News & Updates

There will be no Autumn Budget this year, but that doesn’t mean tax policy has paused, changes are still being made in the following areas:

MTD for corporation tax

We have been waiting for an indication of when the MTD rules will apply to companies, and now we know those rules won’t be compulsory until 2026 at the earliest.

However, the MTD regime will apply to all organisations that pay corporation tax; there will be no minimum turnover threshold as applies for income tax. There will be quarterly reporting of income and expenses, and a pilot to test the software will commence in 2024. HMRC will not provide free software for filing the corporation tax returns required under MTD.

Capital allowances

The annual investment allowance (AIA) cap is currently £1 million, and was due to reduce to £200,000 on 1 January 2021. This £1 million cap will now be extended to 31 December 2021.

R&D tax credits

There is currently no cap on the amount of R&D payable tax credit a small company can receive if their company has made a loss after deduction of their R&D claim. This will change for claim periods starting on and after 1 April 2021. The payable tax credit will be capped at three times the PAYE and NIC payable for the period plus £20,000. We will need to factor this into cash flow forecasts for our clients.

CIS changes

The construction industry is facing a triple whammy of tax changes in 2021: VAT domestic reverse charge on 1 March, off-payroll and CIS reforms on 6 April.

The later changes may affect sub-contractor companies who claim their tax refund through RTI, and large businesses who could be classified as deemed contractors as they undertake more than £3 million of construction expenditure within 12 months.

There will also be new penalties for suppling false information to HMRC when applying for gross payment status or CIS registered status. This penalty will have a wide scope as it can be applied to any person who influences another to provide false information.

Written by the Tax Advice Network

Most government departments have been delivering their services online during the pandemic. However, the issuing of national insurance numbers to individuals who move to the UK must still be done by way of a face to face interview with a DWP officer.

Individuals who were living in the UK at the age of 15, whose parent claim child benefit, will be automatically allocated an NI number at age 16. However, UK and Irish citizens who arrive in the UK later need to apply for an NI number, although they do have an automatic right to work in the UK.

An NI number is normally necessary to register as self-employed. HMRC is aware of this problem and advises that an individual without an NI number should complete form SA1 to register for self-assessment rather than form CWF1, which is normally used to register as self-employed.

On form SA1 tick the box to say there is no NI number and when asked for the reason state “Unable to get a NI number as DWP are currently not holding face to face interviews due to COVID-19.” Further on in the same form it asks “why do you need to complete a tax return”, for this choose “any other reason” and write in “self-employed” stating the nature of the self-employment.

The CJRS grant application asks for each employee’s NI number. Where there are over 100 employees in the CJRS claim, the NI number field can be completed with the employee’s employment number or payroll ID on the spreadsheet submission. However, where there are fewer than 100 employees in the CJRS claim the employer (or we) will have to call HMRC and make the claim by phone if there are any missing NI numbers.

Written by the Tax Advice Network

The VAT rules that determine whether the supply of a service is outside the scope of VAT will change at 11.01 pm on 31 December 2020, as the transition period for the UK leaving the EU comes to an end.

From that point the UK is no longer treated as being part of the EU so the VAT treatment of services sold to customers based outside of the UK, will be the same as currently applies to customers in the “rest of the world” (ie non-EU).

Most business to business customers (B2B) will be outside the scope of VAT, because the place of supply is where the customer is based. The place of supply rules are explained in VAT Notice 741A, which has not yet been updated for transactions in 2021 and beyond.

The main difference for UK suppliers will be for services supplied to non-business customers (B2C) in the EU, particularly for those services in the list in para 12.2 of VAT Notice 741A. This includes most professional services including those of lawyers and accountants.

For example: a VAT registered UK accountant who completes personal tax returns for an individual resident in Spain must currently charge that customer 20% VAT. From 1 January 2021 the UK accountant will not have to charge UK VAT to the Spanish resident for those services, and won’t have to register for VAT in Spain either.

However, the UK business will have to abide by the e-commerce rules for their particular trade sector, which are changing from 1 January 2021. For example, providers of online services need to look at the local rules for each EU country where they operate, which may include licensing requirements. Local legal advice will be required.

Written by the Tax Advice Network

Welcome to our monthly newswire, we hope that you find it useful.
Please contact us if you wish to discuss any matters in this newsletter.

Content prepared / accurate as at 3 November 2020

“FURLOUGH” SCHEME EXTENDED AT 80% USUAL PAY

On 22 October the Chancellor announced that the CJRS “furlough” scheme would end on 31 October 2020 to be replaced by a new Job Support Scheme (JSS). However, at 6.45 pm on 31 October 2020 when the Prime Minister announced a month long lockdown for England he announced that the CJRS furlough scheme would be extended for one further month with employers able to claim a grant of 80% of employees’ usual pay for hours that they are unable to work. Employers will be responsible for paying NICs and pension costs.

The replacement JSS will start when the extended CJRS ends.

JOB SUPPORT SCHEME (JSS)

The JSS scheme that replaces CJRS was originally announced in September.

It has been made more generous than in the original announcement to support businesses that are legally forced to close their premises as a direct result of Coronavirus restrictions imposed by one of the four UK governments. This is referred to as JSS Closed.
For those employers that are able operate safely but continue to face reduced demand such that they may need extra support over the winter to help keep their employees attached to their workforce there is JSS Open. That scheme has been made more generous to encourage employers to keep their employees in a job on shorter hours rather than making them redundant.
JSS Open and JSS Closed were originally scheduled to commence on 1 November 2020 and will now commence when the extended CJRS scheme ends and will run until the end of April 2021.

JSS OPEN

Grants under JSS Open will be available to support the wages of employees working part time who were on the payroll on 23 September 2020 and subject to an RTI submission on or before that date.

The original proposal was that they would need to work at least 33% of their usual hours to be eligible but this has now been reduced to 20%.

For the hours not worked the employee must be paid 2/3 of their normal pay with the employer being responsible for 5% (previously 1/3) of this amount with the government providing a grant for the remaining 61.67%.

The employer will be responsible for national insurance costs and pension costs on the full amount paid to the employee.
The maximum government contribution will be £1,541.75 per month. This will ensure employees continue to receive at least 73% of their normal wages, where they earn £3,125 a month or less.

JSS CLOSED

Grants under JSS Closed will be available to support the wages of employees of businesses required to close who like JSS Open are on the payroll on 23 September 2020.

Claims can be made for employees who cannot work as a result of the Tier 3 or similar restrictions. Employers must be instructed to cease work for at least 7 days to qualify. Employers must agree the new scheme with the relevant staff and make changes to their contract of employment.

JSS CLOSED GRANT IS 2/3RDS OF “NORMAL PAY”

Where employees are paid at least 2/3rds of their normal pay for hours not worked the Government will pay a grant of 2/3ds of their normal pay subject to a maximum of £2,083.33 a month. The employer will be responsible for paying national insurance and pension costs in respect of the employee.

When the business premises reopen employers will be able to claim the JSS Open grant towards the employee’s wages for hours not worked provided the employee works at least 20% of their usual hours.

The employee cannot be made redundant or put on notice of redundancy during the period during which the employer is claiming the grant.

SELF EMPLOYED INCOME SUPPORT SCHEME (SEISS) ALSO IMPROVED

In his Winter Economy Plan the chancellor announced that SEISS grants would continue to be available, but at only 20% of average profits for the period to 5 April 2019. On 22 October the Chancellor increased the amount of the third three month grant to 40% of average profits, capped at £3,750.

On 2 November he made a further announcement that for the month of November the grant would increase to 80%, meaning a cap of £5,160 for the three months to 31 January 2021.

MORE TIME TO PAY TAX DUE ON 31 JANUARY 2021

Those taxpayers who may have difficulty paying the tax due under self-assessment on 31 January 2021 can agree more time to pay with HMRC provided the amount outstanding is no more than £30,000.

The government have already agreed that amounts due under self-assessment on 31 July 2020 could be deferred until 31 January 2021 but this latest announcement generally allows a further 12 months to pay.
You can either set up a payment plan online by logging into your HMRC online personal tax account or call the HMRC Payment Support Service.

CGT BUSINESS ASSET DISPOSAL RELIEF LIFETIME LIMIT JUST £1 MILLION

In the March 2021 Budget it was announced that CGT Entrepreneurs’ relief (ER) was replaced by CGT Business Asset Disposal relief (BADR) for disposals on or after 11 March 2020.
It was also announced that the 10% CGT rate would only apply to the first £1 million of qualifying gains in the taxpayer’s lifetime and many business owners have misinterpreted how this limit applies. Unfortunately claims under the predecessor ER need to be taken into consideration so if £750,000 ER has already been claimed only the first £250,000 of qualifying gains after 11 March 2020 would qualify for BADR. Any gains in excess of that amount would be taxed at normal CGT rates, currently 20% for higher rate taxpayers.

AIRBNB REPORTING PROPERTY RENTAL DETAILS TO HMRC

You may have seen in the newspapers that Airbnb will share data with HMRC about the earnings of hosts (those who let out property) on its UK platform in the years 2017/18 and 2018/19.

It is anticipated that HMRC will use this data to open enquiries into the tax affairs of individuals who have not declared letting income for 2017/18 and 2018/19. The deadline for opening an enquiry into a self-assessment return for 2018/19 is 31 January 2021, if the return was issued and submitted on time. The discovery rules allow HMRC to go back much further, potentially up to 20 years in some cases if the property income has not previously been reported.

RENT COVERED BY RENT A ROOM RELIEF

For many property owners the rental income will be tax free if it is within the £7,500 rent a room relief and will not even need to be reported. This applies where room(s) in the taxpayer’s main residence are rented out, typically to lodgers.

Where the house is owned jointly, they would qualify for £3,750 each tax free.

BRING YOUR TAX AFFAIRS UP TO DATE

2018/19 tax returns can be amended by the taxpayer up until 31 January 2021. Where the omitted property income or gain relates to earlier tax years the taxpayer should consider disclosing using HMRC’s let property campaign.

If this affects you, we can assist you in putting together the details that HMRC require.

DIARY OF MAIN TAX EVENTS

NOVEMBER/ DECEMBER 2020

Date	What’s Due
1/11/20	Corporation tax for year to 31/01/2020 unless quarterly instalments apply
19/11/20	PAYE & NIC deductions, and CIS return and tax, for month to 5/11/20 (due 22/11 if you pay electronically)
1/12/20	PAYE & NIC deductions, and CIS return and tax, for month to 5/12/20 (due 22/12 if you pay electronically)
30/12/20	Deadline for filing 2019/20 tax return online in order to request that HMRC collect outstanding tax via the 2020/21 PAYE code

Content prepared / accurate as at 3 November 2020

Welcome to our monthly newswire. We hope you enjoy reading this newsletter and find it useful.

Customer Onboarding

If your customers have a positive experience from the very beginning, they are going to stick with your product or service and continue to do business with you.

Customer onboarding is the nurturing process that gets new users and customers acquainted and comfortable with your product or service. A positive onboarding experience confirms to your customers that they made the right choice. It also, ultimately, helps you retain them.

A good customer onboarding program can include step-by-step tutorials, guidance, support, and milestone celebrations when a customer achieves success through your product or service.

Creating a customer onboarding strategy is relatively easy. Start by creating a key objective such as “get your new customers to use your product or service more than once a week for the first 10 weeks”.

In order to onboard them effectively, you need to really know your new customers. Some of the information that you gather about your customers during the marketing and sales processes will carry over into the initial stages of onboarding. Try to understand the challenges and pain points that each new customer faces. You can then help them to create solutions to some of those challenges, through using your product or service.

Your sales process should set clear expectations so that customers are prepared to invest time in getting set up with your product or service.

A good onboarding process should reiterate the value that your product or service provides to customers. You could include a personalised kickoff call, specialised training, or documentation to help your new customers get everything set up in order to address some of the pain points or challenges that they face.

Regular communication is important during the customer onboarding phase of a business relationship. An initial welcome message is a good place to start. Following the welcome message, you should spend some time with your new customers in order to help them set goals and KPIs that are unique to their business. Allow them to define success and help them to create measurable milestones.

Once you have agreed a set of goals you should continue to contact your new customers on a regular basis for the first couple of months in order to offer tutorials, guides and training, and to keep them on track with achieving their business objectives.

Diversity in Leadership

The business case for diversity is clear – diverse teams produce better solutions to complex problems.

Diversity can boost innovation and employee engagement. Businesses with greater gender and racial diversity tend to be more successful and perform very well financially.
However, progress within the business community has been slow and there is still a lack of women and minority ethnic groups in leadership positions. In order to create truly inclusive and diverse firms, businesses need to start by creating more diverse teams, from the top down.

Making Diversity and Inclusion part of your culture puts your business ahead of the curve and focusing specifically on your leadership team can help facilitate a top-down approach, so that it trickles through your entire firm. However, adding diversity to your board is not a simple task, and there are numerous ways to implement a D&I initiative at leadership level. The way in which you decide how diverse your board should be and which individuals are right for the role will vary from one business to the next.

Many businesses are now adopting an approach where existing senior leaders sponsor the next generation of managers and directors. Pairing sponsors and proteges in a way that aligns with the goals of the businesses can help to bring the next generation of successful senior people through.

While sponsors don’t have to mirror all the qualities of their mentees, it is certainly easier for an individual to be led by someone who they can relate to. This is worth bearing in mind when you are selecting your sponsors from the current leadership team.

When looking at how to create a more diverse leadership team in your firm, it is important to think about your customers. Every business relies on creating a strong relationship with its customers.
As such, the makeup of your leadership team should reflect the diversity of your customer base. For example, if your firm sells products that are mainly aimed at women, a leadership team that is made up entirely of men may have more difficulty understanding the needs of the women who buy your products or services. A more diverse board with a blend of genders can add different perspectives that can help to align the objectives of the business more closely with the goals of its customers.

Managing a Hybrid Team

As businesses manage the gradual return to the office, some of your team will be able to come back while others may need to continue working remotely.

As firms begin to navigate the complexities of returning to the office, some employees will have to contend with challenges around childcare, health issues that prevent them from returning to work, anxiety and other factors. By contrast, other employees will be racing back to the office as they may have found working from home to be isolating or challenging in other ways. All of this creates a new challenge for managers – how to manage a hybrid team, where some people are in the office and others continue to work remotely.

Set expectations

Avoid creating an atmosphere of “them versus us”. Set expectations and make accountability clear to all staff so that both home and office-based employees can work together productively and know who is doing what.

As part of this, you might run daily or weekly meetings with your entire team to start each day or week on the right foot, then share progress regularly on key projects with the entire team to maintain momentum.

Define clear working hours

This will help you and your team know who is working when and where. Sharing your work calendars will help to further boost visibility of this crucial information, enabling your team to know what each person is doing at any one time, including colleagues who they do not physically sit next to in the same space.

Communication is key

Remote workers can miss out on face-to-face interaction. This means you’ll need to think carefully about how you can make them feel equally included via virtual remote meetings, during which you as the leader might be sitting next to an office-based member of your team.

When communicating with remote team workers, choose voice or video over email or chat, depending on the task. Seeing and hearing you regularly will help your remote staff to feel included and part of the team. Encourage your remote workers to switch on their video when attending team meetings.

Bring everyone together

Once COVID-19 is over and government restrictions lift, it can help team unity, harmony and morale if you arrange occasional opportunities for your hybrid team members to meet and get to know each other face-to-face. In “normal times” maybe try to arrange an all-team social or dinner, every 6 months. The relationships that are built through these events will help your team to function better as a unit.

The Off-Grid Day

Blocking out a whole day once a month can work wonders for your productivity.

Time management courses, books and best practice all suggest carving out some time each day to focus on being productive and working towards your goals and personal business objectives.

However, this often conflicts with the emails, notifications, calls and reminders that we are all bombarded with on a daily basis.

The traditional approach to time blocking simply doesn’t go far enough. Blocking out an hour each day might give you time to focus on progressing a particular project, but just as you start to get into your groove, your hour will be up and you’ll have to move on to the next thing on your agenda.

Calculating the return on investment on time blocking is pretty straightforward. If you are focused on what you want to achieve, then the more time you block out, the greater the return you will experience in terms of productivity. So how about blocking out an entire day, once a month?

To make this work, focus on your key business objectives. Perhaps you are working on a particular project such as entering a new market or launching a new product. Try blocking out one day per month to progress those key objectives. Aim to start early, say 7am and finish late. Log out of your email and block out the time in your calendar. Make sure that your colleagues know that you are uncontactable for the day and ensure that there is another senior person available to handle any queries that come up during the day.

Even short interruptions can interrupt the continuous flow of your off-grid day so make a deal with yourself – no calls, no email and no distractions. In order to make these key days work, populate your off-grid days in your calendar for the next 12 months and defend those days – don’t give them up for anything.

Finally, in order to maximise your off-grid day, you may need to enlist the support of your family to take care of the day to day logistics of family life. The key thing is to remember to say thanks and to pick up your share on other days. Like everything in life, it’s all about balance.

There will be lots of VAT changes for businesses that import or export goods from 1 January 2021, but let’s start with businesses which import low value goods that cost less than £135 per parcel.

At present goods valued at less than £135 can enter the UK will no VAT charged as the goods have often not been declared by the overseas seller for VAT and customs duty. From 1 January 2021 all goods entering Great Britain – there will be different rules for Northern Ireland – must be subject to supply VAT or import VAT.

Where the parcel contains goods worth £135 or more those goods are subject to import VAT – which can be postponed (ie not paid at time of import) by a VAT registered purchaser.

Supply VAT can’t be postponed. The overseas seller of the low value goods will have a choice:

• Ask the UK buyer for their VAT number – the goods can then be sold with no VAT added, but the UK buyer must account for the UK VAT due as a reverse charge in their own VAT records.
• Register for VAT in the UK and charge UK VAT on the sale to the UK customer.
• Sell through an online market place (OMP) which is registered for VAT in the UK. The OMP charges VAT to the UK buyer and issues the sales invoice.

You need to be aware of these VAT changes. We will cover more VAT issues relating to Brexit in the coming weeks.

Written by the Tax Advice Network