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Northern Ireland is still treated as part of the EU single market and customs area to avoid a hard border on the island of Ireland. This means there are different VAT arrangements for goods moving into and out of Northern Ireland to Great Britain.

To reflect these different rules the wording on the VAT return is being changed from today; 8 April 2021. Businesses affected by the Northern Ireland protocol have been implementing the new rules since 1 January 2021. The new wording on the VAT return is designed to assist businesses by using plain language when preparing VAT returns.

The new wording for boxes 2, 4, 8 and 9 and the accompanying notes will be:

Box 2: VAT due in the period on acquisitions of goods made in Northern Ireland from EU Member States. For goods moved under the Northern Ireland protocol only. Show the VAT due (but not paid) on all goods and related services you acquired in this period from EU Member States.

Box 4: VAT reclaimed in the period on purchases and other inputs (including acquisitions in Northern Ireland from EU member states). Show the total amount of deductible VAT charged on your business purchases. Include the VAT reclaimed in this period on imports accounted for through postponed VAT accounting.

Box 8: Total value of dispatches of goods and related costs (excluding VAT) from Northern Ireland to EU Member States. In box 8 show the total value of all supplies of goods and related costs, excluding any VAT, to EU Member States from Northern Ireland.

Box 9: Total value of acquisitions of goods and related costs (excluding VAT) made in Northern Ireland from EU Member States. In box 9 show the total value of all acquisitions of goods and related costs, excluding any VAT, from EU Member States to Northern Ireland.

There are no changes to boxes 1, 3, 5, 6 and 7.

Most software providers should have made the necessary changes to the VAT submission software so that VAT returns will be filed with the new wording, but check that you have updated your VAT software since January 2021.

Written by the Tax Advice Network

Businesses which sell both taxable (subject to VAT) and exempt services are referred to as partially exempt. A typical example would be sellers of domestical appliances who receive commission by selling insurance for those goods – financial services are exempt from VAT.

The input tax for the business has to be allocated between the sales which are taxable and exempt, but some inputs, such as rent for the premises will be common to both, and this input tax needs to be split in a reasonable way. The standard method to do this is to apply this formula:

However, due to coronavirus many physical shops have been closed, and the mix between the taxable and exempt sales may have changed so the current partial exemption method does not provide a fair result. HMRC has recognised situations like this, and has published a concession in Revenue & Customs Brief 4/(2021).

Businesses can now apply to use a temporary partial exemption calculation method (a ‘special’ method) without a lot of questions and delay. The special method will normally apply for one tax year, and the business will be expected to revert to the previously used partial exemption calculation method after that, unless they asked for an extension of the special method.

HMRC do not normally allow such changes to be applied retrospectively, but it considers the impact of coronavirus as an exceptional circumstance, and will allow the special method to be applied from the time that coronavirus pandemic started to affect trade.

Written by the Tax Advice Network

Good Afternoon All

New rules have been announced via HMRC in the last week or so.

Up until now only those businesses who are VAT registered have to carry out any of their accounting procedures during their year of accounts online including filing their quarterly VAT Returns.

However, from 6th April 2023 all those individuals whose business turnover exceeds £10,000, or whose rental income exceeds £10,000, or those whose combined business and rental income exceeds £10,000 will have to file a quarterly online submission of Income and Expenditure using computer software.

Many of our clients have one or more of these categories, most of whom will have done little or no record keeping on a computer previously.

I will be contacting each of those of you who will be affected by these changes within the next few months to further explain these matters and suggest one of a number of solutions.

In the meantime, if you have any questions please get in touch with myself or Julie.

Stay safe

Philip

The National Minimum Wage (NMW) and the National Living Wage (NLW) rates rise for pay periods starting on or after 1 April 2021, but this year there is also a change in the age qualification for the top two bands.

The NLW rate now applies to workers aged 23 and over, which previously applied only for workers age 25 and older. This means the next band down now applies to workers aged 21 and 22, not 21 to 24 inclusive. This represents a significant cost increase for employers who employ workers aged 23 and 24.

Where employers have a salary sacrifice scheme in place, perhaps for employer provided bicycles, they need to check there is still the headroom in the wages calculation, after the salary reduction has been taken, to leave at least the NLW in place for those younger workers.

The current NLW and NMW rates are:

Employers must also retain all NMW and NLW records for six years instead of three years from April 2021.

Written by the Tax Advice Network

Veterans’ NIC relief

A new relief for employer’s class 1 NIC comes into effect on 6 April 2021, that applies only to employees who are in their first 12 months of civilian employment after serving at least one day in the armed forces, including in the Ministry of Defence or NATO.

The relief applies a zero rate of employer’s class 1 NIC up to the upper secondary threshold (£50,720 pa for 2021/22). In future years it will be possible to apply this relief at the point the employee is paid, but for 2021/22 employers need to pay the class 1 NIC due then claim it back after the end of the tax year.

Student loans

There is a new form of student loan which has to be deducted from salaries exceeding £25,000 per year. This plan 4 loan applies to anyone who took out an award from the Students Awards Agency Scotland. However, plan 4 loans can apply to employees located anywhere in the UK, it is dependent on where the person was living when they first took out the loan. Employers may receive switch notices to change employees to plan 4 loans.

Note that an employee can only have deductions for one undergraduate loan made at one time, so if they do have more than one undergraduate loan the employer should default to the loan plan with the lowest earnings’ threshold for the tax year.

Starter checklist

The new version of the starter checklist should be used for employees that start their employment on or after 6 April 2021. This takes into account the new plan 4 loans.

Covid easements

Many employers have provided benefits to employees to allow them to work remotely or to travel to or from work safely where public transport was not available.

If the employer is making a payroll settlement agreement (PSA) for those benefits HMRC will automatically consider a category of Covid-19 to justify expenses being included in the PSA as “minor, irregular or impractical”.

Benefit in kind rules which were flexed to allow the goods or services to be provided to the employee tax free during the pandemic (eg broadband, reimbursement of office equipment costs), can continue to be provided tax free in 2021/22.

Written by the Tax Advice Network

Dates for claims

HMRC has drawn up a handy list of all the CJRS deadlines you can print and pin your noticeboard (see link below). One minor change not mentioned in that list is the date claims can be submitted for pay periods in May 2021; these claims can be submitted from 19 April to 14 June 2021.

The conditions for furloughing employees will change again for periods from 1 May 2021. From that point employers can claim for employees who were employed on 2 March 2021 as long as they were included in an RTI submission between 20 March 2020 and 2 March 2021.The employer does not have to previously included that employee in a CJRS claim before 2 March 2021 to make a claim for that person from 1 May 2021 onwards.

Training

While employees are on furlough they are not permitted to provide services to, or generate revenue for, or on behalf of their employing organisation, or for a linked or associated organisation.

However, furloughed employees can engage in training as long as the any time spent while training is paid a rate equivalent to at least the national minimum wage or national living wage as appropriate to the employee’s age. Where that training relates to an R&D project, the cost of the wages paid should not be included in an R&D credit claim for the SME scheme, or in an RDEC claim under the large company scheme.

Transparency

Employees can see if they were included in a CJRS grant for December 2020 or January 2021 by accessing their personal tax account (PTA). If the employer has repaid the full amount of the grant for those months, the grant will not show up in the PTA.

The data in the PTA will be updated on a monthly basis. February CJRS claims will be available to view in the employee’s PTA from 6 May 2021.

Written by the Tax Advice Network