non-compliance to Local Authorities and local police;
· Using police resources to check compliance in highest incidence areas and in high-risk groups, based on local intelligence;
· Investigating and prosecuting high-profile and egregious cases of non-compliance; and
· Acting on instances where third parties have identified others who have tested positive but are not self-isolating.
Recognising that self-isolation is one of the most powerful tools for controlling the transmission of Covid-19, this new Test and Trace Support payment of £500 will help that those on low incomes to self-isolate without worry about their finances.
Just under 4 million people who are in receipt of benefits in England will be eligible for this payment, which will be available to those who are required to self-isolate from 28 September.
Local Authorities will be working to set up these self-isolation support schemes and the Government expects them to be in place by 12 October. Those who start to self-isolate from 28 September will receive backdated payments once the scheme is set up in their Local Authority.
This financial support comes as the government places a legal requirement on people to self-isolate when instructed to by NHS Test and Trace and introduces tougher fines for breaking the rules.
Deferral of VAT Payments due to Coronavirus
The Chancellor has announced that businesses who deferred VAT due from 20 March to 30 June 2020 will now have the option to pay in smaller payments over a longer period.
Instead of paying the full amount by the end of March 2021, HMRC have confirmed businesses can make smaller payments up to the end of March 2022, interest free.
You will need to opt-in to the scheme, and for those who do, this means that your VAT liabilities due between 20 March and 30 June 2020 do not need to be paid in full until the end of March 2022.
Those that can pay their deferred VAT can do so by 31 March 2021.
If you are still unable to pay the VAT due and need more time, you can contact HMRC by phoning: 0300 200 3835.
More information on the scheme will be
available in the coming months and we will keep you up to date when changes