Brexit, COVID-19, and your business – the latest updates

Brexit and Covid-19: what you need to know and do

Here at TAG Accountants Group, our team of business advisors continue to monitor the latest news, which has been dominated by the COVID-19, Brexit, and the forthcoming introduction of new VAT rules for the construction sector.

Firstly, on a positive note, over 15 million first dose COVID-19 vaccinations have now been administered in the UK and this has without doubt improved the short-term outlook for both families and businesses alike.

The reality is though that Government vaccination targets are dependent on the vaccine manufacturers and the safety checks that follow. With nearly 90% of vulnerable people targeted to get their first injection by mid-February, any slip in the supply will create delays so, for now, it is a waiting game.

On the economic front, the Office for National Statistics latest update shows debit and credit purchases are 35% down on last February and over a quarter (26%) of UK businesses currently trading said that turnover
had decreased by more than 20% compared with what is normally expected for this time of year. Interestingly 48% of all workers are still travelling to a place of work.

Overall retail footfall in the UK is at 33% when compared with the same week a year ago, the lowest level since the week ending 7 June 2020. These figures are not unexpected in a national lockdown.

COVID-19 Government support news.

Below is a round-up of Government supports for businesses and individuals in the UK. Please talk to us here if you need help in applying for Government support.

Paying any VAT that had been deferred due to COVID-19.

The guidance on how to pay any VAT that had been deferred between 20 March and 30 June 2020 has been updated with an added section on ‘Correcting errors on your VAT returns relating to the VAT payments deferral scheme’, including information on how to defer any extra payments resulting error corrections and HMRC VAT assessments.

If you deferred VAT between 20 March and 30 June 2020 and still have payments to make, you can:

• pay the deferred VAT in full on or before 31 March 2021.
• opt into the VAT deferral new payment scheme when it launches in 2021.
• contact HMRC if you need more help to pay.

The online opt in process will be available in early 2021 and you must do this yourself.

Instead of paying the full amount by the end of March 2021, you can make up to 11 smaller monthly instalments, interest free. All instalments must be paid by the end of March 2022.

The scheme will allow you to:

• pay your deferred VAT in instalments without adding interest.
• select the number of instalments from 2 to 11 equal monthly payments.

To use this scheme, you must:

• still have deferred VAT to pay.
• be up to date with your VAT returns.
• opt in before the end of March 2021.
• pay the first instalment when you opt in

If you opt into the scheme, you can still have a time to pay arrangement for other HMRC debts and outstanding tax.

The new system to set up these arrangements is currently being tested by HMRC with a view to going live on 23rd February 2021.

See more by clicking the link HERE.

How to treat certain expenses and benefits provided to employees during COVID-19.

The guidance on taxable expenses and benefits when they are paid to employees because of COVID-19 and how to report them to HMRC has been updated to confirm that if an employer is providing antigen testing kits to employees, outside of the government’s national testing scheme, either directly or by purchasing tests that are carried out by a third party, no Income Tax or Class 1A National Insurance contributions will be due.

Similarly, employers and their employees will not be liable to any Income Tax or National Insurance contributions, where an employee receives money from their employer for obtaining a test.

See more by clicking THIS LINK.

Extension to COVID-19 Job Retention Scheme.

The COVID-19 Job Retention Scheme has now been extended until 30 April 2021.

For the period 1 November 2020 to 30 April 2021 the government grant will cover the full 80% of wages. Employers will not be required to contribute or top-up for the hours not worked. You will still need to pay employer National Insurance contributions and employer pension contributions, you cannot claim for these.

You can choose to top up your employees’ wages above the minimum 80% furlough pay amount, but you do not have to. Employees must not work or provide any services for the business during hours which they are recorded as being on furlough, even if they receive a top-up wage.

Self-employment Income Support Scheme grant extension.

The Government has announced the SEISS grant extension in the form of 2 further grants, each available for 3-month periods covering November 2020 to January 2021 and February 2021 to April 2021.

To be eligible for the grant extension, self-employed individuals, including members of partnerships, must:

• have been previously eligible for the Self-Employment Income Support Scheme first and second grant (although they do not have to have claimed the previous grants)
• declare that they intend to continue to trade and either:
• are currently actively trading but are impacted by reduced demand due to COVID-19.
• were previously trading but are temporarily unable to do so due to COVID-19.

The extension will last for 6 months, from November 2020 to April 2021. Grants will be paid in 2 lump sum instalments each covering a 3-month period.

The third grant will cover a 3-month period from 1 November 2020 until 31 January 2021.

The Government will provide a taxable grant calculated at 80% of 3 months average monthly trading profits, paid out in a single instalment and capped at £7,500 in total. This is an increase from the previously announced amount of 55%.

The Government has already announced that there will be a fourth grant covering February 2021 to April. They will set out further details, including the level, of the fourth grant in due course.

The grants are taxable income and subject to National Insurance contributions.

COVID-19 business support grants.

Local grants remain available to businesses forced to close or severely affected by COVID- 19 restrictions. It is best to consult your local authority website to see what is available.

For businesses in the City of Wolverhampton that are open but have been significantly affected due to the current lockdown restrictions, they can apply for the city’s new discretionary grant and one-off payment. The discretionary scheme is also available to closed businesses not eligible for the national Local Restrictions Support Grant.

New VAT rules for construction sector from 1 March 2021.

New VAT rules are finally due to come into effect this March which will impact on accounting for VAT in the construction sector. These new rules, which were originally scheduled to start back in October 2019, have already been delayed twice as there was a lack of awareness of the changes in the industry.

The new “reverse charge” system of VAT accounting will affect sub-contractors supplying their services to main contractors in the construction sector.

Under the new rules, supplies of standard or reduced-rated building services between VAT-registered businesses in the supply chain will not be invoiced in the normal way. Under the new reverse charge system, the sub-contractor will not show VAT on their invoice to the main contractor and will not account for output VAT.

This is intended to ensure that VAT is correctly accounted for on supplies by sub-contractors, some of whom were allegedly not paying over the VAT charged to HMRC. The new reverse charge will apply to a wide range of services in the building trade, primarily those activities covered by the construction industry (CIS) payment rules. Note that normal VAT invoices will continue to be issued to domestic customers.

Please contact us if you are likely to be affected by these changes and we can work with you to ensure you are ready for the new system when it starts. If you are a sub-contractor using the VAT flat rate scheme, it may be beneficial to leave that scheme as you may be entitled to a VAT refund on your expenses from 1 March 2021.

£1m Annual Investment Allowances Extended

The Chancellor recently announced that the temporary increase in the Annual Investment Allowance (AIA) for expenditure on plant and machinery has been extended to 31 December 2021.

The tax relief was originally scheduled to revert to just £200,000 from 1 January 2021, but that will now be delayed by twelve months.

Remember that there is currently an additional 100% tax relief for the cost of buying a new car for the business where the CO2 emissions of the car are no more than 50g per kilometre. That threshold reduces to 0g from April 2021.

Brexit update

There have been numerous stories of extra layers of administration, courier fees, VAT problems and unexpected customs invoices for both importers and exporters. Some EU specialist online retailers have said they will no longer deliver to the UK because of the new tax changes from 1 January and vice versa. VAT is now being collected at the point of sale rather than at the point of importation.

This means that overseas retailers sending goods to the UK are expected to register for UK VAT and account for it to HMRC if the sale value is less than €150 (£135). Smaller EU businesses are now evaluating whether it is worth their while to export to the UK and the reverse is true.

For smaller UK businesses these changes are problematic, and they will take some time to fully understand and for simpler systems to emerge. UK businesses are innovative and adaptive and new solutions to smooth trade will emerge, so it really is a matter of taking a pragmatic and tentative approach now.

HMRC has issued an employer bulletin: “UK Transition Special Edition”. This contains a roundup of information and support and you can find out about the new rules for:

• Trading with Europe
• Business travellers
• Social security coordination

i) Trading with Europe

The bulletin contains links to the following areas of guidance:

• Customs declarations for all exports from the UK and if you are importing controlled goods.
• If you import goods that are not controlled, you may be able to delay making your declarations for up to 6 months.
• Using a customs intermediary like a freight forwarder or customs broker.
• How to classify goods, and how to evidence their origin.
• Follow safety and security requirements for goods.
• Move goods under the Northern Ireland Protocol.

ii) Business travellers

Putting aside the restrictions around COVID- 19, the guidance also covers new rules for business travellers and the changes in rules you need to be aware of.

For example, bringing commercial goods in accompanied baggage or in a small motor vehicle into and out of Great Britain meaning you need to complete a simple online declaration when entering or leaving Great
Britain if you are carrying goods to sell or use by a business with a value not exceeding £1,500 and not:

• weighing more than 1,000kg.
• classed as excise or restricted goods.

You can do this either by an online declaration up to 5 days of arriving or leaving Great Britain or make an oral declaration to a Border Force officer at the port by going to the ‘goods to declare’ channel (red channel) or red point phone when going through customs if facilities exist.

If you are moving commercial goods exceeding £1,500 in value or weighing more than 1,000kg or if you are carrying excise or restricted goods you or your customs agent must submit a full standard customs declaration to HMRC.

For business travellers bringing commercial goods in accompanied baggage into and out of Northern Ireland (including travelling to Northern Ireland from Great Britain) you can make an oral declaration if the goods have a value less than £873, weigh less than 1,000 kg and are not classed as excise or restricted goods. You can go to the ‘goods to declare’ red channel or the red point phone in the customs area to declare your goods to a Border Force officer if these facilities exist at the Northern Ireland port. You can also submit a declaration to HMRC using the Trader Support Service.

For goods over £873 or that weigh more than 1,000kg or classed as excise or restricted you must submit a declaration to HMRC using the Trader Support Service.

For movements between Northern Ireland and the EU, there are no changes to the rules and goods can move without a customs declaration.

iii) Cash declarations.

There are also revised rules for cash declarations. You need to make a declaration if you are carrying 10,000 euros or the equivalent in any other currency of cash and travelling to or from a non-EU country. You also need to make a declaration if you are carrying 10,000 euros or more of cash and travelling from Great Britain to Northern Ireland.

You can make the declaration at any time in the 72 hours before the time of travel.

If you carry cash of 10,000 euros or more in or out of Northern Ireland, you do not need to declare if you are entering or leaving a country in the EU. You also do not need to make a declaration when you are taking cash from Northern Ireland to Great Britain.

You need to make a declaration if you are carrying £10,000 or more into or out of Great Britain from any country, including the EU. You do not need to make a declaration when you are taking cash from Northern Ireland to Great Britain.

The full guidance and links can be seen HERE.

TAG Accountants Group is always only a phone call away!

Whilst there are positive signs as the level of vaccination increases and the Bank of England signals expectation of a strong recovery as COVID- 19 measures are eased, it is vital that businesses can take advantage of the remaining support that is on offer.

If you need a sounding board for your plans or need some help securing available financial support, get in touch with the team here at TAG Accountants Group today on 01902 783172 and one of our experts will get
back to you or, alternatively, just click HERE to contact us via our website and we will be in touch.

Our business advisors look forward to hearing from you, but in the meantime, please stay safe.