News & Updates

HMRC estimates that around 100,000 businesses have an annual turnover that requires them to join the MTD for VAT regime, but they haven’t signed-up yet. These businesses are still submitting VAT returns through the old HMRC portal (online form).

HMRC has the power to impose penalties of £400 for failure to use MTD-compatible software to file the VAT return, when required to do so, but it has preferred to use a nudge-letter approach. However, that is about to change.

Around 800 businesses will shortly receive a HMRC letter that says they will be able to file their VAT return for the period ending in March, April or May, up until 7 July 2021 using the online form, but that portal will be closed to them after that date. From that point on the business will be forced to use MTD compatible software. If the response to this pilot-run is positive HMRC will roll it out to the rest of the 100,000 MTD refuseniks.

Where our clients have not signed up to MTD for VAT, we may be submitting your VAT returns through the old online portal. When doing so we may find the submission is blocked. If we check our Agent Services Account (ASA) the client record it will say the client has signed up to MTD. This is incorrect.

The problem has been caused by HMRC migrating all VAT registered businesses from their legacy VAT mainframe to the integrated Enterprise Tax Management Platform (ETMP). To remove the blockage and allow you to file the VAT return you need to:

• Log into your ASA
• Go to ‘view and change’
• Find the clients who haven’t signed up to MTD and mark them as such

If that procedure doesn’t work you will need to call the HMRC VAT helpline:0300 200 3700.

Written by the Tax Advice Network

SEISS grants are taxed in the tax year they are received, which may not be the same tax year in which the profits they are designed to replace would have been taxed. This can lead to a bunching of taxable income in 2020/21 and a corresponding low taxable income in 2021/22.

Example

Selina is self-employed with an accounting year end of 30 April. Her actual profits are:

• Year to 30 April 2020: £36,000 taxed in 2020/21
• Year to 30 April 2021: £5,000 taxed in 2021/22

She received SEISS grants totalling £16,500 in 2020/21 which are taxable in that year. This means her taxable income before allowances for 2020/21 is £52,500, which pushes her into higher rate tax and potentially make her subject to the high income child benefit charge.

In 2021/22 Selina claimed an SEISS-4 grant of £2400. She will not be eligible for the SEISS-5 grant as her business is now fully open. Her taxable income for 2021/22 will be £7,400, which is covered by her personal allowance, and indeed wastes some of her allowance.

One solution could be to change Selina’s accounting date to lengthen the accounting period so it ends on say 30 June 2020. This longer period will take in some losses realised in the shut-down period in May and June 2020. The next accounting period would then run from 1 July 2020 to 30 June 2021, absorbing more profits after business opened fully again in 2021.

It’s too late to change the accounting period that ended in 2019/20, as HMRC had to be notified of that change by 31 January 2021.

When changing an accounting date, it is important to take into account the level of any other taxable income, any overlap relief available from the commencement of the trade, and the projected profits.

A change in accounting date will also affect when the business will be mandated into MTD ITSA reporting, which will be compulsory for accounting periods starting on or after 6 April 2023.

Our business tax experts are happy to help with these tricky calculations.

Written by the Tax Advice Network

Many landlords of commercial property are suffering because their tenants have left or gone into liquidation.

If the building is empty and unused no business rates are due for the first three months it is vacant, but most businesses must start to pay the business rates again after three months. An extension of this three month relief period can be claimed for certain types of building (industrial, listed, or very small rateable value), or where the owner is a charity or community amateur sports club.

There is also an exception to the requirement to pay business rates where the owner is a company in liquidation and doesn’t occupy the property, or the owner is a company in administration. However, these exceptions have been used within tax avoidance schemes by certain property developers. They form special purpose vehicle (SPV) companies to hold the empty properties, and then put those SPVs into liquidation, avoiding the business rates.

A number of local authorities have challenged these business rates avoidance schemes at the Supreme Court, and the case will now proceed to a full trial. The use of SPVs to avoid business rates may be ended with rates becoming payable for past years.

If you are facing a business rates bill on an empty property we advise you to contact the local council as you may be able to claim hardship relief for those rates.

Written by the Tax Advice Network

The Plastic Packaging Tax is designed to encourage the use of recycled rather than new plastic in packaging. It will apply to plastic packaging manufactured in, or imported into, the UK where less than 30% of the plastic used in manufacturing the packaging is recycled. The tax, which applies from 1 April 2022, is set at the rate of £200 per metric tonne of plastic packaging.

If you manufacture or import ten tonnes or more of plastic packaging will need to register for the tax. The registration requirement applies regardless of whether you will need to pay the tax, and applies equally to those of you who import plastic packaging that already contains goods, for example, plastic bottles containing drinks. The online service to register and pay the tax will not be available until 1 April 2022 – the date from which the tax applies.

If you manufacture or import plastic packaging will need to keep records of the packaging that they manufacture or import. While this requirement applies regardless of the amount of plastic packaging that you manufacturers or import, HMRC have stated that they intend to reduce the record keeping requirements where the business manufacturers or imports less than ten tonnes of plastic packaging a year. When keeping records, you should be able to show the amount of recycled plastic that the packaging contains – plastic packaging is assumed not to meet the 30% recycled plastic test unless it can be shown that it does.

If you supply packaging which includes recycled plastic you may need to provide more information to your customers about the type and qualities of the materials that they supply.

If you are within the scope of the tax, any invoice that is issued to a business customer must include a statement that Plastic Packaging Tax has been paid on the packaging concerned.

Those of you within the ambit of the new tax should start to plan ahead for its introduction. You may wish to consider a move to using more recycled plastic in your packaging to reduce the amount of the tax that they will have to pay.

Written by the Tax Advice Network

The PAYE system imposes a number of annual reporting tasks on our clients who are employers. One of these tasks is the requirement to give each employee employed at 5 April at the end of the tax year a statement of their total pay and deductions for that tax year (a P60) by the following 31 May. Clients with employees on the payroll on 5 April 2021 must give them their P60 for 2020/21 by 31 May 2021.

The P60 will normally be produced by the payroll software package (including HMRC’s Basic PAYE Tools where this is used). However, paper copies can be ordered from HMRC – it is not possible to download blank copies online from the Gov.uk website. P60s can be given to employees electronically or in paper format.

Once a P60 has been issued, if you need to change it, you can either give the employee a replacement P60, which should be clearly marked ‘replacement’. Again, this can be provided electronically or in paper format. Alternatively, you can give the employee a letter confirming the changes.

Where you have payrolled benefits provided to employees in the 2020/21 tax year, the employees must be given the following information by 1 June 2021:

• details of the benefits payrolled;
• their cash equivalent value;
• where the benefit is made available under and Optional Remuneration Arrangement (OpRA), such as a salary sacrifice scheme, details of the relevant amount payrolled; and
• details of any benefits not payrolled.

The information can be provided on the employees’ payslips or in a separate note or statement, making it clear what benefits have been subject to tax under PAYE and the value of the benefit reported to HMRC and on which tax has been collected. The employee will need this information if they complete a self-assessment tax return.

Written by the Tax Advice Network

HMRC have changed their policy as regards the VAT treatment of the installation of blinds following the decision of the First-tier Tribunal in Wickford Development Co Ltd (Wickford) TC2017/08197 and TC2018/03555. As a result of the Tribunal decision, HMRC now accept that manual blinds are building materials for the purposes of construction services.

The policy change will affect the construction industry and DIY housebuilders.

For VAT purposes, the construction of residential property is zero-rated. The zero rate applies to the construction services and the building materials that are incorporated into the property by the persons constructing the property. The application of the zero rate is limited to basic materials that make up the structure of the property (such as bricks, mortar, timber and glass) and also to standard fixtures and fittings that enable the property to function (such as kitchen units and work surfaces, baths, toilets and hand basins). DIY builders are unable to benefit from the zero rate if they buy the building materials and incorporate them into the property. However, they can recover the VAT charged on basic materials and standard fixtures and fittings through the VAT refund scheme.

Prior to the Tribunal decision, HMRC’s view (in Customs Brief 02/11) was that roller blinds and other window furniture were not ‘building materials’, meaning VAT could not be recovered. However, the Tribunal found that manual window blinds are goods of a description ordinarily incorporated by builders into properties as single family dwelling. HMRC have accepted this decision and revised their policy. Manual window blinds and shutters are now considered building materials for VAT purposes and can be zero-rated when installed in a qualifying build. However, the change of policy does not extend to motorised blinds.

The policy change is effective from 5 October 2020. DIY housebuilders can claim a refund on the VAT incurred on the installation of manual blinds prior to the date of the policy change.

Written by the Tax Advice Network