When we wake up in 2021, we will no longer be in transition; we will be out of the European Union and have to cope with a wide range of regulatory changes if you sell or buy services or goods to EU customers and suppliers.

“YOU NEED TO ACT NOW” was the circular recently sent to all UK businesses that may be affected by the upcoming changes by the Department for Business, Energy & Industrial Strategy.

However, many of these messages will have found their way to waste bins or will still be sitting in a post or letterbox awaiting the return of staff working from home or staying at home because of government guidance due to the lockdown.

The circular raises the following:

  1. Check the new rules on importing and exporting goods between the European Union and Great Britain from 1st January 2021 – different rules will apply in Northern Ireland.
  2. If you plan to recruit from overseas from 1st January 2021, you will need to register as a licensed VISA sponsor.
  3. Use GOV.UK to identify changes affecting manufactured goods, such as new marking requirements or approvals needed, to ensure your business is ready to sell them in the European Union and Great Britain.
  4. If you are moving goods out of or through Northern Ireland, check the latest guidance.

The circular is covered with a red typeface to underline the importance and urgency of the Department for Business, Energy and Industrial Strategy concerns. Presumably, they felt a reminder was necessary due to the expected number of businesses not prepared for the momentous changes that will be happening shortly.

We are leaving the European Union, and with complications due to COVID, we may well be leaving with no formal trade agreement.

If you need help considering your options to protect your business, send us an email at  contactus@accountinggem.co.ukor contact us on 01473 744 700, and we will be more than happy to help.

If you are making claims under the extended furlough scheme from 1st November 2020, there have been changes in the claims process.

Perhaps the most significant is that claims need to be registered within 14 days of the relevant period’s end. In their revised guidance on this topic, HMRC says:

You can claim before, during, or after you process your payroll as long as your claim is submitted by the relevant claim deadline. You cannot submit your claim more than 14 days before your claim period end date.

When making your claim:

· You don’t have to wait until the end date of the claim period for a previous claim before making your next one

· You can make your claim more than 14 days in advance of the pay date (e.g., if you pay your employee in arrears)

If you do not finish your claim in one sitting, you can now save a draft. You must complete your claim within seven days of starting. The claims for periods from 1st July 2020 to 31st October 2020 must be submitted no later than 30th November 2020.

Your claims made from 1st November 2020, must be submitted by 11.59pm, 14 calendar days after the month you’re claiming for. If this time falls on the weekend or a bank holiday, then claims should be submitted on the next working day.

Claim for furlough days in Claim must be submitted by
November 2020 14th December 2020
December 2020 14th January 2021
January 2021 15th February 2021
February 2021 15th March 2021
March 2021 14th April 2021

But what happens if you cannot submit a claim by the deadline?

HMRC accept that there may be circumstances when a claim cannot be made within the set time limits. They confirm that you may have a reasonable excuse if:

· Your partner or another close relative died shortly before the claim deadline

· You had an unexpected stay in hospital that prevented you from submitting

· You had a severe or life-threatening illness, including Coronavirus related illnesses, which prevented you from making your claim (and no one else could claim for you)

· A period of self-isolation prevented you from making your claim (and no one else could make the claim for you)

· Your computer or software failed just before or while you were preparing your online claim

· Service issues with HMRC online services prevented you from making your claim

· A fire, flood, or theft prevented you from making your claim

· Postal delays that you could not have predicted prevented you from making your claim

· Delays related to a disability you have prevented you from making your claim

· An HMRC error prevented you from making your claim

HMRC will not consider reasonable excuses in advance of a claim deadline.

If you have any questions regarding the points raised in this article, please contact us on 01473 744 700 or email us at contactus@accountinggem.co.ukand we will be more than happy to help.

2020 has been a year full of several challenges for small businesses. The coronavirus pandemic has left many small businesses vulnerable. With serval businesses looking to bounce back, there is now the impending Brexit to contend with.

The United Kingdom will leave the Single Market on 31st December 2020. When it does so, it will also leave the European Union’s VAT regime. It will no longer be bound to European Union principles.

If you are a business in the UK, and you are selling goods both in the United Kingdom and to a country within the European Union, you will have to be compliant with local rules.

Post-Brexit tax changes

From January 1st 2021 onwards, businesses will face a potential risk of paying VAT upfront for each cross-border transaction that occurs. VAT-registered companies in the United Kingdom will be able to account for import VAT on their standard VAT Return forms. According to the official guidance, the main ‘place of supply’ rules will remain unaffected. 

How much the current processes will change will be dependent on whether the United Kingdom gets a trade deal and what that might entail when agreed.

If you have any questions about how Brexit could potentially affect your business. Contact us by phone on 01473 744 700 or send us an email contactus@accountinggem.co.ukand we will be more than happy to help.

The Bounce Back Loan Scheme (BBLS) enables you to borrow between £2,000 and up to 25% of your turnover. The maximum loan available is £50,000.

The scheme is open to applications until 31st January 2021. If you already have a Bounce Back Loan but borrowed less than you were entitled to, you can top up your existing loan to your maximum amount. You must request the top-up by 31st January 2021.

For example :

Business turnover                              £50,000                                          £200,000

Maximum loan available  (25%)     £12,500                                           £50,000

BB Loan all ready taken                    £8,000                                            £35,000

Top – up available                         £4,500                                        £15,000

You can apply for a loan if your business:

  • is based in the United Kingdom
  • was established before 1st March 2020
  • or has been adversely impacted by the coronavirus

If you have any questions, please contact us on 01473 744 700 or email us at contactus@accountinggem.co.ukand we will be more than happy to help.

On Saturday night, Prime Minister Boris Johnson announced that the Job Retention Scheme would be extended. The initiative will continue to pay up to 80% of the wages of staff unable to work due to the effects of the coronavirus pandemic. It will continue in place of the Job Support Scheme (JSS), which was due to start 1st November 2020.

New guidance on the extension was issued straight away. However, that guidance is far from complete, and we are awaiting finalised details. Here’s what we do know:

Coronavirus Job Retention Scheme (CJRS)

  • The government will pay 80% of normal wages, capped at £2,500 per month
  • Employers will only be required to cover employer pension contributions and National Insurance for employees on furlough. This mirrors the level of the scheme which was available in August. As with the original, employers are still able to choose to top up employee wages at their own expense
  • Neither the employer nor employee needs previously to have used the Job Retention Scheme
  • To be eligible, employees must be on an employer’s PAYE payroll by 30 October 2020
  • Flexible furloughing will continue to be available, as well as full-time furloughing
  • The extended CJRS will operate as the original CJRS did, with businesses being paid upfront to cover the wage costs. However, the government has noted there will be a short period where the legal terms of the extended scheme are changed and systems updated in which businesses will be paid in arrears

If you have any questions regarding this article and the points raised, please get in touch with An Accounting Gem on 01473 744 700 or email us at contactus@accountinggem.co.uk.

The Court of Appeal has made its final ruling on Payne, Garbett and Coca-Cola European Partners Great Britain Ltd v HMRC –  a case that forms the peak of a protracted debate over the difference between cars and vans.

The Court has concluded that the three types of modified crew-cab vehicles in question are cars rather than vans for tax benefit purposes, closing the book on the case in question, but not on the long-term repercussions of the ruling.

For employers in the UK the outcome of this case could have wide-ranging impact, as there are thousands of these multi-purpose vehicles currently being used by employees in the UK.

The Case

In the case of Coca-Cola v HMRC, it was brought into question whether three commercial vehicles owned by Coca-Cola should be classified as vans or cars for benefit-in-kind purposes.

The vehicles – a series 1 VW Kombi, a series 2 VW Kombi and a Vauxhall Vivaro – are based on a panel van design and are marketed for commercial use, and had been used by Coca-Cola as such. However, as these vehicles also feature additional seating and windows throughout, and each had been modified during manufacture, HMRC argued that they were cars.

In August 2017, the First Tier Tribunal (FTT) ruled that the two Volkswagen Combis, although originally classed as vans for tax purposes, were actually cars. The Vivaro was ruled to be a van, however, as it was “primarily suited to the conveyance of goods”.

After this ruling, appeals were lodged with the Upper Tribunal (UT) by both the plaintiff and respondent, with Coca-Cola disputing the Kombi decision, and HMRC the decision on the Vivaro.

The UT upheld the original decisions made at the FTT, wherein both parties appealed again.

In this final ruling, the Court of Appeal (CA) has ruled in favour of HMRC, and decreed that all three vehicles are multi-purpose vehicles, meaning that they should be taxed as cars.

Reactions

Many finance experts are disappointed with the decision, noting that HMRC has still not revised its outdated legislation in order to take into account the advent of ‘combi’ vehicles.

Speaking to Fleet News, company car tax expert Alastair Kendrick said: “This finding demonstrates that the legislation is out of date and not fit for purpose.

“It is disappointing that despite it being sometime since this case first appeared at the First Tier Tribunal that we have seen no guidance given to employers how they should treat these vehicles for P11D purposes.

“We now need to see how HMRC will react to this decision and whether they believe this gives them the right to challenge the tax treatment of all combi vehicles supplied to employees and more importantly whether they will decide to update their guidance in respect of double-cab vans – a far greater population of drivers.”

In looking at the Court of Appeal decision, it is important to be cognizant of HMRC’s guidance at EIM23110, which clearly states that for a vehicle to be classified as a van it must be primarily suited to the conveyance of goods.

Furthermore, the guidance stipulates that vehicles with side windows, and those that can be fitted with additional seating, are unlikely to meet the definition of a van. This in mind, the CA ruling is very much in line with existing legislation.

What Does This Mean For Employers?

The Court of Appeal decision is binding, as it is unlikely that this case will be deemed important enough for appeal to the Supreme Court. This means that employers are in a position where they must take stock of the vehicles that they own for company purposes and ensure that they take these changes into account when preparing P11D forms for 2020/21.

Some employers may wish to amend their procedures for choosing new multi-purpose vehicles for commercial use, to avoid confusion or difficulty in the future.

Tax Rates For Vans

HMRC offers a number of different tax options for vehicles, depending on how it is used by the business.

Vans used solely for work purposes do not have any P11D implications, and this applies to vehicles used for ‘insignificant private use’, such as one-off trips such as a doctor appointment on the way to work or picking up lunch between jobs.

HMRC views this kind of use as having no apparent ‘Benefit-in-Kind’, unlike company cars which are often used for substantially more than just commuting and work purposes.

Company car tax rates are much more complicated, as they depend on four main criteria. These include:

  • Carbon dioxide (CO2) emissions

  • P11D value

  • Whether you pay Basic, Higher or Additional Rate tax

  • How much the car is used and whether the employee makes a contribution or not.

Gov.uk has extensive information on working out company car tax here.

Company Van Tax Rates

For the 2020/21 tax year, the BiK tax rate for light commercial vehicles is £3,430. This includes vans, pick-ups and any other commercial vehicle that qualifies as a van for tax reasons.

Businesses may be able to get lower tax rates in a few special circumstances, including:

  • If an employee is unable to use the van for more than 30 days consecutively

  • If an employee pays you so that they can use the van privately

  • If more than one employee is using the van (businesses may be able to divide the BiK rate between the number of employees using the van, or if the vehicle is a company vehicle with no specified guardian then there is no tax to be levied)

To work out the amount of company van tax you are likely to pay, you need to multiply your personal rate of tax, times the fixed BiK value. For a taxpayer that pays the 20% tax rate, this would work out as 20% x £3,430, which works out to £686 annually, or £57.17 per month.

Need More Help?

HMRC has created a list of car derived vans and vans with additional seating that shows whether they are classes as a commercial vehicle or a car for VAT purposes. If you have any doubt about your own company vehicles, this can help.

The friendly team at An Accounting Gem are also here to help with any questions you may have on this matter. You can get in touch on 01473 744 700 or email us at contactus@aag-accountants.co.uk to find out more. We are here to help you every step of the way.

In a welcome announcement yesterday, Rishi Sunak revealed new changes to the Job Support Scheme (JSS). The changes will re-establish more practical support for businesses adversely affected by COVID-19.

Changes to the Job Support Scheme (JSS Open)

The JSS applies to the entire United Kingdom. The changes announced to the JSS yesterday – now called the JSS Open – are:

  • The minimum hours an employee is required to work are dropping from 33% to 20%. Accordingly, employees working one day a week will now qualify.
  • The government will pay 61.67% of hours not worked up to a monthly cap per employee of £1,541.75.
  • Employers will need to cover 5% of hours not worked up to a monthly cap of £125.

Benefits for employees

  • Employees who are laid off but still work at least one day a week will receive two-thirds of their pay for hours not worked – up to the monthly caps set out above.
  • Employees receiving the JSS Open grant cannot be made redundant or placed on redundancy notice if the employer is claiming the JSS Open for that employee.

Benefit for employers

  • Under the original JSS scheme, employers were faced with paying one-third of hours not worked. Under the JSS Open, this is now reduced to just 5%.

A word of caution for employers

As with the broader JSS scheme, November’s claims will be processed in December via an online portal. Subsequent months’ claims will thus be paid one month in arrears. Employers will need to accommodate the cash-flow consequences as wages will need to be paid before any JSS Open grants are received.

If you have any questions regarding this article and the points raised then please get in touch with An Accounting Gem on 01473 744 700 or email us at contactus@accountinggem.co.uk

We are here to help.

In a welcome announcement yesterday, Rishi Sunak revealed new changes to the Local Restriction Support Grants (LRSG). The changes will re-establish more practical support for businesses adversely affected by COVID-19.

Cash Grants for businesses severely disrupted by Tier Two restrictions in England

Additional government funding is being provided to local authorities to support businesses in Tier Two lockdown. These will be businesses that are not legally closed but which are severely impacted by restrictions on socialising. The changes will be welcomed by affected concerns in the hospitality sector, which will now receive 70% of the grants paid to businesses legally closed.

Benefits for Tier Two businesses 

Grants available will be based on the rateable value of business premises:

  • The rateable value of £15,000 or under, grant of £934 per month
  • The rateable value between £15,000 and £51,000, grant of £1,400 per month
  • The rateable value above £51,000, grant of £2,100 per month.

Claims can be back-dated to the point at which these restrictions began.

Affected businesses should contact their Local Authority to determine the amount and date that they should start to receive this additional support.

Possible support for businesses not in the business rates system

Local Authorities in England are also being funded – a 5% top-up – to help businesses affected by partial lockdown who may not be registered with rated business premises. Affected companies should contact their local authority to see if funding will be made available.

If you have any questions regarding this article and the points raised then please get in touch with An Accounting Gem on 01473 744 700 or email us at contactus@accountinggem.co.uk.

We are here to help.

In a welcome announcement yesterday, Rishi Sunak revealed new changes to the Self Employed Income Support Scheme (SEISS). The changes will re-establish more practical support for people adversely affected by COVID-19.

The Self Employed Income Support Scheme (SEISS)

From 1 November 2020, the SEISS grant due covering the period from 1 November 2020 to 31 January 2021, is doubled from 20% to 40% of qualifying profits, paid out in a single amount, and capped at £3,750 in total. The second and final grant – covering the period from 1 February 2021 to 30 April 2021 – will be announced next year.

If you have any questions regarding this article and the points raised then please get in touch with An Accounting Gem on 01473 744 700 or email us at contactus@accountinggem.co.uk.

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Each year, HMRC randomly select a number of tax returns to investigate, to ensure compliance in taxpayers reporting their tax. This has long been the case and is something that every business should be aware of, but this year the chances of being subject to an investigation are bigger than ever.

As a result of the coronavirus pandemic, the UK economy has been badly overstretched. The public purse in nearing empty resulting in the Government and HMRC declaring that they are  going to look very closely at those companies that have taking advantage of the tax breaks and Government subsidies that have been paid out in their tens of billions to help keep the economy afloat.

HMRC has responded to these targets with a proactive approach designed to home in on those that they believe may not be declaring their tax accurately.

Whilst there is nothing for you to worry about if you are targeted by HMRC, as long as you are declaring your tax correctly to the best of your knowledge, it does takes time to respond to the questions posed in an investigation, so be prepared to set aside a significant amount of time to deal with it.

In the unfortunate event that HMRC do impose fines, then it is vital that you stay calm and not accept as true everything that they say. HMRC frequently make mistakes in their calculations, as well as in their interpretation of tax law, so before you agree to anything it is vital you consult your accountant to see what your options are.

Fee protection is a form of insurance that you can take out to secure yourself against an HMRC compliance check. The insurance will pay for your accountant and any work time you miss because of dealing with the enquiry, and most insurers will also provide you with dedicated professional help, dealing with HMRC on your behalf so that you don’t need to worry or be distracted with it.

This blog will discuss how HMRC investigations work, and why fee protection is important for any business.

HMRC Investigations

HMRC has the power of investigation over a wide range of taxes and sectors. You may be called to respond to an enquiry for a whole host of reasons, including:

  • A full HMRC enquiry into your accounts or tax return. This could be a random enquiry, or one triggered by something, such as figures that don’t add up on your tax return

  • A dispute from a VAT or PAYE inspection

  • An IR35 investigation

  • Enquiries raised by one of the HMRC task forces

  • ‘Interventions’, a new form of enquiry that allows HMRC to inspect businesses and their records

  • Cross tax enquiries – where VAT, Income Tax, Corporation Tax and PAYE are investigated and cross-referenced

  • Information provided by HMRC intelligence – specifically HMRC Connect

  

HMRC Connect

The HMRC Connect system, dubbed the ‘snooper computer’ by some, was first launched in 2017 as a high-tech way to analyse tax returns.

The technology is designed to quickly and efficiently identify those whose spending habits do not match the information that they report in their tax return. Instead of just relying on the information that people readily provide, the Connect system is able to take information from other sources including government and corporate sources, as well as people’s personal social media profiles, to get a true picture of an individual’s annual expenditure.

If there appears to be a disconnect between the amount of money a person claims to earn and the amount that they are spending, they may be flagged and become subject to an investigation.

What Information Can HMRC Access?

HMRC has been allowed access by a wide range of sources, including banks and lenders and the Land Registry (in order to see property purchases and records). Other sources include:

  • Visa and MasterCard transactions

  • UK and overseas bank records, from banks in more than 60 countries

  • Internal tax records such as council tax and VAT

  • DVLA for information about any vehicles owned and purchased

  • Online platforms including Airbnb, eBay, Gumtree etc

  • Web browsing and emails: HMRC were given powers to look at digital activity in the Investigatory Powers Bill, passed into legislation in 2016

  • Social media: Public Facebook, Twitter and Instagram posts may be used

HMRC Connect offers investigators a huge advantage, allowing them to gather information in moments that would have taken them months to collect in person.

  

What Happens During A Compliance Check?

If you are targeted for a compliance check, they usually conform to the following procedure:

  1. You will receive a letter from HMRC requesting further information as evidence to support the tax return that you last submitted.

  2. You (or your accountant) compile this information and then send it back to HMRC in the timescale requested.

  3. HMRC review the evidence that you have provided, and then either close the investigation, if they feel that the evidence backs up your original return, or ask for further information

  4. If you have been asked for more information then you or your accountant will repeat the process until HMRC concludes that compliance has been achieved, or there has been an error that needs to be rectified.

HMRC will also ask you a number of questions regarding your work, your income and your trading activities. These will all need to be answered in full and to the best of your knowledge until HMRC is satisfied.

If HMRC find what they believe is an error, whether it has been accidental or deliberate, they will take steps to recover whatever taxation they feel is owed, plus penalties (in some cases) and interest.

How Does Fee Protection Work?

To understand why fee protection is important for you, and how it will help you in the event of an investigation, here is an example scenario:

You receive a letter from HMRC saying that your business owes £5,000 in unpaid tax, and requests information to prove that you do not owe this money, or payment in full for the tax owed. You will need to instruct your accountant to look into your accounts and pull any information that you can use as evidence that you do not owe this money.

Your accountant spends £2,000 worth of their time on doing this.

If you are unable to prove that you don’t owe this tax you will then owe £7,000 overall, including your accountant’s fee. If you are successful and HMRC concludes the investigation, you may have nothing to pay to them, but will owe £2,000 to your accountant that you otherwise would not have.

Fee protection insurance ensures that you are able to pay any extra fees without having to go out of pocket. In the worst case scenario you will owe £5000 in total but in the best case scenario you can come out of the investigation without having had to spend any money at all.

Not only does fee protection help you financially, but you will also get:

  • Full representation in case of a tax enquiry from a professional team that will be better able to fight your corner

  • A service that deals with tax authorities for you, leaving you to carry on with the day-to-day running of your business.

  • The ability to negotiate the best possible deal with HMRC, saving you money

 

More Information

HMRC investigations are a fact of life, and the likelihood is there will be many more of them in the coming years due to factors resulting out of the current crisis.

As an example, The Coronavirus Job Retention Scheme is suspected to have been widely abused and there is no doubt that HMRC will thoroughly pursue this and launch large numbers of additional investigations to recoup the payments.

If you have any questions regarding this article and the points raised then please get in touch with An Accounting Gem on 01473 744 700 or email us at contactus@aag-accountants.co.uk.

We are here to help you every step of the way.