Tax Update provides you with a round-up of the latest tax developments. Covering matters relevant to individuals, trusts, estates and businesses, it keeps you up-to-date with tax issues that may impact you or your business. If you would like to discuss any aspect in more detail, please speak to your usual Smith & Williamson contact. Alternatively, Ami Jack can introduce you to relevant specialist tax advisors within our firm.
1.1 Autumn Budget replaced with Winter Economy Plan
The 2020 Autumn Budget, expected in November, has been cancelled. The Government’s view is that the current crisis is not the moment to announce long-term plans, but to focus on immediate support measures.
The Chancellor instead made a statement to the Commons: the Winter Economy Plan. This consisted of new support measures for employment, companies, and the self-employed, to cover the next six months of anticipated COVID-19 restrictions. Full details of the tax measures can be found below, but the stated aim is to protect viable jobs.
The last Budget was given in March 2020, as the 2019 Autumn Budget was postponed after the General Election was announced. No details have been published as to when the next Budget will be held.
1.2 COVID-19: order disapplying interest now in force
The Government previously announced that self-assessment payments due in July 2020, and VAT payments due between 20 March and 30 June 2020, could be deferred without incurring late payment interest. This was intended to alleviate cash-flow difficulties arising from the pandemic.
The statutory instrument enforcing the disapplication of interest has now been enacted. This instrument came into force on 25 September as The Finance Act 2008, Section 135 (Coronavirus) Order 2020.
2. Private client
2.1 Enhanced Time to Pay arrangements for January tax payments
The Winter Economy Plan includes enhanced time to pay arrangements for self-assessment tax bills due in January. Eligible taxpayers will be able to use HMRC’s online self-service application process to extend payments over a 12 month period.
Taxpayers who cannot pay their tax and who have less than £30,000 of tax due will be able to use HMRC’s online self-service time to pay application process. Full details on how, or if, this differs from normal TTP arrangements have not been given. If it follows normal TTP practice, then interest would be due on the deferred payments. HMRC has also not yet released any separate eligibility criteria for this deferral, so we currently expect it to apply only to those who cannot make payment in full without hardship.
The time to pay arrangement will spread the payment due in January 2021, including any deferred July 2020 payment on account, over 12 months, with full repayment not required until January 2022.
2.2 COVID Self-employment income support scheme extended
The Winter Economy Plan includes a six month extension to the self-employment income support scheme (SEISS) consisting of two further grants at reduced levels. The original scheme was due to end on 31 October.
This extension is in line with the extended support for employment, but only covers 20% of profits in the first three months. It is only open to those who are currently actively trading, and intend to continue to trade. They must also be impacted by reduced demand due to COVID-19 in the qualifying period, which is from 1 November to the date of claim for the first grant. They do not need to have claimed the previous grants, but do need to meet the eligibility criteria set out for them such as profits under £50,000.
The support will be paid as two lump sum taxable grants, each covering a three month period. The first will be 20% of average monthly trading profits, capped at £1,875 for the three month period. The level of the second, covering 1 February to 30 April, will be set by the Government in due course.
HMRC will also provide full details of how to claim the additional grants..
3. PAYE and employment
3.1 The Job Support Scheme
As part of the Winter Economy Plan, the Government has announced details of the new Job Support Scheme (JSS). The JSS will succeed the Coronavirus Job Retention Scheme (CJRS).
As CJRS support draws to a close on 31 October 2020, the JSS will aim to protect viable jobs and support the worst affected businesses during the winter months. From 1 November 2020, the Government will subsidise the pay of employees working fewer hours due to lower demand. Where employees can work at least a third of their normal hours, their employer will continue to pay for the hours they work. For the hours the employees cannot work, the employer and the Government will each cover a third of the pay, although the Government grant will be capped at £697.92 a month for each employee. The JSS will run for six months until the end of April 2021, and can be claimed in addition to the Job Retention Bonus. Further information is expected to be announced by the Government on the salary cap and what businesses eligibility.
4.1 New guidance on the VAT reverse charge for construction services
HMRC has published guidance on the operation of the domestic reverse charge from 1 March 2021 for businesses that buy and sell building and construction services.
The guidance covers topics such as how the reverse charge will apply to construction employment businesses and sub-contractors, how it interacts with the Construction Industry Scheme and the end user and intermediary supplier businesses exception. It also explains procedural issues such as how to account for the reverse charge, how it should be reflected in VAT returns and invoicing requirements. Two flowcharts are included to illustrate the application of the rules to sellers and buyers of building and construction services.
4.2 HMT announces an end to VAT refunds for overseas visitors
From January 2021, overseas visitors will no longer be able to claim a refund of VAT in British shops or at British airports. Tax-free sales in airports to passengers travelling to non-EU countries will also no longer be available.
HMT has issued a press release announcing changes to duty-free shopping that will take effect after the UK has transitioned out of the EU. It also includes details on changes to the VAT Retail Export Scheme and tax-free sales at airports. Refunds of VAT to overseas visitors will no longer be available in store, but tourists will still be able to make VAT-free purchases of items that are sent directly to their overseas addresses. Refunds of VAT on items taken overseas in luggage will also no longer be available at airports. Following concerns over tax concessions not being passed along to customers, tax-free sales in airports to passengers travelling to countries outside the EU will also be ended. This will apply to goods such as clothing and electronics.
4.3 VAT in the Winter Economy Plan
As part of the Government’s plan to support businesses this winter, the Chancellor has announced extensions to existing VAT support measures.
Between 20 March and 30 June 2020, businesses were given the option of deferring their VAT liabilities until March 2021. The Winter Economy Plan includes a New Payment Scheme, which will allow the deferred VAT liabilities to be spread over 11 smaller, interest-free repayments. This is designed to give more businesses more time and flexibility to manage their VAT payments.
The temporary VAT cut for the tourism and hospitality sectors has also been extended. The temporary reduction from the usual 20% standard rate of VAT had been scheduled to end on 13 January 2021. Instead, the 5% reduced rate will apply until 31 March 2021.
4.4 VAT on bad debt relief during the deferral period
HMRC has clarified the VAT treatment of bad debt relief for payments on account businesses that partially deferred their VAT liability under the temporary deferral period earlier this year.
Businesses were allowed to defer VAT liabilities arising between 20 March and 30 June 2020, as part of the Government’s economic stimulus package. The CIOT sought confirmation from HMRC on how to account correctly for bad debt relief where a VAT payment on account business had only been able to partly defer its liability during the deferral period. In its response, HMRC acknowledged that the bad debt relief provisions do not specifically address this situation. It explained that bad debt relief can be claimed for a VAT quarter only to the extent that VAT on those unpaid supplies has been paid to HMRC. The total VAT paid for a period should be apportioned across the supplies made in that period to determine the VAT that was paid in respect of the unpaid supplies. Suppliers cannot choose to allocate a greater proportion of the VAT paid to the unpaid supplies in order to claim a greater amount of bad debt relief.
5. Tax publications and webinars
5.1 Tax publications
The following Tax publications have been published
6. And finally
6.1 Manual Labour
Our thanks to HMRC this week, for a helpful article on how to report problems with their manuals: outsourcing at its finest. Manual users can provide comment on anything from a typo to an unclear sentence, even using a form to give detailed feedback to which HMRC will respond.
Given our long-standing grudge against HMRC guidance that does not agree with the legislation, we look forward to expressing our feelings by answering the simple question: Is this page useful?
|ATT – Association of Tax Technicians||ICAEW - The Institute of Chartered Accountants in England and Wales||CA – Court of Appeal||ATED – Annual Tax on Enveloped Dwellings||NIC – National Insurance Contribution|
|CIOT – Chartered Institute of Taxation||ICAS - The Institute of Chartered Accountants of Scotland||CJEU - Court of Justice of the European Union||CGT – Capital Gains Tax||PAYE – Pay As You Earn|
|EU – European Union||OECD - Organisation for Economic Co-operation and Development||FTT – First-tier Tribunal||CT – Corporation Tax||R&D – Research & Development|
|EC – European Commission||OTS – Office of Tax Simplification||HC – High Court||IHT – Inheritance Tax||SDLT – Stamp Duty Land Tax|
|HMRC – HM Revenue & Customs||RS – Revenue Scotland||SC – Supreme Court||IT – Income Tax||VAT – Value Added Tax|
|HMT – HM Treasury||UT – Upper Tribunal|
By necessity, this briefing can only provide a short overview and it is essential to seek professional advice before applying the contents of this article. This briefing does not constitute advice nor a recommendation relating to the acquisition or disposal of investments. No responsibility can be taken for any loss arising from action taken or refrained from on the basis of this publication. Details correct at time of writing.
This article was previously published on Smith & Williamson prior to the launch of Evelyn Partners.