News & Updates

Purchasers of residential properties across the UK have been enjoying a limited reduction in land tax since July 2020, as the entry thresholds were increased as follows:

• SDLT (England and Northern Ireland) starts at £500,000 instead of £125,000
• LTT (Wales) starts at £250,000 instead of £180,000
• LBTT (Scotland) starts at £250,000 instead of £145,000

All those entry thresholds are due to revert to the normal levels from 1 April 2021. If you are thinking of buying a new home, you need to complete the deal before that date to take advantage of the land tax “holiday”.

However, for purchasers of homes in Wales it is already too late for property investors, as the Welsh Government increased the surcharge rate from 3% to 4% on 22 December 2020. As in other parts of the UK, the LTT surcharge applies to the entire consideration where the buyer is a company, or the property will not be used as the purchaser’s main home.

In fact, the Welsh Government cannily restricted the LTT holiday rates to those who are purchasing their main home. Where the surcharge applies, the starting threshold for the main rates of LTT on residential properties is £180,000.

Where you are living overseas and are seeking to purchase a home in England or Northern Ireland, you need to be aware of the additional SDLT surcharge of 2% which will apply from 1 April 2021. This surcharge will apply on top of the current 3% surcharge for second homes, where any of the joint purchasers is a non-resident person, ie an individual, company, trust or partnership at the time of the purchase.

Individuals who are returning to the UK could be caught by this new surcharge as the definition of UK tax residence for SDLT is different from that in the Statutory Residence Test.

Written by the Tax Advice Network

Many small businesses are running out of money, and it’s difficult to budget as no-one knows when the national lockdown will end or be eased. You need to take advantage of the business support schemes available to you.

SEISS

The deadline for applying for the third SEISS grant is 29 January 2021. You need to apply for this grant online yourselves using your Government Gateway ID and password, we can’t apply on your behalf.

The Chancellor said a fourth SEISS grant would be made available to help businesses survive the three months to 30 April 2021, but there is still no detail of how much it will be or when traders will be able to apply. We also don’t know what the conditions for the fourth SEISS grant will be.

It’s possible that this grant will be partially based on the profit reported in the 2019/20 tax return. It may also be restricted to traders who submitted their 2019/20 tax return by 31 January 2021.

CJRS

Many small company directors were locked out of the first two versions of CJRS because they normally pay themselves an annual salary at the end of March.

If those directors did not have pay reported under RTI in 2019/20 before 20 March 2020, they couldn’t claim under CJRS-1 or CJRS-2. If they managed to pay themselves some salary between 20 March 2020 and 30 October 2020 they are eligible for CJRS-3.

The problem is how to calculate the amount to claim under CJRS based on one annual payment of salary, taking into account the monthly pay cap of £2,500.

HMRC has finally issued some examples on annual salary payments (numbered 3.14 and 3.15), and they both take the annual salary and divide it by the number of days in the annual pay period (366 or 365 days). If you have restricted the claim according to the monthly cap of £2,500, you may want to revisit those calculations.

Unfortunately, the HMRC example 3.14 is incorrect as if the director was not paid in the period 20 March to 30 October 2020 (inclusive) they would not be eligible to claim under CJRS-3.

Finally, if you are submitting CJRS claims for employers with more than 100 employees, be sure to download the new spreadsheet templates provided by HMRC.

Written by the Tax Advice Network

Hello All,

As you probably know the Budget this year is on 3rd March, so some serious thought should be given as to which courses of action you might wish to take to preserve or enhance your financial situation. Various rumours abound, some much more prevalent than others.

I list below some of the main ideas being floated. I am not advocating these for one and all, just making you aware of what they are, in case you wish to change things before that date.

• Aligning income and CGT rates or addressing the boundaries between income and capital gains.
• Reintroducing a form of relief for inflationary gains. Also considering the interactions with the tax position of companies.
• Consider reducing the number of Capital Gains Tax rates and the extent to which liabilities depend on the level of a taxpayer’s income.
• Consider taxing more of the share-based rewards arising from employment and of the accumulated retained earnings in smaller companies at Income Tax rates.
• The possible reduction in the Annual Exempt amount for CGT.
• The possibility that the Government remove the capital gains uplift on death and instead provide that the person inheriting the asset is treated as acquiring the asset at the historic base cost of the person who has died.
• Consider a rebasing of all assets, perhaps to the year 2000 and consider extending gift Holdover Relief to a broader range of assets.
• The possibility that the Government might replace Business Asset Disposal Relief ( previously Entrepreneurs Relief ) with a relief more focused on retirement.

Do get in touch if you have any queries or need further help or advice.

Stay safe,

Philip

Paying The Tax – 14/01/2020

The amount of tax payable by an individual taxpayer by 31 January 2021 will be made up of the following amounts:

• Balancing income tax payment for 2019/20
• Second income tax payment on account for 2019/20 – deferred from July 2020
• First income tax payment on account for 2020/21
• Capital gains tax for 2019/20
• Classes 2 and 4 NIC for 2019/20

Where the total of this tax liability is no more than £30,000, and the taxpayer cannot pay it all in one go, they can apply to set up a payment plan online through their Government Gateway.

The taxpayer can choose how many instalments they need to spread their tax bill on a weekly or monthly basis within 2021. But all the late paid tax will accrue interest at 2.6% until it is paid.

The online application for time to pay should be automatically granted as long as the taxpayer is already up to date with all other tax payments, but some taxpayers are finding their request is being rejected by the HMRC computer. In this case the taxpayer, or us as your agent, will have to call the HMRC payment support service (open 8am to 4pm on weekdays) to talk to a HMRC officer in order to agree a payment plan.

Before we reach that stage, we need to examine the level of payment on account for 2002/21 to check whether it is a reasonable amount in view of the expected profits for that year. Remember any SEISS grants received will be counted as trading income for 2020/21, so they need to be taken into account.

Finally, be careful when postponing class 2 NIC due for 2019/20, as if that is not paid by 31 January 2021, the tax year will not count as a completed year in the taxpayer’s NIC record.

Written by the Tax Advice Network

Moving Goods Across Borders – 14/01/2020

Life is now very much more complicated for businesses that need to import or export goods to or from the EU, or transfer goods into Northern Ireland.

Although there are few tariffs to pay on goods moving across borders there is import VAT, and possibly customs duties to pay. To keep track of the goods through the border control computer system, each business that sends or receives goods across the border needs an Economic Operator Registration and Identification (EORI) number.

It is easy to apply for an EORI number, it takes about 10 minutes and businesses do not have to pay for it, or pay someone else to do the EORI registration for them. A complication for UK businesses is that if they move goods into or out of Northern Ireland, they need to already have an EORI number that starts with GB, and then apply for a second EORI number that starts with XI. That is two different EORI numbers, not the same number with the pre-fix changed.

Where the trader is moving goods between Great Britain and Northern Ireland they should sign up for the Trader Support Service, which is designed to help businesses cope with the Customs and VAT border which now exists in the Irish Sea.

Businesses that import goods would normally have to pay import VAT on arrival before those goods can be released from the port. However, HMRC has agreed that this import VAT can be paid as part of the normal quarterly VAT return under the Postponed VAT Accounting (PVA) system.

The importer doesn’t have to use PVA, but it helps with cash flow if they do. To receive statements from HMRC on the amount of import VAT that has been postponed, and which needs to be reported on the VAT return, the trader also needs to register for the Customs Declaration Service (CDS).

Brexit was supposed to remove red-tape.

Written by the Tax Advice Network

Introduction

From the 1 April 2022, MTD for VAT will apply to all VAT registered businesses regardless of the level of turnover. The first VAT period to which MTD applies to all VAT registered businesses (who are not already doing so) will be the one commencing on or after 1 April 2022.

What is “Making Tax Digital”?

Making Tax Digital (MTD) is a government initiative to modernise HMRC’s tax system, with the aim of making the whole process of administrating tax simpler and more efficient. All of your tax information will be in one place (your digital account) and you will be able to pay tax based on your business activity during the year. You can upload and update your tax account in real time.

Will it affect me?

If you own a business, you are self-employed and you pay income tax, national insurance, VAT or corporation tax, then it is quite likely you will be affected. This means you could be required to keep track of your tax affairs digitally using MTD compatible software, and to update HMRC at least quarterly via your digital tax account. Eventually this will abolish the annual tax return. This will be the law and there will be penalties for non- compliance.

When is all this happening?

MTD for VAT has already started and has been “live” for nearly two years. It started with businesses above the VAT threshold limits (currently £85,000) in April 2019.

From the 1 April 2022, MTD for VAT will apply to all VAT registered businesses regardless of level of turnover.

This notice below explains the rules for Making Tax Digital for VAT and about the digital information you must keep if they apply to you. It was last updated 31 December 2020.

Please talk to us about how we can help your business comply with the new rules. We can recommend the right software and provide the training and support you need.

VAT notice 700/22: Making Tax Digital (MTD) for VAT

This notice explains the rules for Making Tax Digital for VAT and about the digital information you must keep if they apply to you. It was last updated 31 December 2020.

Rules introduced under the Making Tax Digital (MTD) initiative mean VAT registered businesses with taxable turnover above the VAT registration threshold need to keep digital records and submit VAT Returns to HMRC using compatible software. From 1 April 2022 this will apply to all VAT registered businesses.

This notice explains:

• the digital records businesses must keep, and ways to record transactions digitally in certain special circumstances
• what counts as compatible software, and when software programs do and do not need to be digitally linked where a combination of programs is used.

MTD for VAT requires VAT registered businesses with taxable turnover above the VAT registration threshold to keep records in digital form and file their VAT Returns using software.

It is increasingly common for business records and accounts to be kept digitally, in a software program on a computer or tablet, or in a smartphone application, or maintained through such a device and stored using a cloud-based application.

The difference under MTD is that the software which businesses use must be capable of keeping and maintaining the records specified in the regulations, preparing their VAT Returns using the information maintained in those digital records and communicating with HMRC digitally through the Application Programming Interface (API) platform.

If your digital records are up to date, software will be able to collate and prepare your return for you. It will then show the return to you and ask you to declare that it is correct and confirm that you want to submit it to HMRC. Once you have submitted your return you will receive confirmation through your software that it has been received.

The notice provides further details of the Making Tax Digital rules. The overview of MTD can be seen here:

https://www.gov.uk/government/publications/making-tax-digital/overview-of-making-tax-digital

Government Resources

Below are useful references to guidance provided by the Government.

VAT record keeping

VAT registered businesses with a taxable turnover of more than £85,000 must follow the rules for ‘Making Tax Digital for VAT’ by keeping some records digitally, unless:

• your business uses the VAT GIANT service, for example if you’re a government department or an NHS Trust
• you apply for an exemption

You can choose to sign up to Making Tax Digital for VAT if your business earns less than £85,000.

From 1 April 2022 all VAT registered businesses must sign up, whatever they earn.

Records you must keep digitally

• You need to keep the following records digitally:
• your business name, address and VAT registration number
• any VAT accounting schemes you use
• the VAT on goods and services you supply, for example everything you sell, lease, transfer or hire out (supplies made)
• the VAT on goods and services you receive, for example everything you buy, lease, rent or hire (supplies received)
• any adjustments you make to a return
• the ‘time of supply’ and ‘value of supply’ (value excluding VAT) for everything you buy and sell
• the rate of VAT charged on goods and services you supply
• reverse charge transactions – where you record the VAT on both the sale price and the purchase price of goods and services you buy
• your total daily gross takings if you use a retail scheme
• items you can reclaim VAT on if you use the Flat Rate Scheme
• your total sales, and the VAT on those sales, if you trade in gold and use the Gold Accounting Scheme

You also need to keep digital copies of documents that cover multiple transactions made on behalf of your business by:

• volunteers for charity fundraising
• a third-party business
• employees for expenses in petty cash

You must add all your transactions to your digital records, but you do not need to scan paper records like invoices or receipts.

How to keep digital records

You need to use a compatible software package or other software (like spreadsheets) that connect to HMRC systems.

If you use more than one software package to keep records and submit returns, you need to link them.

Some ways you can link your software include:

• using formulas to link cells in spreadsheets
• emailing records
• putting records on a portable device to give to your agent
• importing and exporting XML and CSV files
• downloading and uploading files

You must have links between the software you use by your first VAT period after 1 April 2021.

The deadlines for sending your VAT returns will not change after you sign up for Making Tax Digital for VAT.

See: https://www.gov.uk/vat-record-keeping/making-tax-digital-for-vat

Making Tax Digital for VAT as a business: step by step

Follow these steps if you’re a business or sole trader and you need to follow the rules for Making Tax Digital for VAT.

See: https://www.gov.uk/guidance/making-tax-digital-for-vat

Find software that’s compatible with Making Tax Digital for VAT

Before you sign up to Making Tax Digital for VAT you will need either:

• a compatible software package that allows you to keep digital records and submit VAT Returns
• bridging software to connect non-compatible software (like spreadsheets) to HMRC systems
• If you use an agent or accountant, talk to them about what software you need.



See: https://www.gov.uk/guidance/find-software-thats-compatible-with-making-tax-digital-for-vat

Check if you can apply for an exemption or opt out from Making Tax Digital for VAT.

You are automatically exempt from Making Tax Digital for VAT and do not need to apply if:

• your taxable turnover has not been above £85,000 since April 2019
• you’re already exempt from filing VAT Returns online
• you or your business are subject to an insolvency procedure

You can still sign up voluntarily.

Apply for an exemption

You can apply if it’s not reasonable or practical for you to use computers, software or the internet to follow the rules for Making Tax Digital for VAT.

This could be because:

• of your age, a disability or where you live
• you object to using computers on religious grounds
• of any other reason why it’s not reasonable or practical

HMRC will consider each application on a case-by-case basis.

See: https://www.gov.uk/guidance/apply-for-an-exemption-from-making-tax-digital-for-vat

Watch webinars and videos for help with Making Tax Digital for VAT



Contents

• How Making Tax Digital for VAT affects your business
• Getting ready for Making Tax Digital
• Getting compatible accounting software
• Keeping VAT records digitally
• Agent services and Making Tax Digital
• Signing up for Making Tax Digital for VAT
• Making Tax Digital for Income Tax Self-Assessment

See: https://www.gov.uk/guidance/help-and-support-for-making-tax-digital