Monthly Archives: September 2019

government-delays-introduction

Government delays introduction of VAT reverse charge!

The controversial introduction of the VAT reverse charge in the construction sector has been postponed by a year and will now take place on 1 October 2020, following concerns that the industry wasn’t ready for this monumental change.

The new VAT reverse charge had been due to come into force on 1 October this year, but having been informed by industry bodies that this would cause chaos, the Government has relented and provided a 12-month extension.

HM Revenue & Customs has said it “remains committed to the introduction of the reverse charge and has already increased compliance resource”.

From October 2020, it will become the responsibility of the contractors supplying construction services who are deemed to be an end user to pay over the VAT that would have previously been charged and accounted for by their sub-contractors.

The regime affects all VAT registered contractors and sub-contractors supplying and receiving services covered by the construction industry scheme, which are liable for VAT at the standard or reduced rate.

Supplies which will be affected by the reverse charge include, but are not limited to:

  • constructing, altering, repairing, extending, demolishing or dismantling buildings including walls roadworks railways aircraft runways and harbours.
  • installing heating, lighting, air-conditioning, ventilation, power supply, drainage, sanitation, water supply or fire protection systems in any building and even the internal cleaning of buildings and structures, so far as carried out in the course of their construction etc.
  • the painting or decorating of the inside or the external surfaces of any building or structure is included.

The VAT reverse charge also covers materials supplied with these services.

The rules concerning the VAT liability of construction services are complex and will, from October 2020, effectively be determined for the entire supply chain of contractors by the final contractor in the chain.

Contractors and sub-contractors further down the chain of supply will lose the cash flow advantage gained from being paid before having to account for VAT on a VAT return, so they should prepare themselves for this.

Although there is now a 12-month delay, it is still essential that those in the industry begin to take steps now to prepare themselves for the changes in 2020.

If you require help with the VAT reverse charge, please contact us today.

making-a-voluntary-disclosure

Making a voluntary disclosure to HMRC

Taxpayers are actively encouraged by HM Revenue & Customs (HMRC) to inform the tax authority if they realise that they did not pay the correct tax at any time in the past.

This process is known as a voluntary disclosure and will usually allow a taxpayer to settle their affairs and settle any underpayment without the imposition of significant penalties.

In the last few years, there have been many high-profile disclosure campaigns for certain sectors, but the process is available to all taxpayers should they require it.

Below we have summarised how to make a voluntary disclosure to HMRC if you are an individual or company and are not eligible for an HMRC campaign.

How to make a disclosure

To make a voluntary disclosure, an individual or company can use the Digital Disclosure Service (DDS) to update HMRC that the correct amount of income tax, Capital Gains Tax (CGT), National Insurance (NI) contributions or Corporation Tax has not been declared.

How to notify and disclose to HMRC

As soon as you know you owe tax, you must tell HMRC that you intend to make a disclosure. At this stage, you do not need to give any details of the undisclosed income or the tax you believe you owe.

Individuals and companies can notify HMRC by completing the DDS form. Afterwards, HMRC will provide you with your unique Disclosure Reference Number (DRN) and Payment Reference Number (PRN) to use when paying what you owe.

You must disclose and pay within 90 days of the date that HMRC acknowledges your notification.

Prepare your disclosure

Once you have calculated the income you need to disclose, you will need to work out how much tax you owe on that income. The rates of Income Tax you’ll pay depend on how much income you earn above your Personal Allowance.

Please note, you do not need to include any income in your disclosure that you have already declared because tax should already have been paid on this income.

The number of years that you need to disclose depends on how the error occurred, as well as when you should have told HMRC about getting this income or gain.

As part of your disclosure, you will make an offer to pay your outstanding liabilities. The offer, together with HMRC’s acceptance letter will create a legally binding contract between you and HMRC.

Pay HMRC 

You should send your payment at the same time as you send your disclosure; at this point, you will need your PRN to complete the transaction.

HMRC should receive it no later than the 90-day deadline given on your notification acknowledgement letter.

After HMRC gets your disclosure

If HMRC is satisfied that you have made a full disclosure, they will accept and send you an acknowledgement within two weeks.

If they cannot accept the disclosure, they will contact you and if HMRC finds that a disclosure is largely wrong they will seek much higher penalties.

Link: Voluntary disclosure guidance

MTD-for-VAT-filing-deadline

MTD for VAT filing deadline missed by one in ten businesses

HM Revenue & Customs (HMRC) has reassured the 120,000 businesses that failed to meet the 7 August deadline for Making Tax Digital (MTD) for VAT that the tax authority will not be issuing fines to them for missing the date.

Under MTD, all businesses with a turnover of £85,000 or more must keep computer-based records and file their VAT return using HMRC-compliant software.

The latest figures suggest that around one in four firms failed to meet the deadline, meaning that the taxman could have issued tens of millions of pounds in fines, which could be between £100 and £400, depending on the turnover of the business.

However, HMRC has said that it will adopt a ‘light touch’ approach to penalties in the first instance and, according to officials, the organisation is also giving leeway to businesses because of the possibility of a no-deal Brexit.

Although the taxman is showing leniency now, it has been clear that late filings will be punishable with fines after the ‘soft landing’ period ends in April 2020, even though recent research has found that the majority of business owners say they feel unprepared for MTD.

The research, conducted by YouGov, found that only 12 per cent of business owners said they were ‘very prepared’ for MTD, and 28 per cent of small firms said they were worried about the costs of ensuring compliance. More worryingly, 12 per cent of those polled said they had not even heard of MTD, despite the 7 August deadline, which has now passed.

Link: One in 10 business miss MTD VAT filing deadline

boots-asda-and-specsavers

Boots, Asda and Specsavers push back against business rates

Some of the UK’s top retail stores, including Asda and Boots, have joined the fight against spiralling business rates.

It comes after many leading retail bodies published a letter calling for the Chancellor of the Exchequer, Sajid Javid, to address tax rules to boost the UK high street.

The Association of Convenience Stores (ACS) joined the British Retail Consortium (BRC), the Booksellers Association, Asda, Boots, the Co-op, and Specsavers, among many others, in signing the letter.

According to the latest data, the retail sector accounts for 10 per cent of all business taxes and 25 per cent of all business rates despite accounting for just five per cent of the economy.

This has in part been attributed to business rates rising by more than 50 per cent since they were introduced in the 1990s, resulting in the UK having one of the highest commercial property taxes in the world.

Evidence also shows that a huge number of retailers are not able to keep on top of the spiralling rates. The most recent statistics show that retail unit vacancy rates have risen to 10.3 per cent – the highest rate in almost five years.

The retailers have now called on the Government to put business rates front and centre of future policy decisions to prevent the death of the British high street.

Addressing the major challenges posed, the letter makes four recommendations, summarised below:

  • A freeze in the business rates multiplier;
  • Fixing transitional relief, which currently forces many retailers to pay more than they should;
  • Introducing an ‘Improvement Relief’ for ratepayers;
  • Ensuring that the Valuation Office Agency is fully resourced to do its job.

Commenting on the letter, James Lowman, the Chief Executive of the ACS, said: “It’s a really outdated system, it’s designed for a time when there only was physical retail, and people doing business from physical premises. That has been changing for a long time.

“The biggest thing is the way it’s a disincentive to investment – so if you take a retail shop and you improve it, you put in things that are not just important to the business, but are probably important to that community, like CCTV, solar panels perhaps, bringing in a cash machine, that sees your business rates bills significantly increase.

“Now surely it should be the other way around. We should be encouraging and incentivising investment, rather than penalising businesses for it.”

Link: Enabling the Prime Minister’s economic package to boost local investment

half-of-all-smes-make

Half of all SMEs make VAT return mistakes

Half of all small-medium sized enterprises (SMEs) make errors when filing their VAT returns, according to the latest research.

The data also revealed that just 27 per cent of small businesses are confident that they have filed their return correctly, even though they have spent more than an hour checking their figures.

The first online filing under the Making Tax Digital for VAT system fell in August, with the survey conducted by QuickBooks to find out how small businesses are coping with the change.

On average, businesses spend 86 minutes checking their figures before sending their VAT return to HM Revenue & Customs (HMRC).

The research found that more than a quarter (27 per cent) of businesses overpaid and received money back from HMRC as a result, while 18 per cent received fines due to their mistakes.

One-third of small business owners felt relieved once their VAT return was completed, with 19 per cent worrying that they have forgotten something and 18 per cent feeling anxious that they may have made an error.

Link: Half of small businesses make VAT return errors

tax-investigations-reap

Tax investigations reap in £13 billion for the treasury

The latest official data from HM Revenue & Customs (HMRC) shows that the actual cash collected from all tax investigations hit £13 billion in 2018/19.

This was up 27 per cent from the previous tax year in which £10.3 billion was collected. The data also showed that transfer pricing fines for multinationals have risen to £413,000.

The greater yield from tax investigations seems to have been driven in part due to payments HMRC has received ahead of the loan charge being introduced in April 2019.

A considerable amount was also recovered as a result of HMRC’s offshore tax campaign last year.

In addition, technology is playing a greater role in investigations, as HMRC has become more successful at identifying cases for investigation that are likely to result in large amounts of extra tax being collected.

Despite the headline figure, the bulk of this increase is made up of hypothetical estimates, such as ‘revenue losses prevented’ and ‘future revenue benefit’.

Meanwhile, HMRC’s crackdown on aggressive use of transfer pricing has seen the fines imposed on multinational businesses increase tenfold, indicating that the new country-by-country reporting (CBCR) rules are having an impact on compliance.

In 2018/19 HMRC imposed £413,437 in fines, compared to just £45,600 in 2015/16. The clampdown on these irregularities has also helped the tax authority to secure an additional £6.5 billion of tax in the years between 2012/13 and 2017/18.

Link: HMRC annual report and accounts: 2018 to 2019

how-to-tell-if-an-email

How to tell if an email is fraudulent

Email scams have become increasingly common, with fraudsters claiming to be from companies, banks and even HM Revenue & Customs (HMRC) to obtain your data and bank details.

The fraud, which is also known as a phishing scam, can also involve malicious software that can infect your device with a virus.

To stay protected, here are our top tips to tell if an email is fraudulent.

Check the email address

The contact name on the email may appear to be genuine, but if you hover over or right-click onto the email address that corresponds with this, it is often a series of letters or numbers that are not genuine.

Check the contact information

If you’re unsure about the legitimacy of the email, see if there is a ‘contact us’ section at the bottom. If there isn’t, this is unusual, as marketing emails usually include a link back to the company’s website or contact information. If there is, is it genuine?

You can check where the hyperlink takes you by hovering your cursor over the link.

You may also see certain minor details such as copyright information or competition closing dates that may be inaccurate, which will alert you to the illegitimacy of the email.

You must check the validity of any link you click from an email, ensuring that it is authentic. If you’re unsure, you can search the company and find their website, then compare it to the address in the email.

Check the content

Is the writing impersonal? If it doesn’t use your name, this could be a sign that it is a scam.

Other details such as inaccurate spelling or poor grammar are a sure sign that the email is not legitimate, while images and branding may appear to be particularly poor quality.

The information may not match a previous email you received from the company or Government body.

Are they asking for personal data?

Asking for personal information or bank details via an unexpected email is a warning sign. Most companies would never do this, and it is most likely a scam.

Still unsure?

If you’re still unsure if an email is fraudulent or not, you can check with the real company, body or organisation.

You can get in touch with them via their social media page or by going directly to their website to find their contact information or customer services page.

Link: Avoid and report internet scams and phishing