Changes to VAT, tax and other costs
In early June, HM Revenue & Customs (HMRC) announced that firms that failed to cancel their direct debit in time and payment was taken may be eligible for a refund.
The quickest way for taxpayers to make a claim, according to HMRC, is to submit a Direct Debit Indemnity Claim to their bank, ensuring that they state they want to claim a refund under the Direct Debit Indemnity Scheme (DDI).
Read more about deferring payments to HMRC below.
Support for businesses paying tax
All businesses and self-employed people in financial distress and with outstanding tax liabilities, may be eligible to receive support with their tax affairs through HM Revenue & Customs’ (HMRC) Time To Pay service.
These arrangements are agreed on a case-by-case basis and are tailored to individual circumstances and liabilities. This is normally only available to those in significant financial distress.
There is currently no confirmation from HMRC or Government that tax filing deadlines will be relaxed. Business should try to meet tax compliance obligations to avoid penalties being assessed by HMRC.
HMRC may be open to deferral of month 11 (March 2020) PAYE payments for two months, subject to specific agreement with HMRC.
We have already had several success stories of Duncan & Toplis clients being able to defer tax payments. HMRC are supporting this.
If you have missed a tax payment or you might miss your next payment due to COVID-19, please call HMRC’s dedicated helpline: 0800 0241222.
If you’re worried about a future payment, please call HMRC nearer the time.
Exemption for COVID-19 related reimbursed home office expenses:
The Financial Secretary to the Treasury, Jesse Norman, has announced details of a temporary tax exemption and National Insurance disregard to ensure that home office equipment purchased by employees as a result of the coronavirus outbreak will not attract tax and NICs liabilities where reimbursed by the employer.
This measure will apply for 2019–20 from 16 March 2020 only, and 2020–21.
To be eligible for the exemption the expenditure must meet the following two conditions:
- The equipment is obtained for the sole purpose of enabling the employee to work from home as a result of the coronavirus outbreak; and
- The provision of the equipment would have been exempt from income tax if it had been provided directly to the employee by or on behalf of the employer (under section 316 of ITEPA 2003, s. 316).
Further details can be found here.
Tax free allowance for home working:
Employers can grant a tax free allowance to employees working from home of £6 a week.
Employees would be required to do nothing to claim. Alternatively, the rules have been relaxed from 15 May so employees can make a claim directly with HMRC, either through their self-assessment tax return, or through form P87.
An amount greater than £6 can be claimed, but evidence would then by required of the expenditure incurred.
VAT cut for restaurants, hotels and attractions
VAT will be cut from 20% to 5% for eligible businesses for the period 15 July 2020 to 30 September 2021.
This will be followed by an interim 12.5% rate for a further six months and from April 2022, the rate will return to 20%.
Food and non-alcoholic drinks will be covered for eligible businesses, as well as hot takeaway food.
Accommodation in hotels, bed and breakfasts will benefit, as well as admission to theme parks and other attractions.
If a business deferred VAT between 20 March and 30 June 2020 and still has payments that it wishes to defer, it needs to opt in to the new VAT deferral scheme that launches in 2021.
This must be done by the business, it cannot be done by their agent.
The deferral will allow for 11 smaller monthly instalments to be made, interest free, through to the end of March 2022, rather than paying the full balance by the end of March 2021.
Domestic reverse charge VAT for construction services delayed:
The introduction of the domestic reverse charge for construction services will be delayed from 1 October 2020 until 1 March 2021 due to the impact of the coronavirus on the construction sector.
In addition to the five-month delay in implementation, the original legislation will be amended.
Now, for a business to be excluded from the reverse charge because they are end users or intermediary suppliers, they must inform their sub-contractors in writing that they are end users of intermediary suppliers.
Full details can be found on the government’s website here.
The Chancellor also announced that from 1 May VAT will no longer be paid on e-publications and the Treasury cut taxes to reduce PPE costs:
Since 1 May 2020, personal protective equipment (PPE) purchased by care homes, businesses, charities and individuals to protect against COVID-19 has been free from VAT.
A zero-rate of VAT applied to sales of PPE for COVID-19 initially from 1 May 2020 until 31 July 2020.
On 3 July, this was extended to apply until the end of October 2020. The move will save care homes and businesses more than £155 million.
This comes after import duty also removed from PPE.
More information on this is available on HMRC’s website here.
Delaying import duty payments:
Duty deferment account holders who are experiencing severe financial difficulty as a result of COVID-19 and who are unable to make payment of deferred customs duties and import VAT due on 15 April 2020 can contact HMRC for approval to enter into an extended period to make full or partial payment, without having their guarantee called upon or their deferment account suspended.
The account holder should contact the Duty Deferment Office 03000 594243 or by email firstname.lastname@example.org or the COVID-19 helpline on 0800 024 1222.
Account holders will be asked to provide an explanation of how COVID-19 has impacted their business finances and cash flow.
HMRC have extended Making Tax Digital (MTD) ‘digital links’ deadline until 2021:
VAT registered businesses now have until 1 April 2021 to meet the requirement to have ‘digital links’ within their record keeping under MTD.
The previous deadline was either 1 April 2020 or 1 October 2020, dependent upon the original MTD start date.
Other changes for businesses
The government is delaying the new private sector IR35 regime until 1 April 2021.
Extended reporting for Capital Gains Tax (CGT):
HMRC will not charge late filing penalties for reports of CGT on disposals of UK residential property by UK residents made by 31 July 2020.
Stamp Duty Land Tax cut
The threshold for stamp duty on residential property in England and Northern Ireland has been increased from £125,000 to £500,000.
This is applicable from 8 July 2020 to 30 June 2021.
The holiday for properties under £250,00 will be extended until the end of September.