Consultations Issued on Tax Day by Treasury

The Treasury normally issue a bundle of tax consultation documents on Budget Day. This year however they chose to delay the publication until 3 weeks after the Budget. We were expecting the consultation documents to include major changes to CGT and IHT, but it would appear that these have yet again been delayed.

The Treasury have accepted a number of recommendations by the Office of Tax Simplification (OTS) on simplifying IHT reporting. From 1 January 2022 over 90 per cent of non-taxpaying estates each year will no longer have to complete IHT forms for deaths when probate is required. The government will also consider introducing a new digital system for IHT and probate reporting. 

Another consultation is seeking views on modernising the tax administration system including changes to the payment dates for those outside PAYE. It would appear that HMRC are reconsidering a possible Pay as You Go system for the self-employed that was originally consulted on in 2016.

More Details on the New Super-Deduction for Equipment

In the Budget on 3rd March 2021 the Chancellor announced a new 130% tax relief for expenditure on new plant and machinery incurred between 1 April 2021 and 31 March 2023. It turns out that this new tax relief is only available to limited companies and the latest Finance Bill reveals a nasty sting in the tail when the equipment is sold, as the clawback on disposal is potentially at the same 130% rate. So, if a new item of plant cost £100,000 the company would be able to deduct £130,000 in arriving at taxable profits thus saving £24,700 in corporation tax at 19%. However, if the plant was sold for £80,000 on 1 April 2023 130% of the proceeds would be clawed back and £104,000 added to taxable profit which could result in up to £26,000 corporation tax payable at the new 25% rate. The claw-back rate reduces on a time basis from 1 April 2023 onwards so it would be advisable to retain the asset long term.

The 130% rate does not apply to equipment such as air conditioning and central heating that normally qualify for a 6% writing down allowance. Such “integral features” qualify for a special 50% first year allowance for the same two-year period.

Please contact us to discuss the tax implications of major capital expenditure decisions.

Prepare for tax changes if you engage or supply contractors – Off-payroll working rules (IR35)

If you are a medium or large sized non-public sector organisation and you engage contractors, you should now be taking action to prepare for changes to the off-payroll working rules (IR35) coming into effect on 6 April 2021.

For all contractors working through their own limited company, you will need to:

• identify contractors who work in this way
• decide if they are inside or outside the rules
• inform your contractors of their status determination, and any agencies you engage with
• be ready to add them to payroll if needed
• be ready to deal with any disputes
• maintain an audit trail, and test your processes, systems and controls

If you are an employment agency which supplies contractors who work through their own limited company or other intermediary, you need to understand the changes and may also need to take action. You need to:

• identify contractors who work in this way
• be ready to pass on the status determination statement to any agencies you engage with down the supply chain or be ready to put contractors onto payroll
• maintain an audit trail, and test your processes, systems and controls

You can find more information about the actions you need to take to prepare here: https://www.gov.uk/guidance/prepare-for-changes-to-the-off-payroll-working-rules-ir35

26th March 2021 – Hillmans Weekly Update

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

• Pay 2019/20 Self-Assessment Tax Before 1 April 2021 To Avoid 5% Surcharge Penalty
• Grants for Electric Car Buyers Cut
• Bounce Back Loan Application Deadline 31st March 2021
• VAT Deferral – Apply Now to Spread your Payments
• Additional Restrictions Grant

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

Pay 2019/20 Self-Assessment Tax Before 1 April 2021 To Avoid 5% Surcharge Penalty

Last month HMRC announced that self-assessment taxpayers won’t be charged the March 5% late payment penalty if they pay their 2019/20 income tax, CGT, class 2 and 4 NIC liabilities or set up a payment plan by the 1st April 2021.

Note that if the balance is still unpaid at midnight on 1st April 2021, a 5% surcharge penalty is added in addition to the normal interest charge unless a payment plan has been agreed.

Because of COVID-19, Self-Assessment tax payers can now apply online to HMRC to spread the cost of their tax bill into monthly payments without the need to call them.

The online self-serve 'Time to Pay' service is designed to help ease any potential financial burden tax-payers may be experiencing due to the coronavirus pandemic.

If you would like to spread your tax payment, you can use the online self-serve 'Time to Pay' service through www.gov.uk to set up a direct debit and pay the tax that is owed in monthly instalments, up to a 12-month period.

If you set up a 'Time to Pay' arrangement, you will have to pay interest on the tax paid late. Interest will be applied to any outstanding balance from 1 February 2021.

If you need any assistance doing this please do not hesitate to contact us, we will be pleased to assist.

Grants for Electric Car Buyers Cut

2020 was a game changer year for the arrival of fully ’Battery Electric Vehicles’  (BEVs) in the UK new vehicle market, with 108,205 BEVs registered in 2020, with 200,000 BEVs expected to be registered in 2021, including a game changer year for the arrival of electric commercial vehicles/vans.

By 2030, sales of new cars and vans powered wholly by diesel and petrol will be banned in the UK, with Hybrid vehicles to follow 5 years later so between now and then, most new vehicles launched will be offered with some form of electrification, accelerating demand for electric charge points across the UK, to meet the needs of small to medium enterprises.

Within the business user vehicle market, the government introduced significant  ‘Benefit-in-Kind’ (B-I-K) incentives for BEVs, effective from year 2020/2021, with just a 1% B-I-K tax liability for financial year 2021/22 and 2% in 2022/23 and frozen at 2% for 2023/24 and 2024/25.

In February 2021, the government also announced a £50 million extension of the home and workplace grants for installing charger points with the workplace charging scheme being open to small to medium enterprises, for the first time, which includes funding for the accommodation sector such and B&Bs, to provide a boost to rural areas, in places like the South West.

Last week, in a development that was unexpected and seen within the automotive industry as ‘un-helpful’, the government announced that with immediate effect, the current government vehicle Plug-In Grant was being reduced from £3,000 to £2,500 and at the same time, the list price of vehicles, including vans, that qualify for the government grant, was being reduced from £50,000 to £35,000.

In essence, the government are trying to focus on more of the grants going towards lower priced volume models, that appeal to private buyers, as well as company car drivers and remove the incentive for much more expensive models, that are typically only purchased by company executives, who still are able to enjoy the significant Benefit in Kind tax incentives that are in place.

It is thought that the government are also looking to put the emphasis on car manufacturers reducing the list price of their  electric vehicles, to make them more affordable to the masses, with Citroen, for example, responding to last week’s announcement, by announcing the list price reduction on their electric model, to below the qualifying grant limit of £35,000.

Blog Article Written By: 
Leon Wilce - Fleet Specialist Consultant
Westcar Consulting
leon@west-car.co.uk

Bounce Back Loan Application Deadline 31st March 2021

The Governments Bounce Back Loan Scheme (BBLS) offers businesses a 100% government-backed lending facility if they meet the Bounce Back Loan Scheme eligibility criteria.

Loans are available between £2,000 and £50,000 (up to a maximum of 25% annual turnover, whichever is lower).

However the scheme is closing soon. You have until the 31st March 2021 to apply for a loan. 

See more: https://www.british-business-bank.co.uk/ourpartners/coronavirus-business-interruption-loan-schemes/bounce-back-loans/faqs-for-small-businesses 

VAT Deferral – Apply Now to Spread your Payments

The VAT deferral new payment scheme is open for all businesses who deferred VAT due between 20 March and 30 June 2020 and still have payments to make, or who are unable to pay in full by 31 March 2021. This includes those on Payment on Account and Annual Accounting schemes.

Apply now to spread these payments over a number of months – the later you join the fewer instalments are available to you. Join from 19 March 2021 to benefit from the maximum number of 11 instalments.

You can join the scheme online without the need to call HMRC. To find out more information, including the things you need to do before joining, go to GOV.UK and search 'VAT deferral'.

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

Additional Restrictions Grant

The Additional Restrictions Grant (ARG) supports businesses in England that are not covered by other grant schemes or where additional funding is needed.

The Additional Restrictions Grant (ARG) provides local councils with grant funding to support closed businesses that do not directly pay business rates as well as businesses that do not have to close but which are impacted. In addition, larger grants can be given than those made through LRSG (Closed).

Local councils can determine which businesses to target and determine the amount of funding from the ARG. Local councils have the freedom to determine the eligibility criteria for these grants. However, government expects the funding to help those businesses which – while not legally forced to close – are nonetheless severely impacted by the restrictions.

Find your local council here: https://www.gov.uk/find-local-council

This could include:

• businesses which supply the retail, hospitality, and leisure sectors
• businesses in the tourism and events sectors
• business required to close but which do not pay business rates

Businesses excluded from the fund

You cannot get funding if:

• your business is in administration, insolvent or has been struck off the Companies House register
• you have exceeded the permitted subsidy limit

See: https://www.gov.uk/guidance/check-if-youre-eligible-for-the-coronavirus-additional-restrictions-grant

19th March 2021 – Hillmans Weekly Update

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

• 22nd March Email Reply Deadline - SEISS Grant
• Local Restrictions Support Grant (for Open Businesses)
• Closed Businesses Lockdown Payment and Local Restrictions Support Grant
• Advisory Fuel Rate for Company Cars
• 2021/22 National Insurance Bands

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

22nd March Email Reply Deadline - SEISS Grant

HMRC sent an email to a number of self-employed traders on the 26th February 2021. HMRC are asking the trader to prove that they are still trading. The tax-payer will need to reply to the email before they can claim the next two SEISS grants.

An example of the email being sent to tax-payers can be found here: https://www.tax.org.uk/sites/default/files/SEISS%20ceased%20traders%20pt2%20OTM%20email%20Final.pdf

Accountants and tax agents have not been copied in to the email. 

It is important to check your email account to see if you have received an email from HMRC, as if HMRC does not receive a response by Monday 22nd March 2021, the tax-payer will be blocked from receiving further SEISS grants.

You can contact the HMRC SEISS Helpline on 0800 024 1222 (Mon-Fri 8am to 4pm).

Local Restrictions Support Grant (for Open Businesses)

The Local Restrictions Support Grant (LRSG (Open)) supports businesses that have been severely impacted due to temporary local restrictions.

Businesses that have not had to close but which have been severely impacted due to local Tier 2 or Tier 3 restrictions may be eligible for LRSG (Open).

Eligible businesses may be entitled to a cash grant from their local council for each 14 day period under local restrictions.

Local councils have the discretion to provide grant funding for businesses under this scheme. They will use their discretion in identifying the right businesses to receive this funding, based on their application process.

Your business may be eligible if it:

•          is based in England
•          is in an area subject to Tier 2 or Tier 3 local restrictions since 1 August 2020 and has been severely impacted because of the local restrictions
•          was established before the introduction of Tier 2 or Tier 3 restrictions
•          has not had to close but has been impacted by local restrictions

Local councils have the freedom to determine the precise eligibility criteria for these grants. However, we expect the funding to be targeted at hospitality, hotel, bed & breakfast and leisure businesses.

The deadline to apply for the LRSG (Open) scheme is 31 March 2021.

See: https://www.gov.uk/guidance/check-if-youre-eligible-for-the-coronavirus-local-restrictions-support-grant-for-open-businesses

Closed Businesses Lockdown Payment and Local Restrictions Support Grant

Closed Businesses Lockdown Payment - England

The Closed Businesses Lockdown Payment (CBLP) in England supports businesses that have been required to close due to the national lockdown that began 5 January 2021. Eligible businesses may be entitled to a one-off cash grant of up to £9,000 from their local council. Local councils will pay the same businesses that are eligible to receive the Local Restrictions Support Grant (Closed) Addendum for the national lockdown period that began on 5 January.

Your business may be eligible if it:

•      is based in England
•       occupies property on which it pays business rates (and is the ratepayer)
•       has been required to close because of the national lockdown from 5 January 2021 onwards
•      has been unable to provide its usual in-person customer service from its premises

This could include non-essential retail, leisure, personal care, sports facilities, tourism and hospitality businesses. It could also include businesses that operate primarily as an in-person venue, but which have been forced to close those services and provide a takeaway-only service instead.

Eligible businesses can get one grant for each non-domestic property.

The deadline to apply for the Closed Businesses Lockdown Payment is 31 March 2021.

See: https://www.gov.uk/guidance/check-if-your-business-is-eligible-for-the-coronavirus-closed-businesses-lockdown-payment

Local Restrictions Support Grant (for closed businesses) – England

The Local Restrictions Support Grants (LRSG (Closed) and LRSG (Closed) Addendum: Tier 4) support businesses that have been required to close due to temporary local restrictions.

You can apply for a grant if your business is either:

•          in an area of local Tier 2 or Tier 3 restrictions and has been required to close because of local restrictions that resulted in a first full day of closure on or after 9 September
•         in an area of local Tier 4 restrictions and has been required to close because of local restrictions that resulted in a first full day of closure on or after 19 December

You will need to show that your business:

•          is based in England
•          occupies property on which it pays business rates (and is the ratepayer)
•          has been required to close for at least 14 days because of the restrictions
•          has been unable to provide its usual in-person customer service from its premises

For example, this could include pubs and restaurants that operate primarily as an in-person venue, but which have been forced to close those services and provide a takeaway-only service instead.

Eligible businesses can get one grant for each non-domestic property within the restriction area.

Application deadlines

The deadlines to apply for the national lockdown LRSG (Closed) Addendum schemes are:

Scheme	End date
National lockdown, 5 November 2020	31 March 2021
National lockdown, 5 January 2021: first payment cycle, 5 January to 15 February	31 March 2021
National lockdown, 5 January 2021: second payment cycle, 16 February to 31 March	31 May 2021

See: https://www.gov.uk/guidance/check-if-youre-eligible-for-the-coronavirus-local-restrictions-support-grant-for-closed-businesses

Advisory Fuel Rate for Company Cars

These are the suggested reimbursement rates for employees' private mileage using their company car from 1 March 2021.

Where there has been a change the previous rate is shown in brackets.

Engine Size	Petrol	Diesel	LPG
1400cc or less	10p		7p
1600cc or less		9p (8p)
1401cc to 2000cc	12p (11p)		8p
1601 to 2000cc		11p (10p)
Over 2000cc	18p (17p)	12p	12p

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. 

2021/22 National Insurance Bands

The thresholds for employee and employer national insurance contributions (NICs) have been increased by £1 a week for the 2021/22 tax year. Employees will be liable to 12% NICs between £184 and £967 a week (£50,270 a year). Employer contributions will start at £170 a week.

The self-employed will pay 9% Class 4 NICs on profits between £9,570 and £50,270.

The higher rate tax threshold for 2021/22 will be aligned with the £50,270 NIC upper earnings limit and the personal allowance will be uprated by the same percentage to £12,570 for 2021/22. 

12th March 2021 – Hillmans Weekly Update

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

·         New Grants for High Street Businesses and HospitalitySector
·         The New Recovery Loan Scheme
·         Changes to the Coronavirus Job Retention Schemefrom July 2021
·         Self-Employment Income Support Scheme FourthGrant (SEISS)
·         Don't Lose Your 2020/21 Personal Allowance

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

New grants for high street businesses and hospitality sector

Businesses forced to close due to the Coronavirus lockdown will be eligible to apply for grants of up to £18,000 depending upon the rateable value of their business premises. Pubs, restaurants, hotels, gyms and hairdressers will be eligible for a grant of up to £18,000 per premises whilst non-essential retail businesses will be eligible to apply for a grant up to a maximum of £6,000.

The grants are intended to be a contribution towards the fixed costs of the business during the period that they have been unable to trade normally. Staff costs continue to be covered by the CJRS furlough scheme.

The government will also continue to provide eligible retail, hospitality and leisure properties in England with 100% business rates relief from 1 April 2021 to 30 June 2021. This will be followed by 66% business rates relief for the period from 1 July 2021 to 31 March 2022, capped at £2 million per business for properties that were required to be closed on 5 January 2021.

See: https://www.bighospitality.co.uk/Article/2021/03/01/Budget-to-include-5bn-restart-grant-scheme-for-hospitality-and-High-Street-businesses

The Recovery Loan Scheme

The government have already announced a longer repayment period for “Bounce-back” and CBIL loans. From 6 April 2021 a new Recovery Loan Scheme will provide lenders with a guarantee of 80% on eligible loans between £25,000 and £10 million to give them confidence in continuing to provide finance to UK businesses. The scheme will be open to all businesses, including those who have already received support under the existing COVID-19 guaranteed loan schemes.

The Recovery Loan Scheme ensures businesses of any size can continue to access loans and other kinds of finance up to £10 million per business once the existing COVID-19 loan schemes close, providing support as businesses recover and grow following the disruption of the pandemic and the end of the transition period.

Once received, the finance can be used for any legitimate business purpose, including growth and investment. The government guarantees 80% of the finance to the lender to ensure they continue to have the confidence to lend to businesses.

The scheme launches on 6 April and is open until 31 December, subject to review. Loans will be available through a network of accredited lenders, whose names will be made public in due course.

What type of finance is available?

• Term loans and overdrafts will be available between £25,001 and £10 million per business.

• Invoice finance and asset finance will be available between £1,000 and £10 million per business.

Finance terms are up to six years for term loans and asset finance facilities. For overdrafts and invoice finance facilities, terms will be up to three years. No personal guarantees will be taken on facilities up to £250,000, and a borrower’s principal private residence cannot be taken as security.

Eligibility

You will be able to apply for a loan if your business:

• is trading in the UK

You will need to show that your business:

• is viable or would be viable were it not for the pandemic

• has been impacted by the coronavirus pandemic

• is not in collective insolvency proceedings - further details will be provided in due course

Businesses that have received support under the existing COVID-19 guaranteed loan schemes will still be eligible to access finance under this scheme if they meet all other eligibility criteria.

How to apply

The scheme will launch on 6 April 2021. Further details on how to apply and details of accredited lenders will be released in due course.

See:  https://www.gov.uk/guidance/recovery-loan-scheme

Changes to the Coronavirus Job Retention Scheme from July 2021

The Coronavirus Job Retention Scheme has been extended until 30 September 2021 and the level of grant available to employers under the scheme will stay the same until 30 June 2021.

The current version of the furlough scheme that started on 1 November 2020 was scheduled to end on 30 April 2020. In order to avoid a “cliff-edge” with resulting widespread redundancies the chancellor has announced a further extension of the scheme and also a phased reduction in support to employers. The CJRS furlough grant for May and June will remain at 80% of the employees’ usual pay for hours not working.

From 1 July 2021, the level of grant will be reduced, and you will be asked to contribute towards the cost of your furloughed employees’ wages. To be eligible for the grant you must continue to pay your furloughed employees 80% of their wages, up to a cap of £2,500 per month for the time they spend on furlough.

The scheme will then be limited to 70% for July and then 60% for August and September. This phased reduction will operate in a similar way as in September and October 2020 with the employer being required to contribute the remaining 10% and then 20% of an employee’s regular pay so that they continue to receive 80% pay for furloughed hours.

In addition to the 10% and 20% contributions employers will continue to be responsible for paying employers national insurance and pension contributions on the full amount being paid to employees.

The table below shows the level of government contribution available in the coming months, the required employer contribution and the amount that the employee receives per month where the employee is furloughed 100% of the time.

Wage caps are proportional to the hours not worked.

Please contact us if you want an estimate of the claim or you need help in applying.

See: https://www.gov.uk/government/publications/changes-to-the-coronavirus-job-retention-scheme/

Self-Employment Income Support Scheme Fourth Grant (SEISS)

In the recent Budget, the chancellor has set out further support for the self-employed. In addition to the upcoming fourth grant there will also be a fifth SEISS grant covering the 5 months to 30 September.

The chancellor has extended the scheme to include certain traders who were previously excluded. Thus, those who commenced self-employment in 2019/20 will now be included provided they had submitted their 2019/20 tax return by 2 March 2021. This is potentially a further 600,000 traders.

The Budget confirmed that the fourth SEISS grant will be set at 80% of 3 months’ average trading profits, paid out in a single instalment, capped at £7,500. The fourth grant will take into account 2019 to 2020 tax returns and will be open to those who became self-employed in tax year 2019 to 2020. The rest of the eligibility criteria remain unchanged.

Conditions for the fifth grant will be linked to a reduction in business turnover. Self-employed individuals whose turnover has fallen by 30% or more will continue to receive the full grant worth 80% of three months’ average trading profits, capped at £2,500 a month. Those whose turnover has fallen by less than 30% will receive a 30% grant, capped at £950 a month. We are awaiting further details of this fifth grant and we will keep you up to date when we get more information.

Eligibility for the scheme will now be based on your submitted 2019 to 2020 tax return. This may also affect the amount of the fourth grant which could be higher or lower than previous grants you may have received. To be eligible for the fourth grant you must be a self-employed individual or a member of a partnership.

To work out your eligibility HMRC will first look at your 2019 to 2020 Self-Assessment tax return. Your trading profits must be no more than £50,000 and at least equal to your non-trading income.

If you are not eligible based on your 2019 to 2020 Self-Assessment tax return, HMRC will then look at the tax years 2016 to 2017, 2017 to 2018, 2018 to 2019 and 2019 to 2020.

You must also have traded in both tax years:

• 2019 to 2020 and submitted your tax return by 2 March 2021
• 2020 to 2021

You must either:

• be currently trading but are impacted by reduced demand due to coronavirus
• have been trading but are temporarily unable to do so due to coronavirus

You must also declare that:

• you intend to continue to trade
• you reasonably believe there will be a significant reduction in your trading profits due to reduced business activity, capacity, demand or inability to trade due to coronavirus

To allow HMRC to process recently submitted 2019 to 2020 Self-Assessment tax returns, the online Claims service for the fourth grant will be available from late April 2021 until 31 May 2021.

If you are eligible, HMRC will contact you in mid-April to give you your personal claim date. This will be the date that you can make your claim from.

There will be more guidance about the fourth and fifth grants in due course.

Please contact us if you want to check your eligibility and estimate your claim.

See:  https://www.gov.uk/government/publications/self-employment-income-support-scheme-grant-extension

Don't Lose Your 2020/21 Personal Allowance

For every £2 that your adjusted net income exceeds £100,000 the £12,500 personal allowance is reduced by £1. Pension contributions and Gift Aid can help to reduce adjusted net income and save tax at an effective rate of 60%.

The restriction applies between £100,000 and £125,000 adjusted net income. Another way that you could avoid this trap would be to agree with your employer to sacrifice some of your salary in exchange for a tax-free benefit in kind such as an additional pension contribution.

5th March 2021 – Hillmans Weekly Update

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

• Budget 2021 Analysis

• HMRC Start Checking Self-Employment Grant Claims

• Buy New Equipment Before 6 April?

• Get Ready for The "The Off-Payroll" Working Rule

• New Reverse Charge VAT Rules for Construction Sector Started

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

Budget 2021 Analysis

Yesterday the Chancellor announced his Spring 2021 Budget where he confirmed that he had to level with people about the state of the UK economy.  Prior to Budget day there were fewer leaks than normal about possible tax changes. There were however announcements prior to Budget day of grants for High Street businesses and the hospitality sector and the widely predicted extension of the furlough scheme. 

Below is our analysis, and I will update you further as the Government publishes the specifics of the supports and changes.

CHANCELLOR “LEVELS UP” WITH US ON TAX

Rishi Sunak has chosen a fine line between raising taxes to start paying down the massive Government borrowings but at the same time stimulate economic recovery and save jobs. He was also mindful of pledges made in the Conservative Party manifesto not to raise income tax, VAT and national insurance. So that leaves corporation tax, CGT and inheritance tax…

Maybe he will delay the announcement of significant increases in taxation until later in the year as it is anticipated that there will be a further Budget in the Autumn. By then the economy will hopefully have started to bounce back. 

It has already been announced that there will be important consultation documents issued on 23 March which will seek views on future tax changes. That may be when the expected reforms to CGT and IHT will be announced.

HMRC Start Checking Self-Employment Grant Claims

HMRC are beginning the process of checking grant claims made under the Self-Employment Income Support Scheme (SEISS).

HMRC calculates the amount of grant payable for SEISS, and taxpayers are only asked to confirm that they meet the eligibility criteria.

So it’s likely that any HMRC checks will focus on cases where an individual did not continue to trade on a self-employed or partnership basis, at least throughout 2019/20. This would include an individual who ceased their self-employment in 2018/19 (6th April 2018 to 5th April 2019) and moved from being a sole-trader to using a limited company structure.

If you have received a letter from HMRC checking your claim, or if you feel you may have made an incorrect claim for SEISS please contact us for advice.  

2021 Spring Budget Key Updates Summary

Following the Chancellors 2021 Spring Budget announcement this afternoon, I have summarised the key updates that will be relevant to the majority of my small business and personal tax clients. I’ll be posting a detailed analysis once I’ve had time to fully review the updates. 

As always if you have any questions please drop me a line.

Cheers,

Steve Hillman ACA
01934 444100

Budget 2021 key updates:

- Furlough extended until end of September. Still at 80% of salary. Businesses will be asked to contribute 10% from July and 20% for August and September.

- Self-employment grant to be extended. A 4th grant will be available in May and a 5th grant will be available in July.

- Self-employed grant Turnover limits. If your turnover has fallen more than 30% you will receive 80%. If it is less than 30% then you will receive a 30% grant.

- The minimum wage will increase to £8.91 per hour from April.

- New Restart Grant - Non essential retail will receive £6000 per premises. Hospitality, leisure and personal care will receive £18,000.

- New Recovery Loan scheme - Loans of £25k to £1m. 80% government guarantee.

- 5% VAT reduction for hospitality will be extended to 30th September. It will then increase to 12.5% to March 2022 and increase to 20% from April 2022.

- Corporation tax to rise to 25% from April 2023. Businesses with profits under £50k tax will remain at 19%. Tax rate will be tapered between £50k and £250k profit. Profits above £250k at 25% tax rate.

- The "Super Deduction" - Over the next two years, when businesses invest in new equipment, they can offset the full cost for tax purposes plus an additional 30%.

- Stamp duty cut extended by three months.

- "Help to grow - Management" and "Help to grow - Digital" training for SMEs launched - will be effective from June 2021.  Govt will offer subsidised management training (fee - £750 , 10% of unit cost) and will be given vouchers to get up to 50% off the purchase of new productivity-enhancing software, up to £5,000 each to all eligible SMEs. Registration open.

Buy New Equipment Before 6 April?

Your business year end, not 5 April, is relevant for capital allowances purposes. If however you are running a business and making up accounts to 31 March or 5 April you should consider buying plant and machinery to take advantage of the £1 million Annual Investment Allowance (AIA).

The AIA provides a 100% tax write off for equipment used in your business. This tax relief extends to fixtures and fittings within business premises such as electrical, water and heating systems. 

AIA does not apply to motor cars but there is a special 100% tax relief if you buy a new car that emits no more than 50g CO2 per kilometer. Note however that from April 2021 100% tax relief will only apply where there are zero emissions.

Get Ready for The "The Off-Payroll" Working Rule

Where large or medium-sized organisations are paying workers via personal service companies (PSC) or agencies they will need to operate new procedures from 6 April 2021.

The new rules will apply to partnerships, LLPs and larger charities as well as limited companies. Only those organisations that would be classed as “small” under the Companies Act criteria will be outside of the new rules.

From 6 April 2021 the end user organisation will be required to determine whether or not the worker would be an employee of the organisation if directly engaged. That determination will need to be communicated to the worker and the agency supplying the worker, if relevant, and is referred to as a Status Determination Statement. The determination notifies the fee-payer that income tax and national insurance is to be deducted from payments to the PSC.

HMRC recommend that the end user organisation should use the Check Employment Status for Tax (CEST) software on the HMRC website to carry out the determination but that isn’t obligatory.

WHAT IF THE WORKER DISAGREES?

Where the worker disagrees with the employment status determination they should contact the end user straight away setting out their grounds for disagreement.

The end user must provide a response within 45 days of receiving the disagreement. During this time tax should continue to be deducted in line with the original determination.

WOULD THE WORKER BE BETTER OFF AN EMPLOYEE?

The new “off-payroll” working rules mean that the worker pays the same amount of tax and national insurance as if they were an employee, but without the same employment rights. 

Where possible the worker should consider renegotiating a higher rate of pay to compensate them for the additional tax and national insurance deducted. They may also need to consider what they do with their personal service company going forward.

END USERS CAN BE LIABLE FOR THE TAX NOT DEDUCTED

Where the agency or fee payer lower down the labour supply chain fails to deduct tax from payments to the worker’s company the liability passes up the supply chain such that the end user may be liable. This rule was introduced as HMRC have allegedly been defrauded by some structures set up by employment agencies.

Workers need to be aware of a number of schemes under investigation by HMRC.

End users should carry out due diligence and consider the wording of contracts with agencies supplying workers via personal service companies.

CURRENT IR35 RULES STILL APPLY WHERE END USER IS “SMALL”

The new “off-payroll” rules do not apply where the end user organisation is “small” under the Companies Act rules. Thus, the current IR35 rules will continue to apply, with the onus on the worker’s personal service company to determine whether the worker would have been an employee if directly engaged.

New Reverse Charge VAT Rules for Construction Sector Started

The new “reverse charge” system of VAT accounting starts today (1st March 2021) and affects 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 are no longer invoiced in the normal way. Under the new reverse charge system, the sub-contractor does not show VAT on their invoice to the main contractor and does not account for output VAT on that transaction.

The new reverse charge applies to activities covered by the construction industry scheme (CIS) payment rules. So if Eddie the Electrician does £10,000 of work for Big Builder Ltd after 1 March he no longer shows VAT on his invoice. Big Builder Ltd will record £2,000 (20%) as input tax and output tax. Note that normal VAT invoices will continue to be issued to domestic customers and end-users.

Please contact us if you need help understanding this new system.  Note also that 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.

Read our FREE Help Guide:

We have produced a new Help Guide for the VAT Reverse Charge for Construction Services.

You can download the guide from our website here: https://www.hillmans.co.uk/guide-to-vat-reverse-charge-for-construction-services