News

If you are involved in the transport of goods to and from the EU HMRC have posted useful guidance on what you will need to do to accommodate a no-deal Brexit on 31st of this month.

The guidance can be downloaded as a PDF from https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/836920/transporting-goods-between-the-uk-and-eu-in-a-no-deal-brexit-guidance-for-hauliers.pdf

Transitional arrangements are in place regarding licenses and permits.

The EU has agreed that for a transitional period UK hauliers will be able to continue using their current licences to do journeys to and from the EU. This currently applies until 31 December 2019 and is likely to be extended to 31 July 2020.

Hauliers holding a Community Licence will be able to continue using these after a no-deal Brexit for the transitional period. Hauliers applying for or renewing a Community Licence after a no-deal Brexit will instead receive a ‘UK Licence for the Community’, which will give the same rights.

A copy of the Community Licence (or the new ‘UK Licence for the Community’) has to be carried on board all vehicles when working in the EU.

The Community Licence (or the new ‘UK Licence for the Community’) will not be valid for international road haulage journeys made by UK hauliers through the EU to countries outside the EU and EEA – these will require ECMT permits.

Some ‘cross-trade’ (movements between two EU countries) and ‘cabotage’ (movements within an EU country) will be permitted in the transitional period. Until 31 December 2019 at least up to 2 loaded cabotage or cross-trade journeys will be possible per week.

As there is still no “certain” outcome for Brexit, please note that the above comments only apply to a no-deal scenario. If you need help sorting the wood from the trees, please call.

1 October 2019 – Due date for Corporation Tax due for the year ended 31 December 2018.

19 October 2019 – PAYE and NIC deductions due for month ended 5 October 2019. (If you pay your tax electronically the due date is 22 October 2019.)

19 October 2019 – Filing deadline for the CIS300 monthly return for the month ended 5 October 2019.

19 October 2019 – CIS tax deducted for the month ended 5 October 2019 is payable by today.

31 October 2019 – Latest date you can file a paper version of your 2018-19 self-assessment tax return.

1 November 2019 – Due date for Corporation Tax due for the year ended 31 January 2019.

19 November 2019 – PAYE and NIC deductions due for month ended 5 November 2019. (If you pay your tax electronically the due date is 22 November 2019.)

19 November 2019 – Filing deadline for the CIS300 monthly return for the month ended 5 November 2019.

19 November 2019 – CIS tax deducted for the month ended 5 November 2019 is payable by today.

The following press release was published by HMRC last month. Extracts are reproduced below:

Sir Amyas Morse, the former Comptroller and Auditor General and Chief Executive of the National Audit Office (NAO), will lead an independent review of the Loan Charge…

The review will consider whether the policy is an appropriate way of dealing with disguised remuneration loan schemes used by individuals who entered directly into these schemes to avoid paying tax.

The disguised remuneration Loan Charge was introduced to tackle contrived schemes where a person’s income is paid as a loan which does not have to be repaid.

Disguised remuneration loan schemes were used by tens of thousands of people, and concerns have been raised about the use of the Loan Charge as a way of drawing a line under these schemes. The government is clear that disguised remuneration schemes do not work and that their use is unfair to the 99.8 per cent of taxpayers who do not use them.

The Treasury has asked Sir Amyas Morse to report back by mid-November, giving taxpayers certainty ahead of the January Self-Assessment deadline.

We will report on this issue as soon as the results of this review are published.

Follow the outline below to ensure that the cost of your annual staff party will not create tax issues for you or your staff.

1. The event must be open to all employees at a specific location.
2. An annual Christmas party, or other annual event offered to staff, generally is not taxable on those attending, provided that the average cost per head of the functions does not exceed £150 p.a. (including VAT). The guests of staff attending are included in the head count when computing the cost per head attending.
3. All costs must be considered, including the costs of transport to and from the event, accommodation provided, and VAT. The total cost of the event is divided by the number attending to find the average cost. If the limit is exceeded then individual members of staff will be taxable on their average cost, plus the cost for any guests they were permitted to bring.
4. VAT input tax can be recovered on staff entertaining expenditure. If the guests of staff are also invited to the event, the input tax should be apportioned, as the VAT applicable to non-staff is not recoverable. However, if non-staff attendees pay a reasonable contribution to the event, all the VAT can be reclaimed and of course output tax should be accounted for on the amount of the contribution.

Although the Brexit process continues to throw a spanner into the normal workings of government, there are a few certainties from a tax point of view that will be effective from April 2020. A few property related changes are noted in this article:

• Presently, the last 18 months of ownership of a residential property are ignored if a home has been let at any time. From April 2020, this will be reduced to 9 months.
• If your home has been let at any time, or is let when you sell it, there is a letting relief you can claim that can make a significant impact on any Capital Gains Tax payable. From April 2020, you can only take advantage of this lettings relief if you are in shared occupancy with your tenant.
• From April 2020, all finance costs, incurred by UK residents that let residential property, will be disallowed as an expense of their property business. Instead, tax relief on the disallowed finance charges will be restricted to a basic rate (20%) tax credit. This process started on a phased basis on 6 April 2017 and will complete on 5 April 2020.
• UK residents that sell land or property in the UK, after 5 April 2020, will need to prepare a formal CGT computation and return this to HMRC within 30 days of the relevant sale. They will also need to pay any tax due in the same period.

Last month we reported the changes that CIS, VAT registered contractors and sub-contractors were about to face with the introduction of the “reverse charge” process from 1 October 2019.

Shortly after our newsletter was published, HMRC conceded that it was aware that the industry was struggling to adapt to the new rules and, as Brexit is also looming large this month, HMRC has agreed to defer the change until 1 October 2020.

This is a triumph for the construction industry lobby groups who have pushed hard to have this VAT change delayed.

Just in case you missed our alert on this topic last month the nuts and bolts of the reverse charge process for VAT registered businesses who are subject to HMRC’s Construction Industry Scheme, are:

From the 1 October 2020, you may need to change the way you account for VAT on supplies between sub-contractors and their contractor customers.

At present, sub-contractors registered for VAT are required to charge VAT on their supplies of building services to contractors. From 1 October 2020, this approach is changing.

From this date, sub-contractors will not add VAT to their supplies to most building customers, instead, contractors will be obliged to pay the deemed output VAT on behalf of their registered sub-contractor suppliers.

This does not mean that contractors, in most cases, are paying their sub-contractors’ VAT as an additional cost.

When contractors pay their sub-contractors’ VAT to HMRC, they can claim back an equivalent amount as VAT input tax; subject to the usual VAT rules. Accordingly, the two amounts off-set each other.

The change is described as the Domestic Reverse Charge for the construction industry. It has been introduced as an increasing number of sub-contractors have been registering for VAT, collecting the VAT from their customers, and then disappearing without paying the VAT collected to HMRC.

Affected contractors now have a year to make the appropriate changes.

If by chance you have already made changes to your account’s software and invoicing processes, you will need to reverse the process and moth-ball the changes for twelve months.

The following guidelines are reproduced from the government’s website:

You must send a tax return if, in the last tax year (6 April to 5 April), you were:

• self-employed as a ‘sole trader’ and earned more than £1,000
• a partner in a business partnership

You will not usually need to send a return if your only income is from your wages or pension. But you may need to send one if you have any other untaxed income, such as:

• money from renting out a property
• tips and commission
• income from savings, investments and dividends
• foreign income

Other reasons for sending a return

You can choose to fill in a tax return to:

• claim some Income Tax reliefs
• prove you’re self-employed, for example to claim Tax-Free Childcare or Maternity Allowance

If your income (or your partner’s, if you have one) was over £50,000, you may need to send a return and pay the High Income Child Benefit Charge.

Unfortunately, this is just the tip of the iceberg. For example, you may have to submit a return if you have made significant capital gains in a tax year.

If you are at all uncertain if you do need to file, please call. There are significant penalties for failing to register and submit a return. The deadline to register for the tax year 2018-19 is imminent, 5 October 2019, and so action should not be delayed.

If your circumstances have only recently changed – during the current 2019-20 tax year – you have more time, but it is worth getting the registration process completed so you can start to plan for any tax payments that may fall due 2020 and beyond.

If your business makes a trading loss its ability to survive the loss will depend on a number of issues. They include:

• Did your business have sufficient reserves to absorb the loss?
• If not, are the business owners able to introduce new capital to cover the losses? Or,
• Are the business bankers willing to step in and support the business with additional funding?

In all cases, due regard will need to be made to the reasons for the loss and how likely it may be that the losses will continue.

Clearly, planning for the management of losses is critical; digging into the reasons for the loss may reveal that the company has little chance of re-establishing profits or that the loss was occasioned by temporary factors and a clear path back to profitability can be reasonably expected.

Tax planning for the use of losses is also a factor that needs to be considered. Can losses be utilised in such a way that refunds of previously paid tax can be recovered?

Whilst this may only produce modest refunds for companies, corporation tax rates are below 20%, self-employed business owners – particularly those who have paid income tax at the higher rates of 40% or 45% – may be able to recover significant cash refunds to offset the effects of qualifying trading losses.

Again, planning is critical to ensure that any claims for loss relief are not lost. For example, there are annual limits to the amount of certain reliefs that can be claimed and the self-employed must take care that loss claims do not result in a waste of personal tax allowances.

If your management accounts reveal that your business is making losses, please contact us sooner rather than later so we can help you develop strategies to minimise the down-side effects on your business.

HMRC has published a check list of issues you will need to deal with prior to 31 October 2019.

The check list has been sent to all businesses that already trade with the EU or the rest of the world.

The text of the letter is reproduced below, and this contains the links to the step-by-step guides.

We can provide assistance with the implementation required, please call if you need help.

Letter from HMRC:

We are writing to you because our records show that you are a VAT registered business and you trade with the EU and the rest of the world. This means that you will be affected by changes when the UK leaves the EU on 31 October 2019.

As you already trade with countries outside the EU, you’ll have a UK Economic Operator Registration and Identification (EORI) number starting with the letters ‘GB’. You will need this for importing and exporting when we leave the EU.

If you deal with the customs processes of EU Member States, you may need to get an EU EORI number too. Find out if you need an EU EORI by reading our EORI myth buster, go to www.gov.uk/government/publications/hmrcbrexit-communications-resources.

Next steps you need to take to get ready for Brexit

Once you have your EORI number starting with ‘GB’ there is more that you can do to get your business ready. You can:

• use the checklist overleaf to start working through the actions and decisions that you need to make now
• go online to find more detailed step by step guides – for importers, go to www.gov.uk/prepare-import-to-uk-after-brexit – we recommend that you talk to the person who helps you with customs declarations now – for exporters, go to www.gov.uk/prepare-export-from-uk-after-brexit – focus on understanding what information you’ll need to give to the person you are selling to, so that they can complete the transaction
• keep up-to-date with the latest Brexit news, including details of upcoming webinars we are running on importing and exporting with the EU after 31 October – register for our free email update service, go to www.gov.uk/hmrc/business-support and select ‘business help and education emails’, then select ‘Brexit’

With just over one-month to go before the current Brexit deadline, we recommend that you access the check lists and work through the issues raised. The temptation to wait and see what happens should be resisted as this could leave you exposed if we do exit at the end of October.

The short answer to this question is a resounding “no”, but as always with tax, there are exceptions.

Obviously, if you are in business and not VAT registered, you cannot reclaim the VAT added to any of your purchases. If you are VAT registered HMRC has published the following guidance for VAT recovery when acquiring or leasing a company vehicle:

Buying a new car

You may be able to reclaim all the VAT on a new car if you use it only for business. The car must not be available for private use, and you must be able to show that it is not, for example it’s specified in your employee’s contract.

‘Private use’ includes travelling between home and work, unless it’s a temporary place of work.

You may also be able to claim all the VAT on a new car if it’s mainly used:

• as a taxi
• for driving instruction
• for self-drive hire

Leasing a car

If you lease a car, you can usually claim 50% of the VAT. You may be able to reclaim all the VAT if the car is used only for business and is not available for private use, or is mainly used:

• as a taxi
• for driving instruction

Self-drive hire cars

If you hire a car to replace a company car that’s off the road, you can usually claim 50% of the VAT on the hire charge. If you hire a car for another reason (for example you do not have a company car), you can reclaim all the VAT if all the following apply:

• you hire it for no more than 10 days
• it’s used only for business
• it’s not available for private use

Commercial vehicles

You can usually reclaim the VAT for buying a commercial vehicle (like a van, lorry or tractor) if you only use it for business. If they’re used only for business, you can also reclaim VAT on:

• motorcycles
• motorhomes and motor caravans
• vans with rear seats (combi vans)
• car-derived vans

A further restriction in your ability to recover the VAT on a vehicle purchase applies if you purchase a second-hand car and the dealer selling the car uses the VAT margin Scheme. The invoice for the car purchase will clearly show when this is the case. To recover VAT, it must be shown on the seller’s invoice.