Archive for December, 2020

Concerned about tax payments due 31 January 2021?

Wednesday, December 23rd, 2020

UK taxpayers that file a tax return will need to pay a variety of self-assessment tax and NIC liabilities that will fall due at the end of January 2021. They include:

 

· The second payment on account for 2019-20 if deferred when first due 31 July 2020.

· Any balance of taxes unpaid for 2019-20

· The first payment on account for 2020-21

The second two amounts will have been quantified when your self-assessment tax return was filed for 2019-20.

If you have concerns that you will not have sufficient funds to meet these liabilities on 31 January 2021, it is possible to negotiate under HMRC’s time to pay scheme. On their website HMRC offer the following advice:

If you cannot pay your Self-Assessment tax bill

You can set up a payment plan to spread the cost of your latest Self-Assessment bill if:

  • you owe £30,000 or less
  • you do not have any other payment plans or debts with HMRC
  • your tax returns are up to date
  • it’s less than 60 days after the payment deadline

You do not need to contact HMRC if you set up a payment plan online. Call the Self-Assessment helpline if you’re not eligible for a payment plan or cannot use the online service.

Self-Assessment Payment Helpline
Telephone: 0300 200 3822
Monday to Friday, 8am to 4pm
Find out about call charges

 

If you cannot pay other taxes

You might be able to set up a Time to Pay Arrangement with HMRC if you’re unable to pay any other taxes in full. This lets you spread the cost of your tax bill by paying what you owe in instalments.

How you do this depends on whether you’ve received a payment demand.

If you’ve received a payment demand, like a tax bill or a letter threatening you with legal action, call the HMRC office that sent you the letter. If you’ve not received a bill or letter, call the Payment Support Service.

Payment Support Service
Telephone: 0300 200 3835
Monday to Friday, 8am to 4pm
Find out about call charges

Parting shot from the Chancellor

Tuesday, December 22nd, 2020

For a man that has admitted he has concerns about the level of government funding committed to the support of businesses during the last nine months, Rishi Sunak’s disclosure last week that he is extending the furlough scheme to the end of April 2021 points to a deepening concern in government that we are not out of the woods just yet.

He also extended the deadline for making applications under the government-guaranteed loan schemes. Applications were required before 31 January 2021, this deadline is now 31 March 2021.

In his statement to parliament the Chancellor hinted that he may be offering more financial support when he stands to present his budget on 3rd March 2021.

None of us want to contemplate another year like 2020. Although the various vaccines coming online should make some difference to the efforts to control infection it is likely that these efforts will not be some magic bullet to completely tame COVID.

What is likely, is that as soon as government is able to cut-back on its furlough funding and other commitments it will turn its attention to pay-back.

This will likely involve public expenditure cuts and higher taxation. Described by the pundits in the past as austerity.

We will have wait for Rishi Sunak’s announcements on 3rd March to see how this will play out.

The options the Treasury are probably contemplating are reductions in costly tax reliefs – such as continuing higher rate tax relief for pension contributions – and increases in taxation.

Economists that have a different view of government spending and whether it needs to be paid back, will be pressing for a different fiscal agenda. They will no doubt point out that we need to kick-start the economy by encouraging investment and stimulating consumers to buy.

The Chancellor’s parting shot for 2020 will also be coloured by the outcome of the present, protracted EU trade negotiations. At the time this article was written the outcome of discussions was far from clear and mirrors the general feeling of uncertainty that has grown since the first signs of COVID appeared March 2020.

Meantime, we are required to make the best of a situation that is feeling increasingly like self-imposed house arrest and yet there is a note of optimism that 2021 will see a change in our fortunes, and for the better.

Looks like we are heading for a no-deal exit from the EU

Thursday, December 17th, 2020

If the following criteria apply, this is what our government recommend that you do from 1 January 2021:

You:

  • Are British
  • Live and work in the UK
  • Travel to the EU for business reasons
  • Have no plans in the short-term to travel abroad for holidays
  • Do not plan to move to the EU
  • Run and/or own a business in the UK
  • Do not employ EU citizens in your business
  • Do not exchange any form of personal data with customers or suppliers in the EU
  • Do not sell your products or services to the UK public sector
  • Do not rely on intellectual property protection
  • Do not have a website with an .eu domain
  • Import and export goods from and to the EU
  • Are manufacturers of consumer goods

 

If the above apply to your circumstances, our government advises that you need to attend to the following matters to comply with our new trading relationship with the EU from 1 January 2021:

  1. URGENT Check what you need to do to export to the EU from 1 January 2021
  2. URGENT Check what you need to do to import from the EU from 1 January 2021
  3. URGENT Decide how you want to make customs declarations and whether you need to get someone to deal with customs for you.
  4. Check if you need to pay a tariff on the goods you import from 1 January 2021
  5. Get an EORI number that starts with GB to move your goods into or out of the EU. It takes up to a week and you will not be able to move your goods into or out of the EU without an EORI number.

There are also a number of specialist issues that you may have to consider including:

  1. Moving goods between or through common transit countries including the EU
  2. How to comply with REACH chemical regulations
  3. Exporting controlled goods from 1 January 2021
  4. Meeting climate change requirements from 2021
  5. Movement of wood packaging material from 2021
  6. Trading and moving endangered species protected by CITES
  7. Applying for a trade remedies investigation

 

Additionally, you and your family will need to consider

1. Taking out travel insurance and health insurance before travelling to the EU.

2. Check if you need a visa or work permit.

3. Check your mobile contract as providers may reintroduce roaming charges.

4. Allow more time at border crossings.

We will need to get used to treating countries in the EU as non-local. Borders will be re-established at the end of December, no more quick-access to EU gates in airports.

Hopefully, you will have attended to most of these issues already. If not, use the hyperlinks in our text to find out what’s to do next. And call if you want to discuss these or your wider options as we grapple with Brexit and COVID-19.

Accounting for import VAT on your VAT return

Tuesday, December 15th, 2020

From 1 January 2021, if your business is registered for VAT in the UK, you will need to consider how to treat VAT added to imports from the EU.

Accounting for import VAT on your VAT Return means you will declare and recover import VAT on the same VAT Return, rather than having to pay it upfront and recover it later.

The normal rules that may restrict the amount of VAT you can claim back will remain the same.

Who can account for import VAT on their VAT Return?

You will be able to account for import VAT on your VAT Return for goods you import into:

  • Great Britain (England, Scotland and Wales) from anywhere outside the UK
  • Northern Ireland from outside the UK and EU

There will be no changes to the treatment of VAT or how you account for VAT for the movement of goods between Northern Ireland and the EU.

You do not need any approval to account for import VAT on your VAT Return.

When you can account for import VAT on your VAT Return

You can do this if:

  • the goods you import are for use in your business
  • you include your VAT registration number on your customs declaration

When you must account for import VAT on your VAT Return

If you import goods that are not controlled into Great Britain from the EU between 1 January and 30 June 2021, you must account for import VAT on your VAT Return if you either:

  • delay your customs declaration
  • use a simplified customs declaration to make a declaration in your own records

You must make sure that when you complete the supplementary declaration you select that you will be accounting for import VAT on your VAT Return.

How to complete your customs declaration in order to account for import VAT on your VAT Return

When you complete your custom’s declaration you can select that you will be accounting for import VAT on your VAT Return.

If you use the Customs Handling of Import and Export Freight (CHIEF) system

On your declaration, you’ll need to enter:

  • your EORI number starting with ‘GB’ which includes your VAT registration number into box 8 (Header Consignee), or, if applicable, your VAT registration number in box 44h (Registered Consignee)
  • ‘G’ as the method of payment in Box 47e

If you use the Customs Declaration Service

You need to enter your VAT registration number at header level in data element 3/40.

VAT will be recorded against your EORI and will be at declaration level only.

Possible crackdown on unfair employment clauses

Thursday, December 10th, 2020

The following update is copied from a government press release recently issued by the Department for Business, Energy & Industrial Strategy.

New proposed measures to allow workers’ greater freedom to find new or additional work were unveiled by Business Secretary Alok Sharma 4 December 2020.

In a major win for the UK’s lowest paid workers, the government will consult on banning the use of exclusivity clauses in contracts, which prevent workers from taking on additional work with other employers. This would apply to workers whose guaranteed weekly income is below the Lower Earnings Limit, currently £120 a week.

This change will put more power into the hands of an estimated 1.8 million low paid workers across the UK to top-up their income with additional work if they want to – ending an unfair penalty on hardworking Britons who want the freedom and flexibility to make a living and support their families.

It will also greatly expand the pool of talent available for businesses who rely on part-time and flexible workers, as those already in low-paid part-time employment will no longer be bound by restrictive contracts.

The plans also look to reform the use of non-compete clauses, which can prevent individuals from starting up or joining competing businesses after they leave a position. The move will ensure talented individuals have the freedom to apply their skills in another role if they wish while unleashing a wave of new start-ups across the country.

Plans involve introducing a mandatory compensation requirement for any employer that wishes to use non-compete clauses, ensuring that workers receive a fair settlement if they are restricted from joining or starting a business within their field of expertise. This aims to discourage the unnecessary and widespread use of non-compete clauses by employers.

The government is also seeking views on whether it is necessary to go further and ban non-compete clauses all together.

Exclusivity clauses were banned for workers on zero hours contracts, where employers are not obliged to provide any minimum working hours and the worker is not obliged to accept any work offered, in 2015.

What have we learnt from 2020?

Tuesday, December 8th, 2020

To answer this question, we should take a look at a few adjectives that have been used to describe COVID-19’s effects on our personal and business lives. For example, unexpected, unprecedented, disruptive…

Prior to the pandemic we assumed that tomorrow would turn out much like yesterday. Many businesses had become accustomed to managing cash flow on the assumption that next month’s turnover could be more or less guaranteed based on expected market conditions. There were trends, up and down, but by and large positive, growth orientated economic activity was a given in western democracies.

COVID-19, in a matter of weeks, tore up this assumption.

It quickly became evident that the pandemic was creating new norms. A few business sectors have benefitted from the ensuing disruption, but many businesses have not. A sizeable chunk has gone out of business as lock-down regulation has required them to close (witness the effects on our leisure and entertainment industries).

Lesson 1 – always expect the unexpected.

The are a number of businesses in vulnerable sectors that have survived COVID disruption thus far. Many have had their cash flow enhanced by the multitude of government grants and soft loans on offer. Others were financially prepared; they had fat on the bones. Their Balance Sheets showed healthy reserves of cash or assets that could be quickly converted into cash. Very few businesses would have considered the disruption we have suffered in 2020 as anything more than fiction, a great disaster movie script. What we now know if that the unexpected needs to be factored into our business planning.

Lesson 2 – make sure you can ride out extended downturns.

For example, periods where your income is much reduced or if in business you are required to trade at a loss. It will be many years before this coronavirus outbreak passes into folklore. The fear of a repeat will linger for some time, like an itch that can’t be scratched. Should we, therefore, include the acquisition of reserves as one prudent strategy for 2021? If that is not possible could you “mothball” your business if required or convert your business assets to a different use?

 

Lesson 3 – planning is no longer a luxury we cannot afford.

In the past, pre-COVID, when the expectation was tomorrow would be much like today (or yesterday), many of us felt no need to plan what was going to happen tomorrow. This is no longer the case. The last year has provided the evidence that the unexpected can have a real impact.

We can help

During 2021, perhaps we can all benefit from business planning? We are still in the centre of the COVID storm and from next month we will be dealing with additional disruption as we finally leave the EU transition period behind.

If you would like to consider your business finances, how we are going to survive 2021, and then regroup and build a sustainable business modal for the remainder of the 2020’s, we can help you start the process now.

Please call so that we can discuss your options. There will be no one-size-fits-all remedy from the damage inflicted in 2020. What is clear is that a willingness to engage in the challenges presented, to factor in the unexpected, and plan for the future is an endeavour worthy of serious consideration.

Summary of spending review 2021-22

Monday, December 7th, 2020

A summary of the business elements of the recent Spending Review for next year are set out below:

Continuing the UK’s recovery from coronavirus

The Spending Review has set out the government’s intention to maintain support to protect jobs, businesses and livelihoods, while stimulating the UK’s economic recovery.

In the Spending Review the government has committed to invest:

  • an additional £733 million in the government’s Vaccines Taskforce for the purchase of Covid-19 vaccines; £128 million to support vaccines research and manufacturing, including funding for the Vaccines Manufacturing Innovation Centre which will be capable of producing enough vaccine doses for the entire UK population in 6 months;
  • more than £500 million to support the continued delivery of vital Covid-19 loans, including paying for the 12 month interest free period on the Bounce Back Loans and Coronavirus Business Interruption Loan Schemes; and
  • £557.5 million for the British Business Bank to continue supporting SMEs across the UK to access the finance they need to grow and stimulate the economic recovery post-Covid.

Growing the UK’s reputation as a science superpower

The UK has a proud record of innovation and discovery. We are the country that gave the world penicillin, the World Wide Web, the theories of gravity and evolution, that unravelled the structure of DNA. That spirit of discovery is still alive in this country today. The UK remains a science superpower, with a world leading research and development environment. To grow this reputation, the government has committed to investing £14.6 billion in research and development in 2021/22.

In the Spending Review the government has committed to invest in 2021/22:

  • at least £490 million in core Innovate UK programmes and infrastructure to support ground-breaking technologies and businesses;
  • £79 million in innovation loans to help cutting-edge UK businesses to access capital;
  • £200 million for the Net Zero Innovation Portfolio to develop new decarbonisation solutions and accelerate near-to-market low-carbon energy innovations; and
  • £450 million to support strategic government priorities, build new science capability and support the whole research and innovation ecosystem. This includes £350m for BEIS, including the first £50 million of an £800 million investment by 2024/25 towards a new agency for high-risk high-payoff research.

Spurring a green industrial revolution and achieving net zero by 2050

The UK is a world leader in the fight against climate change, cutting emissions by 43% since 1990/ The Prime Minister recently outlined a 10 point plan which will mobilise £12 billion to enable the UK to forge ahead with achieving net zero carbon emissions by 2050, while spurring a green industrial revolution that will create and support up to 250,000 jobs.

In the Spending Review the government has committed to invest:

  • at least £125 million in 2020/21 in nuclear technologies, as part of up to £525 million set out in the PM’s 10 point plan, supporting the development of large-scale nuclear, and including up to £385 million in an Advanced Nuclear Fund for advanced nuclear R&D
  • to increase the Carbon Capture and Storage Infrastructure Fund to support the construction of four new Carbon Capture and Storage clusters by 2030;
  • £240 million to create a Net Zero Hydrogen Production fund to support the production of low-carbon hydrogen;
  • £160 million upgrading ports and infrastructure to support the expansion of offshore wind;
  • over £1 billion next year to decarbonise homes and buildings, extending the package for low carbon heat and energy efficiency announced earlier in the year;
  • £122 million to support the creation of clean heat networks; and
  • £500 million over next four years on the development and mass-scale production of electric vehicle batteries.

Tax Diary December 2020/January 2021

Wednesday, December 2nd, 2020

1 December 2020 – Due date for Corporation Tax payable for the year ended 28 February 2020.

19 December 2020 – PAYE and NIC deductions due for month ended 5 December 2020. (If you pay your tax electronically the due date is 22 December 2020)

19 December 2020 – Filing deadline for the CIS300 monthly return for the month ended 5 December 2020.

19 December 2020 – CIS tax deducted for the month ended 5 December 2020 is payable by today.

30 December 2020 – Deadline for filing 2019-20 self-assessment tax returns online to include a claim for under payments to be collected via tax code in 2021-22.

1 January 2021 – Due date for Corporation Tax due for the year ended 31 March 2020.

19 January 2021 – PAYE and NIC deductions due for month ended 5 January 2021. (If you pay your tax electronically the due date is 22 January 2021)

19 January 2021 – Filing deadline for the CIS300 monthly return for the month ended 5 January 2021.

19 January 2021 – CIS tax deducted for the month ended 5 January 2021 is payable by today.

31 January 2021 – Last day to file 2019-20 self-assessment tax returns online.

31 January 2021 – Balance of self-assessment tax owing for 2019-20 due to be settled on or before today unless you have elected to extend this deadline by formal agreement with HMRC. Also due is any first payment on account for 2020-21.

Customs changes from 1 January 2021

Wednesday, December 2nd, 2020

Most smaller businesses will not have the resources to train and employ their own customs clearance staff in which case you may have to consider using a customs agent or broker. We have reproduced the advice on the GOV.UK website on this critical issue below.

If you do import or export goods from and to the EU you could consider one of the options that follow:

You can hire a person or business to deal with customs for you, such as:

  • freight forwarders
  • customs agents or brokers
  • fast parcel operators

What they can do for you (and who will be liable) depends on:

  • the services they provide
  • what you want them to do
  • the commercial agreement you have with them

They can act for you either as a:

  • direct representative
  • Indirect representative

They cannot act on your behalf without written instructions from you. The instruction must show whether they’re acting for you directly or indirectly. HMRC will only ask for evidence of the authorisation when required.

Freight forwarders

Freight forwarders move goods around the world for importers.

A freight forwarder will arrange clearing your goods through customs. They’ll have the right software to communicate with HMRC’s systems.

Customs agent or broker

Customs agents and brokers make sure your goods clear through customs.

Fast parcel operators

Fast parcel operators transport documents, parcels and freight across the world in a specific time frame. They can deal with customs for you, as part of their delivery.

Trivial benefits are not so trivial

Wednesday, December 2nd, 2020

A reminder that It is possible to make small tax-free payments to employees, including directors, and this might be an appropriate time to make a small tax-free bonus in advance of the annual Christmas, New Year holidays.

Employers and employees don’t have to pay tax on small benefits provided they comply with the following rules:

  • it cost you £50 or less to provide,
  • it isn’t cash or a cash voucher,
  • it isn’t a reward for work or performance related activity
  • it isn’t in the terms of an employees’ contract.

HMRC describes these payments as a ‘trivial benefit’. Based on the national mood following months of COVID disruption, these so-called trivial benefits now seem a possible means to spread a little good cheer.

A word of caution

Where the employer is a close company, and the benefit is provided to an individual who is a director or other office holder of the company (or a member of their family or household) the exemption is capped at a total cost of £300 in the tax year.

Secondly, if you provide a benefit to a group of employees and it is impractical to work out the exact cost per head, then it is acceptable to average the cost per employee.

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