More time to pay your tax bills

In his Winter Economy Plan, the Chancellor, Rishi Sunak, unveiled measures which will allow self-assessment taxpayers and VAT-registered businesses more time to pay back deferred tax.

New Payment Plan for VAT

At the start of the pandemic, VAT-registered business could delay paying VAT where it fell due between 20 March 2020 and 30 June 2020. VAT falling due after that date – i.e. that for VAT quarters ending on or after 31 May 2020 – must be paid in full and on time.

Under the original proposals, if you took advantage of the opportunity to defer paying your VAT due to Coronavirus, you had until 31 March 2021 to pay it. However, if this is likely to be difficult, you can take advantage of the New Payment Plan for VAT and instead pay your deferred VAT in 11 interest-free instalments over the 2021/22 tax year. This will mean that you will have an additional year – until 31 March 2022 rather than 31 March 2021 – to pay the full amount. To take advantage of the instalment option, you will need to opt in. HMRC will publish details of how to do this over the coming months.

Enhanced Time-to-Pay for self-assessment

If you owe tax under self-assessment, you will be able to use enhanced Time-to-Pay arrangements to set up a monthly repayment plan online, without the need to call HMRC. Taxpayers can now use this service as long as they do not owe more than £30,000 in tax. Previously, the service was only available to taxpayers owing £10,000 or less.

Self-assessment taxpayers were able to opt to delay the second payment on account for 2019/20, which was due by 31 July 2020. Under the original proposals, the deferred tax had to be paid by 31 January 2021, together with any balancing payment for 2019/20 and the first payment on account for 2020/21.

If you need more time to pay your tax, you can use HMRC’s self-service facility to set up a Time-to-Pay plan. This will give you an additional 12 months (until 31 January 2022) in which to pay the second payment on account for 2019/20, any balancing payment for 2019/20 and the first payment on account for 2020/21.

Get in touch

October 29, 2020

Further extension to the SEISS

To help self-employed individuals who continue to be affected by the COVID-19 pandemic, the Self-Employment Income Support Scheme (SEISS) has been extended for a further six months, from November 2020 to April 2021.

Grants payable under the extended scheme

The extended scheme will provide two taxable grants for the self-employed. Availability of the grants is limited to those who meet the eligibility conditions for the scheme and who are actively continuing to trade, but are facing reduced demand as a result of COVID-19.

The first grant covers the three-month period from 1 November 2020 to 31 January 2021. It will be based on 40% (rather than 20%, as originally announced) of average monthly profits for a period of three months, capped at £3,750 in total.

The second grant will cover the three-month period from 1 February 2020 to 30 April 2021. The level of the second grant has yet to be set.

As with the earlier grants, any grant that you receive under the extended scheme is taxable and subject to National Insurance.

HMRC are to provide details in due course on claiming the grants.

Talk to us

October 15, 2020

Job Support Scheme

The Job Support Scheme replaces the Coronavirus Job Retention Scheme from 1 November 2020. The scheme, which has already evolved since it was originally announced to provide a greater level of support, will run for six months until 30 April 2021. The Government will review the level of support provided under the scheme in January 2021.

Nature of the scheme

The Job Support Scheme provides grants to eligible employers to enable them to pay employees who are working reduced hours as a result of the impact of the COVID-19 pandemic, or who are unable to work because the business has been required to shut as a result of lockdown restrictions. There are two strands to the scheme – one for open businesses and one for closed business.

Support for open businesses

The Job Support Scheme for open businesses allows you to claim a government grant to top-up the wages of your employees who are working at least 20% of their usual hours. You must pay the employee for the hours worked at their contracted rate. To be eligible to claim a grant, you must also pay the employee for 5% of their usual hours that are unworked, again at the contracted rate. Your contribution for unworked hours is capped at £125 per month. You can claim a grant for 61.67% of the employee’s unworked hours from the Government. The Government will pay those hours at the employee’s usual rate, subject to a cap of £1,541.75 per month. The cap will apply where the employee earns more than £3,125 per month.

Your employee will receive pay for the hours worked and for two-third of their usual hours that they are not able to work. The percentage of their normal pay that an employee receives depends on the proportion of their usual hours that they work. An employee who works 20% of his or her usual hours will receive 73% of their pay, whereas an employee who works one-third of their usual hours will receive just under 78% of their pay.

The level of support now available under the scheme is higher than was originally announced. Under the original proposals, employees had to work at least one-third of their usual hours to be eligible for a grant, with the employer paying one-third of the unworked hours and the Government paying a further third (capped at £697.62 per month). The reduction in the hours worked requirement, and the substantial reduction in the employer contribution, are to be welcomed. In its original format, the costs imposed on the employer would have meant that for many businesses struggling to survive, the scheme was not viable.

Amounts paid to employees benefitting from the Job Support Scheme are liable to tax and National Insurance, as for usual payments of wages and salary. You must account for these as normal through your payroll and pay the deductions over to HMRC, with your employer’s National Insurance. You will be required to meet the full cost of the employer’s National Insurance on the total payment made to the employee, including the grant element – you cannot claim this back from the Government. Pension contributions under auto-enrolment must be paid as normal, as must the apprenticeship levy.

More details of the scheme, together with examples of how it will work in practice, can be found in the factsheet published by the Government.

Support for closed businesses

The Job Support Scheme for closed businesses provides a higher level of support to business which are required to close as a result of local lockdown restrictions, such as pubs not serving substantial meals in Tier 3 lockdown areas. If your business is restricted to delivery or collection services only as a result of lockdown restrictions, you will also qualify for the scheme for closed businesses.

If you are forced to close due to lockdown restrictions imposed by one of the four governments in the UK, you will be able to claim a grant with which to pay your employees, as long as your employees are instructed to cease work for at least seven consecutive days, and actually do so. You cannot claim a grant for employees who are working from home.

Unlike the open scheme, you do not need to pay the employee for any unworked hours. Instead, you can claim a grant of two-thirds of the employee’s usual pay, subject to a cap of £2,100 per month. The grant will cover wages paid to employees who are unable to work. The scheme will mean that workers who are not subject to the cap will receive two-third of their usual pay. You can top up your employees’ pay if you want to, but there is no obligation to do so.

You will, however, have to pay employer’s National Insurance on grant payments, and also any employer pension contributions and the apprenticeship levy as normal. You must deduct PAYE tax and employee’s National Insurance contributions from payments made to employees, and report pay and deductions to HMRC under RTI.

The Government factsheet on the scheme for closed businesses provides more details.

Eligible employers

You will be eligible to claim a grant under the relevant Job Support Scheme if you have a UK bank account and a UK PAYE scheme which was registered, and in respect of which an RTI submission had been made, on or before 23 September 2020. You do not need to have used the Coronavirus Job Retention Scheme to be eligible to use the Job Support Scheme.

Under the scheme for open businesses, a financial impact test applies to large businesses with 250 or more employees. If you fall into this category, you will have to demonstrate that your turnover is not above the level that it was before you experienced difficulties as a result of the COVID-19 pandemic.

If you claim under the Job Support Scheme, you will still be eligible to claim the Job Retention Bonus, as long as the qualifying conditions are met.

Claiming the grant

Grants are payable in arrears. Unfortunately, this means that you must pay the money to your employees before you receive it back from the Government, and report the payments and deductions to HMRC via RTI. While this will limit fraudulent claims, it may cause cash flow problems for businesses who have either been forced to close or are operating at reduced capacity. You may need extra funding to cover the first month. Grants payable to businesses in Tier 2 and 3 lockdown areas may help bridge the gap.

Claims must be made online via the dedicated portal, which is due to open on 8 December 2020. Claims will be paid on a monthly basis.

Speak to us

Speak to us to find out what help may be available to you under the Job Support Scheme.

October 8, 2020

Postponed VAT accounting

Postponed VAT accounting is being introduced from 1 January 2021. This will affect you if you are VAT-registered and you import goods into the UK, particularly if you are a smaller business and you do not currently use the Duty Deferment Scheme. Postponed VAT accounting will apply to goods imported into the UK from all countries, regardless of whether they are in the EU or not.

Nature of postponed VAT accounting

The Brexit transition period comes to an end on 31 December 2020. From 1 January 2021, if you are a VAT-registered business in the UK, you will be able to account for import VAT on your VAT return for goods imported from anywhere in the world. This is good news as it means that you will declare and recover VAT on the same VAT return, rather than having to pay it upfront and recover it at a later date. This will be beneficial from a cash flow perspective.

The introduction of postponed accounting does not change the VAT that can be recovered as input tax; normal rules continue to apply.

Accounting for import VAT on your VAT return

You can start to account for import VAT on your VAT return from 1 January 2021. You do not need to be authorised in order to do so.

You can account for import VAT on your VAT return if:

you import goods for use in your business;
you include your EORI number, which starts with ‘GB’, on your customs declaration; and
you include your VAT registration on your customs declaration where needed.

You can also account for import VAT on your VAT return if you use certain customs special procedures, or if you release excise goods for use in the UK (also known as ‘released for home consumption’).

If you are eligible to defer submitting your supplementary declaration for up to six months, you must account for import VAT on your VAT return.

Customs special procedures

If you initially declare goods using one of the following special procedures, you can account for import VAT on your VAT return when you submit the declaration to release the goods into free circulation. The relevant customs special procedures are:

customs warehousing;
inward processing;
temporary admission;
end use;
outward processing; and
duty suspension.

Completing your VAT return

From 1 January 2021, there are some changes in the way in which you will need to complete your VAT return if you are a UK VAT-registered business importing goods into the UK and you account for import VAT on your VAT return.

You will be able to download an online monthly statement which will show the total import VAT postponed for the previous month, and which should be included on your VAT return. You should keep this statement for your records.

The changes affect boxes 1, 4 and 7.

In Box 1, you must include the VAT due in the VAT accounting period on imports accounted for through postponed accounting.

In Box 4, you must include the VAT reclaimed in the VAT accounting period on imports accounted through postponed VAT accounting.

In Box 7, you must include the total value of all imports of goods included on your monthly online statement, excluding any VAT.

If you are eligible to defer your customs declarations, you must account for import VAT on the VAT return that covers the date on which you imported the goods. To do this, you will need to estimate the import VAT that is due from your records of the imported goods. When you submit your deferred declaration, your next online monthly statement will show the amount of import VAT due on that declaration. You must then account for any difference between the estimated figure and actual figure for the import VAT on your next VAT return.

When you can’t use postponed accounting

If you are authorised to use simplified declarations for imports and you complete your simplified frontier declaration before 1 January 2021, you will not be able to use postponed accounting to account for import VAT on your VAT return. This is the case even if you complete your supplementary declaration after 1 January 2021.