Planning Actions Before Increase in National Insurance and Tax on Dividends

With the announcement of the proposed 1.25% increase in National Insurance and tax on Dividends more than six months before they take effect mean that there is time to reduce the impact.

Employees could consider agreeing a salary sacrifice arrangement with their employer, for example sacrificing their £5,000 annual bonus for an additional pension contribution paid by their employer. Such an arrangement would save 1.25% NICs for both employee and employer as well as £2,000 income tax where the employee is a higher rate taxpayer.

Employees might also consider a salary sacrifice in favour of an electric company car.

Shareholder/directors of family companies could consider bringing forward dividend payments to before 6 April 2022. Such a strategy needs careful planning as if the extra dividend takes the taxpayer’s income above £50,270 the excess would be taxable at the 32.5% rate instead of the 7.5% rate and the planning could backfire.

Live Events Reinsurance Scheme

The scheme rules for the Live Events Reinsurance Scheme have been published by the Department for Digital, Culture, Media and Sport (DCMS).

On 5 August 2021, the government announced that it is partnering with insurers to offer a cost indemnification insurance scheme which will make cover available against the cancellation, postponement, relocation or abandonment of events due to new UK Civil Authority restrictions in response to COVID-19.

The Live Events Reinsurance Scheme will support live events across the country — such as music festivals, conferences and business events — that are at risk of being halted or delayed due to an inability to obtain COVID-19 cancellation insurance. Cover will be available to purchase alongside standard commercial events insurance for an additional premium.

The scheme will not cover loss of revenue prompted by lower demand for tickets or venue capacity, and the scheme does not cover self-isolation of staff or performers. The scheme will cover a limited series, or run, of linked events, provided that the event organiser specifies which event dates from that limited series, or run, require cover and how much cover they are purchasing for each.

The Scheme will run to 30 September 2022 with a review point in Spring 2022. Cover will be available to purchase through participating insurers. A number of prominent insurers in the Lloyd’s market, including Arch, Beazley, Dale, Ark and Munich Re, are supporting the scheme. Event organisers can now start approaching these insurers to discuss their cover.

The full scheme rules, as published by DCMS, can be found on this page: UK Live Events Resinsurance Scheme (https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/1019546/UK_Live_Events_Reinsurance_Scheme.pdf)

Government Postpone Making Tax Digital for Income Tax to 2024/25

Having listened to stakeholder feedback from businesses and the accounting profession, the government have announced that they will introduce Making Tax Digital (MTD) for Income Tax Self-Assessment (ITSA) a year later than planned, in the tax year beginning in April 2024.

This will give the self-employed and buy to let landlords an extra year to prepare for the digitalisation of Income Tax and also allow HMRC more time for customer testing of the pilot system.

The start date for partnerships to join MTD for ITSA has been put back still further to the tax year beginning in April 2025.

There has been no change to the £10,000 per annum gross income threshold which means that most self-employed traders and buy to let landlords will be mandated to comply with MTD for income tax from April 2024.

See: Businesses get more time to prepare for digital tax changes - GOV.UK (https://www.gov.uk/government/news/businesses-get-more-time-to-prepare-for-digital-tax-changes)

End of temporary insolvency measures

Temporary insolvency restrictions protections are being lifted and new targeted measures to support small business and commercial tenants introduced. The Insolvency Service has announced that Temporary measures brought in to support businesses from insolvency during the pandemic will be phased out from 1 October.

Companies in financial distress as a result of the pandemic have been protected from creditor action since June last year, through the Corporate Insolvency and Governance Act 2020. This was to ensure that viable businesses affected by the restrictions on trading during the lockdown periods were not forced into insolvency unnecessarily. As the economy returns to normal trading conditions, the restrictions on creditor actions will be lifted.

New legislation will be made to help smaller companies get back on their feet to give them more time to trade their way back to financial health before creditors can take action to wind them up.

The new legislation will:

• Protect businesses from creditors insisting on repayment of relatively small debts by temporarily raising the current debt threshold for a winding up petition to £10,000 or more.
• Require creditors to seek proposals for payment from a debtor business, giving them 21 days for a response before they can proceed with winding up action.

These measures will be in force until 31 March 2022.

Businesses should pay contractual rents where they are able to do so. However, the existing restrictions will remain on commercial landlords from presenting winding up petitions against limited companies to repay commercial rent arrears built up during the pandemic. 

Continuing the restriction on winding up, in respect of commercial rent only, supports the UK government statement that commercial tenants will continue to be protected from eviction until 31 March 2022, whilst the government implements a rent arbitration scheme to deal with commercial rent debts accrued during the pandemic.

See: End of temporary insolvency measures - GOV.UK (https://www.gov.uk/government/news/end-of-temporary-insolvency-measures)

24th September 2021 – Hillmans Weekly Update

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

• VAT rate reduction for hospitality, holiday accommodation and attractions
• Plastic Packaging Tax Starts 1 April 2022
• No capital allowances for plant and machinery installed in Houses of Multiple Occupation
• Audience of the Future funding for early-stage projects

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 great weekend.

Stay safe and well.

Cheers,

Steve

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

Plastic Packaging Tax Starts 1 April 2022

The legislation to introduce the new Plastic Packaging Tax is included in the Finance Act 2021. Secondary legislation will be introduced later in the year. Until the secondary legislation becomes law, the contents of the HMRC Policy Paper are subject to change. More guidance will be published later in the year. You must continue to comply with all regulatory requirements for plastic packaging in other legislation.

HMRC Guidance published on 19 September provides a high level overview of Plastic Packaging Tax.

If you are a business that manufactures or imports 10 or more tonnes of plastic packaging over a 12-month period you will need to register for the tax. This is regardless of whether you will have to pay any tax. This includes importers of packaging which already contains goods, such as plastic bottles filled with drinks. Where the packaging you import already contains other goods, the tax only applies to the plastic packaging itself.

If you are a business that needs to register for the tax, you will need to pay Plastic Packaging Tax on any packaging that contains less than 30% recycled plastic. The tax will be charged at £200 per tonne. For example, if you manufacture 10 tonnes of plastic packaging, and 1 tonne contains less than 30% recycled plastic, you will need to pay £200.

The online service to register and pay will be available on 1 April 2022 when the tax takes effect.

Find more information on the scope of the tax, who is liable to register and pay, and other requirements: https://www.gov.uk/government/publications/get-your-business-ready-for-the-plastic-packaging-tax/further-information-for-businesses

No capital allowances for plant and machinery installed in Houses of Multiple Occupation

HMRC have recently confirmed their view that common areas in Houses of Multiple Occupation (HMO) are parts of a “dwelling house” and ineligible for capital allowance claims.

The capital allowance legislation specifically denies tax relief for plant and machinery installed in a dwelling house. However, plant and machinery installed in the common areas such as hallways, stairs and lift shafts, in blocks of flats would qualify as the flats themselves are the dwellings, not the building as a whole.

This would seem inconsistent with the HMRC view on HMOs and there may be a test case on the interpretation, particularly as there is no definition of “dwelling house” in the tax legislation. There is also a lack of clarity concerning the status of University Halls of residence where there is often substantial expenditure on plant and machinery in common areas.

See: CA11520 - Capital Allowances Manual - HMRC internal manual - GOV.UK (https://www.gov.uk/hmrc-internal-manuals/capital-allowances-manual/ca11520) and CA23060 - Capital Allowances Manual - HMRC internal manual - GOV.UK (https://www.gov.uk/hmrc-internal-manuals/capital-allowances-manual/ca23060)

VAT rate reduction for hospitality, holiday accommodation and attractions

The reduced VAT rate of 5% has been extended until 30 September 2021. Following this, an interim rate of 12.5% will be in place for a further six months with the standard rate of 20% returning in April 2022.

If you are a VAT registered business, check if you can temporarily reduce the rate of VAT on supplies relating to hospitality, accommodation, or admission to certain attractions.

Hospitality:

If you supply food and non-alcoholic beverages for consumption on your premises, for example, a restaurant, café or pub, you’re currently required to charge VAT at the standard rate of 20%. However, when you make these supplies between 15 July 2020 and 31 March 2021 you will only need to charge 5%.

You will also be able to charge the reduced rate of VAT on your supplies of hot takeaway food and hot takeaway non-alcoholic drinks.

More information about how these changes apply to your business can be found in Catering, takeaway food (VAT Notice 709/1 https://www.gov.uk/guidance/catering-takeaway-food-and-vat-notice-7091).

Hotel and holiday accommodation:

You will also benefit from the temporary reduced rate if you:

• supply sleeping accommodation in a hotel or similar establishment
• make certain supplies of holiday accommodation
• charge fees for caravan pitches and associated facilities
• charge fees for tent pitches or camping facilities

More information about how these changes apply to your business can be found in Hotels and holiday accommodation (VAT Notice 709/3 https://www.gov.uk/guidance/hotels-holiday-accommodation-and-vat-notice-7093).

Admission to certain attractions:

If you charge a fee for admission to certain attractions where the supplies are currently standard rated, you will only need to charge the reduced rate of VAT between 15 July 2020 and 31 March 2021.

However, if the fee you charge for admission is currently exempt, that will take precedence and your supplies will not qualify for the reduced rate.

More information about how these changes apply to your business can be found in VAT: Admission charges to attractions https://www.gov.uk/guidance/vat-on-admission-charges-to-attractions.

For the full details including the Flat Rate Scheme, The Tour Operators Margin Scheme, Retail Schemes and Accounting for supplies that straddle the temporary reduced rate see: VAT: reduced rate for hospitality, holiday accommodation and attractions - GOV.UK (https://www.gov.uk/guidance/vat-reduced-rate-for-hospitality-holiday-accommodation-and-attractions)

Audience of the Future funding for early-stage projects

Apply for a share of up to £800,000 for early-stage, human-centred design projects in creative or immersive experiences. Innovate UK, as part of UK Research and Innovation, will invest up to £800,000 to fund early-stage, human-centred design projects through the Audience of the Future Challenge Fund. The aim of this competition is to support early-stage projects to generate ideas that meet customer needs, using research and human-centred design principles. Fast, low-cost prototyping and user testing of those ideas is also within scope.

Your proposal must deliver well-defined, user-validated ideas ready for further technical research and development (R&D) and discover insights about the problem space, consumer motivations and behaviours.

Projects must explore innovation opportunities in one or more of the following themes:

• designing for Net Zero
• design for Build Back Better
• design for Cross Sector Immersive Projects

Projects must include activities or work packages that:

• discover customer perceptions, motivations, and behaviour
• define the problem statement and pinpoint the characteristics necessary to make any solution desirable and fit for purpose
• deliver clearly communicated ideas that have been validated through fast, low-cost prototyping and user-testing and are ready for further technical R&D

The competition is open to single applicants and collaborations for projects with total eligible costs between £25,000 and £50,000. To lead a project, your organisation must be a UK registered business of any size. You must involve at least one micro, small or medium-sized enterprise (SME).

See: Competition overview - Audience of the Future – Design Foundations 2 - Innovation Funding Service (https://apply-for-innovation-funding.service.gov.uk/competition/1001/overview)

17th September 2021 – Hillmans Weekly Update

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

• Further Details on Proposed NIC and Dividend Tax Rates
• Check how to import or export goods
• Claiming back Statutory Sick Pay paid to employees due to coronavirus (COVID-19)
• Businesses given more time to apply new product safety marking

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 great weekend.

Stay safe and well.

Cheers,

Steve

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

Check how to import or export goods

There is a new government tool check on how to import or export goods, which provides step by step tailored guidance. Use this service to get information about importing and exporting, including:

• how to register your business for trading
• which licences and certificates you need for your goods
• paying the right tax and duty for your goods
• how to make declarations for your goods to clear the UK border
• which paperwork you need to keep

You will need to know:

• where the goods are coming from or going to
• the commodity code for the goods

See: Check how to import or export goods - GOV.UK (https://www.gov.uk/check-how-to-import-export)

Claiming back Statutory Sick Pay paid to employees due to coronavirus (COVID-19)

The Coronavirus Statutory Sick Pay Rebate Scheme will repay employers the Statutory Sick Pay paid to current or former employees.

HMRC have updated the guidance to confirm that employers can only claim for employees who were off work on or before 30 September 2021.

The online service you could use to claim back Statutory Sick Pay (SSP) is now available.

See: Check if you can claim back Statutory Sick Pay paid to employees due to coronavirus (COVID-19) - GOV.UK (https://www.gov.uk/guidance/claim-back-statutory-sick-pay-paid-to-employees-due-to-coronavirus-covid-19)

Further Details on Proposed NIC and Dividend Tax Rates

Following last weeks announcement, the Government has published further details on the proposed National Insurance and dividend tax rate increases. It is proposed that there will be a 1.25% rise in National Insurance Contributions (NICs) from April 2022 paid by both employers and workers and will then become a separate tax on earned income from 2023 - calculated in the same way as NIC and appearing on an employee's payslip. Note that the 1.25% increase applies to the Class 4 contributions paid by the self-employed on their profits as well as the Class 1 contributions paid by employees increasing the rates to 10.25% and 13.25%. The employers Class 1 rate will increase from 12.8% to 14.05% however many small businesses are able to set off a £4,000 employment allowance against their employers NIC liability.

Many workers operating through personal service companies to whom the new “off-payroll” working rules apply will also be caught by the proposed measures.

The 1.25% additional levy doesn’t just apply to national insurance contributions, it is proposed that the income from share dividends, earned by those who own shares in companies, will also see a 1.25% tax increase. This would mean that after the £2,000 tax free dividend allowance the rate of tax would be 8.75% for basic rate taxpayers, 33.75% for higher rate taxpayers and 39.35% for those with income in excess of £150,000 a year.

Details of the proposals are set out in the following document: 6.7688_CO_Command paper cover_060921 (https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/1015736/Build_Back_Better-_Our_Plan_for_Health_and_Social_Care.pdf)

Businesses given more time to apply new product safety marking

The UKCA marking replaces the product safety labelling the UK previously used while a member of the EU, such as the CE mark.

Businesses will have an additional year to apply new product safety markings for most products placed on the market in England, Scotland and Wales. The UK Conformity Assessed (UKCA) marking allows the UK to have control over its goods regulations, maintaining the high product safety standards expected in the UK.

Recognising the impact of the pandemic on businesses, the UK Government will extend this deadline to 1 January 2023 to apply UKCA marks for certain products to demonstrate compliance with product safety regulations, rather than 1 January 2022.

See: Businesses given more time to apply new product safety marking - https://www.gov.uk/government/news/businesses-given-more-time-to-apply-new-product-safety-marking

10th September 2021 – Hillmans Weekly Update

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

• National Insurance and tax on dividends to rise by 1.25%
• Intellectual Property renewal service goes digital
• Back to school - Remind employees about HMRC support with childcare costs!
• Reimbursing Fuel for Company cars from 1 September 2021

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 great weekend.

Stay safe and well.

Cheers,

Steve

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

Intellectual Property renewal service goes digital

A new digital renewals service that reduces bulk renewal time for IP rights from 5 days to 5 minutes has now been opened up to all customers by the Intellectual Property Office (IPO).

Customers who need to renew a registered design can do so online. Customers can also renew up to 1,500 IP rights - including combinations of patents, trademarks and designs - in a single digital transaction. The IPO say that they will bring forward these design principles to their One IPO Transformation Programme, which will provide a single, integrated system for all registered IP rights.

See: Renew a patent, trade mark or registered design - https://www.gov.uk/renew-patent-trademark-registered-design

National Insurance and tax on dividends to rise by 1.25%

This week, the government has announced that it plans to increase National Insurance Contributions by 1.25% and tax on dividends by 1.25%. 

We are told the rise is part of the Governments social care plan. The increase will come into effect from April 2022.

We will provide a detailed analysis once we have more information.

Back to school - Remind employees about HMRC support with childcare costs!

With children starting to go back to schools and nurseries in September, and more employees going back to work full time due to the withdrawal of CJRS support, they may need to start thinking about childcare. HMRC have issued a reminder that there is support available for families towards their childcare costs. If they haven’t already done so they should set up a “Tax-Free” Childcare Account to help pay towards the cost of childminders, breakfast and after school clubs, nursery fees and approved play schemes. For every £8 an eligible family pay into the special account the government adds £2, up to £2,000 a year, or up to £4,000 a year if a child is disabled.

The scheme is available to parents or carers who have children aged up to 11, or 17 if their child is disabled. Parents can get Tax-Free Childcare in addition to 30 hours free childcare if they are eligible for both. If the employee or their partner have an expected ‘adjusted net income’ over £100,000 in the current tax year they will not be eligible. This includes any bonuses they expect to get.

For more details see: HMRC can help with childcare costs as children head back to school: https://www.gov.uk/government/news/hmrc-can-help-with-childcare-costs-as-children-head-back-to-school

Reimbursing Fuel for Company cars from 1 September 2021

As the result of recent increases in petrol and diesel prices HMRC have increased the advisory fuel rates that apply for the reimbursement of employees' private fuel for their company cars. The same rates apply when the employer reimburses employees for fuel used for business journeys in their company car. Curiously the LPG reimbursement rates have reduced, which appears to be an anomaly.

The new rates apply from 1 September 2021, but you can continue to use the previous rates for up to 1 month from the date the new rates apply.

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

For hybrid cars you must use the petrol or diesel rate which may differ significantly from the actual fuel costs. The advisory electricity rate for fully electric cars is 4 pence per mile.

Employees should carefully consider whether it is advantageous having private fuel provided for their company car.  Remember that the P11d benefit for having private fuel provided for a company car in 2021/22 is £24,600 multiplied by the CO2 emissions percentage for that vehicle.

For example, a director driving a Mercedes Benz E200 saloon company car (CO2 emissions 169g per km) would be assessed on 37% = £9,102 for 2020/21. If they are a higher rate taxpayer that would mean £3,641 tax. That is an awful lot of private fuel!

3rd September 2021 – Hillmans Weekly Update

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

• Hillmans Guide to VAT rules for supplies of digital services to consumers in the EU
• Self-Employment Income Support Scheme (SEISS) - How to Work out your turnover so you can claim the fifth SEISS grant
• Claiming financial support under the Test and Trace Support Payment scheme

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 great weekend.

Stay safe and well.

Cheers,

Steve

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

Guide to VAT rules for supplies of digital services to consumers in the EU

We have produced a new Help Guide for the VAT rules for supplies of digital services to consumers in the EU.

You can download our guide for free from our website here: https://www.hillmans.co.uk/guide-to-vat-rules-for-supplies-of-digital-services-to-consumers-in-the-eu

UK businesses selling digital products and services to consumers in the EU must account for the EU VAT due based on the country of the consumer.

From the 1st January 2021, it is possible to register for a Non-Union VAT MOSS (mini one stop shop) scheme in an EU member state (of your choice), which enables you to report all of your EU VAT sales in a single VAT return.

A common option is to register in the Republic of Ireland due to the English language benefits.

Under the Non-Union VAT MOSS, UK businesses must record for each country the total sales made and VAT collected in that EU country, along with the rate of VAT that has been applied. Note that the rate of VAT depends on the rate that applies in the EU country where supplies are made and not the EU country of registration.

The Digital Services Threshold (which was £8,818) is no longer available to UK suppliers of B2C Digital Services from 1st January 2021. This means as soon as a covered digital service is provided to an EU consumer, the UK business will need to account for the EU VAT (either by the Non-Union VAT MOSS) or direct with the relevant EU country.

Please contact us if you would like further information. 

Self-Employment Income Support Scheme (SEISS) - How to Work out your turnover so you can claim the fifth SEISS grant

For the fifth grant you will need to tell HM Revenue & Customs (HMRC) about your turnover if you traded in 2019 to 2020 as well as any of the following tax years:

• 2018 to 2019
• 2017 to 2018
• 2016 to 2017

Turnover includes the takings, fees, sales or money earned or received by your business.

Before you claim you must:

1. Work out your April 2020 to April 2021 turnover.
2. Find your turnover from either 2019 to 2020 or 2018 to 2019 to use as a reference year.

You will need to have both figures ready when you make your claim.

How to work out your April 2020 to April 2021 turnover

You need to work out your turnover for a 12-month period, starting on any date from 1 to 6 April 2020.

You can use one of the following periods:

• 1 April 2020 to 31 March 2021
• 2 April 2020 to 1 April 2021
• 3 April 2020 to 2 April 2021
• 4 April 2020 to 3 April 2021
• 5 April 2020 to 4 April 2021
• 6 April 2020 to 5 April 2021

You should check that your figure is accurate. HMRC will be able to check your figures after you submit your tax return for this period. Your figure must include the turnover from all of your businesses. 

See more here: Claim a grant through the Self-Employment Income Support Scheme -https://www.gov.uk/guidance/claim-a-grant-through-the-self-employment-income-support-scheme