What have you missed? – A round up of the tax updates from the last two weeks.

Keep up to date with the key announcements made over the last 2 weeks.

Winter Economic Plan

The Chancellor, Rishi Sunak has laid out the latest support package for the ongoing coronavirus pandemic. In his speech to the house of commons yesterday, Sunak confirmed that the furlough scheme would indeed end on 31st October as originally planned and will be replaced by the Job Support Scheme.

The Self-Employment Income Support Scheme has been extended for a further six months, it will now run until 30th April 2021. A number of the government loan schemes have been extended to new applicants until 30th November 2020. Sunak also announced the new pay as you grow scheme which will allow greater flexibility for businesses when repaying bounce back loans, included in the scheme are extended time to pay along with the option to suspend payments for up to six months.

Deferred VAT from March – June 2020 which would have fallen due in March 2021, businesses now have the option to be paid across 11 equal monthly instalments across the 2021-22 tax year. The reduced 5% VAT rate for hospitality and tourism sectors has been extended until 31st March 20201.

Self-Assessment liabilities on taxes due in January 2021 – individuals will now also have the opportunity to use HMRC’s time to pay facility allowing taxpayers the opportunity to secure a payment plan to pay over an additional twelve-month period to January 2022.

A full in depth breakdown of yesterday’s announcements can be found in our article here.

Autumn Budget Cancelled

The winter economic plan came following the surprise announcement on Wednesday that the Autumn 2020 Budget had been cancelled amidst renewed coronavirus uncertainty. The treasury said “now is not the right time to outline long-term plans ― people want to see us focused on the here and now”.

HMRC appear set up push on with IR35 changes despite Coronavirus challenges

Given the recent updates to HMRC’s Employment Status Manual it would appear that they are intent currently on pushing forward with the updated April 2021 deadline for IR35.

While there’s no change to the principles which determine if IR35 applies, from April 2021 the responsibility for applying the rules shifts from those doing the work to the business that pays them – but only if it’s a large or medium-sized business.

HMRC have confirmed its’ commitment to not using new information received as a result of the changes to open up retrospective enquiries into earlier tax years. With HMRC seeking to reassure workers that their intermediary entity, will not be subject to new compliance checks using information from the off payroll working reforms, for tax years prior to 6 April 2021, unless HMRC has reason to suspect fraud or other criminal behaviour.

In practice, the new approach will likely only apply in very limited circumstances. If you personally provide services to a client but invoice them through an intermediary (your company, partnership, etc), keep a record of how you arrived at your view that it didn’t apply. This can include results produced by HMRC’s check employment status for tax (CEST) tool.

HMRC letters to VAT registered businesses for post Brexit changes

On 31st December 2020 the United Kingdom will leave the EU single customs market at the end of the Brexit transition period.

As a result HMRC have sent a letter to VAT registered businesses which trade with the EU, the letter highlights what changes will be taking place and what businesses need to do now to prepare for these changes.

With the UK leaving the EU’s Single Market and Customs Union, From January 1st 2021 the UK will operate a full, external border with the EU.

This means that there will be controls placed on the movement of goods between Great Britain and the EU. From 1st January businesses will need to submit declarations when importing and exporting goods that are categorised as ‘controlled’.

What businesses need to do now

In order to prepare for the incoming changes HMRC have set out a list of tasks for businesses to undertake to ensure they are ready for the new processes for moving goods that will take effect from 1st January 2021, these include:

  • Making sure they have an Economic Operator Registration and Identification number (EORI)
  • Deciding how they will make customs declarations
  • Checking if their imported goods are eligible for staged controls
  • Deciding how they will account for import VAT when making customs declarations
  • Checking if import VAT is due at the border
  • Checking the controlled goods list to see if they need to complete declarations from January, where goods are not on the list they can choose to delay import declarations until July 2021
  • Checking government tariff tables and consider how their trade will be effected
  • Signing up to the new Trader Support Service if they move goods between Great Britain and Northern Ireland or bring goods into Northern Ireland from outside the UK

The letter also details how the UK’s import processes will be introduced in 2021.

Coronavirus Job Retention Scheme updates

HMRC have updated their guidance on the way to calculate usual furloughed hours for employees coming off of furlough or flexible furlough midway through a claim period. The updated guidance is to be used for claims made from 14th September onwards. Employers using this calculation will not need to amend any previous claims.

VAT Retail Export Scheme

As part of the duty free extension announcement made by the treasury they have announced an end to the VAT Retail Export Scheme.

The scheme which allows VAT refunds for overseas visitors in British airport shops will be removed from 1st January 2021.

Overseas visitors will still be able to buy items VAT-free in store and have them sent directly to their overseas address. However the scheme, which the treasury described as a “costly system of claiming VAT refunds” which allows them to take the items home in their luggage will be ended.

HMRC respond to ATT queries on temporary reduced rate of VAT

On 8th July 2020 the Chancellor Rishi Sunak announced that VAT would be temporarily reduced to 5% for certain supplies of hospitality, holiday accommodation and admission to attractions from 15th July 2020 – 12th January 2021. Following this, the Association of Taxation Technicians (ATT) raised a number of questions to HMRC regarding the scope and operation of the temporary reduced rate.

HMRC have now responded to these queries included in HMRC’s response were clarifications that:

  • Alcoholic beverages served with a mixer are considered to be alcoholic beverages and remain at standard rate of VAT
  • Shandy and other low alcohol beverages qualify for the reduced rate if there is no excise duty charged on them as they would be considered a soft drink
  • Off-Premises catering (catering not provided on the catering supplier’s own premises) is not included in the reduced rate

Guidance on the schemes interaction with holiday accommodation, admission to attractions, interaction with rules on vouchers and interaction with the flat rate scheme were also provided and can be found in HMRC’s response.

Source – Lexis Nexis via Tolley Guidance