VAT Deferral Scheme deadline

The online portal for the new VAT payment scheme closes on 21 June 2021.

Over half a million businesses deferred £34 billion in VAT payments due between March and June 2020 under the VAT Payment Deferral Scheme. Businesses had until 31 March 2021 to pay this deferred VAT or, if they could not afford to do so, they could go online from 23 February to set up a new payment scheme and pay by monthly instalments to spread the cost.

The VAT Deferral New Payment Scheme means businesses can now manage their cashflow by paying their deferred VAT more gradually.

The March, April and May joining dates have passed, but businesses can still spread their payments across up to eight equal monthly instalments, interest-free, if they join by 21 June 2021. Payments can easily be set up via the VAT Deferral New Payment Scheme portal.

Eligible businesses that are unable to use online service by 21 June 2021, can call the HMRC Coronavirus Helpline on 0800 024 1222 to join the scheme until 30 June 2021.

Businesses may be charged a 5% penalty and/or interest if they do not join up to the scheme online by 21 June, or pay in full by 30 June, or contact HMRC to arrange to pay by 30 June 2021.

Businesses should also contact HMRC by 30 June 2021 if they need to agree extra help to pay.

Businesses can pay their deferred VAT in 2 to 8 consecutive instalments without adding interest if they join online by 21 June 2021. The first payment is made when they join.

The joining stage is slightly longer for those unable to use our online service due to the way payments are processed.

Outlook for employment

Government continues to be optimistic about the outlook for employment. In a recent press release they said:

“Furlough numbers have fallen to their lowest level this year, according to official statistics published 3 June, as the number of people relying on the scheme fell to 3.4 million.”

And yet that is still 3.4 million who are uncertain if they will still have a job come 30 September, when the furlough scheme is withdrawn.

We are aware of many small businesses who are keen to retain staff but are still struggling to regain market share as lockdown restrictions are gradually reduced.

And uncertainty has not been eradicated. The abandonment of COVID restrictions due to apply from the end of this month is under threat as new variants of coronavirus tilt the infection rates in yet another upward direction.

Can we take comfort from these bullish announcements from Mr Sunak? In the same press release it was asserted:

“There are also other reasons to be optimistic about the outlook for the labour market, as ONS survey results released today estimate that the number of employees on furlough fell even further in early May.

HMRC data released last month showed that the number of payrolled employees jumped by nearly 100,000 in April. Together, this makes it clear that our Plan for Jobs is working to protect and create jobs across the country.

Alongside the furlough and self-employed schemes, the Kickstart scheme is creating thousands of new jobs for young people and a range of business grants and loans have provided a bridge so that businesses could make it through the pandemic.”

Truthfully, we will have to wait and see. Readers who have lingering concerns about their ability to maintain staffing levels after 30 September 2021, would be advised to create forecasts for their business based on their actual performance to date. If uncomfortable decisions need to be made about staffing levels, they need to be based on an “eyes wide open” approach.

If you need help crunching the numbers, pick up the phone, we can help.

The 7-year rule

If there is any Inheritance Tax to pay on gifts you make during your lifetime, it is charged at 40% on gifts given in the 3 years before you die.

Gifts made 3 to 7 years before your death are taxed on a reducing, sliding scale known as ‘taper relief’.

Years between gift and death

Tax paid

less than 3

40%

3 to 4

32%

4 to 5

24%

5 to 6

16%

6 to 7

8%

7 or more

0%

 

Example reproduced from GOV.UK website:

 

Sally died on 1 July 2018. She was not married or in a civil partnership when she died.

Sally left 3 gifts in the 7 years before her death:

  • £300,000 to her brother 6.5 years before her death
  • £50,000 to her sister 4.5 years before her death
  • £150,000 to her friend 3.5 years before her death

Sally is not entitled to any other gift exemptions or reliefs.

There is a £325,000 inheritance tax threshold. Anything below this amount is tax free.

£300,000 is used up by the gift Sally gave her brother. There is no tax to pay on his gift.

The remaining £25,000 is used up by her £50,000 gift to her sister. There’s tax to pay on the amount not covered by the threshold. That means there’s tax to pay on £25,000 of the gift to Sally’s sister at a rate of 24%.

The £150,000 gift given to her friend is taxed at a rate of 32%.

Sally’s remaining estate was valued at £500,000 and charged at the usual 40% inheritance tax rate. Sally used up the tax-free threshold on gifts given before her death.

Gifts are not counted towards the value of your estate after 7 years.

Package holiday refunds

Package holiday companies have been instructed to respect the refund rights of holidaymakers ahead of the summer period. In a recent press release, this is what the Competition and Markets Authority (CMA) said:

The CMA has published a further open letter to the sector and also sent it directly to the 100 package travel firms with the most complaints about them. The letter reminds the firms of their legal obligations and of the need to ensure refund options are clear and accessible.

Since March 2020, the CMA has received over 23,000 complaints from consumers about refund issues relating to package holidays that could not go ahead due to the pandemic. In acknowledgement of this, the recent letter to the package travel sector sets out what businesses should provide and what customers can expect, including:

  • holidays cancelled by package holiday companies must be refunded within 14 days under the Package Travel Regulations (PTRs).
  • any offer of a refund credit note must be accompanied by the option of a full refund. Customers should be able to exchange their credit note for a refund at any time.
  • people have a right to a full refund where they decide to cancel their package because unavoidable and extraordinary circumstances at the destination significantly affect the holiday they have booked or their travel there.
  • if the FCDO (Foreign, Commonwealth and Development Office) is advising against travel to the package holiday destination when the consumer is due to leave, that is, in the CMA’s view, strong evidence that these unavoidable and extraordinary circumstances are likely to apply. If the consumer is refused a full refund, the package holiday company should fully explain why it disagrees that the holiday or travel is significantly affected.

Prepare benefit in kind returns to HMRC

Next month, as you will see from the Tax Diary notes for July, employers that provide any form of taxable benefit to clients will need to prepare and file P11D returns to HMRC. The deadline to file is 6 July 2021.

You will also need to provide employees affected with a copy of their P11D form by the same date. They will need this to check their tax account or to include on their tax return.

Unfortunately, there is one further chore to complete this annual process.

Employers are obliged to pay employers’ National Insurance contributions on the aggregate value of benefits provided to all employees. The way to do this is to complete a P11D(b) return; and again, this needs to be filed by 6 July 2021. NIC class 1A contributions are payable at 13.8% of the total benefits returned and are payable by 22 July 2021 if paid electronically or by 19 July 2021 if you pay by cheque.

If we prepare your payroll, we may undertake this work for you.

If not, do not miss the filing and payment deadlines otherwise you may trigger late filing penalties and interest charges.

Any Class 1A NIC paid is an allowable deduction for tax purposes.

Tax Diary June/July 2021

1 June 2021 – Due date for Corporation Tax due for the year ended 31 August 2020.

19 June 2021 – PAYE and NIC deductions due for month ended 5 June 2021. (If you pay your tax electronically the due date is 22 June 2021)

19 June 2021 – Filing deadline for the CIS300 monthly return for the month ended 5 June 2021.

19 June 2021 – CIS tax deducted for the month ended 5 June 2021 is payable by today.

1 July 2021 – Due date for Corporation Tax due for the year ended 30 September 2020.

6 July 2021 – Complete and submit forms P11D return of benefits and expenses and P11D(b) return of Class 1A NICs.

19 July 2021 – Pay Class 1A NICs (by the 22 July 2021 if paid electronically).

19 July 2021 – PAYE and NIC deductions due for month ended 5 July 2021. (If you pay your tax electronically the due date is 22 July 2021)

19 July 2021 – Filing deadline for the CIS300 monthly return for the month ended 5 July 2021.

19 July 2021 – CIS tax deducted for the month ended 5 July 2021 is payable by today.

Furlough scheme ends September 2021

There are still a significant number of UK employees that are furloughed. Unfortunately, this scheme is scheduled to end 30 September 2021.

Businesses that are struggling to re-establish themselves following the downside effects of repeated lockdown, may be faced with difficult decisions as this deadline approaches. The pundits are expecting a significant rise in the unemployment numbers.

If you have concerns that you may be faced with laying off furloughed staff when the Coronavirus Job Retention Scheme closes, and are unsure how to plan for any changes, we can help.

The key is to create a forecast of business activity – based on current estimates – that highlights profitability, solvency and cash flow. Armed with this information, it will then be possible to try out different what-if scenarios and consider the options this process opens.

It is better to plan for these changes before they happen than to react when the changes have occurred.

Importing goods for the first time?

If you are new to the import process the following check list will provide you with a rough guide to what you need to do:

  • You need an EORI number that starts with GB to import goods into England, Wales or Scotland. You will need a new one if you have an EORI that does not start with GB.
  • The business sending you the goods may need to make an export declaration in their country or secure licences or certificates to send goods to the UK.
  • You can hire someone to deal with customs and transport the goods for you, or you can do it yourself. Most businesses that import goods use a transporter or customs agent.
  • If the UK has a trade agreement with the country you are importing from, you may be able to pay less duty or no duty on the goods (known as a 'preferential rate').
  • If you have appointed someone to deal with UK customs for you, they will make the declaration and get your goods through the UK border.

Unless you have experience dealing with cross-border transactions appointing a customs agent or similar organisation would seem to be a sensible option unless the value and frequency of imports is unlikely to be significant.

More detailed information is available free of charge on the GOV.UK website.

Update on the Trade Credit Reinsurance scheme

The government and the Association of British Insurers (ABI) have announced that the temporary Trade Credit Reinsurance (TCR) scheme will close on 30 June as planned.

TCR was designed as a temporary solution for companies struggling to get insurance cover for transactions because of the pandemic. It is now ending in the context of a positive outlook for economic recovery in 2021, an appetite for new business among participating insurers and the continued success of the vaccine rollout.

Participating insurers have indicated to the government that the scheme is no longer required, and they are keen to take back full underwriting control.

The government and participating insurers will continue to work together to ensure there is a smooth transition to the private sector resuming its normal role of providing cover, as agreed with the ABI and participating insurers.

The scheme was a vital and necessary intervention by the government in response to the coronavirus pandemic, providing certainty to businesses across the UK and protecting jobs. The scheme has offered eligible insurers a government-backed reinsurance agreement, covering insurance offered on business transactions within the UK and overseas.

This enabled trade, which required insurance but was unable to get it due to the uncertainty caused by the pandemic, to continue flowing.

Whilst the government scheme is being wound down, insurers have committed in the joint statement between the government and the ABI to:

  • continue to work closely with policy holders and their clients to understand their insurance needs, whilst proactively seeking out relevant information to inform underwriting decisions.
  • give adequate consideration in underwriting decisions to a business’s plans for recovery and prospects for future growth, as well as the impact of the pandemic on different sectors and the ongoing nature of government support.
  • continue to communicate the rationale behind underwriting decisions transparently and in good time.

Similarly, during this period the government has committed in the joint statement to:

  • maintain an open dialogue between insurers and businesses, working collaboratively with both to help ensure the smooth transition of cover back to the private sector.
  • continue to monitor the levels of insurance cover within the market.

Following the conclusion of the scheme, the government will begin work on the review of the Trade Credit Insurance market to ensure that it is leading to fair outcomes for consumers.

Company super-deductions and tax increases

One of the more innovative aspects of the recent March budget was the introduction of the rather grandly named super-deduction.

Limited companies that invest in qualifying assets in the two-year period 1 April 2021 to 31 March 2023, will be eligible for a 130% tax write-off.

What this means is that if you buy say a new computer system for £5,000 you will be able to claim a £6,500 write-off against your taxable profits.

Note, the reduction is in the amount of profit subject to corporation tax. The 130% is not a deduction from tax payable.

In our example, the capital purchase of £5,000 would be converted into a super deduction of £6,500 that would reduce corporation tax by £1,235 (£6,500 x 19% – the current rate of corporation tax).

Interestingly, the tax saved of £1,235 is almost 25% of the £5,000 investment. You may remember that the Chancellor advised, in the same March budget, that he is considering raising corporation tax to 25% from 1 April 2023, the date on which the 130% super deduction ends. Large companies with profits more than £250,000 will pay the 25% rate.

Smaller companies will continue to pay a lower rate of 19% if profits less than £50,000. No doubt this will lead to complex marginal rates being applied to companies with taxable profits between £50,000 and £250,000.

Clearly, the Chancellor wants businesses to invest during the next two years and this tax incentive will help to smooth the way.

Businesses tempted to make larger investments need to consider how the assets will contribute to rebuilding their businesses after the recent, and prolonged, COVID disruption. It is useful to make the most of these tax incentives, but the purchase of capital assets needs to create additional profits.

Readers who are considering capital acquisitions would be wise to seek advice before placing orders to make sure that all aspects of their investment are carefully considered. We would be delighted to help.