As the Coronavirus Job Retention Scheme (CJRS) comes to a close today, HMRC are now beginning to open compliance checks into claims made under the scheme. 
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Selected employers will be contacted by letter (sample here) requesting very detailed information on every employee for which CJRS grants were claimed.  The letters will not necessarily be sent to the employer’s agent so it is important that they are forwarded as soon as possible should you require assistance.

The letters will have a short timescale for a response as HMRC expect the information to be readily available.  In certain circumstances this may be unachievable and it is therefore important that contact is made with HMRC at the earliest opportunity to agree an alternative deadline.

Whether a compliance check letter is received or not, it is important to retain records of any CJRS claims made including:

• The amounts claimed and claim period for each employee
• All calculations used to calculate the claims
• For employees on flexi furlough, the usual hours worked and how this was calculated together with evidence of the actual hours worked

Records should be retained for six years.

As a reminder, the CJRS closes on 30 September 2021.  Claims for September should be submitted by 14 October 2021 and any amendments must be made by 28 October 2021.

We are here to help so please contact us if you wish to discuss any of the above.

The Government yesterday announced with effect from 6 April 2022 an increase of 1.25% to class 1 employees and employers national insurance, class 4 national insurance and income tax on dividends to fund shortfalls in the NHS and social care.

This will have the following effect on rates:

Draft legislation has not yet been published so these details could still change and we will keep you up to date with any new information.

The Government also announced that the Autumn Budget will take place on 27th October 2021 and we will update you of the key points as they are announced.

We are here to help do please contact us should you wish to discuss any of the above.

1 July 2021 was the implementation date for the changes coming in under the EU’s scheme for Modernising VAT for Cross-Border E-Commerce. The changes are designed to simplify VAT obligations for businesses making cross-border supplies of goods and services.   
 
The measures being implemented affect supplies of goods and services to EU consumers and these are summarised below. The measures concerning goods affects supplies of goods from stocks held by businesses within Great Britain and stocks held within Northern Ireland differently, as supplies of goods (but not services) fall within the Northern Ireland Protocol.

Low value consignment relief has ceased
The VAT exemption for goods in small consignments with a value of up to €22 has been abolished.  Unless falling within import VAT relief schemes, such as temporary importation relief, VAT will be due at the applicable local rate on all imports into the EU. This means that when you send goods into Europe your customer will be responsible for import VAT, regardless of the value of the consignment. Your terms and conditions should be clear for customers to ensure that they know they will be responsible for paying the VAT before the courier will release the goods to them.
 
If you want to take responsibility for paying the import VAT you will need to register in the destination country. For low value deliveries there is a new measure available where you will only need to register in one country: the IOSS.

The non-mandatory Import One Stop Shop scheme (IOSS) begins.  
​​This is a simplification open to non-EU established businesses supplying goods to non-VAT registered EU consumers with a consignment value of €150 or less. Businesses using the scheme must VAT register in one Member State (MS), using a local intermediary, and submit a local VAT return for that MS and a one stop shop return for all other MSs, declaring and paying over VAT at the applicable local rate. Where the goods are supplied via an online marketplace, the marketplace is responsible for accounting for the local VAT via their own one stop shop registration. Goods on which VAT is accounted for under IOSS benefit from a VAT exemption upon importation, allowing faster customs processing. 

The IOSS scheme is not mandatory, it is a simplification. As mentioned above for sales outside the scheme, there are two options: –

1. For the customer to be the importer of record – in which case the import VAT will be collected from the customer by the parcel courier, or
2. For the supplier to be the importer of record, in which case the supplier will be treated as importing their own goods into the EU before the sale to the EU customer, and as a non-established taxable person making an onward supply of goods in the MS of importation, the supplier will be required to VAT register in that member state. They will be able to recover the import VAT but will then account for VAT at the local rate on the local VAT return.

The Non-Union OSS Scheme
This applies to non-EU established businesses supplying services to EU consumers and has been extended to cover all B2C services where the place of supply is the EU (previously only certain telecoms and electronic services were covered). The rules do not apply to services supplied to businesses.

When you sell a service to a consumer the default rule is that the place of supply (and the liability to VAT) is where the you as the supplier belong, but there are a few types of service where this is reversed to where the customer belongs.  

This simplification allows a Non-Union OSS registration to be used to account for VAT on supplies such as those listed below without the need to VAT register in each member state.

• Accommodation services carried out by non-established taxable persons,
• Admission to cultural, artistic, sporting, scientific, educational, entertainment or similar events, such as fairs and exhibitions,
• Transport services,
• Services of valuation and work on movable tangible property,
• Ancillary transport activities such as loading, unloading, handling or similar activities, 
• Services connected to immovable property,
• Hiring of means of transport,
• Supply of restaurant and catering services for consumption on board ships, aircraft or trains etc.

Other Things to Remember
The above points are changes recently made by the EU, but it is also useful to remember the following:

Sales of Goods outside the UK
When you are selling goods that are physically located in the UK to an overseas customer then UK VAT is chargeable, unless you have the relevant evidence of removal of those goods from the UK. Where you have that evidence then you can charge 0% VAT on the sale - this is an export. The rules on exports apply to EU countries as well as non-EU. The rules also apply regardless of whether the customer is a consumer or a business.

Sales of Services to Businesses
Unless modified by the special rules (as detailed above) when a service is sold to a business then the place where VAT is charged is where the customer belongs. The customer will then account for the VAT in their local VAT return. Remember that this applies in the UK where you buy a service from a non-UK business.  

Comprehensive guidance can be found on the European Commission Website at - 
​https://ec.europa.eu/taxation_customs/business/vat/modernising-vat-cross-border-ecommerce_en

​We are here to help so please contact us should you wish to discuss any of the above

The online service for claiming the fifth SEISS grant will be available from late July 2021 and you must make your claim on or before 30 September 2021. As with previous grants under the scheme, the actual date for claiming will be staggered and if you were eligible for the fourth grant, you will also be eligible for the fifth grant. HMRC should contact you shortly by email, text message, letter or within the online service with the date that you can claim. In order to make a claim you must:

• ​Have traded in the 2019-20 tax year and submitted your 2020 Tax Return on or before 2 March 2021
• Have traded in the 2020-21 tax year
• Intend to keep trading in the the 2021-22 tax year
• Reasonably believe there will be a significant reduction in your trading profits due to the impact of Covid-19 between 1 May 2021 and 30 September 2021 - see HMRC examples 
• Have trading profits of no more than £50,000
• Business profits must make up at least 50% of your total income

The fifth grant is different as the level of your grant will be determined by the reduction in your business turnover. To make your claim, you will need to provide HMRC with two turnover figures:

1. Turnover for a 12-month period starting on any date between 1 April 2020 and 6 April 2020 - please contact us if you need assistance calculating this figure
2. Turnover reported on your 2019-20 Tax Return if 2019-20 was not a normal year for your business, you can use the turnover reported on your 2018-19 Tax Return - again please contact us if you need assistance with finding this figure.

The online service will then compare your turnover figures and then confirm the level of the grant you can claim based on the following:

• If your turnover is down by 30% or more, your grant will be worked out at 80% of 3 months’ average trading profits as calculated in previous claims (capped at £7,500)
• If your turnover is down by less than 30%, your grant will be worked out at 30% of 3 months’ average trading profits as calculated in previous claims (capped at £2,850)

HMRC may ask you to provide evidence showing how your business has been impacted by Covid-19 in the period if you make a claim under the fifth grant.  Therefore it is important for you to keep details of issues encountered by the business in the period 1 May 2021 to 30 September 2021, whether this is difficulty obtaining materials, the inability to work due to periods of self isolation or anything else that impacted the business.

We are here to help so please contact us should you wish to discuss any of the above, or if you need any assistance in calculating the turnover figures required in order to make a claim. 

​Further to our previous messages regarding furloughed staff we thought we should remind you that the level of the CJRS grant reduces from 1 July 2021. The Government’s contribution to wages will reduce to 70% of wages up to a cap of £2,187.50 for the hours a furloughed employee is on furlough.
 
Employees remain entitled to receive 80% of their normal wages while on furlough with the balance of 10% after the CJRS claim now being funded by the employer. Employers will also continue to pay the national insurance and pension contributions for hours not worked as well as all costs for any hours worked under the flexible furlough scheme.
 
Further changes will be effective for August and September claims. Below is a summary of the grants to cover the costs of furlough to the end of the scheme on 30 September 2021:

These changes should be factored into any decisions regarding the use of flexible furlough and decisions to bring employees back to work, as well as implications for holiday entitlement and timing of any redundancy decisions.
 
We are here to help so please contact us if you wish to discuss any of the above

The soft-landing period is coming to an end for VAT return periods commencing on or after 1 April 2021, meaning that if your records are not compliant HMRC could issue penalties.

What are the requirements?

• MTD requires that all MTD VAT registered businesses have a complete set of digitally stored data
• For many businesses, transactions are all stored in one system so if you record and maintain all your records in MTD compliant software such as Sage, Xero, QuickBooks or equivalent then you should be compliant
• However, you need to consider the requirements in more detail if you use separate systems for recording sales, purchases, or other transactions that then feed into the main accounting system; or if you maintain manual or spreadsheet-based records that then feed into a digital system
• Specifically, it is a requirement that any data transferred from one system to another is digitally linked

What is a digital link?

• A ‘digital link’ is one where a transfer or exchange of data is made, or can be made, electronically between software programs, products or applications without the need for manual re-entry

• HMRC accepts that the following are digital links (noting this list is not exhaustive):
  • emailing a spreadsheet containing digital records so the information can be imported into another software product
  • transferring a set of digital records onto a portable device (for example, a pen drive, memory stick, flash drive) and physically giving this to someone else who then imports that data into their software
  • XML, CSV import and export, and download and upload of files
  • automated data transfer
  • API transfer
• A digital link includes linked cells in spreadsheets, for example, if you have a formula in one sheet that mirrors the source’s value in another cell, then the cells are linked

 
What is not a digital link?

• HMRC does not consider the use of “cut and paste” or “copy and paste” to be a digital link
• Any situation where information is noted from one system and manually entered in total into another system is also not a digital link.

 
Can I still use bridging software?

• Any business recording sales and purchases data in workbooks and use a bridging software to collate the data into an MTD compliant return can continue with this approach on the basis that this does form a digital link

 
Other information

• Businesses using a retail VAT scheme need to keep a digital record of Daily Gross Takings, so whilst these can be entered weekly, they need to split by day
• Businesses that have partial exemption for VAT are still able to make manual adjustments to reflect the partial exemption calculations
• Detailed HMRC guidance can be found here

 
 
We are here to help, so if you have any queries please contact us

Following our bulletin yesterday on the key points of the 2021 Budget our new Budget Summary is available and provides an overview of the key announcements arising from the Chancellor’s speech. We have also looked beyond the headlines to cover details on the less-publicised changes that are most likely to have an impact upon your business and your personal finances.

The Summary is available to view here.

We are here to help, so if you have any queries or wish to discuss any of the above then please contact us.

The Chancellor of The Exchequer, Rishi Sunak, today delivered his much-anticipated Budget Speech.  Here are the key headline announcements:
 
Coronavirus Support

• The Coronavirus Job Retention Scheme (furlough) is to continue to the end of September 2021, with employers contributing 10% towards staff costs in July and 20% in August and September.
• Self-Employed Income Support Scheme is being extended for a further two grants and will now include a further 600,000 newly self-employed individuals who have previously missed out.
• Universal Credit £20 weekly top-up to continue until September 2021.
• Working Tax Credit claimants to get £500 one-off payment.

 
Business Support

• ‘Restart Grants’ for the High Street, with up to £18,000 per premises being available depending on the type of business and when the business can reopen.  This will replace the current monthly grant system for businesses.
• Existing Business Rates Holidays to continue until end of June 2021, with a 75% reduction in rates until the end of March 2022.
• The reduced VAT rate of 5% for the hospitality sector to continue until September 2021, when it will then increase to 12.5% until April 2022.  It will then revert back to the standard rate.
• Recovery Loan Scheme announced to replace CBILS and Bounceback Loans, which will be in place from 6 April to 31 December 2021.  Businesses can apply for loans between £25,000 and £10,000,000 with the government providing guarantees of 80% to lenders.

 
Tax

• No changes to rates of Income Tax, National Insurance or VAT.
• Personal Tax Allowance set at £12,570 and Higher Rate Tax Threshold set at £50,270 from 6 April 2021 and these will remain at this level until 2026.
• Inheritance Tax Threshold, Pensions Lifetime Allowance, Capital Gains Tax Annual Exemption and VAT Registration – All thresholds to be frozen. 
• Corporation Tax from 2023 to be charged at 19% of profits up to £50,000, 25% on profits over £250,000 with a tapered rate applied for profits between then amounts.
• Corporation Tax loss relief extended for the next two years to allow carry back of losses against profits of the prior three years.
• ‘Super Deduction’ giving 130% allowance on investment in new plant & machinery acquired from 1 April 2021 for two years.

 
Property

• ‘Mortgage Guarantee Scheme’ which will see 95% mortgages return from April 2021.
• The Stamp Duty holiday with no duty on properties up to £500,000 to be extended until 30 June 2021.  The threshold will then reduce to £250,000 until September 2021 before returning to the pre pandemic threshold of £125,000

 
Other

• There will be an increase to the payments made by the government to firms taking on apprentices to £3,000.
• Living wage increased by 2.2% to £8.91 from April 2021.
• Alcohol and fuel duty frozen.

 
The devil is always in the detail and we will continue to monitor the Government press releases as they are issued and bring you further information as soon as we know it.
 
We are here to help, so if you wish to discuss any of the above then please contact us

The VAT Deferral New Payment Scheme is now open for businesses that deferred their VAT liabilities that were originally due for payment between 20 March and 30 June 2020. 

The deferred VAT was originally due to be paid on or before 31 March 2021 but businesses that opt into the VAT Deferral New Payment Scheme can pay the outstanding amounts by direct debit over a period up to 11 months.

To avoid interest and penalties being imposed businesses must either:

• Pay all of the deferred VAT by 31 March 2021

          You can pay the deferred VAT in any of the normal ways.  Further details can be found here.

• Opt into the VAT Deferral New Payment Scheme

 
         The online service for opting in went live on 23 February 2021 and will remain open until 21 June 2021.  The first instalment will           be due when you opt in and you can decide on the maximum number of monthly instalments based on when you opt in as                   follows:

HMRC have announced that Self-Assessment taxpayers will not be charged the 5% late payment penalty if the 2019/20 tax is paid or a payment plan is arranged by 1 April 2021.

The payment deadline for Self-Assessment was 31 January 2021 and interest is charged from 1 February 2021 on any amounts outstanding.  The 5% late payment penalty would normally be charged on any unpaid tax that is still outstanding on 3 March 2021 however, because of the impact of the Covid-19 pandemic HMRC are giving taxpayers more time to pay or set up a payment plan.
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Taxpayers can pay their tax bill or set up a monthly payment plan via their Government Gateway account.  The online Time to Pay facility allows taxpayers to spread the cost of their Self-Assessment tax bill into monthly instalments until January 2022.  If you are unable to set up a payment plan online, you can contact HMRC by telephone on 0300 200 3822.