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Month: July 2020

Making Tax Digital – the next steps

Making Tax Digital – the next steps

On 21 July, the Treasury published a report, Building a trusted, modern tax administration system, which sets out the Government’s vision of what they wish to achieve in the next ten years. The vision comprises three elements – policy, systems and law and practice. The ‘policy’ vision means a progressive extension of HMRC’s Making Tax Digital (MTD) work, the ‘systems’ vision means exploring the appropriate timing and frequency for the payment of the different taxes and the technology infrastructure needed to support this, and the ‘law and practice’ vision means reform of the tax administration framework itself.

Extension of MTD

HMRC’s MTD programme is currently in the initial roll-out phase for VAT. Since April 2019, MTD for VAT (MTDfV) is mandatory for most VAT-registered traders whose VAT-taxable turnover is above the VAT registration threshold of £85,000. As a result of a recent Government announcement, the next phase will be to extend the scope of MTD to the VAT registered with turnover below £85,000 from April 2022 and then to introduce MTD for Income Tax for the self-employed and unincorporated landlords from April 2023.

MTD for VAT

MTDfV is compulsory for VAT-registered traders whose taxable turnover is above the VAT registration threshold of £85,000. Traders within its scope must maintain digital VAT records and file digital returns using MTD-compliant software. However, the requirement for digital links to be in place between all parts of process has been delayed by one year as a result of the COVID-19 pandemic and will now apply from the first VAT return period starting on or after 1 April 2021. A digital link is simply the transfer or exchange of information between software programmes without the need for manual input of data.

MTD for Income Tax

Businesses and landlords with annual business income chargeable to Income Tax of more than £10,000 will need to comply with MTD for Income Tax from the start of their first accounting period that starts on or after 6 April 2023. This will necessitate the keeping of digital records and the use of software to send in-year updates of their income and expenditure to HMRC, at least quarterly, instead of filing annual post year end information when submitting a self-assessment tax return.

In addition to the four ‘in-year’ updates, at the end of the accounting period the taxpayer will need to finalise their business income by filing a final adjusting submission and making a declaration that it combined with the earlier submissions is correct. The final declaration will replace the current self-assessment return filed after the end of the tax year.

More information about MTD for income tax can be found on the Gov.uk website.

MTD for Corporation Tax

HMRC are to consult later in 2020 on the design of the MTD system for Corporation Tax to ensure that the MTD process evolves to include limited companies.

Help and advice

We can help you prepare for and comply with MTD.

July 30, 2020

Bonus for employers who retain furloughed staff

Bonus for employers who retain furloughed staff

The Chancellor, Rishi Sunak, presented A Plan for Jobs at the time of the Summer Economic Update on 8 July 2020. This included incentives for employers who retain furloughed staff and who offer training and apprenticeships.

Job Retention Bonus

The Coronavirus Job Retention Scheme (CJRS) is now in its final phase. Government support under the scheme is withdrawn gradually from August and the scheme comes to an end on 31 October 2020. Where staff are still furloughed in October, employers will need to decide whether they can bring their furloughed employees back to work.

To encourage employers to retain furloughed staff, a bonus – the Job Retention Bonus – of £1,000 will be paid to the employer for each furloughed employee who is employed continuously from the end of the CJRS until 31 January 2021. However, to qualify for the bonus, the employer must pay the employee, on average, earnings that are at least equal to the lower earnings limit for Class 1 National Insurance purposes, set at £120 per week (£520 per month) for 2020/21.

The Government will pay the bonuses from February 2021.

The scheme is not without its critics, with Jim Harra, Chief Executive of HMRC, questioning whether it offers value for money. Some employers, including Primark and Rightmove, have stated that they will not claim the bonus.

Kickstart Scheme

The Chancellor also unveiled plans to fund a new Kickstart Scheme providing £2 billion of funding to create high-quality work placements aimed at young people between the ages of 16 and 24 who are on Universal Credit and who are deemed to be at risk of long-term unemployment. Funding for each job will cover 100% of the relevant National Minimum Wage for 25 hours a week, plus the associated employer’s National Insurance contributions and employer pension contributions under auto-enrolment (where relevant).

Traineeships

Funding of £111 million is to be made available to fund work placements and training for 16 to 24 year olds. The Government will pay employers who provide trainees with work experience £1,000 per trainee. The funding will expand the provision of and eligibility for traineeships for those with Level 3 qualifications and below.

Apprenticeships

Employers who hire new apprentices will also receive funding from the Government. Where employers take on a new apprentice between 1 August 2020 and 31 January 2021, they will receive a payment of £2,000 for each new apprentice under the age of 25 that they hire and £1,500 for each new apprentice aged 25 and over. These payments are in addition to the existing £1,000 provided by the Government for apprentices aged 16 to 18 and to those aged under 25 with an Education, Health and Care Plan.

Contact us

Contact us to find out how you can benefit from the incentives on offer.

July 22, 2020

New rules for claims under the CJRS

New rules for claims under the CJRS

The second and final phase of the Coronavirus Job Retention Scheme (CJRS) runs from 1 July 2020 to 31 October 2020. During this phase, furloughed workers may return to work part-time under the flexible furloughing provisions. New rules also apply from 1 July 2020 to determine the length of the claim period.

Claims must start and finish in same calendar month

For claim periods ending on or before 30 June 2020, there was no maximum length for the period for which a claim could be made. However, for claim periods starting on or after 1 July 2020, claims must start and end in the same calendar month. This is because the amount payable under the scheme differs in each month as support under the scheme is phased out.

Where the furlough period for which a grant is being claimed spans more than one calendar month, the period must be split and two claims made. For example, if employees are furloughed for three weeks from 20 July 2020 to 9 August 2020, one claim should be made for the period from 20 July 2020 to 31 July 2020 (12 days) and a further claim should be made for the period from 1 August 2020 to 9 August 2020 (9 days).

Claim period must be at least seven days

Claims for periods starting on or after 1 July 2020 must cover at least seven days, unless the period spans more than one calendar month and the claim relates to the last few days in one month or the first few days in the next month. Where this is the case, a claim can only be made for fewer than seven days if the claim includes the first or the last day of the month, and a claim has been made for the period ending immediately before it.

Only one claim per period

Only one claim can be made for each period. This means that all furloughed or flexibly furloughed employees must be included in the same claim. Where a subsequent claim is made, the subsequent claim cannot overlap with other claims that have been made.

If an employee has been furloughed or flexibly furloughed continuously, the claim periods must follow on from each other with no breaks. For example, an employer could make a claim each week. The claim must include all employees furloughed or flexibly furloughed that week. The first day of the next claim period must be the day after the last day of the previous claim period.

Cap on number of employees

The number of employees who can be included in a claim for a period starting on or after 1 July 2020 cannot be more than the maximum number of employees under any claim ending on or before 30 June 2020. This is subject to an exception where an employee returns from statutory leave and is furloughed on their return.

We can help

We can help you work out your claim periods for claims under the CJRS and assist you in making the claim.

July 16, 2020

Reduced rate of VAT for hospitality sector

Reduced rate of VAT for hospitality sector

To support businesses and jobs in the hospitality sector, the reduced (5%) rate of VAT applies to supplies of food and non-alcoholic drinks from restaurants, pubs, bars, cafés and similar establishment across the UK for a temporary period from 15 July 2020 to 12 January 2021.

The reduced rate of VAT (5%) also applies to supplies of accommodation and admissions to attractions during this period.

Guidance on the application of the reduced rate can be found on the Gov.uk website.

Speak to us

If you operate in these sectors, talk to us about what the reduced rate of VAT will mean for you.

July 2, 2020