Taxable benefit charge – returning office equipment

A taxable benefit charge can apply when employees return office equipment they used to work from home. There was a significant rise in the provision of office equipment to employees working from home due to the COVID-19 pandemic. Qualifying home office equipment is that deemed necessary for an employee to work from home and can, for example, include a laptop, mobile phone, office desk and chair and other necessary computer accessories such as webcams.

Taxable benefit charges are as follows:

  • If you supplied your employees with office equipment so they could work from home, and you did not transfer ownership, there is no tax charge when they return the equipment to you.
  • If you transfer the ownership of home office equipment to an employee at any stage of their employment, a benefit charge generally arises on the market value of the equipment at the time of the transfer, less any amount made good by the employee.
  • If your employee has agreed to purchase home office equipment for use whilst working at home due to COVID-19 and you reimburse the exact expense, unless you have specified that your employee must transfer ownership to you, the ownership of the equipment rests with your employee. There is no benefit charge on the reimbursement.
  • There is also no benefit charge if you allow your employee to keep the equipment as it is something that they already own.
Source: HM Revenue & Customs Tue, 29 Jun 2021 00:00:00 +0100

Reminder for reporting expenses and benefits for 2020-21

The deadline for submitting the 2020-21 forms P11D, P11D(b) and P9D is 6 July 2021. Employees must also be provided with a copy of the information relating to them on these forms by the same date.

P11D forms are used to provide information to HMRC on all Benefits in Kind (BiKs), including those under the Optional Remuneration Arrangements (OpRAs) unless the employer has registered to payroll benefits. This is known as payrolling and removes the requirement to complete a P11D for the selected benefits. However, a P11D(b) is still required for Class 1A National Insurance payments regardless of whether the benefits are being reported via P11D or payrolled.

Where no benefits were provided during 2020-21 and a form P11D(b) or P11D(b) reminder is received, employers can either submit a 'nil' return or notify HMRC online that no return is required. Employers should ensure that they complete their P11D accurately, including all the details of cars and loans provided. There are penalties for late filing of returns.

Employers pay Class 1A National Insurance contributions on most benefits. If you provided taxable benefits to staff or directors your business is likely to have a Class 1A employers’ NIC liability. The deadline for paying class 1A NICs is 22 July 2021 (or 19 July if paying by cheque).

In addition, any tax or National Insurance due for 2020-21 under a PAYE Settlement Agreement (PSA) needs to be paid electronically to clear into HMRC’s bank account by 22 October 2021 (19 October 2021 for payments by cheque).

Source: HM Revenue & Customs Tue, 29 Jun 2021 00:00:00 +0100

Stamping documents goes digital

HMRC has confirmed that the 300-year-old process used to manually stamp documents to show the duty has been paid will officially come to an end on 19 July 2021. 

A new electronic process was introduced during the pandemic as traditional physical stamping could not function under COVID-19 restrictions. As this process has worked well, HMRC has decided to retain the new approach.

This change leaves the stamp presses themselves in need of new homes. Three of the presses will be retained by HMRC and installed in the newly created regional centres as a nod to the department’s history. HMRC has launched an appeal to search for suitable institutions which might be keen to take on one of the five remaining decommissioned presses, weighing some 685 kilograms and preserving them for future generations.

The first ‘stamp duty’ was introduced in 1694 as a temporary measure to fund the war on France. It was paid on all paper, vellum or parchment to be used for legal documents, and payment was indicated by an embossed, colourless stamp, hence the name.

Source: HM Revenue & Customs Tue, 29 Jun 2021 00:00:00 +0100

Deadline for EU Settlement scheme

EU workers already living in the UK before 31 December 2020 have been required to apply for the EU Settlement scheme. Settled or pre-settled status gives the holder the right to work in the UK as well as other important rights including access to the NHS and the right to travel in and out of the UK. In most cases, the deadline for EU workers and their families to apply expired on 30 June 2021. It is understood that there was a significant wave of last-minute applications although the government appears to have ruled out any meaningful extension to the deadline.

Home Office guidance states that late applications will be accepted only if an individual has "reasonable grounds" for failing to meet the deadline applicable to them. Reasonable excuses listed in the Home Office guidance include lack of mental or physical capacity, serious medical condition or significant medical treatment care, victims of modern slavery and those in an abusive or controlling relationship. There is also a category for ‘other compelling practical or compassionate reasons’.

Since 1 January 2021, most EU citizens coming to the UK for work are required to apply for work visas and permits in the same way as for non-EU nationals. The new ‘points-based’ immigration system replaced the current rules for workers from outside the UK. The only exception is for Irish citizens. Employers need to have a sponsor licence to recruit any worker from outside the UK, including EU, EEA and Swiss citizens. There are important salary thresholds and skills requirements that must be considered as well as the payment of fees.

Source: HM Revenue & Customs Tue, 29 Jun 2021 00:00:00 +0100

UK Infrastructure Bank opens for business

The new UK Infrastructure Bank has officially opened for business. The new bank, which is headquartered in Leeds, will be tasked with accelerating investment into ambitious infrastructure projects, cutting emissions and levelling up every part of the UK. 

The establishment of the bank comes in the wake of the pandemic but is expected to result in a long-lasting public institution helping to drive growth across the UK.

The bank is to have an initial financial capacity of £22bn made up of £12bn in capital and £10bn in government guarantees. This is expected to unlock more than £40 billion of overall investment in local government lending and across the private sector. The bank will initially provide funding for the private sector and will start lending to local authorities later in the summer.

HM Treasury and the UK Infrastructure Bank have entered into a Keep Well Agreement to ensure that the Bank has sufficient funds to be able to meet its payment obligations in full as they fall due.

The new Chair of the UK Infrastructure Bank said:

'The new UK Infrastructure Bank is open for business. I am delighted to be leading this institution, which will be a catalyst for investment to support regional economic growth and net zero ambitions.

I look forward to building strong partnerships with project sponsors, institutions and local leaders.'

Source: HM Treasury Tue, 29 Jun 2021 00:00:00 +0100

Off-payroll working rules best practice

The rules for individuals providing services to certain private sector organisations via an intermediary such as a personal service company (PSC) changed from 6 April 2021. The new rules mean that medium and large-sized clients are now responsible for deciding whether the intermediaries’ legislation applies to their workers. This includes charities and third sector organisations. The changes mainly apply to businesses with an annual turnover of more than £10.2 million.

HMRC has laid out some helpful best practice points to be aware of in complying with the rules:

  • consider how the changes affect your organisation
  • upskill those responsible for making decisions
  • review current workforce
  • talk to your contractors
  • operate PAYE where appropriate
  • use the RTI flag
  • have a clear process in place for disagreements
  • maintain an audit trail – this is a legal requirement
  • utilise the resources and guidance available to you including HMRC’s off-payroll working guidance.

This is also relevant to agencies of any size who supply contractors that may be affected by these rules.

Source: HM Revenue & Customs Tue, 29 Jun 2021 00:00:00 +0100

VAT – what is partial exemption?

A business that incurs expenditure on taxable and exempt business activities is partially exempt for VAT purposes. This can happen where a business makes or intends to make both taxable and exempt supplies and incurs input tax that relates to both kinds of supply. Under this scenario, the business must make an apportionment between the activities using a 'partial exemption method' to calculate how much input tax is recoverable.

There are a number of partial exemption methods available. The standard method of recovering any remaining input tax is to apply the ratio of the value of taxable supplies to total supplies, subject to the exclusion of certain items which could distort the calculations. The standard method is automatically overridden where it produces a result that differs substantially from one based on the actual use of inputs. It is possible to agree a special method with HMRC.

The VAT incurred on exempt supplies can be recovered subject to two parallel de-minimis limits.

The tests are met where the total value of exempt input tax:

  1. Is under £625 a month (£1,875 a quarter/£7,500 a year); and
  2. Is less than half of the total input tax incurred.

If both tests are met the VAT can be recovered. Businesses that are partially exempt, need to complete this calculation on a quarterly basis as well as completing an annual calculation.

Source: HM Revenue & Customs Wed, 23 Jun 2021 00:00:00 +0100

Replacement of domestic items relief

The replacement of domestic items relief has been in place since April 2016. The relief allows landlords to claim tax relief when they replace movable furniture, furnishings, appliances and kitchenware in a rental property. The allowance is available for the cost of domestic items such as free- standing wardrobes, curtains, carpets, televisions, fridges and crockery.

The amount of the deduction is based on:

  • the cost of the new replacement item, limited to the cost of an equivalent item if it represents an improvement on the old item (beyond the reasonable modern equivalent); plus
  • the incidental costs of disposing of the old item or acquiring the replacement;
  • less any amounts received on disposal of the old item.

There is an important distinction when deciding if a new item represents a replacement or an improvement. Where the new item is an improvement on the old item the allowable deduction is limited to the cost of purchasing an equivalent of the original item.

HMRC’s guidance provides the example of replacing a sofa with a sofa bed and is clear that if a new sofa would have cost you £400 but a sofa bed cost you £550, you could only claim the £400 as a deduction and no relief is available for the £150 difference as this is an 'improvement'.

However, if a replacement item is for a reasonable modern equivalent for example a new energy efficient fridge replacing an old fridge this is not considered an improvement and the full cost of the new item is eligible for relief.

Source: HM Revenue & Customs Wed, 23 Jun 2021 00:00:00 +0100

Boost to UK tourism

In a boost to UK tourism, the government has launched a new Tourism Recovery Plan to help the sector bounce back from the pandemic. The plan is to recover domestic tourism to pre-pandemic levels by the end of 2022 and international visitor numbers and spend by the end of 2023. If achieved, this would be at least a year faster than independent forecasts predict.

Specifically, the aim is to:

  • Ensure that the sector’s recovery benefits every nation and region, with visitors staying longer, growing accommodation occupancy rates in the off-season and high levels of investment in tourism products and transport infrastructure.
  • Build back better with a more innovative and resilient industry, maximising the potential for technology and data to enhance the visitor experience and employing more UK nationals in year-round quality jobs.
  • Ensure the tourism sector contributes to the enhancement and conservation of the country’s cultural, natural and historic heritage, minimises damage to the environment and is inclusive and accessible to all.
  • Return the UK swiftly to its pre-pandemic position as a leading European destination for hosting business events. 

The National Lottery will also launch a £10 million voucher scheme to encourage people to take holidays outside of the peak summer season. The scheme will provide National Lottery players the chance to claim vouchers to redeem at tourist attractions across the UK between September 2021 and March 2022. A rail “staycationers” pass for domestic tourists will also be launched later this year.

The plan seeks to capitalise on a year of celebration and renewal in 2022 with major events including Her Majesty The Queen’s Platinum Jubilee, the Festival UK 2022 and the Birmingham Commonwealth Games.

Source: HM Government Wed, 23 Jun 2021 00:00:00 +0100

Tax Diary July/August 2021

1 July 2021 – Due date for Corporation Tax due for the year ended 30 September 2020.

6 July 2021 – Complete and submit forms P11D return of benefits and expenses and P11D(b) return of Class 1A NICs.

19 July 2021 – Pay Class 1A NICs (by the 22 July 2021 if paid electronically).

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

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

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

1 August 2021 – Due date for Corporation Tax due for the year ended 31 October 2020.

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

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

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

Source: HM Revenue & Customs Tue, 22 Jun 2021 00:00:00 +0100
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