Making Tax Digital (MTD) Coming For Corporation Tax

HM Treasury has opened a consultation on ‘Making Tax Digital for Corporation Tax‘ inviting views on how the principles of Making Tax Digital (MTD) could be implemented for Corporation Tax this will be for the entities within the charge to Corporation Tax.

For business it would mean higher compliance cost but at the same time businesses will have real-time information available to them.

https://www.gov.uk/government/publications/making-tax-digital/overview-of-making-tax-digital

The regime MTD already started in April 2019 for VAT purposes only. MTD for Income Tax is expected to be introduced from 6 April 2023.

Please visit our Corporation tax page to know more about our Corporation Tax Services.

The consultation provides some additional information on the planned rollout of MTD for Corporation Tax. Following the end of the consultation, the government will continue to refine the MTD for Corporation Tax requirements by working collaboratively with stakeholders and will then provide entities with an opportunity to take part in a pilot.

This was based on the success of testing the MTD for VAT service and allowed HMRC to identify issues based on real people’s experiences of the service. HMRC initially introduced a limited, small-scale pilot for MTD for Income Tax, before building in additional functionality and scaling up the numbers of eligible participants and expects to follow a similar pattern for Making Tax Digital for Corporation Tax.

 

The pilot will present HMRC with opportunities to check the proposed design of the system and learn lessons. The consultation states that the proposed date to commence the voluntary pilot for MTD for Corporation Tax is April 2024, with mandation to follow from 2026 at the earliest.

If you are looking to know more about this, feel free to contact us.

Beware Of Tax Refund Scams

Beware from tax refund scams fraudsters are continuing to target taxpayers with scam emails in advance of the 31 January deadline for submission of Self-Assessment returns.  In fact, over the last year, HMRC received more than 846,000 reports about suspicious HMRC contact.

https://www.gov.uk/government/publications/phishing-and-bogus-emails-hm-revenue-and-customs-examples/phishing-emails-and-bogus-contact-hm-revenue-and-customs-examples

A number of these scams purport to tell taxpayers they are due a tax rebate or tax refund from HMRC and ask for bank or credit card details in order to send the refund. The fraudsters use various means to try and scam people including making contact by phone calls, texts or emails. In fact, fraudsters have been known to threaten victims with arrest or imprisonment if a bogus tax bill is not paid immediately.

Please visit our Tax Services page to know about our tax services.

HMRC’s dedicated Customer Protection team to identify and close down scams but is advising customers to recognise the signs to avoid becoming victims themselves. For example, genuine organisations like HMRC and banks will never contact customers asking for their PIN, password or bank details.

If you think you have received a suspicious call or email claiming to be from HMRC you are asked to forward the details to [email protected] and texts to 60599. If you have suffered financial loss you should contact Action Fraud on 0300 123 2040 or use their online fraud reporting tool.

If you are looking to know more about this, feel free to contact us.

Tax Diary for December 2020/January 2021

Tax Diary for December 2020/January 2021

1 December 2020 – Due date for Corporation Tax payable for the year ended 28 February 2020.

19 December 2020 – PAYE and NIC deductions due for month ended 5 December 2020. (If you pay your tax electronically the due date is 22 December 2020)

19 December 2020 – Filing deadline for the CIS300 monthly return for the month ended 5 December 2020.

19 December 2020 – CIS tax deducted for the month ended 5 December 2020 is payable by today.

30 December 2020 – Deadline for filing 2019-20 self-assessment tax returns online to include a claim for under payments to be collected via tax code in 2021-22.

1 January 2021 – Due date for Corporation Tax due for the year ended 31 March 2020.

19 January 2021 – PAYE and NIC deductions due for month ended 5 January 2021. (If you pay your tax electronically the due date is 22 January 2021)

19 January 2021 – Filing deadline for the CIS300 monthly return for the month ended 5 January 2021.

19 January 2021 – CIS tax deducted for the month ended 5 January 2021 is payable by today.

31 January 2021 – Last day to file 2019-20 self-assessment tax returns online.

31 January 2021 – Balance of self-assessment tax owing for 2019-20 due to be settled on or before today unless you have elected to extend this deadline by formal agreement with HMRC. Also due is any first payment on account for 2020-21.

Tax Diary for December 2020/January 2021

What Is A Reasonable Excuse For Making A Late Furlough Claim

What Is A Reasonable Excuse For Making A Late Furlough Claim? HMRC may accept a claim made after the deadline if you had a reasonable excuse for failing to make a claim in time.

https://www.gov.uk/guidance/claim-for-wages-through-the-coronavirus-job-retention-scheme

HMRC’s list of example excuses is as follows:

  • your partner or another close relative died shortly before the claim deadline
  • you had an unexpected stay in hospital that prevented you from dealing with your claim
  • you had a serious or life-threatening illness, including Coronavirus related illnesses, which prevented you from making your claim (and no one else could claim for you)
  • a period of self-isolation prevented you from making your claim (and no one else could make the claim for you)
  • your computer or software failed just before or while you were preparing your online claim
  • service issues with HMRC online services prevented you from making your claim
  • a fire, flood or theft prevented you from making your claim
  • postal delays that you could not have predicted prevented you from making your claim
  • delays related to a disability you have prevented you from making your Furlough Claim
  • an HMRC error prevented you from making your claim

If you are looking to know more about this, feel free to contact us.

Changes To CIS Abuse Rules

CIS Abuse Rules A shake-up of VAT rules could impact the cash flow of businesses in the construction sector, many of whom are covered by the Construction Industry Scheme (CIS).

The UK government is rolling out a reverse charge initiative aimed at tackling fraud within the construction industry. This happens when suppliers or ‘subcontractors’ charge main contractors VAT but ‘disappear’ before passing the same to HMRC.

https://www.gov.uk/government/publications/changes-to-tackle-construction-industry-scheme-abuse/changes-to-tackle-construction-industry-scheme-abuse

The Construction Industry Scheme (CIS) is a set of special CIS Abuse Rules for tax and National Insurance for those working in the construction industry. It was announced at Spring Budget 2020 that a consultation on measures to tackle abuse of the CIS would be launched.

Please have a look at our VAT services page to know more about VAT services.

Following the consultation and further meetings with those working in the sector four new changes to prevent CIS abuse are set to come into effect from 6 April 2021.

  1. CIS set-off amendment power. The measure provides a power to allow HMRC to amend the CIS deduction amounts claimed by sub-contractors on their Real Time Information Employer Payment Summary returns.
  2. Cost of materials. The measure makes it clear that it is only where a sub-contractor directly incurs the cost of materials purchased to fulfil a construction contract, that the cost in question is not subject to deduction under the CIS.
  3. Deemed contractors. The measure changes the rules for determining which entities operating outside the construction sector need to operate the CIS.
  4. CIS registration penalty. The measure expands the scope of the penalty for supplying false information when applying for gross payment status (GPS) or payment under deduction within the CIS.

If you are looking to know more about this, feel free to contact us.

 

How The Interest On Investment Works

People use different vehicles for investment for example building a pension fund, a portfolio of shares or deposits with our bank or building society. Most of these investment options reward us for our participation by offering income (usually in the form of interest or dividends) or by demonstrating capital growth (share prices increasing).

Accordingly, there are three components to our investments: the capital sum we invest, any growth in the value of the capital sum invested or rewards (interest or dividends) paid by banks or companies in which we hold shares.

What we do with these rewards, particularly interest and dividends, is key to the speed with which our investments grow.

The reason for this is the impact of compound interest.

If the average return on your investments is say 3%, paid as dividends or interest, if you withdraw these payments your investments will maintain their capital value and over time inflation may reduce the purchasing power of this capital value as the value of money decreases.

Whereas, if you reinvest rewards, future returns will compound, and you are more likely to counter the effects of inflation.

Over short term periods these effects are small, but over longer periods the impact of compounding can be dramatic.

If you are looking to know more about this, feel free to contact us.

Allowance For Fixed Asset (Annual Investment Allowance) Extended

There is good news for those businesses who are looking to expand their business and invest in the assets of their companies. The government has announced that the temporary Annual Investment Allowance (AIA) cap will be extended for a further 12 months until 1 January 2022.

Annual Investment Allowance (AIA) could be claimed on plant and machinery, Integral features, and fixtures

Please visit our Tax Services page to know about our tax services.

Plant and machinery include:

  • items that you keep to use in your business, including cars
  • costs of demolishing plant and machinery
  • parts of a building considered integral, known as ‘integral features’
  • some fixtures, for example, fitted kitchens or bathroom suites
  • alterations to a building to install other plant and machinery – this does not include repairs
  • Claim repairs as business expenses if you’re a sole trader or partner – deduct from your profits as a business cost if you’re a limited company.

Integral features include:

  • lifts, escalators, and moving walkways
  • space and water heating systems
  • air-conditioning and air cooling systems
  • hot and cold water systems (but not toilet and kitchen facilities)
  • electrical systems, including lighting systems
  • external solar shading

Fixtures include:

  • fitted kitchens
  • bathroom suites
  • fire alarm and CCTV systems

The government says that this move is intended to boost confidence as companies look to weather the pandemic and plan for the future. This should also encourage investment in qualifying plants and machinery over the next 12 months.

The AIA allows for a 100% tax deduction on qualifying expenditure on plant and machinery to be deducted from your profits before tax. The relief is normally capped at £200,000 per annum but was temporarily increased to £1 million for a 2-year period from 1 January 2019 to 31 December 2020.

This increased temporary limit is a generous allowance and should cover the annual spending of most small and medium-sized businesses. The AIA is available for most assets purchased by a business, such as machines and tools, vans, lorries, diggers, office equipment, building fixtures, and computers. The AIA does not apply to cars.

The extension in the temporary limit means that businesses thinking of incurring large items of capital expenditure will now have additional time to consider their options during these uncertain times. There are complex transitional rules so the timing of any purchase should be carefully considered.

If you would like to know more about it, feel free to contact us.

EU Importers/Exporters Would Need A Customs Agent

EU Importers/Exporters Would Need A Customs Agent?

The businesses which only buy and sell goods from and to the EU but not from any non-EU country probably would have no experience of dealing with the raft of red tape involved in clearing goods through customs and settling any duties or VAT payable.

The businesses will need to abide by the new regulatory situation from 1 January 2021 which is only a matter of weeks from now. They will need to employ someone or appoint a customs agent to undertake the necessary chores.

For most businesses, the latter option may be preferred. The Government has anticipated this need and there is a list of UK customs agent available.

https://www.gov.uk/guidance/list-of-customs-agents-and-fast-parcel-operators#list-of-customs-agents

If you transport goods on behalf of EU or UK businesses, back and forth across the English Channel, the regulations your drivers will need to comply with from 1 January 2021 are significant.

Government has again stepped up and provided detailed guidance. You can Google and download a PDF copy of their Transporting goods between the UK and EU in a no-deal Brexit: guidance for hauliers on the GOV.UK website.

The outcome of current trade talks with the EU is still uncertain. However, whatever the outcome of these talks, UK firms involved in the acquisition and/or transport of goods to and from the EU will need to abide by the new regulations imposed as a result of our exit from the European Union.

If you would like to know more about it, feel free to contact us.

How Business Asset Disposal Relief (BADR) Works

Business Asset Disposal Relief (BADR) in simple words is a tax relief that the seller of a business can benefit from on sale of the business. This relief was formerly as Entrepreneurs Relief until 6th April 2020.

This incentive set up by the UK Government to encourage people to set up a business, put time and energy into building it and then reward them for their hard work once they are ready to sell it.

Business Asset Disposal Relief formerly known as Entrepreneurs’ Relief before 6 April 2020. The relief was renamed in Finance Act 2020. The name change does not affect the operation of the relief.

Where this relief applies:

Business Asset Disposal Relief (BADR) applies to the sale of a business, shares in a trading company or an individual’s interest in a trading partnership.

Where this relief is available CGT of 10% is payable in place of the standard rate. There are a number of qualifying conditions that must be met in order to qualify for the relief.

History of applicable rates:

When the relief was first introduced there was a lifetime limit of £1 million for gains. This was increased to £2 million from 6 April 2010, to £5 million from 23 June 2010 and to £10 million from 6 April 2011. The limit was reduced to £1 million on 11 March 2020.

The £1m lifetime limit means that individuals can qualify for the relief more than once subject to an overriding total limit of £1m of qualifying capital gains. The changes to the lifetime limit are not retrospective.

Please visit our Capital Gains Tax Page.

Who can claim:

To qualify for relief, you should be either an officer or employee of the company and own at least 5% of the company and have at least 5% of the voting rights. There are also other qualifying conditions that must be met in order to qualify for the relief.

The minimum period during which certain conditions must be met in order to qualify for Business Asset Disposal Relief increased from one to two years from 6 April 2019.

If you need further information; feel free to contact us.

VAT – When A Business Is Sold

If a business is registered for VAT it charges VAT on the goods it sells in the course of its trade. This rule applies not only products and services but anything the business sells. However, there’s a rule which overrides the normal VAT treatment that is when a business is sold as going concern.

Where a business is sold as a going concern, the transaction is outside the scope of VAT. That means VAT isn’t chargeable, even on items on which you would normally charge it, e.g. stock. Applying the TOGC rules correctly is very important for the purchaser.

The transfer of a business as a going concern (TOGC) rules concern the VAT liability on the sale of a business. Normally the sale of the assets of a VAT registered or VAT registerable business will be subject to VAT at the appropriate rate.

https://www.gov.uk/hmrc-internal-manuals/vat-transfer-of-a-going-concern

Where the sale of a business includes assets and meets certain conditions the sale will be categorised as a TOGC. A TOGC is defined as ‘neither a supply of goods nor a supply of services’ and is therefore outside the scope of VAT. Under the TOGC rules no VAT would be chargeable on a qualifying sale.

Have a look at our VAT services page.

All the following conditions are necessary for the TOGC rules to apply:

  • The assets must be sold as part of a ‘business’ as a ‘going concern’. In essence, the business must be operating as such and not just an ‘inert aggregation of assets’.
  • The purchaser intends to use the assets to carry on the same kind of business as the seller.
  • Where the seller is a taxable person, the purchaser must be a taxable person already or become one as the result of the transfer.
  • Where only part of a business is sold it must be capable of separate operation.
  • There must not be a series of immediately consecutive transfers.
  • There are further conditions in relation to transactions involving land.

The TOGC rules can be complex and both the vendor and purchaser of a business must ensure that the rules are properly followed. The TOGC rules are also mandatory which means that it is imperative to establish from the outset whether a sale is or is not a TOGC. For example, if VAT is charged in error, the buyer has no legal right to recover it from HMRC and would have to seek to recover this ‘VAT’ from the seller.

If you need further information; feel free to contact us.

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