Tax Newsletter Sept 2019

Welcome to this month's issue of the Clarkson Cleaver & Bowes Ltd newsletter. 

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Newsletter September 2019


 

How to claim a personal tax refund

HMRC’s annual reconciliation of PAYE for the tax year 2018-19 is well under way. HMRC use salary and pension information to calculate if you have paid the correct amount of tax. The calculation is usually generated automatically by HMRC’s computer systems on what is known as a P800 form. If you are due a tax refund for 2018-19, you should receive a P800 by the end of September. If you owe additional tax you will usually receive the form by the end of October following the tax year in question.

 

If you are due a refund, the P800 form will usually tell you that you can claim a refund online. Once you complete the claim online, the refund will be paid within 5 working days and will be in your UK account once your bank has processed the payment. If you do not claim the refund online within 45 days, HMRC will send you payment by cheque. 

 

If your P800 tells you that you will be repaid by cheque, then you do not need to take any further action and you should receive a cheque within 14 days of the date on the P800 Tax Calculation.

 

If you have not received a P800 form but think that you have overpaid tax, then you can contact HMRC to inform them. If HMRC agree that you are due a tax refund, they will send you a P800 form.

 

You may be able to claim a refund if you:

 

  • are employed and had too much tax taken from your pay;
  • have stopped work;
  • sent a tax return and paid too much tax;
  • have paid too much tax on pension payments;
  • bought a life annuity.

 

We would be happy to assist you in making a tax refund claim.

 


 

VAT for business if there’s a no-deal exit from the EU

With the new Prime Minister, Boris Johnson, appearing to take an increasingly hard line the chances of Britain leaving the EU without any working agreement, known as a 'no deal' Brexit, are looking increasing likely and certainly cannot be ignored.

 

If the UK leaves the EU on 31 October 2019, without a deal, there would be immediate changes to the procedures that apply to businesses trading with the EU. It would be timely to repeat a summary of the VAT guidance published by HMRC reminding businesses how to prepare.

 

Listed below are some of the main VAT issues that will affect UK businesses trading with the EU in goods and services, if the UK leaves the EU without an agreement.

 

Imports

 

Businesses that are importing goods from the EU, would be required to follow customs procedures in the same way that they currently do when importing goods from a country outside the EU. This means that an import declaration would be required, customs checks and any customs duties due must be paid.

 

There would also be multiple VAT issues, including the requirement to account for import VAT on goods coming from the EU. The Government has already confirmed that postponed accounting for import VAT on goods brought into the UK, will be introduced if the UK leaves the EU without an agreement.

 

Exports

 

Any agreement in place businesses exporting goods to the EU, will be required to follow customs procedures in the same way that they currently do when exporting goods to a non-EU country.

 

VAT registered UK businesses will continue to zero-rate sales of goods to EU businesses and will no longer be required to complete EC sales lists. However, 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.

 

A 'no deal' Brexit would also mean the end of special VAT 'distance selling' rules for the zero-rated sale of goods to EU consumers, as well as changes to the UK VAT Mini One Stop Shop rules.

 

We would advise any UK businesses trading with the EU, to seriously consider what action will be required in the event of a 'no deal' Brexit and to prepare a carefully thought-out risk assessment.

 

 


 

When you can claim back VAT on purchase of a car

There are complex VAT rules that determine the amount of VAT that can be recovered when purchasing a new car. The usual rule is that when you purchase a car for your business then no VAT can be reclaimed.

 

The main exception to this rule is when the new car is used solely for business use. This rule has been the subject of much case law over the years, but it has generally been established that to qualify for VAT recovery the car must not be available for any private use and you must be able to demonstrate that this is so. Accordingly, a car should only be available to staff during working hours and should never be used for personal journeys.

 

It is also possible to claim back the VAT on a new car that is purchased for a specific business related activity such as: use as a taxi, self-drive hire car or a car for driving instruction.

 

If your business leases a car for business purposes, you can normally reclaim 50% of the VAT paid on the lease rentals. If the leased car is used exclusively for business purposes, 100% of the VAT can be reclaimed.

The rules are less complicated when you purchase a commercial vehicle such as a van, lorry or tractor that is only used for business purposes. In these cases, all the VAT charged on purchase can be reclaimed. The VAT incurred on the purchase of motorcycles, motor-homes and motor caravans, vans with rear seats (combi-vans) and car-derived vans can also be recovered if they are used solely for business purposes

 

 


 

VAT changes for CIS Sub-contractors

Important changes to the VAT rules for building contractors and sub-contractors are coming into effect from 1 October 2019. In a nut-shell, if you are subject to the Construction Industry Scheme (CIS) and if you are registered for VAT, from the 1 October 2019 you may need to change the way you account for VAT on supplies between sub-contractors and their contractor customers.

 

At present, sub-contractors registered for VAT are required to charge VAT on their supplies of building services to contractors. From 1 October, this approach is changing and sub-contractors will not add VAT to their supplies to most building customers, instead, contractors will be obliged to pay the deemed output VAT on behalf of their registered sub-contractor suppliers.

 

This does not mean that contractors, in most cases, are paying their sub-contractors’ VAT as an additional cost. When contractors pay their sub-contractors’ VAT to HMRC, they can claim back an equivalent amount as VAT input tax; subject to the usual VAT rules. Accordingly, the two amounts off-set each other.

 

The change is described as the Domestic Reverse Charge (DRC) for the construction industry. It has been introduced as an increasing number of sub-contractors have been registering for VAT, collecting the VAT from their customers, and then disappearing without paying the VAT collected to HMRC.

 

However, the change to DRC may create cash flow issues especially if you use the VAT Cash Accounting Scheme or the Flat Rate Scheme. We recommend that all affected CIS readers contact us so we can help you make the necessary changes to your invoicing and accounting software and reconsider the use of VAT special schemes if your continued use would adversely affect your cash flow.

 


 

Visiting EU after 31 October 2019

Although we have a new Prime Minister, it would seem that so far nothing has changed to bring us any closer to a Brexit resolution. In fact, it appears that a no-deal Brexit is becoming more likely as we approach the 31 October deadline.

 

HMRC has published guidance on visiting the EU after 31 October 2019. They have said that there will be significant changes to the rules for EU travel if there is a no-deal Brexit. This would affect you if you visit the EU, Iceland, Liechtenstein, Norway or Switzerland from the time the UK is due to leave the EU at 23:00 GMT on 31 October 2019.

 

If you hold a British passport, you will need to ensure that your passport is valid for at least six months on the day you travel and be less than 10 years old (even if valid for more than 6 months). These rules will not apply for travel to Ireland, in this case you will be able to travel as long as your passport is valid for the length of your stay in Ireland. Even if there is a no deal, you will not need a visa for short trips according to European Commission proposals.

 

There will also be changes at border control.

 

  • If there is a deal, there will be no changes to how you enter the EU or Iceland, Liechtenstein, Norway and Switzerland until at least 31 December 2020.
  • If there is a no-deal Brexit, your EHIC card may not be valid and you must ensure that you have proper health insurance coverage. The EHIC card will remain valid if there is a deal and it will also apply in Iceland, Liechtenstein, Norway and Switzerland.

 

In the event of a no-deal exit, there will also be other immediate changes for visiting the EU including the rules for driving, pet travel and mobile data roaming.

 

 

 


 

Pregnant women and new parents to get enhanced redundancy protections

The government has published its response to its January 2019 consultation on “pregnancy and maternity discrimination: extending redundancy protection for women and new parents” and has confirmed that it will now take action to address such discrimination.

 

As the law currently stands, employees who are placed at risk of redundancy when they are absent on maternity, adoption or shared parental leave have an absolute right to be offered a suitable alternative vacancy, where one is available, in priority to other employees who are also at risk of redundancy. They do not need to apply for the vacancy, nor must they undertake a competitive interview process. However, this protection does not currently apply to pregnant employees who have not yet started their maternity leave, nor does it apply to those who have recently returned to work from maternity, adoption or shared parental leave. 

 

The government has now stated that it will:

 

  • Ensure the redundancy protection period applies from the point the employee informs the employer that she is pregnant, whether orally or in writing
  • Extend the redundancy protection period for six months once a new mother has returned to work (and it is expected this period will start immediately once maternity leave is finished, notwithstanding any additional leave which may immediately follow)
  • Extend the redundancy protection into a period of return to work for those taking adoption leave, following the same approach being provided for those returning from maternity leave, i.e. protection for six months
  • Extend the redundancy protection into a period of return to work for those taking shared parental leave, taking account of the following key principles and issues: (a) the key objective of the policy is to protect pregnant women and new mothers from discrimination; (b) the practical and legal differences between shared parental leave and maternity leave mean that it will require a different approach; (c) the period of extended protection should be proportionate to the amount of leave and the threat of discrimination; (d) a mother should be no worse off if she curtails her maternity leave and then takes a period of shared parental leave; and (e) the solution should not create any disincentives to take shared parental leave. The government will therefore consult further on the design of this protection over the coming months
  • Establish a taskforce of employer and family representative groups to make recommendations on what improvements can be made to the information available to employers and families on pregnancy and maternity discrimination. It will also develop an action plan on what steps the government and other organisations can take to make it easier for pregnant women and new mothers to stay in work.

 


 

Government to end free movement if a no-deal Brexit

If the UK leaves the EU without a deal in place on 31 October 2019, EU, EEA and Swiss citizens (and their family members) who are living in the UK by this date will still be eligible to apply for settled or pre-settled status under the EU Settlement Scheme and they will have until 31 December 2020 to do so.

 

Under Theresa May’s Government, in the event of a no-deal Brexit, temporary transitional arrangements were to be put in place for those EU, EEA and Swiss citizens arriving in the UK after exit day but on or before 31 December 2020. Under those transitional arrangements, EU, EEA and Swiss citizens would be able to come to the UK for up to three months to visit, work or study without applying for a visa. However, those who wished to stay in the UK for more than three months, would need to apply to the Home Office for the new status of “European Temporary Leave to Remain” (ETLR) and they would need to apply within three months of entry. ETLR was to be valid for a maximum of three years and would allow work and study, but it would not lead to indefinite leave to remain in the UK. A new immigration system would then take effect from 1 January 2021. Irish citizens do not need to obtain settled status and would not need to apply for ETLR.

 

However, the new administration, under new Prime Minister Boris Johnson, has now stated that the UK is leaving the EU on 31 October 2019 come what may, and that free movement will end immediately if the UK leaves without a deal. In the event of a no-deal Brexit, it is therefore seeking to introduce a new immigration system to take effect immediately from exit day, abandoning the proposed ETLR arrangements set out above. With only just over two months to go until exit day, there is no indication yet about what the requirements of this new immigration system will be. The Home Office has said that the new plans are being developed and will be announced shortly. In the meantime, it has confirmed that EU, EEA and Swiss citizens will still be able to come to the UK on holiday and for short trips, but what will change is the arrangements for them to come to the UK for longer periods of time and for work and study. 

 

As a precaution, if you currently employ any EU, EEA and Swiss citizens who have not yet applied for settled or pre-settled status, you should advise them to do so before 31 October 2019, particularly if they intend to travel outside the UK after that date, so as to reduce possible difficulties in verifying their UK immigration status on re-entry. At the same time, in the event of a no-deal Brexit, any EU, EEA or Swiss citizens proposing to relocate to the UK for work after 31 October 2019 should not assume they will be able to do so without prior immigration permission. This means UK businesses currently have no idea whether they can recruit EU, EEA and Swiss citizens for vacancies with a start date after exit day. Finally, it is also not now clear how right to work checks are to be made on EU, EEA and Swiss citizens immediately after exit day in the event of a no deal.

 


 

Last chance to join the Help to Buy ISA scheme

The Help to Buy ISA scheme will close to new savers after 30 November 2019. This leaves less than 4 months to open an account before the product is due to be withdrawn by the Government. Once opened, account holders can continue to save in their ISA account until 30 November 2029 when accounts will close to additional contributions. Bonuses can be claimed until 1 December 2030.

 

The scheme allows savers to claim a Government bonus of 25% on monthly savings of up to £200 on savings towards their first home. The bonus translates to an extra £50 added to every £200 saved up to a maximum governmental contribution of £3,000 on £12,000 worth of savings.

 

Savers can make an initial deposit of £1,200 (the monthly maximum plus an extra £1,000). The bonus is only payable on the purchase of a first home. The scheme is limited to one per person (not one per home) so two people buying a home together can both receive a bonus. The bonus is available on home purchases of up to £450,000 in London and £250,000 outside London and can only be claimed against the deposit for a new home. It cannot be used to pay solicitors, estate agents or any other costs associated with buying a home.

 

If you are a first-time buyer and planning to buy a property in the short to medium term future, you should consider whether you would benefit from this scheme. The scheme is open to first-time buyers aged over 16.

 


 

 

Tax Diary September / October  2019

 

1 September 2019 - Due date for Corporation Tax due for the year ended 30 November 2018.

19 September 2019 - PAYE and NIC deductions due for month ended 5 September 2019. (If you pay your tax electronically the due date is 22 September 2019)

19 September 2019 - Filing deadline for the CIS300 monthly return for the month ended 5 September 2019. 

19 September 2019 - CIS tax deducted for the month ended 5 September 2019 is payable by today.

1 October 2019 - Due date for Corporation Tax due for the year ended 31 December 2018.

19 October 2019 - PAYE and NIC deductions due for month ended 5 October 2019. (If you pay your tax electronically the due date is 22 October 2019.)

19 October 2019 - Filing deadline for the CIS300 monthly return for the month ended 5 October 2019. 

19 October 2019 - CIS tax deducted for the month ended 5 October 2019 is payable by today.

31 October 2019 – Latest date you can file a paper version of your 2019 self-assessment tax return.


       


DISCLAIMER - PLEASE NOTE: The ideas shared with you in this email are intended to inform rather than advise. Taxpayers circumstances do vary and if you feel that tax strategies we have outlined may be beneficial it is important that you contact us before implementation. If you do or do not take action as a result of reading this newsletter, before receiving our written endorsement, we will accept no responsibility for any financial loss incurred.