This is our final Newsletter of 2020.
A year quite like any other , overshadowed by a virus which has governed peoples lives for nine months and of course our impending exit from the EU.
We have seen huge amounts of financial support from the Government to businesses both large and small.
We have seen most businesses but principally the retail, travel and hospitality sectors suffer like never before and we have seen medical advances achieved rapidly in search of vaccines.
Sadly the likes of Arcadia and Debenhams have not survived in their present form but we should also remember those whose jobs have been lost as a consequence.
Of course it is not just large companies which have been affected but also the smaller independents on High Streets across the UK.
At Christmas we would normally be looking forward to joining family and friends for a celebration but this year it is likely that we may need to be raising a glass to each other via Zoom or Facetime.
We should perhaps think about those families who have lost loved ones due in some part to the impact of Covid-19 virus and those who remain vulnerable during the holiday period.
We would of course like to wish everyone a Peaceful Christmas in the hope that 2021 will bring greater joy and prosperity to everyone and that we can return to business as usual.
- Get prepared for the end of the Brexit transitional period
- Virtual Christmas parties will qualify for tax exemption
- Gifts to employees can be tax-free
- Minimum Wage Increases from April 2021
- Advisory fuel rates for company cars
- Self assessment taxpayers warned to watch out for scammers posing as HMRC
- HMRC confirms MTD for corporation tax to be mandated from 2026
- £1 million Annual Investment Allowance cap extended
It is time to prepare for the end of the Brexit transitional period.
Whilst the United Kingdom officially left the European Union (EU) on 31 January 2020, this prompted the start of an 11-month transitional period during which time the UK remains part of the Single Market, the EU Customs Union and the VAT Territory. The UK will leave the EU VAT Territory on 31 December 2020. After this date, Great Britain (England, Wales and Scotland) will not be subject to EU VAT legislation. Northern Ireland will remain subject to EU VAT legislation in respect of transactions involving goods, but not for services.
Acquisitions (purchases of goods from EU member states) will be treated as imports. A new system, Postponed Accounting, will be introduced and will apply to imports received from all over the world, with some exceptions such as low-value consignments. The system is intended to mitigate the cashflow disadvantage posed by paying import VAT upfront and waiting to reclaim it in a later VAT return. Under the new system, import VAT can be deferred and declared to HMRC in the VAT return for the period of importation. The VAT can be reclaimed in the same return subject to the normal rules for reclaiming input tax.
Dispatches (zero-rated sales of goods to business customers in EU member states) will be treated as exports. Exports are zero-rated, provided certain conditions are met.
Distance sales (sales of goods to non-business persons in the EU) will also be treated as exports. The EU distance-selling regime and thresholds will no longer apply to UK suppliers.
When the UK leaves the EU Customs Union on 1 January 2021 the UK will operate a full, external border with the EU. New border controls on imports from the EU to Great Britain will be introduced in stages, with customs declarations for goods which are not controlled being delayed until 30 June 2021.
From 1 January 2021, there will be new rates of Customs Duty for imports – called the UK Global Tariff. To check the tariffs that will apply to different categories of imported goods, please see https://www.gov.uk/guidance/uk-tariffs-from-1-january-2021.
It is important to be ready for these changes. Some practical actions to take now include:
- Obtaining an Economic Operator Registration and Identification (EORI) number, which will be required when trading with the EU post Brexit. It is free to obtain an EORI number and you can do so by visitinghttps://www.gov.uk/eori.
- Deciding whether to use an agent freight forwarder to help with making customs declarations. The following guidance outlines the services they can provide:https://www.gov.uk/guidance/appoint-someone-to-deal-with-customs-on-your-behalf
- If you buy goods from the EU, checking whether those goods are ‘controlled’. Ascertaining which declarations are required and when they will need to be made. For more information please seehttps://www.gov.uk/guidance/list-of-goods-imported-into-great-britain-from-the-eu-that-are-controlled.
- Checking the UK Global tariff to see the rate of Customs Duty that is likely to apply to the goods you import.
- Deciding whether to use the Postponed Accounting system (https://www.gov.uk/guidance/check-when-you-can-account-for-import-vat-on-your-vat-return) to defer import VAT and familiarising yourself with the procedure for declaring the deferred import VAT on the VAT return.
If you require more information please contact us to discuss how we can help you move smoothly into 2021.
Internet link: GOV.UK transition campaign
HMRC has confirmed that they will accept a virtual Christmas party as an event which is capable of falling within the tax exemption rules for annual functions.
The Association of Taxation Technicians (ATT) has received the following statement from HMRC:
‘Having considered the scope of section 264 ITEPA03 (annual parties exemption), we are pleased to confirm that the exemption will apply to the costs associated with virtual parties in the same way that it would for traditionally held parties.
‘Therefore, the cost of providing food, entertainment, equipment and other expenses which may be incurred in hosting a virtual event, will be exempt, subject to the normal conditions of the exemption being met.
‘It is important to note that the intention of the exemption is to allow for costs of provision which are generally incurred for the purposes of the event itself, and that the event, along with any associated provision, is available to employees generally. We will be updating our GOV.UK guidance shortly.’
The rules allow employers to spend up to £150 per head (including VAT) towards the costs of an annual function such as a seasonal party, without creating a tax liability.
To qualify the party must be an annual event which is open to all staff generally, or all staff at a specific location, if the employer has more than one location. If the employer has more than one annual event in a tax year, for all the events to be tax-free the combined cost per head must be no more than £150.
Internet link: ATT news
Some employers may wish to give a small gift to their employees. As long as the employer meets the relevant conditions, no tax charge will arise on the employee.
A tax exemption is available which should help employers ensure that the benefits provided are exempt and do not result in a reportable employee benefit in kind. In order for the benefit to be exempt it must satisfy the following conditions:
- the cost of providing the benefit does not exceed £50 per employee (or on average when gifts are made to multiple employees)
- the benefit is not cash or a cash voucher
- the employee is not entitled to the benefit as part of a contractual arrangement (including salary sacrifice)
- the benefit is not provided in recognition of particular services performed by the employee as part of their employment duties
- where the employer is a ‘close’ company and the benefit is provided to an individual who is a director, an office holder or a member of their household or their family, then the exemption is capped at a total cost of £300 in a tax year.
If any of these conditions are not met then the benefit will be taxed in the normal way subject to any other exemptions or allowable deductions.
No more than £50
One of the main conditions is that the cost of the benefit does not exceed £50. If the cost is above £50 the full amount is taxable, not just the excess over £50. The cost of providing the benefit to each employee and not the overall cost to the employer determines whether the benefit can be treated as a trivial benefit. So, a benefit costing up to £50 per employee whether provided to one or more employees can be treated as trivial. Where the individual cost for each employee cannot be established, an average could be used. HMRC examples consider various gifts including turkeys, bottles of wine and gift vouchers.
Further details on how the exemption works, including family member situations, are contained in the HMRC manual.
However if you are unsure please do get in touch before assuming the gift you are about to provide is covered by the exemption.
Internet link: HMRC manual
Increased minimum wage rates have been announced to take effect from 1 April 2021.
The government has announced that the National Living Wage (NLW) will increase by 2.2% from £8.72 to £8.91, and will be extended to 23 and 24 year olds for the first time. For workers aged under 23, Commissioners recommended smaller increases in recognition of the risks to youth employment, which the current economic situation poses.
NLW and National Minimum Wage (NMW) rates will also increase as follows:
|Rate from April 2020||Rate from April 2021||Increase|
|National Living Wage||£8.72||£8.91||2.2%|
|21-22 Year Old Rate||£8.20*||£8.36||2.0%|
|18-20 Year Old Rate||£6.45||£6.56||1.7%|
|16-17 Year Old Rate||£4.55||£4.62||1.5%|
*Rate also applies to those aged 23 and 24
Bryan Sanderson, Chair of the Low Pay Commission, said:
‘Recommending minimum wage rates in the midst of an economic crisis coupled with a pandemic is a formidable task. The difficulty in looking forward even to next April is daunting. There are strong arguments concerning both low-paid workers – many performing critically important tasks – and the very real solvency risks to which small businesses are currently exposed. In these unprecedented conditions, stability and competence are prime requirements.
‘Our value as a social partnership is to use the imperfect economic evidence to produce a recommendation which is professionally researched and dispassionate. Most importantly, after much debate it has the support of the business, trade union and academic representatives who make up the Commission. We have opted for a prudent increase which consolidates the considerable progress of recent years and provides a base from which we can move towards the Government’s target over the next few years.’
Internet link: GOV.UK news.
New company car advisory fuel rates have been published and took effect from 1 December 2020.
The guidance states: ‘You can use the previous rates for up to one month from the date the new rates apply’. The rates only apply to employees using a company car.
The advisory fuel rates for journeys undertaken on or after 1 December 2020 are:
|1400cc or less||10p|
|1401cc – 2000cc||11p|
|1400cc or less||7p|
|1401cc – 2000cc||8p|
|1600cc or less||8p|
|1601cc – 2000cc||10p|
HMRC guidance states that the rates only apply when you either:
- reimburse employees for business travel in their company cars
- require employees to repay the cost of fuel used for private travel
You must not use these rates in any other circumstances.
The Advisory Electricity Rate for fully electric cars is 4 pence per mile. Electricity is not a fuel for car fuel benefit purposes.
If you would like to discuss your car policy, please contact us.
Internet link: GOV.UK AFR
HMRC is warning self assessment taxpayers to be alert to the danger of scammers posing as the tax authority in the lead up to the tax return deadline.
Every year HMRC issues thousands of SMS messages and emails as part of its push to remind people to file before the 31 January deadline. HMRC says it is aware that fraudsters use calls, emails and texts to contact taxpayers.
In the last 12 months, HMRC has responded to more than 846,000 referrals of suspicious HMRC contact from the public and reported over 15,500 malicious webpages to internet service providers so that they can be taken down.
Many scams target customers to inform them of a fake tax rebate or tax refund. The imposters use language intended to convince the taxpayer to hand over personal information, including bank details, in order to claim the refund.
Karl Khan, Interim Director General for Customer Services at HMRC, said:
‘We know that criminals take advantage of the self assessment deadline to panic customers into sharing their personal or financial details and even paying bogus ‘tax due’.
‘If someone calls, emails or texts claiming to be from HMRC, offering financial help or asking for money, it might be a scam. Please take a moment to think before parting with any private information or money.’
Internet link: GOV.UK news
In a new consultation HMRC has confirmed that Making Tax Digital for corporation tax (MTD for CT) will not be implemented until 2026 ‘at the earliest’.
The consultation considers how the principles created for MTD could be established for companies within the charge to CT. It outlines the potential design of the MTD for CT system and provides companies with information in regard to what may be required of them following the introduction of MTD for CT.
HMRC is seeking feedback on the plans from companies and agents.
Commenting on the consultation, Tina Riches, Chair of the joint Association of Taxation Technicians (ATT) and Chartered Institute of Taxation (CIOT) Digitalisation and Agent Services Committee, said:
‘We are disappointed that the consultation presupposes that most entities within the charge to CT should be within the scope of MTD before the costs and benefits arising to different parts of the population have been established.
‘If a key purpose of MTD is to encourage taxpayers to become digital then it is not necessary to extend it to CT, as a large proportion of companies are VAT registered and so already in MTD for VAT, or using digital records anyway.’
The consultation runs from 12 November 2020 to 5 March 2021.
The Treasury has confirmed that the £1 million cap on the Annual Investment Allowance (AIA) is to be extended for an additional year as the government continues to look at ways to stimulate the economy.
The AIA provides a tax write off against profits for expenditure incurred on plant and machinery by businesses and owners of commercial property.
Businesses can now continue to claim up to £1 million in same-year tax relief through the AIA for capital investments in plant and machinery assets until
1 January 2022. The temporary £1 million cap was originally due to revert to £200,000 on 1 January 2021.
Commenting on the extension, Jesse Norman, Financial Secretary to the Treasury, said:
‘It is vital that we support business through the difficult months ahead.
‘Extending the AIA’s £1 million cap will give businesses the confidence they need to invest into next year, helping them to grow whilst benefiting the wider economy too.’
Internet link: GOV.UK news