Archive for February, 2018

Unexpected VAT charge for UK importers

Monday, February 5th, 2018

With no agreement on tariffs, the UK will be treated as any other non-EU trading nation post Brexit. Consequently, UK importers would be required to make an up-front VAT payment in addition to any customs duties. This VAT payment will rank as input VAT that can be reclaimed from HMRC.

However, a problem will arise if an importer submits VAT returns quarterly. Any VAT paid to HMRC when they import goods will be authenticated by the issue of HMRC’s form C79 (this form is issued monthly). Once issued this can be treated like a VAT invoice and included on the next VAT return.

Accordingly, the importer will not be able to reclaim VAT until this form is received.

Affected businesses therefore need to add the VAT costs each quarter to their cash flow as it could be up to four months until a refund of import VAT paid can be recouped.

It is to be hoped that our government will respond to lobbying on this issue. Perhaps they will allow some form of deferment of the VAT payable or speed up the reclaim process.

Biker club wins VAT case

Monday, February 5th, 2018

Many clubs offer members a range of services for their membership fee. For example, membership may include a members’ magazine. Ordinarily, a magazine subscription should be zero rated for VAT purposes, but when the magazine element is bundled into a general club subscription – that is standard rated for VAT – problems can arise.

HMRC is prone to view the “bundled” price as a standard rated supply, whereas the affected organisation would prefer to separate out the zero-rated element thus reducing the cost to their members.

In a recent case, the Harley Owners Group challenged such a fixed supply argument raised by HMRC. They argued that the members’ magazine was a separate supply and should be considered zero-rated, and the courts agreed.

The delivery of mixed services under an umbrella membership subscription is an area of VAT law that is far from clear. However, HMRC has lost a number of cases recently with a similar outcome to the Harley Owners Club.

Getting ready for Making Tax Digital

Monday, February 5th, 2018

As our regular readers of our newsletter will be aware, the government has back-tracked on their original proposal to digitise taxpayers’ affairs.

The original plan, to have most self-employed traders and landlords uploading accounts and VAT data from April 2018, was scrapped.

The new plan, delayed until April 2019, requires traders registered for VAT, and with turnover above the current £85,000 registration threshold, to upload their VAT figures digitally direct from a HMRC software interface. HMRC has offered, somewhat tongue in cheek, that taxpayers not required under these revised criteria, are non-the-less welcome to upload their VAT numbers this way on a voluntary basis.

The outcome of these changes requires affected businesses to use compatible software – to link with HMRC – from April 2019.

Those VAT traders who are still using a manual record-keeping process, or IT solutions that will not be recognised by HMRC’s systems, will need to upgrade to more suitable software during the next year.

Clients and other VAT registered business owners that are concerned about their readiness for these changes should call for advice. Clients who use our VAT services can be assured that we will use software that is MTD compliant.

Proposals to extend pensions auto enrolment to younger workers

Sunday, February 4th, 2018

The government has announced proposals to extend pensions auto enrolment to include younger workers and to amend the way in which contributions are calculated.

‘The review’s recommendations, which will now be progressed and legislated for where necessary, will see:
• automatic enrolment duties continuing to apply to all employers, regardless of sector and size
• young people, from 18 years old, benefiting from automatic enrolment, introducing 900,000 young people into saving an additional £800 million through a workplace pension

• workplace pension contributions calculated from the first pound earned, rather than from a lower earnings limit – this will bring an extra £2.6 billion into pension saving, improving incentives for people in multiple jobs to opt-in, and simplifying the way employers assess their workforces and calculate contributions

• the earnings trigger remaining at £10,000 for 2018/19, subject to annual reviews
• contribution levels reviewed after the implementation of the 8% contribution rate in 2019
• the government testing a series of ‘targeted interventions’ – including through opportunities to work with organisations who act as ‘touch points’ for the 4.8 million self-employed people, such as banks and those who contract labour – to explore how technology can be used to increase their pension saving.’

Under auto enrolment, employers are required to automatically enrol all eligible workers (generally employees) into a workplace pension scheme and pay a minimum contribution into their pension. Employees do, however, have the right to opt out of auto enrolment.
Currently workers who are aged between 22 and the State Pension Age with earnings of £10,000 per annum are eligible to be auto enrolled. Younger employees and those who do not meet the minimum income requirement can opt to make pension contributions.
The government plan to reduce the lower age limit to 18 by the mid 2020s, in order to encourage younger workers to get into ‘the habit of saving’.

David Gaulke, Work and Pensions Secretary said:
‘We are committed to enabling more people to save while they are working, so that they can enjoy greater financial security when they retire. We know the world of work is changing, so it is only right that pension saving does too. This ambitious package will see more people than ever before helped onto the path towards building a secure retirement.’
Mike Cherry, National Chairman of the Federation of Small Businesses (FSB), stated:
‘Requiring employers to contribute from the first pound of earnings will mean that, by 2019, hundreds of thousands of small employers will have to pay up to £180 more per employee each year. ‘For employers in certain sectors, such as care and hospitality where margins are tight, this will really add up.’

Contact us if you would like help with payroll and auto enrolment.

Delay to roll out of Tax free childcare

Sunday, February 4th, 2018

The government have announced a delay to the roll out of tax free childcare which was expected to be fully implemented by the end of the year. From 24 November 2017 the service is available to parents whose youngest child is under 6 or who has their 6th birthday on that day. Parents can apply online through the childcare service which can be accessed via the Childcare Choices website.

In April 2017, HMRC started rolling out the childcare service via a single website through which parents can apply for both 30 hours free childcare and Tax-Free Childcare. The roll out started with parents of the youngest children first. HMRC acknowledge that over the summer some parents didn’t receive the intended level of service when using the website and that they have subsequently made significant improvements. For those parents who have had difficulties in accessing the service, compensation may be available: see childcare service compensation.

Over the coming months, HMRC will gradually open the childcare service to parents of older children, whilst continuing to make further improvements to the system. HMRC hope this strategy of managing the volume of applications will result in prompt eligibility responses when parents apply, with ‘almost all parents receiving a response within five working days, and most getting their decision instantly’.
All eligible parents will be able to apply by the end of March 2018. Parents will be able to apply for all their children at the same time, when their youngest child becomes eligible.

Tax-Free Childcare is the new government scheme to help working parents, both employed and self employed, with the cost of childcare. For every £8 a parent pays in, the government will pay in an extra £2. Parents can receive up to £2,000 per child, per year, towards their childcare costs making a total amount of £10,000. Higher limits of £4,000 and £20,000 apply for disabled children.
To qualify for Tax-Free Childcare parents and partners in the household must generally meet a minimum income level of on average £120 a week and each earn less than £100,000 a year.

The scheme will eventually be available for children up to the age of 12, or 17 for children with disabilities. Those eligible will be able to apply for all their children at the same time.

Employer Supported Childcare, usually by way of childcare vouchers, will remain open to new entrants until April 2018 to support the transition between the schemes and it will continue to be available for current members if they wish to remain in it or they can switch to the new scheme. It is not possible to benefit from both Employer Supported Childcare and Tax Free Childcare at the same time.