4th December 2020 – Hillmans Weekly Update
Below I have summarised all the main tax related updates we have seen this week.
- New ‘Significantly Reduced Profits’ Test for Third SEISS Grant
- Pay VAT Deferred Due to COVID-19
- Christmas Gifts of up to £50 to Employees
- How About a Virtual Christmas Party?
If you have any queries about this week’s content, or if you need any assistance please do not hesitate to contact me.
I hope you have a good weekend.
Stay safe and well.
Steven Hillman BSc (Hons) ACA
Tel: 01934 444100
New ‘Significantly Reduced Profits’ Test for Third SEISS Grant
We have been advised by the ICAEW’s Tax Faculty that the eligibility criteria for the third Self-Employment Income Support Scheme (SEISS) Grant has been tightened Further. With the grant claim window opening this week, claimants will need to consider them carefully before making a claim.
Earlier government policy announcements indicated that to qualify for the third SEISS grant, the business needs to not only be adversely affected due to coronavirus but also to:
• be currently trading but be impacted by reduced demand due to coronavirus; or
have been trading but be temporarily unable to do so due to coronavirus.
There is now an additional test which states that the taxpayer must:
• intend to continue to trade; and
• reasonably believe there will be a significant reduction in their trading profits due to reduced activity, capacity or demand or inability to trade due to coronavirus.
Pay VAT Deferred Due to COVID-19
HMRC has issued guidance on paying deferred VAT.
If you deferred VAT between 20 March and 30 June 2020 and still have payments to make, you can:
• pay the deferred VAT in full on or before 31 March 2021
• opt into the VAT deferral new payment scheme when it launches in 2021
• contact HMRC if you need more help to pay
If you want to opt into the new payment scheme:
You cannot opt in yet. The online opt in process will be available in early 2021. You must opt in yourself. Your agent cannot do this for you.
Instead of paying the full amount by the end of March 2021, you can make up to 11 smaller monthly instalments, interest free. All instalments must be paid by the end of March 2022.
The scheme will allow you to:
• pay your deferred VAT in instalments without adding interest
• select the number of instalments from 2 to 11 equal monthly payments
To use this scheme you must:
• still have deferred VAT to pay
• be up to date with your VAT returns
• be able to pay the deferred VAT by Direct Debit
If you opt into the scheme, you can still have a time to pay arrangement for other HMRC debts and outstanding tax.
Get ready to opt into the new payment scheme:
Before opting in you must:
• create your own Government Gateway account if you don’t already have one
• submit any outstanding VAT returns from the last 4 years. You will not be able to join the scheme if you have not done so
• correct errors on your VAT returns as soon as possible. Corrections received after 31 December 2020 may not show in your deferred VAT balance
• make sure you know how much you owe, including the amount you originally deferred and how much you may have already paid
You should also:
• pay what you can as soon as possible to allow HMRC to show the correct deferred VAT balance
• consider the number of equal instalments you will need, from 2 to 11 months
Please talk to us about helping you with your options.
Christmas Gifts of up to £50 to Employees
Certain gifts to staff at Christmas are tax free if structured correctly. Employers are allowed to provide their directors and employees with certain “trivial” benefits in kind tax free.
This exemption applies to small gifts to staff at Christmas, on their birthday, or other occasions and includes gifts of food, wine, or store vouchers.
There are of course a number of conditions that need to be satisfied to qualify for the exemption.
Conditions for the exemption to apply
• the cost of providing the benefit does not exceed £50
• the benefit is not cash or a cash voucher
• the employee is not entitled to the benefit as part of any contractual obligation such as a salary sacrifice scheme
• the benefit is not provided in recognition of particular services performed by the employee as part of their employment duties (or in anticipation of such services)
How About a Virtual Christmas Party?
HMRC are not the Grinch after all. They have recently announced that employers may arrange a “virtual” Christmas party this year and there will be no taxable benefit for employees provided that all staff are invited and the cost per head does not exceed the normal £150 limit.
Maybe keep it to a modest affair and have a big bash when the Coronavirus pandemic is over as we are allowed more than one event a year within the £150 limit.