Friday 29 January 2021

29th January 2021 – Hillmans Weekly Update


Below I have summarised all the main tax related updates we have seen this week.

Business News Update
No Self-Assessment late filing penalty for those who file online by 28 February
Deadline for claiming third SEISS grant - 29th January 2021
Pay VAT deferred due to coronavirus (COVID-19)
Making Tax Digital for VAT

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.

Cheers,

Steve

Steven Hillman BSc (Hons) ACA
Chartered Accountant
Tel: 01934 444100


Thursday 28 January 2021

Business News Update

Last week we witnessed the inauguration of a new US president with the promise of further economic stimulus and over 6 million first dose Covid-19 vaccinations administered in the UK. This continues to create a more positive short-term outlook for families and businesses.

The reality is that Government vaccination targets are dependent on the vaccine manufacturers and the safety checks that follow. Nearly 90% of vulnerable people should get their injection by mid-February. Any slip in the supply will delay vaccinations. So we still need to be patient.

On the economic front, the Office for National Statistics latest update shows debit and credit purchases are 35% down on last February and over a quarter (26%) of UK businesses currently trading said that turnover had decreased by more than 20% compared with what is normally expected for this time of year. Interestingly 48% of all workers are still travelling to a workplace.

Overall retail footfall in the UK is at 33% when compared with the same week a year ago, the lowest level since the week ending 7 June 2020. These figures are not unexpected in a national lockdown.

Regional grants are available for closed businesses so please talk to us about these.

Wednesday 27 January 2021

Making Tax Digital for VAT

MAKING TAX DIGITAL (MTD) FOR VAT

From the 1 April 2022, MTD for VAT will apply to all VAT registered businesses regardless of the level of turnover. The first VAT period to which MTD applies to all VAT registered businesses (who are not already doing so) will be the one commencing on or after 1 April 2022.

What is “Making Tax Digital”?

Making Tax Digital (MTD) is a government initiative to modernise HMRC’s tax system, with the aim of making the whole process of administrating tax simpler and more efficient. All of your tax information will be in one place (your digital account) and you will be able to pay tax based on your business activity during the year. You can upload and update your tax account in real time.

Will it affect me?

If you own a business, you are self-employed and you pay income tax, national insurance, VAT or corporation tax, then it is quite likely you will be affected. This means you could be required to keep track of your tax affairs digitally using MTD compatible software, and to update HMRC at least quarterly via your digital tax account. Eventually this will abolish the annual tax return. This will be the law and there will be penalties for non- compliance.  

When is all this happening?

MTD for VAT has already started and has been “live” for nearly two years.  It started with businesses above the VAT threshold limits (currently £85,000) in April 2019.

From the 1 April 2022, MTD for VAT will apply to all VAT registered businesses regardless of level of turnover.

This notice below explains the rules for Making Tax Digital for VAT and about the digital information you must keep if they apply to you. It was last updated 31 December 2020.

Please talk to us about how we can help your business comply with the new rules. We can recommend the right software and provide the training and support you need.   

Tuesday 26 January 2021

Pay VAT deferred due to coronavirus (COVID-19)

The guidance on how to pay VAT payments deferred between 20 March and 30 June 2020 has been updated with an added section on ‘Correcting errors on your VAT returns relating to the VAT payments deferral scheme’, including information on how to defer any extra payments resulting error corrections and HMRC VAT assessments.

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.

The online opt in process will be available in early 2021 and you must do this yourself.

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.
opt in before the end of March 2021.
pay the first instalment when you opt in

If you opt into the scheme, you can still have a time to pay arrangement for other HMRC debts and outstanding tax.

See: https://www.gov.uk/guidance/deferral-of-vat-payments-due-to-coronavirus-covid-19


Monday 25 January 2021

No Self Assessment late filing penalty for those who file online by 28 February

HMRC has today confirmed that taxpayers who cannot file their self-assessment tax return by the 31st January 2021 deadline will not receive a late filing penalty if they file online by 28th February.

However taxpayers are still obliged to pay their bill by 31st January. Interest will be charged from 1st February on any outstanding liabilities.

Taxpayers who cannot afford to pay their tax bill on time can apply online to spread their bill over up to 12 months, but they will need to file their 2019 to 2020 tax return before setting up a time to pay arrangement. 

https://www.gov.uk/government/news/no-self-assessment-late-filing-penalty-for-those-who-file-online-by-28-february


Deadline for claiming third SEISS grant - 29th January 2021

A reminder that claims for the third Self Employment Income Support Scheme (SEISS) grant must be submitted to HMRC by midnight on Friday 29th January 2021.

It is not usually possible to make a late claim under the scheme.

When deciding whether you meet the “significant reduction in trading profits” test for the third SEISS grant, you do not need to take into account the first and second SEISS grants, nor any other COVID-19 government support payments received.

If the 1st November 2020 to 31st January 2021 eligibility period for the third grant straddles two basis periods, it is sufficient to be able to show a significant reduction in trading profits for one of the basis periods. You do not need to show a significant reduction in both basis periods to be eligible for the third grant.

When assessing whether there has been a significant reduction in trading profits, the comparison period is not specified in HMRC’s guidance. You can use the previous year or an average of for example the last three years trading profits, but a reduction against an earlier forecast for the relevant basis period would also be valid.

Where you have more than one trade it is sufficient to show that one of the trades has suffered reduced activity, capacity, or demand, or has been temporarily unable to operate since 1st November 2020, and that you reasonably believe that this will cause a significant reduction in the profits compared with what you would otherwise have expected for that trade. You do not have to consider the two trades together.

In some cases, the reduction in activity, capacity, or demand may be only partly due to COVID-19 restrictions. For example, you might decide to take on a part-time job or college course alongside your reduced self-employment. So long as least some of the reduced activity, capacity or demand is due to COVID-19 restrictions you would be eligible for the third grant.

Friday 22 January 2021

22nd January 2021 – Hillmans Weekly Update


22nd January 2021 – Hillmans Weekly Update

Below I have summarised all the main tax related updates we have seen this week.

Guide to VAT reverse charge for construction services
Making Tax Digital for Income Tax
Advisory Fuel Rate For Company Cars
Data Sharing
Selling services to the EU

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.

Kind regards,

Steve

Steven Hillman BSc (Hons) ACA
Chartered Accountant
Tel: 01934 444100
https://www.hillmans.co.uk/covid-19-updates 


Thursday 21 January 2021

VAT reverse charge for construction services

VAT reverse charge for construction services

The VAT domestic reverse charge for building and construction services is now scheduled to come into effect from 1 March 2021. The original introduction date was changed from 1 October 2019 to 1 October 2020 and revised again in June 2020 due to the impact of Covid-19. The legislation has not changed since it was enacted in 2019 except for a useful change to the requirements placed on ‘end users’ and ‘intermediary suppliers’.


The reverse charge represents part of a government clampdown on VAT fraud. A domestic reverse charge means that a contractor receiving a supply of specified construction services must account for the output VAT due, rather than the sub-contractor who supplied the services. The contractor also deducts the VAT due on the supply as input VAT, subject to normal VAT rules, meaning no net tax is usually payable to HMRC. The reverse charge thus removes the scope to evade any VAT owing to HMRC by the sub-contractor.


The charge affects only supplies at standard or reduced rates where payments are required to be reported via the Construction Industry Scheme (CIS). It does not apply:

  • to zero-rated supplies
  • to services supplied to ‘end users’ or ‘intermediary suppliers’ who have given written confirmation of their status to their supplier in respect of the services supplied
  • to an employment business supplying either staff or workers.

How will the scheme work?


A VAT-registered business, supplying ‘specified services’ to a VAT and CIS registered business, other than an end user or intermediary supplier:

  • issues a VAT invoice indicating the supplies are subject to the reverse charge and that the customer must account for the VAT. The invoice does not therefore charge any amount for VAT. It should, however, state how much VAT is due, or the rate of VAT, if the VAT amount cannot be shown.

The business receiving the supply of specified services:

  • does not pay output VAT to its supplier on supplies received from them
  • accounts for the output VAT on supplies received through its VAT return
  • reclaims the VAT on supplies received as input tax, subject to normal VAT rules.

Example


Safe as Houses Ltd is a VAT and CIS registered contractor. It uses Brickyard Bill, who is also VAT and CIS registered. Brickyard Bill issues an invoice which shows the usual information required to be shown on a VAT invoice but instead of charging VAT, the invoice states that the VAT reverse charge applies.


Safe as Houses does not pay VAT to Brickyard Bill. It accounts for the VAT on its own VAT return, entering it as both output and input tax. It enters the value of the purchase from Brickyard Bill as part of its inputs. It does not include the value in its outputs.


Their VAT returns will look like this:

  • Brickyard Bill puts the net value of the sales in box 6 of the VAT return: but no output tax in box 1 
  • Safe as Houses uses box 1 to declare the output tax on the services from Brickyard Bill to which the charge applies. It does not include the value of the transaction as an output in box 6. It reclaims the input tax on reverse charge purchases in box 4 and includes the net value of purchases in box 7.

Specified services


Generally, construction services covered by the reverse charge are those falling within the category of ‘construction operations’ for CIS. There are two particular points to note.

  • The reverse charge includes goods, where supplied with specified services. This is different from the CIS scheme, where CIS payments to sub-contractors who are subject to income tax deductions, are apportioned to exclude the materials content.
  • Services excluded from the definition of construction operations for CIS are similarly excluded from the VAT reverse charge, where these are supplied on their own. But, where such services are supplied with services subject to the reverse charge, the whole supply is subject to the reverse charge, as is the case for the CIS scheme.

HMRC guidance provides a ‘5% disregard’ if the reverse charge part of the supply is 5% or less of the value of the whole supply. For example, a joiner constructing a staircase offsite then installing it onsite will be making a reverse charge service unless the charge for installation is 5% or less of the overall charge.


Also, if there has already been a reverse charge supply on a construction site, any subsequent supplies on that site between the same parties may be treated as reverse charge supplies, if both parties agree. Where there is any doubt, HMRC’s guidance states the reverse charge should apply, if the recipient is VAT-registered and payments are subject to CIS.


End users and intermediary suppliers


The domestic reverse charge applies to VAT-registered businesses throughout the CIS supply chain, but is designed not to apply to ‘end users’ or ‘intermediary suppliers’. End users are VAT and CIS registered businesses receiving supplies of specified services which are not sold on as construction services. 


An example of an end user would be a construction firm building an office on land which it owns and selling that interest in land as a newly-built office. Supplies made to the construction firm by sub-contractors will therefore subject to normal VAT rules. 


However, if the construction firm undertook a ‘design and build’ contract for an office to be built on land owned by a customer, the firm will be providing a construction supply to the customer (and will apply normal VAT rules). Construction services supplied by sub-contractors to the construction firm will be subject to the reverse charge.


Intermediary suppliers are VAT-registered businesses in receipt of CIS supplies who are connected or linked to end users. Examples could be landlords and tenants, or recharges of building and construction services within a group of companies.


How to determine if supplies are being made to end users or intermediary suppliers


Businesses need to know when they are dealing with an end user or intermediary supplier, so that they can invoice appropriately. Due to the difficulties that may have arisen to suppliers, an amendment has been made to the legislation requiring end users and intermediary suppliers to notify their suppliers of their status in respect of a particular construction service contract. 


If no confirmation is given, the supplier should issue a reverse charge invoice.


The confirmation needs to be ‘in writing’ or in a written agreement (for example a contract). HMRC interpret the notification requirements as being satisfied if made on paper and sent by post or electronically in an email.


If you are a supplier of construction services and have any doubt on the correct VAT treatment, you should always ask the customer if they are registered for VAT and CIS and whether or not they are an end user.


If you often deal with end users or intermediary suppliers, you can include a statement in your terms and conditions to say you assume that your customer is an end user or intermediary supplier unless they say they are not. This places responsibility on the customer to respond if this is not the case.


HMRC guidance


HMRC has now issued revised guidance. This link sets out what you need to do and has links to further guidance: bit.ly/2WHQ5R2. There is also a technical guide: bit.ly/2F7tuKU. The technical guide has a list of contents covering specific areas which may be relevant to your particular circumstances. At the end of the technical guidance there are two useful flowcharts which summarise the steps that need to be taken to determine whether a supply is subject to the reverse charge.


HMRC will apply a ‘light touch’ on genuine errors for six months from March 2021, where businesses are aiming to comply and act in good faith.


Planning for the new regime


Key action points:


  • establish when the reverse charge is likely to apply to supplies to and from other VAT-registered contractors and sub-contractors you deal with. Before you can apply the reverse charge you need to be satisfied that your customer is VAT-registered and your contract is within the CIS
  • check that your accounting systems will calculate and report reverse charge supplies. Invoices will need to specify that the reverse charge applies
  • establish procedures for additional information you will need from some of your customers
  • consider the training staff will require to deal with the new rules
  • estimate the cashflow consequences on your business if you no longer hold output tax. It may be that changing to a monthly VAT return cycle to accelerate payments due from HMRC would be of benefit.

If you are a supplier using the Cash Accounting Scheme or the Flat Rate Scheme, neither of these schemes can be used for the supply of services that are subject to the reverse charge. This may mean that it is no longer beneficial to use these schemes.


How we can help


The change means that the construction sector is likely to be subject to considerable HMRC scrutiny in the foreseeable future. The reverse charge may highlight that some construction services may not have been correctly classified in the past. For these reasons, we would recommend taking stock of VAT and CIS compliance across the board.


Please contact us for an in-depth discussion, or for advice on cashflow and financial management strategies to help your business adapt successfully to the new regime.

Advisory Fuel Rate For Company Cars

These are the suggested reimbursement rates for employees' private mileage using their company car from 1 December 2020. Where there has been a change the previous rate is shown in brackets.



Note that for hybrid cars you must use the petrol or diesel rate.

You can continue to use the previous rates for up to 1 month from the date the new rates apply.




Wednesday 20 January 2021

Data Sharing

The Government has updated its guidance on the new rules that apply to data sharing with Europe.

How this affects your business will depend on several factors, including the nature of your business and where your customers are located. Data sharing with the EEA is one of the key areas to consider.

The Government has legislated so that UK firms can continue to lawfully send personal data from the UK to the EEA and 13 other countries that the EU has deemed to provide an adequate level of protection of personal data. They have also announced that the UK-EU Trade and Cooperation Agreement provides for the continued free flow of personal data from the EU and EEA to the UK until adequacy decisions are adopted, for no longer than 6 months.

The Information Commissioner’s Office (ICO) states that the agreement between the UK and the EU enables businesses and public bodies across all sectors to continue to freely receive data from the EU (and EEA). However, as a sensible precaution, the ICO recommends that businesses work with EU and EEA organisations who transfer personal data to them, to put in place alternative transfer mechanisms to safeguard against any interruption to the free flow of EU to UK personal data.

This means that businesses and organisations can be confident in the free flow of personal data from 1 January, without having to make any changes to their data protection practices.

See:  https://ico.org.uk/about-the-ico/news-and-events/news-and-blogs/2020/12/ico-statement-in-response-to-uk-governments-announcement-on-the-extended-period-for-personal-data-flows-that-will-allow-time-to-complete-the-adequacy-process/

The new rules will take some time to “bed in” and we will keep you updated on practical actions to take and as new rules or agreements are made between the UK and the EU.   


Tuesday 19 January 2021

Selling services to the EU

Selling services to the EU, Switzerland, Norway, Iceland and Liechtenstein

The UK-EU Trade and Cooperation Agreement ensures that UK firms in a variety of service sectors can continue to access the EU market, including as business travellers and cross-border services suppliers or investors, while being treated no less favourably than either EU businesses or competitors from third countries.

While the Agreement sets out expectations of the treatment and level of access to each Party’s domestic market, there will still be some changes for business as a result of no longer operating under European Economic Area (EEA) regulation covering cross-border trade in services. These changes are different for each sector and differ in each member state of the EU.


There are country guides and information for UK businesses providing services and travelling for business to countries in the EEA and Switzerland: https://www.gov.uk/government/collections/providing-services-to-eea-and-efta-countries-after-eu-exit

Monday 18 January 2021

Making Tax Digital for Income Tax

MAKING TAX DIGITAL (MTD) FOR INCOME TAX

Self-employed businesses and landlords with annual business or property income above £10,000 will need to follow the rules for MTD for Income Tax from their next accounting period starting on or after 6 April 2023.

What is “Making Tax Digital”?


Making Tax Digital (MTD) is a government initiative to modernise HMRC’s tax system, with the aim of making the whole process of administrating tax simpler and more efficient. All of your tax information will be in one place (your digital account) and you will be able to pay tax based on your business activity during the year. You can upload and update your tax account in real time.

Will it affect me?

If you own a business, you are self-employed and you pay income tax, national insurance, VAT or corporation tax, then it is quite likely you will be affected. This means you could be required to keep track of your tax affairs digitally using MTD compatible software, and to update HMRC at least quarterly via your digital tax account. Eventually this will abolish the annual tax return. This will be the law and there will be penalties for non- compliance. 

When is all this happening?

MTD for VAT has already started and has been “live” for nearly two years.  It started with businesses above the VAT threshold limits (currently £85,000) in April 2019.

From the 1 April 2022, MTD for VAT will apply to all VAT registered businesses regardless of the level of turnover.

MTD for income tax


MTD for income tax should become law from 6 April 2023. MTD for income tax will apply to self-employed, partnerships and to those who receive income from property, with gross income from these sources combined above a threshold of £10,000.

The Government is running a pilot scheme where businesses can use the online service for Making Tax Digital for Income Tax.

See: https://www.gov.uk/guidance/sign-up-your-business-for-making-tax-digital-for-income-tax

What should I do about MTD?

Talk to us - In the last two years we have worked with many other clients to help them comply with MTD for VAT and streamline the way they do things.

Just suppose you had a system where your bank feeds your data directly into your accounts on a DAILY basis, you take a photo on your phone of a purchase invoice and it is posted automatically, you can see your results, who owes you money, who you owe and your business bank balance 24/7, 365 from your smart phone.

We have MTD compliant Cloud accounting packages that give you:

A clear picture of your current financial position, in real-time
Automatic updates that mean you can spend more time doing what you enjoy
Your accounts are 100% online, so there’s no software to install and everything is backed up automatically. Updates are free and instantly available

Please contact us about helping you to comply with the new rules. We are cloud accounting specialists, and we can train and support you with the right software.  

Friday 15 January 2021

15th January 2021 – Hillmans Weekly Update


Below I have summarised all the main tax related updates we have seen this week.

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.

Cheers,

Steve

Steven Hillman BSc (Hons) ACA
Chartered Accountant
Tel: 01934 444100


Supreme Court finds in favour of small firms receiving payments from business interruption insurance policies

The Financial Conduct Authority (FCA) has won its court case to get insurers to pay out for business interruption due to the first lockdown in the spring of 2020. The Supreme Court says it “substantially allows” the appeal by the FCA and hospitality groups. The decision affects approximately 370,000 policyholders and over £1billion in claims which should now be paid out.  

Small businesses including pubs, cafes, wedding planners and beauty parlours, argued they faced becoming insolvent when they were refused compensation by insurers for business interruption policy claims on losses caused by the first national COVID-19 lockdown.

Some of the world's largest commercial insurers including Hiscox, Royal Sun Alliance, QBE, Argenta, Arch and MS Amlin, told the Supreme Court in an appeal that many business interruption policies did not cover widespread disruption. The Court ruled against them. 

This now means that the Supreme Court ruling will provide guidance on the claim adjustment process and it is hoped that this will progress quickly.


The FCA has stated that they will be working with insurers to ensure that they now move quickly to pay claims that the judgment said should be paid, making interim payments wherever possible. Insurers should also communicate directly and quickly with policyholders who have made claims affected by the judgment to explain next steps.


Thursday 14 January 2021

Exporting to EU - Getting an EORI Number

From January 2021 you need an EORI number to move goods between the UK and the EU.

You can apply for your EORI number in advance. It can take up to a week to get one.

You will not usually need an EORI number if you only:
provide services
move goods between Northern Ireland and Ireland
If you use a post or parcel company they will tell you if you need an EORI number.

You will need an EU EORI number if your business will be making customs declarations or getting a customs decision in the EU. Get this from the customs authority in the EU country where you submit your first declaration or request your first decision.

IF YOU ALREADY HAVE AN EORI

From January 2021 you’ll need an EORI number that starts with GB to move goods to or from the UK.

Check your EORI number. Apply for a new one if yours does not start with GB.

BEFORE YOU APPLY

To apply you may need your:
VAT number and effective date of registration - these are on your VAT registration certificate
National Insurance number - if you’re an individual or a sole trader
Unique Taxpayer Reference (UTR)
Business start date and Standard Industrial Classification (SIC) code - these are in the Companies House register
Government Gateway user ID and password

If you need a Government Gateway user ID, use either:
the one for your business or organisation
your own if you’re applying as an individual

If you do not already have a user ID, you’ll be able to create one when you apply.

To apply for an EORI number see: https://www.gov.uk/eori?step-by-step-nav


Wednesday 13 January 2021

Business News Update

The latest economic news and indicators for the UK make gloomy reading and as we are in lock down they will probably remain so for the foreseeable future. Remember though, they should be taken for what they are – a snapshot at a particular point in time, and once the vaccination programme fully kicks in and lock down restrictions ease, we should see an improvement in our lives and businesses.

Retailers had their worst annual sales performance on record in 2020, driven by loss of demand for fashion and homeware products, figures from the British Retail Consortium (BRC) show.

Food sales growth rose 5.4% on 2019, non-food fell about 5%, this is an overall fall of 0.3% in a year dominated by the Covid-19 impact.  This is the worst annual change since the BRC began collating the figures in 1995.

The latest Government surveys show for all businesses, excluding those who have permanently ceased trading, 11% of their workforce are on furlough leave, a decrease from 16% previously.

UK footfall overall is down by 38% compared to January 2020 and we can expect this to fall further as we stay in lock down.   

The Chancellor has stated that the UK economy “to get worse before it gets better” and that the new national restrictions were necessary to control the spread of coronavirus.

We expect to see further Government supports announced shortly and we will keep our clients fully informed of when and how these will be applied. 

See: https://www.ons.gov.uk/peoplepopulationandcommunity/healthandsocialcare/conditionsanddiseases/bulletins/coronavirustheukeconomyandsocietyfasterindicators/2021

What is interesting is that according to the most recent results from of the Business Impact of Coronavirus (COVID-19) Survey (30 November to 13 December 2020), 84% of UK businesses were trading, an increase from 80% in the last survey (16 to 29 November). Clearly this will fall in January, February and March as the lock down continues.

What these figures do show to us is that businesses are resilient and adapting to the changes caused by the Pandemic.

We are seeing some remarkable clients who have adopted new technologies to change the way they conduct business and distribute their goods or services. Talk to us about helping you pivot or repurpose your business and adapting for the future.       


Tuesday 12 January 2021

Passing on the Family Home

TIME TO REVIEW YOUR WILL

Top of the to do list for many individuals is to make or update their will. Many think this is something to leave until later in life but it is important to get things in place once property is acquired or when children come along. 

In the absence of a will there are statutory rules which dictate how your assets are distributed on death. Those statutory intestacy rules may not be tax efficient and you might to want to make specific provision in your Will for your unmarried partner or for the guardianship of your children.

PASSING ON THE FAMILY HOME

One recent change that should be taken into consideration when drafting your Will is the additional Inheritance Tax (IHT) nil rate band for passing on the family home to direct descendants on death. 

Now that the additional relief is fully phased in it provides an extra £175,000 on top of to the normal £325,000 nil rate band.  Where the allowance is unused on the death of the first spouse, the unused allowance is available on the death of the surviving spouse, potentially allowing a married couple (or civil partners) to potentially pass on assets of up to £1 million without paying IHT.

This additional relief is, however, restricted if your assets exceed £2 million. 

This relief is even available when you downsize to a smaller property. 

For example, if a married couple currently live In a large house worth  £500,000 downsize to a flat worth £300,000, they could give away some of the proceeds during their lifetime and yet still benefit from inheritance tax relief based on the higher valued property.  

They could even sell up completely and move into a rental property or a care home and still get the inheritance tax relief! 


Monday 11 January 2021

£1 Million Annual Investment Allowances Extended

The Chancellor recently announced that the temporary increase in the Annual Investment Allowance (AIA) for expenditure on plant and machinery has been extended to 31 December 2021.

The tax relief was originally scheduled to revert to just £200,000 from 1 January 2021, but that will now be delayed by twelve months.

Remember that there is currently an additional 100% tax relief for the cost of buying a new car for the business where the CO2 emissions of the car are no more than 50g per kilometre. That threshold reduces to 0g from April 2021.


Friday 8 January 2021

8th January 2021 – Hillmans Weekly Update


I hope you are keeping safe and well.


Below is a summary of all the main tax related updates we have seen this week.

If you have any queries about this week’s updates, or if you need any assistance please do not hesitate to contact me.


I hope you have a good weekend. 


Stay safe and well. 


Cheers,


Steve


Steven Hillman BSc (Hons) ACA

Chartered Accountant

Tel: 01934 444100

Thursday 7 January 2021

New VAT Rules For Construction Sector Starts on 1 March 2021

New VAT rules are finally due to come into effect this March which will impact on accounting for VAT for transactions in the construction sector. These new rules, which were originally scheduled to start back in October 2019, have already been delayed twice as there was a lack of awareness of the changes in the industry.

The new “reverse charge” system of VAT accounting will affect sub-contractors supplying their services to main contractors in the construction sector.

Under the new rules, supplies of standard or reduced-rated building services between VAT-registered businesses in the supply chain will not be invoiced in the normal way. Under the new reverse charge system, the sub-contractor will not show VAT on their invoice to the main contractor and will not account for output VAT.

This is intended to ensure that VAT is correctly accounted for on supplies by sub-contractors, some of whom were allegedly not paying over the VAT charged to HMRC.

The new reverse charge will apply to a wide range of services in the building trade, primarily those activities covered by the construction industry (CIS) payment rules. Note that normal VAT invoices will continue to be issued to domestic customers.

Please contact us if you are likely to be affected by these changes and we can work with you to ensure you are ready for the new system when it starts. If you are a sub-contractor using the VAT flat rate scheme, it may be beneficial to leave that scheme as you may be entitled to a VAT refund on your expenses from 1 March 2021.


Wednesday 6 January 2021

What is the best use of your time in January

We encourage all clients to consider taking time to prepare a 2021 Strategic plan.

“A sailor without a destination will never get a favourable wind”

It is easier to get to your destination with a plan. We all know this simple truth. If you are driving from A to B it helps to know where A is and the directions you need to take.

If you have a vision of what you want your business to look like when it is “complete” then you are in a position to drive your business towards the vision, and you can monitor how you are doing as you go along.

If you do not have a strategic plan then you could get blown around like flotsam in the sea. This way and that way without any control.

If we agree it is hard to accomplish anything without a plan, let’s start thinking about putting one in place.  A plan looks at all the things a business could do and narrows it down to the things it is actually good at doing.  A strategic plan also helps you determine where to spend time, resources and money.

So how do you do a strategic plan?

1. Take time to review your own personal objectives - the business is there to provide you with what you want from life, do not forget this.

2. Look at where you are now, your strengths, weaknesses, opportunities and threats. Take external advice so you have a clear understanding of your position in the marketplace, the competition, your systems and the way you do things and what you are good at and what you are not.

3. Focus on where you want to be (say) in 2 years, what you want your business to look like when it is “complete” or running profitably and successfully. Then you can determine your priorities - the big issues that you need to focus on - this is the strategic plan!

4. Write down your vision and define what you must achieve and the actions you need to take. Monitor how you are doing towards your vision each month and what actions have been completed and what needs to be done to keep you moving towards your plan.

5. Allocate responsibility for taking the actions.

6. Monitor, review and adjust your regular activities to keep you on track towards your plan.

We have useful tools and checklists to help you analyse where you are now, set a strategy, agree actions and monitor them. Please talk to us about how we can help you achieve your goals - we have helped many other businesses grow and succeed!

Tuesday 5 January 2021

Announcement of Further Business Support Grants

The Chancellor this morning announced one-off top up grants for retail, hospitality and leisure businesses worth up to £9,000 per property to help businesses through to the Spring. In addition there is a £594 million discretionary fund also made available to support other impacted businesses.
The grants will be provided on a per-property basis to support businesses through the latest restrictions, and is expected to benefit over 600,000 business properties, worth £4 billion in total across all nations of the UK. A further £594 million is also being made available for Local Authorities and the Devolved Administrations to support other businesses not eligible for the grants, that might be affected by the restrictions. Businesses should apply to their Local Authorities. The one-off top-ups will be granted to closed businesses as follows: • £4,000 for businesses with a rateable value of £15,000 or under • £6,000 for businesses with a rateable value between £15,000 and £51,000 • £9,000 for businesses with a rateable value of over £51,000 • any business which is legally required to close, and which cannot operate effectively remotely, is eligible for a grant Business support is a devolved policy and therefore the responsibility of the devolved administrations, which will receive additional funding as a result of these announcements in the usual manner: • the Scottish Government will receive £375 million • the Welsh Government will receive £227 million • the Northern Ireland Executive will receive £127 million We will keep you up to date with further details as and when the Governments release information.

Brexit Trade Agreement


The transition period for the UK leaving the EU has ended. The EU and UK have struck a trade deal, and this has been ratified by the UK Parliament so from 1 January we are trading with the EU quota and tariff “free”. There are new Customs regulations and VAT requirements to get to grips with, but we have every confidence once we all get used to the new system imports and exports will continue to flow.


The full agreement is entitled “trade and cooperation agreement between the European Union and the European atomic energy community, of the one part, and the United Kingdom of Great Britain and Northern Ireland, of the other part” and can be seen at: https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/948119/EU-UK_Trade_and_Cooperation_Agreement_24.12.2020.pdf

THE KEY POINTS OF THE AGREEMENT ARE:

Travel - UK nationals will need a visa for stays longer than 90 days in a 180-day period and there will be new procedures for UK travellers at EU borders.  European Health Insurance Cards (EHIC) will remain valid until they expire. Mobile roaming charges may change so if you are using your phone abroad check with your plan provider first.

Trade - There will be no tariff charges on goods or quota limits on the amount that can be traded from 1 January. However there will be Customs checks at borders and customs declarations will need to be made by exporters from the EU and the UK.

Services - UK financial businesses lose their access to EU customers (many larger firms have already established subsidiaries within the EU to continue access) and whilst the UK has granted EU businesses temporary permission to continue servicing UK customers, there is no reciprocal EU agreement for UK businesses as yet. We expect regulatory discussions about “equivalence” in 2021 and hopefully, an arrangement whereby UK firms will get access to EU customers.       

There is a Government Brexit checker to assist with the planning for business, family, and personal circumstances. Use the Brexit checker to get a personalised list of actions. You can also sign up for emails to get updates for what you need to do.   

See: https://www.gov.uk/transition

There are other agreements on fishing, security, the Justice system and study which have been widely commented on in the last few days and it is now a question of moving forward with the agreement and we will keep you informed of the practical measures that follow.


Monday 4 January 2021

New Years Resolutions to Save Tax

Wishing everyone a Happy New Year, all the best for 2021!

TAX PLANNING

At this time of year we think about New Year’s resolutions. It is also a good time to start planning your tax affairs before the end of the tax year on 5th April.

An obvious tax planning point would be to maximise your ISA allowances for the 2020/21 tax year (currently £20,000 each).

You might also want to consider increasing your pension savings before 5 April 2021 as the unused annual pension allowance is lost after three years.

For those looking to do some inheritance tax planning, it would be a good time to review (or make) your Will.

PENSION PLANNING


For most taxpayers the maximum pension contribution is £40,000 each tax year, although this depends on their earnings. This limit covers both contributions by the individual and by their employer.

Note that the unused allowance for a particular tax year may be carried forward for three years and can be added to the relief for the current, but then lapses if unused. 

Hence the unused pension allowance for 2017/18 will lapse on 5 April 2021 if unused.

Note that there are rumours that pension tax relief may be restricted in the next Budget. Under the current rules, the net after tax cost of saving £4,000 in a personal pension for a higher rate taxpayer is £3,000. HMRC then add a further £1,000 to your contribution and there is a further £1,000 relief when your tax liability is calculated, thus the value of your pension pot would be £5,000, for a net cost of £3,000. 

Remember that pension fund investments can go down as well as up, but a 40% fall would be unlikely.