HMRC’s Family Investment Company Unit Closed

It was announced last week that HMRC has closed down its dedicated Family Investment Company (‘FIC’) Unit after finding no evidence of any link between the use of FICs and non-compliant behaviour. The FIC Unit was established by HMRC in 2019 to explore the tax avoidance risks associated with FICs, which have become increasingly popular as a wealth and succession planning tool in the last decade. FICs can often be used to meet objectives which are more traditionally associated with trusts, however, they are not subject to the same tax regime as trusts.

HMRC has never specifically stated which taxes they considered were at risk of avoidance, and whilst it was always difficult to see any means by which HMRC could have targeted FICs on a universal scale under current rules, the closing of the dedicated unit will come as a relief to many. That being said, it is notable that HMRC would not be drawn on whether any changes to tax policy are being considered which might make FICs less attractive as a succession vehicle in the future. In the meantime, FICs will continue to be subject to existing tax rules including existing general and targeted anti-avoidance provisions. Anyone considering establishing a FIC should therefore seek specialist tax and legal advice to ensure such planning meets their desired objectives whilst avoiding any unpleasant surprises.

If you have any queries about a Family Investment Company please feel free to contact Lisa Travers or Michelle Fallon or call 0131 558 5800.

Reform of tax ‘Basis Period’ announced by HMRC

The Government has this week announced a consultation concerning a potential reform of the basis on which trading profits arising to the self-employed (including members of partnerships) are subject to income tax. Should the proposed changes go ahead they will impact the self-employed who carry on a trade for UK tax purposes and do not draw up annual accounts to 31 March or 5 April.

In very broad terms, to align the taxation of trading profits with other types of income arising to individuals, the Government has proposed that existing ‘basis period’ rules, whereby income tax on trading profits for a tax year is determined based on profits arising in the accounting period ending in the tax year, will be replaced by a simplified system which would require the self-employed to apportion trading profits to tax years.

Whilst the proposals should certainly remove much of the complexities associated with the taxation of trading profits for many self-employed individuals (particularly in the early years of trade), to align with the introduction of Making Tax Digital (MTD) for income tax, the Government has proposed that these changes will take effect from 2023/24 with a one year transitional period in 2022/23. This leaves very little time for businesses to prepare for the practical implications of the changes which, due to the transitional provisions which will apply in 2022/23, could include cash flow challenges arising from the possibility that a higher income tax liability will arise for that tax year than might otherwise have been the case.

Notwithstanding that the objective of the proposals is the simplification and modernisation of a somewhat outdated set of rules, implementation of the changes over such a short period of time could represent an added burden for the self-employed post-Covid and arguably another unwelcome level of disruption as the whole country looks towards a future after the global pandemic. The consultation closes on 31 August; we will provide further information when available.

C+T team on hand to help recipients of the Early Stage Growth Challenge Fund

One requirement of receiving funding under the Early Stage Growth Challenge Fund is that – throughout the duration of the loan or whilst Scottish Enterprise (‘SE’) holds shares in your company – you must provide an annual report which sets out how the funding has been spent.

The report must be prepared by an independent firm of accountants and submitted within 30 days following each anniversary of the date of payment of the funding. your Funding Award. We will prepare the report in the required format and send to SE.

Chiene + Tait can produce these annual reports, which demonstrate that your funds have been spent in line with your application. Working together with you, we will undertake an independent inspection of the relevant accounts records in accordance with the terms of your Funding Award. We will prepare the report in the required format and send to SE.

For more details on how we can help your business download our flyer or contact us today at mail@chiene.co.uk.

 

Lisa Travers appointed as new Personal Tax Partner

Accountancy firm Chiene + Tait (C+T) has appointed a new Partner within its expanding Personal Tax team. Lisa Travers joins from RSM’s Glasgow office where she worked within its private client practice.  Prior that that she spent the first nine years of her career at KPMG before moving to Deloitte, where she was an Associate Director.

Lisa brings a wealth of experience to her new role as an experienced adviser on income and capital tax planning for high net worth individuals, entrepreneurs and private equity fund executives. Working alongside Michelle Fallon, C+T’s Head of Private Client Tax, Lisa will focus on further growing the firm’s private client business throughout Scotland.

Commenting on her new role, Lisa said: “I’m really thrilled to join the highly regarded Personal Tax team at Chiene + Tait. The entire firm’s growth over the past decade is so impressive. It’s incredibly exciting for me to now be part of this success and help further develop its private client practice.

Michelle Fallon, C+T’s Head of Private Client Tax, said: “Lisa is an experienced and talented personal tax specialist who has built a formidable reputation in her successive roles with so much to offer as we continue to grow our practice. We are very pleased to welcome her to the firm and I look forward to working closely with her and leveraging her wealth of expertise to benefit our clients.”

VAT changes for UK businesses selling to EU consumers from 1 July

As of 1 July 2021, new EU VAT rules for business to consumer (B2C) sales will be introduced. These new rules will affect UK suppliers selling goods to EU consumers online.

Why are new rules being introduced?

The new rules are being introduced to facilitate with EU cross-border trade, to ensure a fair competition for EU suppliers and to ensure that VAT is charged based on where the customer is located. The changes are also designed to combat VAT fraud.

What’s new?

The major changes from 1 July 2021 include:

  1. Withdrawal of distance selling rules and new single return for ecommerce sales;
  2. Removing import VAT exemption and new VAT scheme for imported goods – IOSS; and
  3. Online market places responsible for EU VAT.

1. Withdrawal of distance selling rules & new single return for ecommerce sales

Firstly, the existing ‘Distance Selling Thresholds’ for EU sales will be withdrawn from 1 July 2021.

Instead, cross-border sellers will have to charge the VAT rate of the customer’s country of residence at point of sale. This is to be accompanied by the roll-out of a single One Stop Shop (OSS) EU Return. This new OSS return will avoid the requirement to register for VAT in each applicable EU country. This is an extension of the MOSS which is currently used for accounting for VAT for digital supplies. Local businesses will be registered in their home country, and non-EU businesses can choose any member state to act as their VAT identification country. All pan-EU sales will then be included in a single OSS return.

The Union scheme which applies to EU businesses will extend to include the supplies of all types of B2C services, intra-EU online sales of goods and specific domestic supplies sold through digital marketplaces.

2. Removing import VAT exemption and new VAT scheme for imported goods – IOSS

This VAT change also affects imported goods into the EU so will have an impact on businesses who wish to sell goods to EU consumers that are based outside the EU, including the UK.

The EU is introducing a new imports scheme called Import OSS (IOSS) for goods worth less than €150. Non-EU businesses will have the option to register for this scheme in a member state of the EU.

In addition, from 1 July 2021, the VAT exemption for goods imported into the EU in small consignment of a value of up to €22 will be withdrawn. This is intended to level the playing field for EU businesses that are always charged VAT.

The options for non-EU UK sellers are therefore:

a) Use the new IOSS scheme

If using the IOSS, businesses will be required to register for the scheme in one EU country, and charge and collect VAT at the point of sale on products below €150 when selling to EU customers.  The applicable VAT rate will be the customer’s local rate. Each month, the business must then declare and remit the total applicable EU VAT through an IOSS return. These sales will then benefit from a VAT exemption upon importation, allowing a fast release at Customs. Businesses will also have to consider their pricing structure as rates of VAT vary in the EU from 17% to 27%.

b) Alternative to IOSS

Where the Import OSS is not used, a second simplification mechanism will be available for sales to EU consumers worth less than €150. Import VAT will be collected from customers by the customs declarant (e.g. postal operator, courier firm, customs agents) which will pay it to the customs authorities via a monthly payment. This means that the customer will have to pay a fee to accept their package.

3. Online marketplaces responsible for EU VAT

After July 2021, online marketplaces will become responsible for charging and collecting VAT on deemed supplier transactions. For imports not exceeding €150, instead of import VAT the marketplace will charge the customer VAT at the point of sale and declare it instead of the seller. Both EU and non-EU sellers will benefit from reduced VAT obligations and may be able to deregister in some EU states.

How can we help?

At Chiene + Tait we are in a unique position to help you navigate these changes and help you to understand how the above changes will impact you and your business on a day-to-day practical level.

If you are concerned about expanding your business into EU markets, or how your current business with the EU might be affected, we can assist you by undertaking a review into your business and recommending to you the best course of action. Whether it be sales to EU consumers and businesses, importing goods from the UK, exporting goods to the EU and further afield, Customs Duties & Tariffs, we will help you find the ideal solution for you and your business.

Chiene + Tait is also part of a worldwide association of firms, including members in the EU, with whom we can communicate on your behalf or put you in touch with directly so that you can understand from professionals across the EU how the rule changes will affect you from start to finish.

Grant Funding Available

The UK government has confirmed that that there will be grant funding available of up to £2,000 for SMEs to receive advice and training on how changes brought about because of Brexit can affect your business. We can guide you through the grant funding process to ensure you get the best value and piece of mind.

We would recommend that any business that wishes to sell goods to EU consumers acts now to be in a position to be ready for these changes.

Contact our VAT and Indirect Taxes team at vat@chiene.co.uk, or 0131 558 5800 for help, advice or to arrange a review.

Chiene + Tait announces private client team promotions

Accountancy firm Chiene + Tait (C+T) has announced promotions within its Edinburgh-based private client team. Partner Michelle Fallon has been named as the firm’s new Head of Private Client Tax, leading the 20-strong team, while her colleague Alan Dean has been promoted to the role of Director.

Michelle joined the firm in 2013 as Personal Tax Manager before being promoted to director level in 2017 and was then made a Partner in 2019.

Alan joined C+T in 2018 after working with accountants French Duncan and legal firm Turcan Connell.  He specialises in advising high-net worth individuals, trusts and businesses on a range of tax planning issues, including succession planning, business structure, residency and employer taxes.

C+T Managing Partner Carol Flockhart said: “Michelle’s move to become Head of Private Client Tax and Alan’s promotion to Director marks another important stride forward for our renowned private client team. They are both well-regarded and highly respected personal tax experts who have contributed towards the growth of the firm.”

VAT refund opportunity for partially exempt organisations affected by COVID-19

HMRC has provided some additional flexibility that partially exempt organisations may well wish to take advantage of for their VAT accounting. This is because COVID-19 restrictions over the last 12 months may have had an adverse impact on partially exempt organisations.

HMRC has released a Business Brief which might offer assistance to partially exempt organisations impacted by COVID-19. In short, businesses/organisations that have not been able to operate as normal due to COVID-19, and have experienced lower than normal partially exemption recovery rates, can apply to HMRC for a retrospective special method using previous year % to receive a VAT refund from HMRC and a better result.

Normally, PESMs are often difficult to get approved but HMRC has set up a new unit with an accelerated process and will look more favourably on businesses that can demonstrate they have been affected over the past year. These will be temporary alterations to business’ partial exemption methods with proposals based on representative income streams from the previous tax year to get a fair and reasonable recovery rate.

Whilst there is not an automatic approval scheme in place, we would hope that HMRC will process these applications with little fuss.

There will also be an impact on organisations within a capital goods scheme (CGS) adjustment period. The same accelerated process will also be available to businesses who use the CGS to calculate input tax recoverable on capital items they use for taxable and exempt purposes.

We have been asked by some charity clients whether this also covers organisations that have Business/Non Business Methods (“BNB”), as the Brief does not mention this. This may be because BNB methods are not heavily regulated in the legislation. We would recommend that charities that have had a reduction in their taxable commercial activities due to COVID-19 get in touch as there may be an opportunity to address this with HMRC.

If you think your business or organisation may be able to benefit from this development please contact our VAT team.

HMRC announces new Brexit Support Fund for SMEs involved in imports or exports

HMRC has recently announced an SME Brexit Support Fund which can provide funds of up to £2,000 to assist with professional advice and/or training for the business.

To qualify for this grant the business must:

  • Have up to 500 employees
  • Have no more than £100 million in annual turnover
  • Be established in the UK
  • Have been established in the UK for at least 12 months, or hold a valid AEO status
  • Be involved in imports and/or exports between UK and the EU or Northern Ireland.

The potential VAT and Customs issues surrounding Brexit, particularly following the trade agreement announced in December 2020, is having an impact on many businesses and it is not too late to seek advice to get to grips with this.

If you would be interested in learning more about the grant funding available to you, and having a review undertaken of the potential VAT & Customs implications on your businesses, we would be happy to provide you with a quote for this work and discuss this further with you.

Please contact our VAT Department for more information.

Budget 2021: VAT Extension for Tourism & Hospitality Businesses

On 3 March 2021, the Chancellor announced the annual UK Budget for the coming year in an effort to kick start the economy following the restrictions imposed as a result of the Coronavirus pandemic. Amongst the package of financial support and assistance during 2021/22, the Chancellor confirmed further assistance for the tourism and hospitality sector which has arguably been the worst affected industry by the pandemic.

Temporary VAT rate extended

The UK government has confirmed that the temporary reduced rate of 5% VAT for the tourism and hospitality sector will be extended to until 30 September 2021.  To help businesses manage the transition back to the standard 20% rate, the Government has also announced that a 12.5% rate will apply for the subsequent six months from 1 October 2021 until 31 March 2022.  The 20% normal standard VAT rate will then be reinstated from 1 April 2022.

Summary of changes

The table below summarises the applicable VAT rate and timeline for the sectors:

Period VAT Rate
To 30 September 2021 5%
From 1 October 2021 to 31 March 2022 12.5%
From 1 April 2022 20%

To highlight the significance of this announcement, this will be the first time since 1979 that 4 distinctive VAT rates will be in operation in the UK.

Key Issues

With this extension of the reduced VAT rate we consider the following key issues:

  • How to operate and correctly identify the tax point in relation to supplies to determine the correct VAT rate to use.
  • If your business also provides goods or services that fall outside the scope of the reduced VAT rate above such as alcohol sales, how should this be accounted for and are you paying the correct amount of VAT?
  • If you are using an accounting packages (Xero, Quickbooks, SageL50 etc.) you may not have a defined tax rate for the interim 12.5% that will be used from 1 October 2021 to 31 March 2022.  A new tax rate may therefore need to be added to your software package.

Tax Points

Special provisions are available which provide an option to maximise the use of the limited 5% reduced rate period – allowing you to choose to apply the ‘basic’ or ‘actual’ tax point.  But with this flexibility it can cause complexities.  Actual tax points (invoicing for a service or receiving payment) normally override the basic tax point (service completion) but the special provisions allow a choice; tax payers have the opportunity to receive cash payments and account for VAT at the reduced rate for supplies that will be taking place after end of the 5% period (so after 30 September 2021).

Practical Example

Consider a scenario where a hotel business supplies hotel rooms at £100 per night, 50% of the payment is usually paid for at booking and 50% at the time of the stay.  A customer books on 1 March 2021 to stay at the hotel on 5 October 2021.  The issue created here is that up to 30 September 2021 the VAT rate will be 5%, but from 1 October 2021 the VAT rate will change to the interim rate of 12.5%.  Therefore at the time of the booking the VAT rate is 5% but at the point of stay it will be 12.5%.

The table below outlines the different VAT rates in the outlined scenarios:

Scenario Tax Point VAT Treatment
Customer pays 50% at time of booking (1 March 2021) and then 50% at time of stay (5 October 2021)

Payment date of 1 March 2021 will create a tax point, therefore VAT at 5%.

Second payment/actual stay will create another tax point, therefore at 12.5%

1st Payment: £50 (VAT 5% of £2.38)

2nd Payment: £50 + (VAT 12.5% of £5.55)

Total VAT = £7.93

What if full amount was paid at time of booking (March 2021) Date of payment – 1 March 2021, therefore 5% rate Payment: £100 (VAT 5% of £4.76)
What if full amount was paid at time of visit (October 2021) Date of payment  – October 2021 Date of payment  – October 2021
Payment: £100 (VAT 12.5% of £11.11)

Unusually, and perhaps due to the nature of the legislation, there are no specific anti-forestalling measures (designed to stop people circumventing and abusing the rate change), in particular when the VAT rate increased to 12.5% from 1 October 2021 and then returns to 20% from 1 April 2022.

If you would like to discuss the impact of the reduced VAT rate on your business please contact our VAT team on 0131 558 5800 or email VAT@chiene.co.uk.

Corporation tax: Budget 2021 updates

The Chancellor said that this would be a Budget that “meets the moment” and, as most commentators predicted, it included corporation tax rises designed to start bringing down the debt the Government has incurred during the pandemic.

However, it was not all bad news for companies as some tax giveaways were also announced.

Corporation tax loss extension

Currently, companies can only carry back losses against profits arising in the previous year subject to certain restrictions in some cases. This first give-away applies to trade losses only arising in accounting periods ending between 1 April 2020 and 31 March 2021. These trade losses can be carried back three years, and will benefit those trading companies, that previously had healthy taxable profits but struggled with heavy losses during the pandemic.

Losses will be carried back to the latest accounting periods first, so for companies with a 31 May 2020 year end, losses are first carried back to 31 May 2019 and then any surplus trade losses can be carried back to the years ended 31 May 2018, and then 31 May 2017.

As you would expect, there are some restrictions:

  • There will be unlimited carry back to the preceding year. There will be a cap of £2 million on the total losses that can be carried back to the earlier periods. This cap applies to each accounting period within the extended carry back period.
  • There will be a requirement for groups that have companies with losses exceeding a de minimis of £200,000 trading losses to apportion the £2 million cap between companies.
  • Any repayment claims exceeding £200,000 will need to be made through an amended corporation tax return.

Tax Planning:

If your company has trade losses for this period, and has previously had taxable profits, consider whether you can increase the amount of tax you are repaid by utilising this relaxation to the loss carry back rules.

Capital allowance super deductions

This second give-away will benefit companies that plan to purchase certain types assets between 1 April 2021 and 31 March 2023.

Currently companies that incur capital expenditure may be able to obtain a tax deduction for these costs through the capital allowance scheme. The super deductions scheme adds a new first year allowance on certain types of new plant and machinery. The amount of the super deduction will be either 130% or 50% of the cost of the new asset, depending on the type of asset purchased. The 130% rate will apply to main pool additions, while the 50% to special rate pool additions.

Exclusions will apply to claims for super deductions, including:

  • Those already existing for increased allowances, including permanently discontinuing business activities, cars or plant or machinery used for leasing.
  • Expenditure on used and second-hand assets.
  • Expenditure on contracts entered into prior to Budget Day, 3 March 2021.

These super deductions can be claimed through your corporation tax return and will be available to reduce your taxable profits for the year in which they are claimed, and therefore will reduce the amount you need to pay to HMRC (see the corporation tax rates section for more information on why this might be great news!) Alternatively, they can be used to increase tax losses, which can be carried back to the previous accounting period (resulting in a tax repayment) or carried forward and utilised against future profits.

Tax Planning:

There will be additional rules concerning acquisitions on hire purchase contracts, disposals, accounting periods straddling 31 March 2023, among others. The Chiene + Tait capital allowance specialists are on hand to guide you through the process of claiming these new super deductions, as well as discussing your expenditure with you to ensure all claims are maximised.

Corporation tax rate rise

From 1 April 2023, companies with profits over £250,000, as well as ‘close investment holding companies’, will see their corporation tax rate rise from the current rate of 19% to 25%. There will also be the re-introduction of marginal relief for corporation tax, which will see the corporation tax rate of companies with profits between £50,000 and £250,000 rise to a hybrid rate between 25% and 19%. The tax rate will depend on these companies’ circumstances and HM Revenue & Customs have yet to announce full details on how these rates will be calculated.

The ‘profit thresholds’ for each corporation tax rate will be adjusted for shorter accounting periods, as well as for the number of associated companies. Whilst we do not yet have full details, these two caveats are likely to see the corporation tax rates rise hit a wider range of companies.

Tax Planning:

Companies paying their corporation tax liabilities in instalments will need to consider these rate changes early. The rules will be complex, and likely even more so for groups of companies.

Speak to our tax experts who are on hand to answer any questions you may have on the new corporation tax rates. We can help ensure that your company is claiming all tax reliefs it is eligible for, as well as advising on tax planning opportunities arising from your future plans.

The Budget: key points from today’s Budget speech

Much of the content of today’s Budget was trailed in advance, so there were few surprises. Indeed, the shift in news consumption (not to mention the demands of the pandemic) may mean that we say goodbye to the traditional big announcements on one day in favour of smaller piecemeal policies.

We also need to consider the impact of the ‘Tax Day’ due on 23 March. This is expected to see the publication of tax consultations which would traditionally have been published alongside the Budget. It remains to be seen how much of government tax strategy and policy will be laid down then, and how the Tax Day and Budget Day interplay.

We’ve summarised key points from today’s Budget speech below – but, as ever, the devil is in the detail so do contact us for clarification, or if you have any questions.

Corporation tax rates

  • Corporation tax to rise from 19% to 25% in April 2023
  • Rate to be kept at 19% for about 1.5 million smaller companies with profits of less than £50,000
  • Companies with profits between £50,000 and £250,000 will be subject to tapered rates

Personal tax rates

  • Personal income tax allowance frozen at £12,570 from April 2021 until 2026
  • Higher rate income tax threshold frozen from 2021 until 2026
  • No changes to inheritance tax nil rate band, lifetime pension allowance or capital gains tax annual exemptions until 2026
  • No mention of any increases to capital gains tax rates or inheritance tax reliefs despite much discussion on these prior to the Budget

VAT and duty

  • No changes to the main VAT rate
  • The VAT rate reduction to 5% for the hospitality industry has been extended until 30 September; thereafter, an interim rate of 12.5% will apply until April 2022
  • No change to the VAT registration threshold of £85,000 until April 2024
  • Planned increased to alcohol and fuel duties cancelled

EIS and R&D tax

  • The EIS system will be reviewed this year to enhance the benefit it brings
  • A consultation on R&D tax relief to ensure its is up-to-date and competitive

Tax reliefs in investment

  • A new ‘super-deduction’ form of capital allowances which will allow incorporated businesses to deduct 130% of expenditure that would normally qualify for main writing down allowances

Loss relief

  • Enhanced loss reliefs for businesses, both incorporated and unincorporated, to allow carry back of losses against earlier years’ profits

Brexit

  • Eight freeports to be established in England

COVID funding

  • Multiple initiatives relating to COVID in the Budget, from an extension of the furlough scheme to new grants for non-essential businesses
  • Sector-specific funding packages announced for the arts and sports
  • Business rates in England will continue their holiday until June, with a 75% discount thereafter
  • Access to grants for self-employed people is to be widened

HMRC announces grant support for SMEs requiring VAT & customs assistance

HMRC has announced that it has set up an SME Brexit Support Fund which can fund up to £2,000 to help with training or professional advice, if your business has up to 500 employees and no more than £100 million annual turnover.

The grant can be used for training on:

  • How to complete customs declarations
  • how to manage customs processes and use customs software and systems
  • specific import and export related aspects including VAT, excise and rules of origin

It can be used to help you get professional advice so businesses can meet customs, excise, import VAT or safety and security declaration requirements.

In order to qualify the business must:

  • be established in the UK
  • have been established in the UK for at least 12 months before submitting the application, or currently hold Authorised Economic Operator status
  • not have previously failed to meet its tax or customs obligations
  • have no more than 500 employees
  • have no more than £100 million turnover
  • import or export goods between Great Britain and the EU, or move goods between Great Britain and Northern Ireland

The business must also either:

  • complete (or intend to complete) import or export declarations internally for its own goods
  • use someone else to complete import or export declarations but requires additional capability internally to effectively import or export (such as advice on rules of origin or advice on dealing with a supply chain)

If you are interested in obtaining VAT and Customs advice in relation to Brexit and qualify based on the above conditions, please contact VAT Director Iain Masterton via email or 0131 558 5800.

New HMRC VAT Deferral Scheme – Update

If your business deferred VAT payments for the February, March or April 2020 VAT returns, HMRC has issued updated guidance in relation to the repayment of these outstanding amounts.

If the business has outstanding VAT to pay, the business can either:

  • Pay the deferred VAT in full, on or before 31 March 2021; or
  • Join the VAT deferral new payment scheme.

The opt-in process for the VAT deferral new payment scheme will be open from 23 February to 21 June 2021 (inclusive).

If your business is on the VAT Annual Accounting Scheme or the VAT Payment on Account Scheme, the business will be invited to join the new payment scheme later in March 2021.

The new deferral scheme allows businesses to:

  • Pay any applicable deferred VAT in equal instalments, interest free; and
  • Choose the number of instalments, from 2 to 11 (depending on when it joins).

To use the online service, the business must:

  • Join the scheme itself. Agents cannot sign up on the business’ behalf;
  • Still have deferred VAT to pay;
  • Be up to date with its VAT returns;
  • Join by 21 June 2021;
  • Pay the first instalment when it joins;
  • Pay its instalments by Direct Debit (if you want to use the scheme but cannot pay by Direct Debit, there’s an alternative entry route).

If your business joins the scheme, it can still have a Time to Pay arrangement for other HMRC debts and outstanding tax.

Instalment options available to you

The month the business decides to join the scheme will determine the maximum number of instalments that are available. If you join the scheme in March, you’ll be able to pay your deferred VAT in up to 11 instalments.

The table below sets out the monthly joining deadlines (to allow for Direct Debit processing) and the corresponding number of maximum instalments (including the first payment):

If you join by: Number of instalments available:
18 March 2021 11
21 April 2021 10
19 May 2021 9
21 June 2021 8

Before joining, the business must:

  • Create its own Government Gateway account (if it does not already have one)
  • Submit any outstanding VAT returns from the last 4 years – otherwise the business will not be able to join the scheme
  • Correct errors on any VAT returns as soon as possible
  • Make sure you know how much the business owes, including the amount you originally deferred and how much you may have already paid (if any).

Interest & Penalties

You may be charged interest or a penalty if you do not:

  • Pay the deferred VAT in full by 31 March 2021.
  • Opt into the new payment scheme by 21 June 2021.
  • Agree extra help to pay with HMRC by 30 June 2021.

Paying your fees by direct debit

Direct debit is one of the easiest, quickest and most secure payment methods available, and all transactions are covered by the Direct Debit Guarantee. If you would like to reduce your admin time and settle your fees by direct debit, please complete, sign and return a Direct Debit mandate.

You can submit the signed form by email to accounts@chiene.co.uk or by post to Accounts, 61 Dublin Street, Edinburgh EH3 6NL. If using email, please put ‘Direct Debit’ in the subject line. Please advise if you have a preference for the collection date (mid/end of month).

Once the completed form has been returned to us, we will advise you when the direct debit instruction has been set up and confirm the date of the first collection.

If you sign up to pay fees this way you will continue to receive fee invoices but payment for monthly fees will be on or just after the 15th or the 28th of each month. For other invoices the payment date will be at least 10 working days from the date of the invoice.

For more information, please contact accounts@chiene.co.uk

New Trade Agreement reached between the EU and UK: VAT and imports

A new “Trade and Cooperation Agreement” was reached in principle between the UK and EU on 24 December 2020. The deal will cover the future UK-EU relationship, with the two parties aiming to implement it in time for the end of the Brexit transition period on 31 December.

What impact does this have on the previously foreseen changes from a VAT perspective?

The UK will still leave the EU Single Market and Customs Union on 1 January 2021. This will end the free movement of persons, goods, services and capital with the EU. From a VAT perspective the intracommunity rules for supplies of goods and services will no longer apply and all previously foreseen changes will still apply.

The free movement of goods will end, and customs checks and controls will apply to all UK exports entering the EU and vice versa. A key feature of the agreement includes a free trade agreement ensuring no tariffs or quotas on trade in goods between the UK and EU. It provides for zero tariffs and zero quotas on all goods that comply with the appropriate rules of origin.

The UK and EU have agreed a rules of origin Chapter which contains modern and appropriate rules of origin ensuring that only ‘originating’ goods are able to benefit from free trade agreement. This means that goods must not only be produced in the EU but also consist in majority of raw materials that originate in the EU or the UK to benefit from zero tariffs and quotas. For goods imported into the UK/EU on which duties have been paid, the onward sale to the EU/UK may trigger customs duties again, as these imported goods do not meet the rules of origin.

It is important to remember that regardless of the trade deal, the UK will still be a non-EU member and therefore additional import/export paperwork will still be required to move goods between the UK and EU. It is therefore important to be aware of the new rules that will apply from 1 January 2021. Also, it is important to note that there are proposed new EU rules for online B2C trade which are planned to come into force from 1 July 2021 which will change the VAT rules significantly.

Tour Operator Margin Scheme (TOMS) VAT update

We understand that HMRC has confirmed that once the Brexit transition period ends on 1 January 2021, the VAT charged on package tours and holidays through the Tour Operator Margin Scheme (TOMS) on travel outside of the UK will be zero rated.

The announcement comes after discussions between ABTA and HMRC and removes a crucial area of uncertainty for many travel businesses.

Through TOMS, UK tour operators only account for VAT on their profit margin (ie the difference between the amount they receive from customers and the amount they pay suppliers).

It has been agreed by HMRC on the assumption of a possible no deal with the EU on TOMS. In the event of a no deal Brexit scenario, a new UK TOMS scheme will be introduced which will require payment of TOMS VAT only on UK holidays but not on package holidays outside the UK.

Tax planning ahead of Spring 2021 Budget

As we approach the end of 2020 we can reflect on a tumultuous year as a result of the Covid-19 pandemic. As seen recently in the financial press, there are a number of speculative discussions about possible future tax increases. While tax increases are possible, it is also clear that the Government will need to take steps to encourage investment, to boost the economic recovery.

At this time, we can only speculate about possible tax changes in 2021 however, we do know that changes to taxation will be announced in the Spring Budget, which will take place on 3rd March 2021. Rather than leave the usual year-end tax planning until February next year, it would be prudent to bring forward this process. If you are anticipating a quieter than usual festive period, it could be the perfect time to turn your attention to financial matters.

The Chiene + Tait Tax Team has flagged some areas that may be of interest to you or your business including gifting of assets to members of your family, pension planning if the higher rate tax relief is removed from contributions or what to look out for if you are thinking of selling your business.

Our infographics below highlight further areas for consideration. If you would like to discuss selling your business, please contact Jonathan Griffiths, if you would like to discuss any tax aspects for your family, please contact Michelle Fallon or Moira McMillan. Alternatively, please email us at mail@chiene.co.uk, we would be delighted to discussion the options available to you, your family or your business.

Areas families to consider Spring 2021
Family areas to consider ahead of 2021 Budget
Business areas to consider 2021 Budget
Business areas to consider ahead of 2021 Budget

Do you import goods? Do you need to sign up for CDS?

It has recently been announced by the UK Government that businesses importing goods into the UK from anywhere outside of the UK from 1 January 2021 will have to register for access to the new Customs Declaration Service (CDS).

The CD, initially introduced in 2018, is due to be the long-term replacement for the current Customs Handling Imports and Export Freight (CHIEF) system.

You will need to request access to use the CDS so that your business can:

  • Make Customs declarations (for which you will also need compatible software for the CDS).
  • Get Import VAT statements and certificates to assist you in completing your VAT returns.
  • Get Duty Deferment Statements.

Access to the CDS can be requested through your existing government gateway account using your user ID and password that you already use for your business or organisation, using the following link: https://www.gov.uk/guidance/get-access-to-the-customs-declaration-service.

You will also need to provide HMRC with the following:

  • Your business’ EORI number (if you do not have one already – please get in touch).
  • Organisation’s Unique Tax Reference Number (UTR).
  • Registered business address for Customs records
  • National Insurance number (if you are registering as an individual).
  • The date on which you started your business.

We understand that the application process will take 5-10 minutes and you can receive access either immediately, or within 5 working days.

We recommend that you get access now to make sure you are ready to get your first import VAT statement when applicable.

Brexit: EORI Numbers – not one but two!

If your business will be selling goods to consumers between the UK and EU from 1 January 2021, it will need to ensure it has the appropriate EORI numbers to avoid goods being held by customs in the UK or EU.

What is an EORI?

EORI stands for “Economic Operators Registration and Identification Number”

Businesses and people wishing to trade must use the EORI number as an identification number in all customs procedures when exchanging information with Customs administrations. An EORI number is formed of the ISO country code (EU member state) and a maximum of 15 digits. Generally speaking, in the UK, a VAT registered company’s EORI number will consist of the prefix ‘GB’ followed by the company VAT number and suffixed with ‘000.’ Despite being based on the traders VAT number, the EORI isn’t automatically generated. Businesses should therefore check if they have an EORI and if not apply to be activated.

Why is an EORI required?

From 1 January 2021 businesses will need an EORI number to move goods between the UK and the EU. When a business imports into the UK or EU, it will have to include its EORI number on declarations for customs to check. If you do not have one, you may have increased costs and delays.

I need more than one EORI?

Yes, prior to Brexit, UK EORI numbers were accepted by the EU and vice versa. This will however stop from 1 January 2021. Businesses will need an EU EORI number if it will be making customs declarations or getting a customs decision in the EU. Businesses will therefore need a UK EORI number to export or import goods. And an EU EORI for the opposite leg of the same goods movement.

How do I register for an EORI?

If your businesses does not currently have an EORI number don’t worry it really is quite a straightforward (and relatively quick!) process. It was announced that EORI numbers would be automatically issued to certain businesses so it would be worth checking first. If required, businesses will be required to complete a simple form with HMRC. HMRC will then email confirmation of the UK EORI.

Procedures for issuing EU EORI numbers differ across the remaining 27 Member States. The European Commission has indicated that all customs authorities across the Member States are accepting applications for authorisations and registration.

These EU EORI numbers will activate upon the UK leaving the EU. So UK businesses trading with the EU should (if they do not already have one) apply for a UK EORI number from HMRC, to ensure they can still move their goods into and out of the UK post-Brexit, and (whether or not they have a UK EORI number) apply for an EU EORI number from the Customs authorities in whichever EU state they deal with the most, to ensure they can still move their goods into and out of the EU.

Similarly, EU businesses intending to continue trading with the UK will need to apply for a UK EORI number post-Brexit. If you have a question about Brexit or an EORI number, please contact a member of our VAT team today.

Brexit: Digital Supplies & MOSS

The end of the Brexit transition period on 1 January 2021 will bring new changes that will impact any business that currently trades with the EU.

Digital Supplies & MOSS

Brexit will have a major impact on digital businesses both in the UK and outside, particularly when it comes to accounting for and reporting VAT. This will impact both UK businesses supplying digital services to EU consumers and non-UK businesses supplying digital services to UK consumers.

The Mini-One-Stop-Shop (MOSS) service was introduced back in 2015 when the EU amended the rules on how cross border digital supplies to consumers were to be taxed in the member state of consumption. The MOSS service allows businesses to submit one return including its supplies to all consumers in the different EU member states.

1. Digital businesses registered with UK VAT MOSS

As the UK will be a non-EU member state from 1 January 2021 digital businesses will not be able to use the UK’s VAT MOSS service to declare the VAT due on its sales to consumers located in the EU. The final return period for the UK’s VAT MOSS system will be the period ending 31 December 2020.

From 1 January 2021, to continue to use VAT MOSS digital businesses will need to register for the VAT MOSS scheme in an EU member state, by the 10th day of the month following your first sale to an EU customer. For example, if a business makes its first sale on 12 January 2021, then it must register by 10 February 2021. Effectively businesses need to change their MOSS identification country.

If a business does not want to use VAT MOSS from 1 January 2021, it must register for VAT in each EU member state where it sells digital services to consumers. We therefore recommend any business with a UK VAT MOSS registration to consider and apply for a MOSS registration number in an EU member state, for example Ireland. This will then allow the business to report quarterly sales to the remaining EU member states under the non-Union MOSS scheme.

2. Digital businesses selling into the UK

Any digital business that sells digital services into the UK will also be unable to use their MOSS registration to report sales to UK consumers from 1 January 2021. In this case, these businesses will be required to apply for a regular UK VAT number to report any digital sales to UK customers. Please note, there is no threshold for this. All UK sales will be required to be immediately reported to HMRC from 1 January 2021. This will therefore apply to all EU based digital businesses making supplies to UK consumers

Business Current Position From 1 January 2021
UK Based Registered for Union MOSS Scheme in UK
  • Will need register for MOSS in an EU member state under Non-Union scheme.
  • We would recommend Ireland.
  • Registration would need to be made by 10 February 2021 if sales made to EU consumers in January 2021.
EU Based (Not UK) Registered for Union MOSS
scheme in EU member state
  • If makes digital supplies to UK consumers, will need to register for UK VAT with effect from 1 January 2021.
Non-EU Business Registered for Non-Union MOSS
Scheme in UK
  • Will need to register for MOSS in a different EU member state under Non-Union scheme.
  • We would recommend Ireland.
  • Registration would need to be made by 10 February 2021 if sales made to EU consumers in January 2021.
  • If makes digital supplies to UK consumers, will need to register for UK VAT with effect from 1 January 2021.

Post Brexit: New trade rules

With the end of the transition period nearing, businesses need to consider the new rules that will come into force from 1 January 2021 in relation to trade with EU countries.

From 1 January 2021, there will be changes in the way indirect taxes are accounted for when importing into the UK. New processes for administering imports and exports will be implemented and taxpayers may need to obtain additional information about their goods for crossing the UK border, and they may require the services of a customs agent.

Imports

From 1 January 2021, purchases of goods from EU suppliers will be regarded as imports. The process for importing goods from the EU will change. Businesses in the UK will need to complete the following actions to continue importing from EU countries from 1 January 2021:

a. How to declare goods – A customs declaration will need to be made when importing goods from the EU. These rules currently apply to importing goods from the rest of the world, including Switzerland, Norway, Iceland and Liechtenstein. This declaration can be made by the business or the business could engage someone else such as a courier, freight forwarder or customs agent to do it on its behalf.

b. EORI Number – An EORI number will be required to import goods from 1 January 2021.

c. Check the rate of tax and duty – Businesses will need to pay import VAT and Customs duty, if applicable, on all imports.

Import VAT

From 1 January 2021, UK VAT registered businesses will be able to account for import VAT on its VAT Return for goods imported from anywhere in the world. This means businesses will be able to declare and recover import VAT on the same VAT Return, rather than having to pay it upfront and recover it later which is a huge cash flow saving. Businesses do not need to be authorised to account for import VAT on its VAT Return and can automatically start using this procedure from 1 January 2021. This is the case if: + the goods imported are for a business use; + the business’ EORI number, which starts ‘GB’ is used on the customs declaration; and + the business’ VAT registration number is included on the customs declaration, where needed. Businesses will therefore be able to use this way of accounting for import VAT moving forward from 1 January 2021, which will assist with cashflow.

How to complete your VAT return

Due to postponed VAT accounting, there will be changes to the way VAT returns are completed. An online monthly statement will be available to download and keep for business records. It will show the total import VAT postponed for the previous month which businesses should include in the VAT Return. The boxes on the VAT Return will be as follows:

Box 1 Include the VAT due in this period
on imports accounted for through
postponed VAT accounting
Box 4 Include the VAT reclaimed in this period
on imports accounted for through
postponed VAT accounting
Box 7 Include the total value of all imports of
goods included on the online monthly
statement, excluding any VAT

Customs Duty

The UK’s new Global Tariff will replace the EU’s Common External Tariff on 1 January 2021 at the end of the Transition Period. The new tariff is tailored to the needs of the UK economy supporting the economy by making it easier and cheaper for businesses to import goods from overseas. HMRC state that it is a simpler, easier to use and lower tariff regime than the EU’s Common External Tariff (EU CET). Therefore, after 1 January 2021, when any purchases of goods from outside the UK will be classified as imports, they will be liable to duty calculated based on the UK Global Tariff rate. Customs Duty is not recoverable so any applicable duty would be an additional cost to any UK business. To use the UK Global Tariff, you need either the commodity code or description of the product. The UK Global Tariff can be found using this link.

If you consider your business will be impacted by the updated rules for importing goods to the UK, please get in touch and the VAT team can ensure your business is fully equipped for the new rules from 1 January 2021.

Brexit – Are you Ready?

The UK left the European Union on 31 January 2020. A transitional period for Brexit is now in place which will last until at least the 31 December 2020 where existing EU VAT Regulations and Directives will continue to apply, including those relating to VAT and Customs.

Up until the onset of the COVID-19 crisis, the UK Government and the EU has been negotiating a trade deal during the transitional period and one of the things that will be determined will be the extent to which Customs tariffs will apply to goods moving between the UK and EU.

With COVID-19 affecting every country in the world including the UK and EU it remains to be seen whether the transition period will be extended. Alternatively, if no agreement is reached (“no deal”) Customs tariffs will apply to goods moving in and out of the UK and the UK will not benefit from any preferential tariffs applying to the EU for goods being exported to other countries.

We have outlined some of the main changes that can be expected, however this may be subject to change depending on developments in the next few months. In summary:

  • The UK will continue to have a VAT as VAT is the second-biggest tax revenue earner for the Government (after Income Tax)
  • The VAT rules relating to UK domestic transactions will continue to apply to businesses as they do now
  • VAT procedures will continue as they are now, however there will be some key changes, particularly in relation to trade with EU customers and suppliers.

Businesses buying goods from EU

In what is possibly the biggest potential impact to UK businesses, the current rules for imports from non-EU countries will also apply to imports from the EU. Import VAT is paid to HMRC when goods enter the country, which can lead to cashflow delays as the VAT cannot be recovered until the business submits its next VAT return. In a normal VAT return cycle this could lead to delays of up to 3 months to recover an import VAT depending on when the goods were imported. Imports also require additional paperwork which also adds to the cost of bringing goods into the country.

One area which has not been decided yet is whether Customs Duty or tariffs will apply to goods coming into the UK. A lot will depend on whether the UK Government and the EU reach a trade agreement before 31 December 2020. If a deal is reached it is likely that tariffs will not apply to the majority of goods coming into the UK from the EU, but formal Customs procedures will still need to be undertaken.

During 2019, the Government announced that in the event of a “no deal” it would introduce postponed accounting for import VAT on goods brought into the UK which meant that UK VAT-registered businesses importing goods to the UK would be able to account for import VAT on their VAT return, rather than paying import VAT on or soon after goods arriving at the UK border. This will apply to imports from both current EU and non-EU countries. If a deal is reached with the EU during 2020 this simplification measure will not apply (unless this is announced by the Government this year, which would be welcomed).

For businesses not familiar with importing, there are measures that can be adopted to alleviate some of these issues such as duty deferment accounts, customs warehousing and inward processing relief.

We would recommend any businesses not familiar with importing procedures to get advice on this as soon as possible to plan for the changes in 2021.

Sales of goods to EU businesses and consumers

VAT registered UK businesses will continue to be able to zero-rate sales of goods to EU businesses but will not be required to complete EC sales lists or EU Intrastat declarations. As is the position now, VAT will not be charged by UK businesses exporting goods to EU businesses after Brexit and evidence will need to be kept that the goods have left the UK to support the zero-rating of the supply. Most businesses already maintain this evidence as part of current processes, and the required evidence will be similar in nature to that currently required for exports to non-EU countries. Any changes will be communicated by HMRC in due course.

Current EU rules mean that EU member states will treat goods entering the EU from the UK in the same way as goods entering from other non-EU countries. Import VAT and (potentially) Customs Duties will be due when goods arrive into the EU. Individual EU member states may have different rules for import VAT from the UK and import VAT payments may be due at the border. UK businesses should check the relevant import VAT rules in the EU member states where they have customers.

For businesses selling goods to EU consumers, after 2021 distance selling arrangements will no longer apply so UK businesses will be able to zero-rate sales of goods to EU consumers as “exports”. EU rules mean that EU member states will treat goods entering the EU from the UK in the same way as goods entering from other non-EU countries, with associated import VAT and customs duties due when the goods arrive into the EU. Any businesses affected by this will have to be mindful that consumers in EU countries will have to bear these additional charges, so this may have to be communicated up front at the points of sale and on websites.

Businesses could also adopt customs measures where the duty and VAT can be paid up front, however this will require discussions with customs agents in advance and be clear at the point of sale on websites.

Businesses selling digital services to EU consumers

Businesses that sell digital services to consumers in the EU will be able to register for the non-EU MOSS scheme. There is currently an EU scheme so most providers will already be registered for this. The non-EU scheme is similar but will require UK businesses to register in one EU country. MOSS is an online service that allows EU businesses that sell digital services to consumers in other EU member states to report and pay VAT via a single return and payment in their home Member State. Non-EU businesses can also use the system by registering in an EU Member State.

We would urge affected businesses to prepare for this now. Alternatively, a business can register in each EU Member State where sales are made.

Other issues

There are of course other issues which will be impacted such as the EU VAT refund system which will not be available after 2021, although subject to the EU negotiations it should still be possible for UK businesses to make VAT claims where employees have incurred VAT on business trips to the EU. One other area affected will be tour operators who offer holiday packages in the EU. Currently the Tour Operator Margin Scheme (“TOMS”) is used to simplify the VAT calculation. HMRC has not provided a lot of information on what will happen, but tour operators should contact their advisers.

Recommendations

We would hope that by the Summer, businesses can start to get back to some form of normality and it would be useful to get clarity at that point from the Government on what we should expect after 31 December. If possible, we recommend that any business affected by these changes undertakes a review as soon as possible to prepare for the changes that Brexit will bring. Chiene + Tait has been working with its clients over the past 12 months to undertake these reviews and we are happy to discuss this with any affected businesses Our bespoke reviews look at the impact of the changes on relevant business income and expenditure streams and point to potential solutions which will alleviate any potential administration, cashflow or cost on the business. We also offer a helpline service to businesses to deal with ad-hoc Brexit-related enquiries.

Post Brexit: Trading in Goods

From 1 January 2021, there will be major changes once the Brexit transitional period ends.  New VAT procedures will apply to goods imported into the UK.  The new procedures differ according to whether the value of the goods arriving in the UK exceed £135. Find out more here about how trading in goods post Brexit may impact you.

Less than £135

Goods that arrive in the UK from 1 January 2021 that have a value of less than £135 will be subject to ‘sales VAT’ rather than ‘import VAT’ if they are being imported by an overseas seller.

How does this work?

The overseas supplier is required to register for VAT in the UK.  This supplier will then be required to charge UK VAT on all shipments into the UK which are less than £135 in value (final selling price charged to UK customer).

The supplier will be required to include a sales invoice with the shipment to ensure that all required Customs checks can be undertaken and evidence is held that VAT has been appropriately charged.   No Customs Duty will be liable as £135 is the threshold for Customs Duty relief however a Customs declaration is still required.

What if the customer is registered for VAT?

If the UK customer is registered for VAT, the overseas supplier is no longer required to charge 20% UK VAT on the shipment if it is less than £135.  Instead, if the customer provides a UK VAT number to the supplier, the customer in the UK will account for the VAT on its own VAT return by doing a reverse charge calculation.

More than £135

Goods that arrive in the UK from 1 January 2021 that have a value in excess of £135 will be subject import VAT and Customs Duty.

Import VAT in these cases should be accounted for by using postponed VAT accounting, which results in declaring and recovering import VAT on the same VAT return, rather than having to pay it upfront and recover it later, subject to normal VAT recovery rules.

Customs Duty may be applicable depending on the actual commodity code of the goods imported.  The new UK Global Tariff will be effective from 1 January 2021 and can be found using the following link: https://www.check-future-uk-trade-tariffs.service.gov.uk/tariff.

Post Brexit: Customs Special Procedures

After 1 January 2021 when the Brexit transition period ends, UK business should consider a number of Customs Special procedures and other import facilitation measures when goods come into the UK.

Not all of these reliefs are necessary and will depend on the type of business involved.

Businesses can use Customs Special Procedures to suspend, reduce or claim relief on the payment of customs duties and VAT under specified conditions. Special procedures include:

Customs Warehousing

  • Allows for goods not in free circulation to be stored without payment of customs duty, and where appropriate excise duty or import VAT, in a customs warehouse.

Inward Processing Relief (“IPR”)

  • Allows for the payment of customs duties, import VAT and excise duties to be suspended on imported goods whilst processing is taking place.

Outward Processing Relief (“OPR”)

  • Allows for the temporary export of goods for processing or repair, and to re-import the processed products whilst retaining domestic status or with partial relief from import duties.

Temporary Admission

  • Allows for businesses and individuals who are established outside of the UK to be authorised to import goods with total or partial relief from customs duties and other charges because of the specific use to which the goods will be put.

Authorised Use

  • Allows for reduced or nil rates of Customs duty on certain imported goods, provided they are put to a prescribed end use.

In the past these procedures required a Customs Comprehensive Guarantee.  Businesses will be able to apply to be fully authorised to operate special procedures without the need to provide a Customs Comprehensive Guarantee unless one is specifically required as a condition of authorisation by HMRC, for example because a trade presents a payment risk.

Other import facilitations

Temporary Storage facilities that are not part of an existing inventory-linked community will be able to temporarily operate without an inventory linked system in place until 1 July 2021. They will still be required to have control over their facility and keep effective records.

Authorised parcel operators will be able to submit a bulked customs declaration for non-controlled goods with a value not exceeding £135.

Duty Deferment Accounts (DDAs) will be required for traders making delayed declarations (non-controlled goods) because delaying a customs declaration also means deferring the duty payable. A DDA belonging to either the trader or their agent must be in place at the point of submitting the supplementary declaration (which can be deferred up to six months from point of import). Traders importing controlled goods will need access to a DDA at point of import if they are using simplified declaration procedures. HMRC are introducing new rules that will allow most businesses to use duty deferment without needing to obtain a Customs Comprehensive Guarantee.

Businesses with Authorised Economic Operator (C) status will automatically be able to use duty deferment without providing a guarantee. Other compliant and solvent businesses will be able to defer customs duty, import VAT and/or excise duty up to £10,000 per month without needing to provide a guarantee. They will be able to obtain approval to defer amounts above this monthly limit if they have sufficient financial resources for the amount they’re seeking to defer. Duty deferment limits agreed with HMRC will not need to cover amounts included in delayed supplementary declarations. A new application process for duty deferment accounts has been available from early November 2020. Businesses who don’t meet these criteria will still be able to set up a DDA if they provide a guarantee.

Authorised Economic Operator (AEO) Status

Traders can apply for AEO status for moving goods between the UK and the EU. AEO status is an internationally recognised quality mark that shows a business’s role in the international supply chain is secure and has customs control procedures that meet UK and EU standards.

From 1 January 2021 to 30 June 2021, goods with pre-lodged temporary storage declarations may be imported via GB border locations without existing customs control systems and transported to a temporary storage facility (TSF) in GB provided they meet specific requirements. More information on the requirements for TSF operators and Community Systems Providers wishing to offer this service is available here. For GB border locations with existing customs control systems, movements in temporary storage will continue to be permitted under current requirements.

The ability to delay customs declarations in the period 1 January 2021 to 30 June 2021 only applies to non-controlled goods which have been in free circulation in the EU immediately prior to import. All rejected exports that haven’t entered free circulation in the EU cannot meet this condition and therefore must submit a customs declarations on their return to the UK.

Returned / Rejected Goods

From January 2021, businesses that export goods from GB to another country, (including the EU), may need to have those exported goods returned to the UK, or may have their goods rejected upon import to the EU.

In order to return such goods to GB, there are differing requirements depending on:

  • Whether the goods have been in free circulation in the UK prior to being exported,
  • Whether the goods were in free circulation in the EU prior to being returned,
  • Whether the goods have been rejected upon import to the EU,
  • And/or whether the goods are subject to additional requirements before they can be imported to GB, for example those goods featured in 1.2 additional requirements

Returned goods – Customs requirements

Customs import duty and VAT

Traders returning goods will be able to claim Returned Goods Relief (RGR) from customs import duty for goods that are exported from the UK and re-imported within three years of export, subject to certain conditions similar to those set out in existing guidance here. VAT relief will also apply, providing that any VAT due has previously been paid in the UK, and the importer/exporter is the same person. VAT relief will also be available from the 1 January 2021 for goods that are in free circulation in the UK on the 31 December 2020, providing that EU VAT has been paid. Such goods will be treated as domestic goods for customs purposes.

Businesses would normally apply for RGR in the same way as they do currently which means filling out a full Customs Declaration. In order to identify the goods as returning, the RGR Procedure Code should be used. This declaration should also reference the export declaration, and where the export declaration is not available, HMRC will consider alternative evidence which proves the goods were previously within the UK.

Delayed declarations and returned goods

During the period 1 January 2021 to 30 June 2021, traders have the ability to delay customs declarations if they are returning non-controlled goods that have been in free circulation in the EU immediately prior to their return. For those goods, traders can use delayed declarations procedures as detailed in delayed declarations and claim Returned Goods Relief from customs import duty (and VAT relief, if applicable) by completing their Entry in Declarants Records and subsequently submitting the supplementary declaration.

Controlled goods and goods rejected upon import into the EU Controlled goods (as listed in Annex C) and any rejected exports that have not entered free circulation in the EU cannot use delayed declarations

The trader must submit a full Customs Declaration on returning these goods to the UK. They will also need to meet any additional requirements as detailed below.

Returned / Rejected goods – Additional requirements

Some commodities are subject to additional regulatory requirements, such as those listed in additional requirements, and/or those goods that are included on the controlled goods list as detailed in Annex C. To return these goods to GB, a full customs declaration will be required on their return, and the relevant additional requirements will need to be met.

If you have a query about Brexit, please contact our team today at VAT@chiene.co.uk or visit our dedicated Brexit page for more information on how we can help you.

Chiene + Tait Statement: Neil Cameron

It is with great sadness that we share the devastating news of the sudden passing of our friend and highly respected colleague Neil Cameron. Throughout his 13 years of service with the firm, Neil led our payroll department with passion and professionalism and was held in the highest regard by all who knew him. He was dedicated to providing the highest standards of service to our clients and supporting his fellow team members, encouraging them to develop and grow. In this spirit, he was determined to develop the payroll profession and was a founding member of the Payroll Bureau Association, helping others in the payroll sector to come together for a common purpose and to drive forward standards in the industry.

We have created an online book of remembrance for friends to share their memories and messages, which will be passed to his family in due course.

Neil’s loss is felt by all his friends at the firm and he will be missed beyond words. All our thoughts are with Neil’s family and friends.

The online book of remembrance is here: http://www.remembr.com/neil.cameron

Extension to Annual Investment Allowance announced

The UK Government has announced that planned reduction to the amount of relief available under the Annual Investment Allowance (AIA) will be delayed.  The AIA is a tax incentive for businesses to promote investment. Generally, it can be claimed against most types of plant and machinery (but not cars), including fixtures and fittings. The relief enables businesses to claim a 100% tax deduction for eligible expenditure.

The current amount of relief, set at £1,000,000, is a temporary measure which was scheduled to revert back to £200,000 from 1 January 2021. This has now been delayed until 1 January 2022, to encourage investment following the COVID pandemic.  Businesses can therefore continue to claim up to £1 million in immediate tax relief for capital investments (such as for plant and machinery).

This extension will be welcome to businesses that are looking to invest in plant and equipment.

New draft legislation affecting R&D tax credit claims

HMRC has published draft legislation that introduces a PAYE/NIC cap on the payable tax credit available for R&D claims under the SME scheme.

A cap has been discussed for a number of years in order to help prevent abuse of the SME scheme and there is already a similar cap under the RDEC scheme.  There was, however, some worry that any new legislation would inadvertently impact genuine innovative businesses. Following extensive consultation, the draft legislation has been published with the following caveats.

  • A company making a small claim for payable credit below £20,000 will not be affected by the cap.
  • A company will be able to include related party PAYE and NIC liabilities attributable to the R&D project when calculating the cap, and these will be subject to the 300% multiplier.
  • A company’s claim, of any size, will be uncapped if it meets two tests. These tests require that a company’s employees are creating, preparing to create or actively managing intellectual property (IP) and that its expenditure on work subcontracted to, or externally provided workers provided by, a related party is less than 15% of its overall R&D expenditure.

The above changes are due to form part of the Finance Bill 2021, so will have effect for accounting periods beginning on or after 1 April 2021.

Dave Philp, Head of R&D Tax at Chiene + Tait, said: “Overall this is good news. There were worries that the initial draft would impact genuine claims rather than the rouge ones that are the target of this anti-avoidance measure.

“The changes made following the consultation should mitigate all impact on authentic claims.”

If you have any questions, please contact our R&D Tax team at rdtax@chiene.co.uk.

Trustees’ Week 2020

This year’s Trustees’ Week runs from 2-6 November 2020.

Each year, Trustees’ Week highlights the work that trustees do for their charities; and shares and promotes the role that trustees play. If you are thinking of becoming a trustee, find our more here.

Read more here: http://trusteesweek.org/

Follow on Twitter here: https://twitter.com/trusteesweek

Chiene + Tait publishes lots of guidance for Trustees – see some below, and watch out for more posts throughout the week.

See also The Informed Trustee: an online course for current and prospective trustees to help promote best-practice and equip people with the skills it takes to govern a charity. Euan Morrison, our Head of Charities, contributed to the course.

 

Auditing remotely: how we delivered audits during lockdown

In this post, Stuart Beattie looks at auditing remotely. But, while this post is specific to audits, we have used similar tools and processes for all of our client work done remotely this year.

October heralds the end of the busiest time for the audit department. Looking back on a busy season that has been quite unusual, I am happy to note that the vast majority of our audits have continued.

Despite not being able to work onsite with our clients we have still been able to access all the required information, data and evidence that we normally require as part of the audit process. This is down to effective planning and communication with our clients.

The keys to success

Generally, there are three key points to auditing remotely:

  • The normal planning and audit completion meetings take place through video calls
  • All our staff have the hardware and software to carry out audit at a distance – they all have laptops, and all have access to our secure portal for sharing files
  • We communicate regularly, and proactively: we get in touch with finance teams regarding forthcoming audit bookings to put plans in place for how the work can be delivered, and we continue to liaise with clients through the audit process via phone or video conferencing.

Useful tools

Before lockdown started at the end of March, we were already using software that allowed our audit files to be accessed remotely and securely, plus we had a variety of ways for clients to get in touch and send us information. So, when we were no longer permitted to work onsite (or indeed from our offices), we had the core tools in place to ensure we could continue to deliver an excellent service.

Our secure client portal allowed clients to send through back-ups of their accounting system, Excel documents and various other material that we required. We also use screen-sharing facilities and video calls to assist with fieldwork.

All of our clients worked extremely hard to provide the relevant information and we would like to thank them for this.

New challenges and new support

Being in contact with each of our clients to discuss their systems, their access to documents and more importantly, how else can we assist them during the lockdown was very important at a time of new challenges. The pandemic and lockdown shone a new light on the concept of ‘going concern’ – that is, is the organisation in shape to survive? Some organisations thrived in lockdown; others faced a cessation to their activities like never before, and we were able to support by testing the underlying strengths of our clients.

Additionally, some of our clients were not sure initially how to access COVID funding or the furlough scheme. We were able to put them in touch with our payroll and corporate finance departments who assisted them with the preparations of forecasts or in their applications for assistance.

New perspectives

It has also been fantastic to speak to our clients remotely through video calls and see the variety of backgrounds and homeworking set ups that have been adopted during the lockdown. Gone are the meetings in an office – this has been a chance for our clients to see a slightly different side to us. The auditor is a human and one who is dealing with all the same lockdown issues. I hope also that my clients have enjoyed seeing my own home working space and can forgive the interruptions by young children and dogs!

At present we are likely to be working remotely for at least the reminder of the calendar year and therefore we would like to continue to let both our current and new clients know that we are here and are ready.

Contacting us

You can email or call your audit manager and partner in the usual way. Our switchboard will continue as normal.

You can also contact us by email at mail@chiene.co.uk

Receiving updates

We will keep our website updated with relevant sector news and continue to email out updates (unless you have opted not to receive these).

You can also follow us on LinkedIn (here) and Twitter (here), where we post our updates.

Extra support offered to businesses in local lockdown areas

The UK Government has announced extra support to businesses based in all UK areas with local lockdowns that must close to combat a rise in coronavirus infection cases. Businesses will be offered two-thirds of workers’ wages in the form of a grant from 1 November for six months, with a review in January. With the Coronavirus Job Retention Scheme due to close at the end of October, the new scheme effectively replaces this with some key differences.

The new plan is for the Government to support eligible businesses by paying two thirds of each employees’ salary, up to a maximum of £2,100 a month. This is a higher rate than is currently offered via the furlough scheme. The Chancellor has confirmed that business will only be eligible to claim the grant while they are subject to restrictions and employees must be off work for a minimum of seven consecutive days.

Further details will be announced in due course.

Job Retention Scheme Bonus Details Announced

Further information about the Job Retention Scheme Bonus was released this month by HMRC. Please find below key points related to the Bonus and where to source further information.

What is the Job Retention Scheme Bonus?

The bonus is a £1,000 one-off taxable payment to the employer, for each eligible employee that was furloughed and subsequently kept continuously employed until 31 January 2021.

Who can claim the bonus?

Employers will still be able to claim under the scheme even if they are also receiving support from the recently announced Job Support Scheme (the replacement to the Coronavirus Job Retention Scheme), which launches on 1 November.

The bonus is available to any employer that has furloughed employees and made an eligible claim for them through the CJRS but is not payable to any employer who repaid a CJRS grant.

The new guidance outlines arrangements for employees who have been transferred from another employer, and those who are not employees but classified as office holders or agency workers.

There is a minimum income threshold the employer must pay the employee – a total of at least £1,560 (gross) throughout the tax months 6 November to 5 December 2020; 6 December 2020 to 5 January 2021; and 6 January to 5 February 2021.

What steps must employers take to claim the bonus?

Before employers can claim the bonus, they will to need to have reported all payments made to employees between 6 November 2020 and 5 February 2021 to HMRC through full payment submissions via real time information (RTI).

Businesses must include payments they receive under the scheme as income when calculating their taxable profits for income tax and corporation tax purposes but can deduct employment costs as normal.

Individuals with employees that are not employed as part of a business (such as nannies or other domestic staff) will not have to pay tax on grants received under the scheme.

Is there a minimum wage threshold?

To be eligible for the bonus, employers must make sure that their employees have been paid at least the minimum income threshold of £1,560 (gross), or a minimum of £520 per month throughout November, December and January.

When can employers claim the bonus?

You cannot claim the bonus until 15 February 2021 and employers will have until 31 March 2021 to make a claim after which the scheme will close. No further claims will be accepted after this date.

This guidance will be updated by HMRC at the end of January 2021 with details on how to access the online claim service at https://www.gov.uk/guidance/check-if-you-can-claim-the-job-retention-bonus-from-15-february-2021

C+T nominated for Best EIS/ SEIS Tax Adviser award

We are delighted to announce that Chiene + Tait has been nominated for the Best EIS/SEIS Tax Adviser award at the EISA Awards 2020, the annual celebration of the #EIS, #VCT and tax efficient investment industry and community.

This will be the fifth year the firm is nominated, having been ‘Highly Commended’ for the last four years, the only firm in Scotland to have ever achieved this Tickets for the Awards ceremony can be found here: https://bit.ly/2EXu4eg

EISA Awards Nomination 2020

How to Find Financial Expertise for Your Charity

Most people on charity boards would agree that it is useful to have someone with financial expertise also on the board, so that they can deal with the ‘finance stuff’. However, charities often struggle to recruit people with any financial know-how and charities can survive without this skill set, so does it really matter? In short, yes –  but let me explain why.

It saves money

Charities operate in a highly regulated environment, with very complex tax and accounting rules; having someone on the board who can help you navigate these will help avoid any accidental non-compliance, or unforeseen tax charges, which can save a lot of money.

Individuals with financial expertise will also be well placed to assist with the development of strategic aims of the charity, especially in relation to resources, as well as ensuring the effectiveness and robustness of the charity’s internal policies and procedures. Smaller charities in particular would benefit from this expertise as, often, they are too small to support a discrete finance function within the organisation.

In these smaller organisations the day-to-day bookkeeping is often be undertaken by an office administrator with little to no finance knowledge or training. In these circumstances, it would be especially important to plug this knowledge gap through financial expertise on the board. Ultimately the board is responsible for the charity’s finances, and it will always benefit the charity if there is someone on the board who will be able to identify potential financial risks, and ways of mitigating these risks.

Add financial expertise to your board

So, how do you find financial expertise for your charity board? A good place to start is to increase the financial literacy of the current board. Now, I don’t mean the board needs to start taking accountancy exams and become financial experts, but there are lots of excellent training sessions run throughout the year run by professional organisations: and most of these training sessions are free.

I would encourage all board members to learn more about finance matters generally. Not only will it increase the financial expertise of the board, but it will also ensure that board members are more able (and confident) to understand, scrutinise and question the charity financials, which makes for better governance and better decision making.

How to find an expert

If you want someone who is professionally qualified on your board, there are a number of options. You can ask your contacts and see if they know anyone. Professional accountancy bodies such as ICAS will have web pages dedicated for their members to find volunteering opportunities with charities, and it may be worthwhile contacting these organisations to get your job advert posted. And don’t forget your own accountants or independent examiners. They will be able to provide advice on charity matters, and they will also be able to use their networks to recommend someone outside your usual channels.

Self-Assessment Taxpayers get additional help through HMRC Time To Pay

UK taxpayers can now apply online for additional support from HMRC to help spread the cost of their self-assessment tax bill from an annual payment to smaller monthly payments.

In his Winter Economy Plan, Chancellor Rishi Sunak announced that taxpayers could pay amounts due on 31 January 2021 (including any deferred payment on account from July 2020, their balancing payment owed for 2019/20 and the first payment on account for the current tax year) in monthly instalments online through HMRC’s online Time To Pay system.

Interest will still be charged on the tax owed from 1 February 2021.

Taxpayers who wish to set up an arrangement must:

·         Have no outstanding tax returns, other tax debts or existing HMRC payment plans;

·         Have tax due of between £32 and £30,000;

·         Put the payment plan in place no later than 60 days after the due date of 31 January 2021.

Anyone who has larger amounts due or needs more than 12 months to settle their tax affairs will need to contact HMRC separately.

HMRC has also asked taxpayers to be aware of scammers claiming to be from HMRC who offer to help set up Time To Pay.

Welcome to our Research & Development week!

This week we will focus on the work of our Research & Development Tax team, highlighting the work they do for clients; sharing hints, tips and advice on how to utilise R&D Tax relief; and hearing directly from clients themselves on how they have found working with us.

One of the most generous corporation tax reliefs currently available, R&D Tax relief is designed to encourage innovation and increase spending on R&D activities. You can claim back money that you spend on research and development to offset against current or future tax bills.

The team are tax experts first and foremost, and combine inside-out knowledge of R&D with a deep understanding of the wider corporate tax position. Dealing with over a hundred claims a year, we understand HMRC’s language and can advise on the impact a relief claim will have on your tax position, compliance and strategy.

If you are thinking of making a claim for R&D Tax Relief, or not sure if you would qualify, contact David and our team of experts today.

Key questions to ask a research and development tax adviser

David Philp, Head of Research & Development Tax Relief at Chiene + Tait, provides a step by step guide for businesses to use when approaching an Research & Development Tax adviser about whether a project qualifies for the relief.

Whilst there are a number of good, tax-focused, R&D advisers operating within the UK, there are also a number of ‘experts’ who resort to cold-calling, and wrongly advise that a company can quickly and easily qualify for relief.

HMRC can take their time opening enquiries into a company’s tax affairs and any erroneous R&D claim will be required to be repaid plus penalties/interest and can be a red mark in any due diligence process, should the company be sold in future.

With HMRC actively taking steps to combat fraudulent tax claims and the UK entered into a recession, access to cash is essential and therefore it is more important now than ever to pick the right R&D tax adviser to help with a claim.

Here are a couple of questions I would ask if I were a company looking to find the right supplier:

Are they accountable to a relevant professional body such as ICAS or CIOT?

There is currently no regulatory body for R&D tax specialists. There is, however, the recent Professional Conduct in Relation to Taxation (PCRT) guidance specifically created for R&D tax advice.

Any reputable R&D tax adviser worth their salt will already be a member of one of the PCRT bodies and adhere to the 5 fundamental principles:

  1. Integrity
  2. Objectivity
  3. Professional competence
  4. Confidentiality and
  5. Professional behaviour

By choosing and advisor that is accountable to a relevant professional body, it will give you the assurance that the work completed is up to the minimum quality standard you should expect from an advisor.

Is the person preparing the claim a tax adviser?

An R&D claim is a tax incentive first and foremost. It forms part of a company’s tax return and is subject to tax legislation. It is important to find an adviser that understands HMRC language and the impact that a relief claim will have on the company’s overall tax position, compliance and strategy.  This allows the adviser to identify eligible projects and costs under the scope of the legislation, maximising the available relief whilst minimising the risk of an enquiry.

What experience do they have of making a claim?

The tax legislation is constantly changing, particularly R&D tax with a number of consultations currently ongoing. Make sure that you pick an adviser that has lives and breathes in the legislation. An adviser dealing with a lower volume of claims may not be as knowledgeable in this specialist area where it helps to work day-in, day-out.

Do they charge extra to deal with an enquiry?

Enquiries are HMRCs way of asking for further information before making their decision. They can, however, take significant time and effort to resolve. The costs associated to an enquiry can therefore spiral.

 

Hopefully this has given you some good pointers to keep in mind. If you are unsure about whether you can make a claim for R&D, feel free to contact David and his team at Chiene + Tait at rdtax@chiene.co.uk or call 0131 558 5800.

Research & Development Tax Relief: common misconceptions

There are several big misconceptions surrounding Research & Development Tax Relief – we come across them on a near-daily basis. Despite it being one of the most generous corporation tax breaks available, many people rule themselves out without looking into it in greater detail. But if you do look into it, you might be surprised at what qualifies for R&D Tax Relief.

Dave Philp, Head of R&D Tax at Chiene + Tait, looks at the misconceptions you might have heard.

“We haven’t created anything new so we aren’t eligible”

This simply isn’t true: you don’t need to be breaking new scientific ground to qualify. R&D tax relief covers any project that seeks an advance in science or technology. As well as creating an innovative, state-of-the-art product, this can also mean simply improving upon existing processes. If you have:

  • Been working on something that has never before been attempted;
  • Tried to improve their existing products through technological change; or
  • Looked to find a more efficient way to work,

then you will likely have scope for an R&D claim.

“We have received grant funding so can’t make a claim”

Not correct. However, receipt of a grant does throw a spanner into the works. You can still make a claim, albeit the grant may limit the total tax credit/deduction that you will get back. The legislation around grants and how they interact with R&D tax relief is extremely complex, so I always recommend speaking to a specialist to ensure that you maximise your claim.

“But we don’t focus purely on R&D”

R&D tax relief is available to companies that attempt to overcome technological or scientific uncertainties through the use of untried and untested techniques. It doesn’t matter if that is the company’s sole purpose, if there is innovation as part of the process, there will likely be a claim. That means that companies from a range of different sectors can qualify for relief.  In the past 12 months, Chiene + Tait has worked with (but not limited to) companies in the following sectors:

  • Software
  • Electricity and Gas
  • Manufacturing
  • Financial & Insurance
  • Life science
  • Construction

 “It’s not worth the time to make an R&D tax relief claim”

Companies can receive a tax credit up to 33% of the total eligible expenditure incurred. So, if you spent £100k on eligible staff costs, you could receive up to £33k tax credit, cash in hand

Granted, the rules and application process is complex and can seem daunting, but you can remove that hurdle by using a good adviser.

If you’d like a discussion about whether you can claim R&D tax relief, or if you have any questions about it, get in touch with me at david.philp@chiene.co.uk.

Chiene + Tait’s Future Of… series launched

Chiene + Tait has launched a new LinkedIn group aimed at providing a discussion forum to support Scottish businesses in a post-pandemic world. The Future Of… group will bring together experts from across the Scottish and UK business community and will focus on key economic challenges being faced, and how these could be overcome by working collaboratively.

In launching the group, Chiene + Tait Chair, Lena Wilson CBE will deliver a series of Future Of… videos with high-profile speakers. The first video features a discussion with Professor Graeme Roy, Head of Economics at University of Strathclyde and Director of the Fraser of Allander Institute that covers core factors that will impact the speed of economic recovery in Scotland. Further discussions with Professor Roy will appear on the Future Of… LinkedIn group over the coming weeks, with future speakers in the pipeline discussing the future of entrepreneurship, the environment and climate, and Scottish businesses.

The initial session, available from today, features Professor Graeme Roy, Head of Economics and Director of the Fraser of Allander Institute, discussing core factors that will impact the speed of economic recovery in Scotland.

Further sessions will include a post-Covid analysis of entrepreneurship, the environment and climate, and Scottish businesses. The videos will analyse the potential opportunities to emerge after a period of economic stagnation, focusing on finance, business models, leadership and outsourcing.

Commenting on the launch of the Future Of… series, C+T Managing Partner Carol Flockhart said: “The impact of Covid-19 is profound and will be felt for years to come. While this is inevitably creating huge challenges for many businesses and impacting heavily on a number of industry sectors, a crisis of this scale also presents longer term opportunities.

“The Future Of… series is focused on the economic landscape beyond the pandemic, considering where future opportunities may lie and how Scottish businesses can align themselves to ensure they are able to rebuild and benefit from these. We are delighted to have input from some of the UK’s leading business figures whose insights we are pleased to share across the business community.”

Get involved and join the discussions here.

Second round of Self-Employment Income Support Scheme now open

Self-employed people whose trade has been hit by Coronavirus can now apply for a second, and final, Self-Employment Income Support Scheme (SEISS) grant of up to £6,750 from the government.

The online claims service on GOV.UK opened on 17 August and the deadline for claiming the second grant is 19 October. The claims window is open for a four-day period but anyone who thinks they may be eligible and hasn’t been contacted by HMRC has until October to make a claim. To be eligible for the Self-Employment Income Support Scheme, more than half of a claimant’s income needs to come from self-employment.

The scheme is open to those with a trading profit of less than £50,000 in 2018-19, or an average trading profit of less than £50,000 from 2016-17, 2017-18 and 2018-19. Under the first payment earlier this year, self-employed workers who qualified had been in line for a grant of 80% of their average profits, up to £2,500 a month for three months.

This was paid in one instalment, of up to £7,500 and applications for this first round of grants closed on 13 July. As of today (Monday 17th August), those eligible can claim the second, slightly less generous, grant covering 70% of the applicant’s average monthly trading profits. The grant will be made in a single payment, covering three months and capped at £2,190 a month, or £6,570 in total.

Applicants will need to confirm their business has been affected by the virus on or after 14 July, but they would not need to have taken the first grant to be eligible for the second.

If you think you are eligible and haven’t been contacted by HMRC, you can go onto the HMRC’s website, which will tell you if you are eligible, and when you can make a claim.

HM Revenue and Customs (HMRC) has recently admitted thousands were paid too much from the first tranche of the scheme, but it will not be demanding repayment. Approximately 15,000 payments – less than 0.6% of the total – were miscalculated.

If you have any queries about SEISS, please contact Iain Paulin at iain.paulin@chiene.co.uk or call 0131 558 5800.

Chiene + Tait launch Just for Jess Challenge

In the summer of 2019 our beloved colleague Jessica Welsby tragically passed away whilst on secondment in Australia. In her memory, at the end of August, Jess’ family will undertake the Just for Jess Challenge and cycle from her home in St Helens to Edinburgh, a total of 230 miles in aid of SADS UK. Additionally, our AGN partner firm, Ashfords in Australia plan to complete their own 230 mile challenge.

We at Chiene + Tait are proud to support the Welsby family and set a target of 230 miles that our colleagues will aim to reach on their own throughout the month of August, or join a relay, all whilst aiming to reach a fundraising target of £2,300 that will be donated to the charity the Welsby family have nominated – SADS UK.

We would be grateful for any support towards helping us reach our fundraising target and look forward to supporting the Welsby family with our own Just for Jess Challenge.

COVID-19 Redundancy Pay Level Protected

The UK Government has confirmed that in the event of redundancy, workers’ wages will be protected regardless of being on furlough.

In response to a minority of firms taking advantage of the current COVID-19 pandemic to pay a lower rate of redundancy, any furloughed workers that lose their jobs will now be eligible for redundancy pay based on normal wages, rather than the furlough rate. The UK’s 95 million furloughed workers are currently only being paid 80% of their normal wage, raising the anomaly in redundancy pay level.

Workers with more than 2-years continuous service that are made redundant are usually entitled to a statutory redundancy payment that is based on their length of service, age and pay up to a maximum statutory level. Additionally, the new law will also apply to statutory notice pay, which is where employees must be given a notice period before their employment ends. Notice periods can vary from one week to up to 12 weeks’ notice, depending on length of service. Another change will ensure basic awards for unfair dismissal cases will be based on full pay, rather than furlough-level wages.

It is estimated that 150,000 people have so far been made redundant during the crisis, but there are estimates that this figure could climb much higher, especially when the Government’s furlough scheme ends in October. Indeed, the National Institute of Economic and Social Research think tank warned that the ending of the furlough scheme could lead to 1.2 million people being unemployed by Christmas.

In a recently announced step by the UK Government to encourage employers to retain staff, further details about the Job Retention Bonus Scheme have been publicised. The plan will see businesses receive a one-off payment of £1,000 for every previously furloughed employee that earn at least £520 a month on average, if they are still employed at the end of January 2021.

To claim the bonus, employers will need to have relevant up-to-date payroll RTI records for the period to the end of January, and for an employee to be eligible employees must have been paid at lease £520 a month on average between 1 November 2020 and 31 January 2021. Details guidance on the process of how to claim the bonus will be issued in September 2020.

Finishing university and returning to C+T: all from my bedroom

In this blog, Entrepreneurial Tax Trainee Sarah Gibbens talks through the last months of finishing university and starting her new job at Chiene + Tait – all through lock down.

 

Many remember their final year of university fondly; sharing the last few months with your university friends before you end up miles apart, the post-exam celebrations, and travelling the world before you start work with the prospect of being a real adult. Sadly, for me, and all other 2020 graduates, this was not the case. I didn’t realise that my last, physical day at university was in fact my last. Coronavirus was certainly around at that time, but the world was yet to descend into full lock down. And so, as we broke up for Easter break I assured my friends that I would be back in town come a week or two, and made plans for our return. We didn’t realise quite how much the world was about to change.

It was almost like a dystopian dream when the PM appeared on our television screens to announce lock down, I’m sure many of you felt the same. Universities subsequently began to scramble to get us all online so that we could finish our degrees. Thankfully, the end of my degree wasn’t as stressful as it was for others. Unlike most other people, I’m still not sick of my dissertation topic (the benefits of being a modern history student mean that you get to choose topics such as the Kennedy brothers’ involvement in the plots to assassinate Castro) and my final economics exam was replaced by an essay that was shockingly also very interesting.

However, the end to my degree was still anticlimactic. Clicking submit on ‘Turn-it-in’ doesn’t quite have the same satisfaction levels as handing in a bound copy of your dissertation or leaving the exam hall for the last time and finding your friends waiting to soak you with water, as is university tradition at St. Andrews. For the months I had before starting at Chiene + Tait, I had this strange feeling that I hadn’t actually finished at university.

Coming back to C+T was something I had been looking forward to ever since receiving my job offer, after my internship last summer. Everyone in the team had been so friendly and the work in Entrepreneurial Tax had been incredibly interesting. The knowledge that I already got on well with the team, and enjoyed the work made my last year at university somewhat more relaxing, as I didn’t face the pressure my peers were under, not just to find a job but to find one that I liked as well.

As the world pandemic developed and the weeks turned into months, my start date for C+T began to quickly approach but lock down remained firmly in place. This made me somewhat apprehensive about starting. Many of my friends had their jobs postponed until next year, but thankfully C+T emailed to let me know that I’d be starting from home remotely. This again left me with many questions, however, as I had no idea what it would be like to start a new job from my bedroom.

However, beginning my new job at the firm has helped to make it feel like my life is moving forward once again. Although it has only been a few days, the remote start to my work has been an easy and enjoyable process.  Everyone at C+T has been extremely helpful and welcoming, and I already feel part of the team. I’ll admit it is odd working from home, especially when my flatmates aren’t in full-time work, meaning that I seem to be living in a  different time zone to them when it comes to our waking hours, but having my morning commute reduced to from one side of the room to the other is definitely something that I could get used to!

As I continue my career at C+T, I’m looking forward to developing my knowledge of Entrepreneurial Tax and working towards my tax qualifications. As much as I am so far enjoying working from home, I am also excited for when the world starts to return to some semblance of normality and I can meet my colleagues properly, rather than through a grainy camera screen. It’s uncertain when that will be possible, however, so for the moment we’ll have to wait until we can see each other in HD once again.

Sarah Gibbens, Chiene + Tait Entrepreneurial Tax Trainee

 

What businesses should focus on ahead of Brexit

The UK Government is pressing ahead with its post-Brexit planning, with the release of a Border Operating Model following engagement with businesses. The 206 page document is designed to give guidance to industries on how border issues will work after the transition period ends on 31 December and the actions that traders, hauliers, ports and carriers need to take.

On December 31st 2020 the transition period with the EU will end, and the UK will operate a full, external customs border with the EU and the rest of the world. This means that controls will be placed on the movement of goods between Great Britain (GB) and the EU for the first time.

The Government has broken this down into 3 phases up until 1 July 2021 to assist businesses in planning and preparation.

The key messages which we urge businesses to focus on as 31 December approaches are as follows:

  • Get a customs intermediary. Intermediaries can help traders find the information needed to complete formalities and submit the required declarations, for example customs information to HMRC systems. This simplifies the declaration processes for traders. If you decide not to use an intermediary, you will need to make declarations yourself.
  • Apply for a duty deferment account. Traders who import goods regularly, may benefit from having a duty deferment account. This enables customs charges including customs duty, excise duty, and import VAT to be paid once a month through Direct Debit instead of being paid on individual consignments.
  • Prepare to pay or account for VAT on imported goods.
  • Ensure you have International Driving Permits if you have vehicles travelling outside the UK.
  • Apply for a GB Economic Operator Registration and Identification (EORI) number. This is required for all businesses moving goods into or out of the UK.

The link to the document is contained here – https://www.gov.uk/government/publications/the-border-operating-model?utm_source=43c65c94-3755-427b-a052-15742071d45e&utm_medium=email&utm_campaign=govuk-notifications&utm_content=immediate

We will continue to produce guidance to assist businesses with Brexit planning and are available for consultations on what action needs to be taken by businesses. Find out more about our VAT and Brexit Review service here.

For further information and advice please contact Iain Masterton in our VAT team.

VAT Rate Cut

The Chancellor Rishi Sunak has announced a temporary 5% VAT rate which will come into effect from 15 July to 12 January 2021. The main areas which will be affected are:

  • Sales of Food and non-alcoholic drink in restaurants, pubs, bars, cafes and similar premises;
  • Hot takeaway food and non-alcoholic beverages;
  • Sleeping accommodation in hotels, B&B and similar accommodation including holiday accommodation, pitch fees for caravans and tents and associated facilities; and
  • Admissions to tourist attractions such as theatres, concerts, amusement parks etc.

The changes are not limited and will impact on any businesses or organisation that provide food or drink, accommodation, or are considered a tourist attraction. For more details visit our VAT page here. Or download our free VAT Rate Cut Factsheet here.

If you have a query about the VAT rate change, contact our team today at vat@chiene.co.uk.

Summer Statement 2020: Main Points

Chancellor Rishi Sunak today outlined a series of measures aimed at restarting the economy after the recent impact of the COVID-19 pandemic. Key points delivered in his speech were:

  • Stamp Duty holiday – a temporary holiday on stamp duty, on the first £500,000 of all property sales in England and Northern Ireland, effective immediately.
  • The launch of a new “Kickstart Scheme” to create more jobs for young people – a six-month work placement for people on Universal Credit between 16 – 24 who are at risk of long-term unemployment.
  • The launch of a “Job Retention Bonus” – the Government will pay employers a £1,000 bonus for every staff member kept on for three months once the furlough scheme ends in October.
  • VAT cut from 20% to 5% – on food, accommodation and attractions starting 15th July until 12th January 2021. Watch out for more details on the VAT cut from our specialist team shortly.
  • A new ‘Eat out to help out’ discount – will give people 50% off meals in participating restaurants on Monday-Wednesday throughout August, up to £10 per person.

Other announcements made before Chancellor Sunak’s speech in the Commons include:

  • Grants to help homeowners and landlords in England as part of a green investment package – will receive vouchers of up to £5,000 for energy-saving home improvements.
  • Organisations working in the arts and culture sector across the UK are to receive £1.57bn in grants.
  • A pledge to provide 30,000 new traineeships for young people in England, giving businesses £1,000 for each new work experience place they offer.

Details about the VAT rate cut can be found here.

 

 

Running an accountancy practice through the COVID-19, and beyond

Chiene + Tait’s new Accounts and Business Support Partner, Dave Shadwell, was delighted to recently take part in an online discussion led by MyWorkPapers, with leaders from other accountancy practices. The event focused on experiences of running a practice through the COVID-19 crisis and how, in the future, firms may work differently. Here, Dave talks us through the main areas covered during the discussion.

COVID-19 has forced many accountancy practices to change or re-think technology requirements, but at Chiene + Tait, being a ‘digital first’ business is one of three key pillars of our strategy. There’s no doubt that the pandemic has reinforced the importance of this, but it hasn’t changed our direction. Indeed, I feel strongly that the lock down has given us an opportunity to make some significant changes in the business, addressing issues such as climate change and increased flexible working models. I envisage that we will see a hybrid model, when our office officially reopens, to ensure our people can achieve the best work/ life balance that suits them.

One of the things that the lock down has clearly shown, is that our team doesn’t need to be in a building all together to serve our clients. Although our people have told us that some of them miss the social aspect of the office, others are revelling in managing their time more effectively. Overall, we are determined to pick the model that works best for all, and collaborate to deliver this as a team. Fundamentally, we are our people. That’s why we continue to recognise and place huge value on the fact that our staff have an active growth mindset, curiosity and a willingness to learn new tools and techniques

Another key learning is the recognition that accountants aren’t bean counters, clients view our role as essential to their success – we help them understand and make sense of risk, uncertainty and opportunity to decide the best way forward to meet their ambitions.

There are, of course, other ‘positives’ for our business – forcing a change of mindset around the smarter use of technology to enhance what we do for clients, adopting an approach of welcoming change and challenging ourselves to constantly look for new and better ways to support our clients. At C+T, we want our team to benefit as much as possible from how we innovate and support our clients. This enhances our credibility when advising clients on how to adapt their businesses to change and technology. Indeed, our virtual CFO service has seen a huge surge in demand, to provide the higher-level, strategic, financial and commercial advice required to help clients deal with risks and opportunities. Cloud technology has made this offering far easier.

Over the next six months, the challenge will be to navigate ourselves, and our clients, through the huge economic uncertainty that will only reveal itself as we start to see the real economic landscape. We know times are going to be hard, but it’s still a massive unknown – I personally believe the UK’s future prosperity will depend on how well we can all adapt to technology. My advice to any practice, or other type of business, is to push forward with using cloud-based technology. You will wait indefinitely if you wait for perfection, or to be 100% ready – the sooner you jump, the sooner you will reap the benefits. By building in a 20% learning curve, you will build solid change management and structures to the implementation, resulting in an opportunity to gain the most from innovation and adapting to future change.

Gift Aid Emergency Relief Package for Charities

Whilst HM Revenue & Customs (HMRC) have provided a vast amount of support to individuals and organisations throughout the COVID-19 pandemic, a coalition of organisations in the charity sector are highlighting that more can, and should, be done to support the third sector. During the pandemic, many organisations in the third sector have been stepping up to provide vital support to the communities they serve, all while seeing a huge drop off in their income.

The coalition has put together a Gift Aid Emergency Relief Package proposal, which aims to increase relief charities can claim via the Gift Aid and Gift Aid Small Donations (GASDS) Schemes. This is a proposal only at this stage and has not been agreed with HMRC. If the proposal is agreed with HMRC, it is the intention for it to take effect from 6 April 2020 for 2 years.

The proposal aims to:

  • Increase the effective tax rate used in Gift Aid relief calculations, from 20% to 25%. So, for a Gift Aid donation of £100, charities could reclaim £33.33 of Gift Aid;
  • Remove the matching rule in the GASDS, so the amount that can be reclaimed through GASDS is no longer linked to the amount reclaimed through Gift Aid;
  • To increase the GASDS limit from £8K to £10K; and
  • To increase the GASDS effective tax relief to 25%, as proposed for the Gift Aid scheme.

To find out more about the proposal please see https://nmn.org.uk/2020/06/24/gift-aid-emergency-relief-package/

 

Further delay in implementation of Construction Services Domestic Reverse Charge

HMRC has issued a short brief, which outlines that the introduction of the domestic reverse charge for construction services will be delayed a further 5 months until 1 March 2021, due to the impact of the Coronavirus pandemic on the construction sector.

The domestic reverse charge for building and construction services was originally planned to come into force on 1 October 2019, but this was initially delayed for a year in response to industry concerns that some businesses were not ready to implement the changes required.

This further extension has been implemented to help businesses overcome the effects that the Coronavirus pandemic has had and provide additional time to prepare for the introduction of the reverse charge

HMRC have also confirmed that there will also be an amendment to the original legislation, which was laid in April 2019, to make it a requirement that for businesses to be excluded from the reverse charge because they are end users or intermediary suppliers, they must inform their sub-contractors in writing that they are end users or intermediary suppliers.  This is designed to make sure both parties are clear whether the supply is excluded from the reverse charge.  It reflects recommended advice published in HMRC guidance and brings certainty for sub-contractors as to the correct treatment for their supplies.  If followed, it will remove a concern that HMRC may seek to challenge the reverse charge treatment where a business that qualified as an end user or intermediary supplier had not given any notification of their status.

In the intervening period, HMRC will continue to focus additional resource on identifying and tackling existing perpetrators of the fraud.  It will also work closely with the sector to raise awareness and provide additional guidance and support to make sure all businesses will be ready for the new implementation date.

If you have a query about the domestic reverse charge, please contact our VAT team today at vat@chiene.co.uk.

How COVID-19 reliefs impact Research & Development Tax claims – update

HMRC have sent us further details clarifying their stance on certain COVID-19 reliefs.

The Bounce Back Loans (BBL) Scheme

HMRC has confirmed that this has been notified as a state aid, following similar notification of the Coronavirus Business Interruption Loan Scheme (CBILS). Being in receipt of the BBL or CBILS could impact a potential R&D tax claim, particularly if it relates specifically to R&D expenditure rather than being used more generally to support the Company as they are intended. An area to watch out for when drafting loan applications.

The Future Fund

The Future Fund provides up to £500m in convertible loans to high-growth innovative businesses and is not a state aid. The convertible loans are commercial, meaning they are not caught by s1138, allowing a full claim can be made under the SME scheme if eligible.

Temporary Framework grants/loans

A significant number of small loans and grants have been provided recently through the Temporary Framework. These are deemed to be notified and will impact an R&D claim the same way as if a General Bock Exemption grant had been received in relation to a project. These are normally much smaller in size but can have a significant impact to a potential claim. It’s important to consider how these interlink with your R&D projects fully to avoid falling into any traps.

Deferred Liabilities

HMRC have confirmed that the VAT deferral scheme, which has been introduced in response to COVID-19 will not impact payable SME tax credits. The scheme defers the VAT payment due date to the end of the tax year, therefore, deferred VAT payments in this period are not overdue and HMRC has confirmed that R&D claim payments will not be offset. For RDEC payments, the legislation requires HMRC to offset the RDEC payment against other HMRC liabilities. This includes any PAYE/NIC or VAT payment which was overdue and HMRC does not have the power to provide a temporary relaxation of this rule.

If you have a query about accessing COVID-19 grants and support, please contact our team today at covid@chiene.co.uk.

How COVID-19 reliefs impact Research & Development Tax claims

The Chiene + Tait team has been inundated with queries regarding the various new COVID-19 reliefs that are available for businesses. Whilst cash has always been ‘king’ for businesses, there has never been a more important time to have sufficient reserves.

Research & Development (R&D) Tax Relief has been the ‘go-to’ cash relief for innovative companies since 2002. There are complexities as to how R&D Tax is interlinked with the new COVID-19 reliefs, which should be considered before diving into making claims for the various reliefs available. Below are a few frequently asked questions we have received from clients in relation to the reliefs:

Should I claim under the Coronavirus Business Interruption Loan Scheme (CBILS)?

Yes, but watch out for traps. EU regulations require that no project, as opposed to no company, can receive more than one notified State Aid. As the SME R&D Tax scheme and the CBILS have both been notified as State Aids, there could be an issue regarding allocation of costs, particularly if the CBILS relates specifically to R&D expenditure, rather than being used more generally to support the company as it is intended. It is vital to watch out for this when drafting CBILS applications. If it is not an option split out the costs, all isn’t lost. An R&D claim would still be able to be made under the RDEC scheme, albeit at a lower level of relief.

Should I use a COVID-specific grant to fund my R&D project?

Since the start of the pandemic, we have seen a significant increase in the number of grants available for R&D projects. In some instances, these grants are deemed to be notified State Aid, meaning that the full R&D project would be ineligible under the SME scheme. A claim can, thereafter, only be made under the less-beneficial RDEC scheme. It is worth noting that, once a project is ineligible for the SME scheme, that’s it. The project would continue to be ineligible for the entire length of the project. It’s therefore important not to just think about the cash benefit this year, but also years 2 and 3.

Where a grant isn’t notified, it will likely be de minimis. Receiving de-minimis aid will still impact your R&D claim but not to the same extent as if you received notified State Aid. All costs subsidised would be ineligible under the SME scheme, however, an SME claim can still be made for the costs not covered by the grant. This essentially means that 2 claims can be made, one under the SME scheme for the non-subsidised costs, while a RDEC claim can be made for the subsidised costs.

It’s not always obvious how a grant should be treated, and it is an area where the devil is very much in the detail. Make sure that you seek advice so that you don’t accidently limit the cash relief available.

What happens if I furlough staff?

When an employee is furloughed, they will not be carrying out any work; therefore, they will not be directly and actively engaged in R&D activities. This will likely impact next year’s claim rather than any immediate claim for obvious reasons, however, it is something to consider. This will not affect your ability to claim eligible projects, once the employee has returned, the R&D project can re-start.

During the pandemic, it is vital that you claim for all relief that you are eligible for. If you have a query about what your business can claim contact our team today at covid@chiene.co.uk.