HOSPITALITY VAT REDUCTION

HOSPITALITY VAT REDUCTION

HOSPITALITY VAT REDUCTION

Hospitality VAT: When the Chancellor announced a temporary cut in the rate of VAT for the hospitality sector and attractions in his Summer Statement on 8 July there were a number of areas that needed clarification. The reduction applies to supplies made between 15 July 2020 and 12 January 2021. HMRC have now set out more details of which supplies will attract the 5% temporary rate as well as the impact on invoicing, deposits and the flat rate scheme.

 

HOSPITALITY VAT: WHAT DOES THE 5% TEMPORARY VAT RATE APPLY TO?

The temporary 5% rate applies to catering, including hot food takeaway, accommodation in hotels, guest houses and similar places and to tourist attractions such as zoos, cinemas and theme parks. Please note this is not an exhaustive list.

 

HOSPITALITY VAT: WHAT TYPES OF DRINKS DOES THE RATE APPLY TO?

Note that as far as catering is concerned, the 5% rate only applies to food and non-alcoholic drinks. The 20% rate continues to apply to alcoholic drinks. Please contact us if you are unsure as to whether the 5% rate applies to any of your supplies.

 

HOSPITALITY VAT REDUCTION: WHAT ABOUT DEPOSITS?

It is fairly common, particularly in the summer holidays, to pay a deposit when booking a hotel or self-catering accommodation but how should the deposit be accounted for? HMRC have confirmed that the hotel has the option of charging VAT according to the ‘basic tax point’ (dates of the stay) rather than the ‘actual tax point’ (invoice/payment dates). 

 

EXAMPLE VAT DEPOSIT SITUATION

For example where the customer paid a non-refundable £300 deposit in February 2020 for a £1000 holiday in Cornwall in August, using the actual tax point, the hotel would account for 20% VAT on the deposit received in February 2020 and 5% on the balance payable after 15 July 2020. The hotel could choose to use the basic tax point rule which would mean that the 5% rate would apply to the entire cost of the stay and make an adjustment for the VAT already accounted for.

 

CONTACT US

Please contact us if you need advice on dealing with the invoicing or accounting for such transactions.

Please click our link to see the video of our blog here.

 

Digitaccs can work with you to make sure your accounting systems are MTD compliant. To find out how, please contact us on 020 3367 1108. 

“Flexible Furlough” and Self Employed Grants

“Flexible Furlough” and Self Employed Grants

“Flexible Furlough” and Self Employed Grants: “Flexible Furlough” starts 1st July

“Flexible Furlough” and Self Employed Grants: From 1 July the new CJRS “Flexible furlough” grant scheme starts, which will allow employers to gradually bring their furloughed employees back to work part-time. The new scheme will be in place until the end of October and the Government will gradually reduce the amount of grant towards employees’ furlough pay to 70% in September and 60% in October.

The grant paid by the Government via HMRC will remain at 80% of the employee’s normal pay for July and August but they will stop reimbursing NICs and pension contributions from 1 August 2020.

Further details on the operation of the new scheme were announced on 12 June 2020 which are summarised below. We will of course continue to assist you in making furlough claims.

  

“Flexible Furlough”: Key Conditions for New “Flexible Furlough”

Only those employees who have been furloughed and included in a claim under the original CJRS scheme may be included in a claim for the new flexible furlough. That means they must have been furloughed on or before 10 June to allow a full 21 days prior to the end of the original scheme.

A further restriction is that the maximum number of employees that can be included in a flexible furlough claim cannot exceed the maximum number included in a claim under the original scheme. Thus if the employer has 8 employees split into teams of 4 and furloughed team A for three weeks and then team B for 3 weeks the maximum number of employees that can be included in a flexible furlough claim will be limited to 4.

Unlike the original CJRS furlough scheme there is no minimum furlough period as the intention is to allow employers the flexibility to gradually bring employees back to work. The hours/days worked will need to be agreed between employee and employer which is likely to involve amending the employees’ contracts.

Employees will be entitled to their normal contractual pay for the hours that they work and must be paid at least 80% of their normal pay for the hours that they are furloughed, even when HMRC are only reimbursing 70% or 60%. Employers will need to notify HMRC of the employee’s usual hours and the hours worked in the claim period. The furloughed hours will be the difference. This will be complicated where the employee’s hours vary. There is currently a lack of clarity in the HMRC guidance on the calculation of “usual hours” and we will of course be available to assist you in making your claim. We will also be able to make the claims on your behalf. Each claim made by an employer must be for a week or more and no claim period can straddle a calendar month end.

 

Second Self Employed Income Support Grants

On 29 May the Chancellor announced that the grant scheme to support the self employed would also be extended with a further payment based on 70% of average profits for the 3 years ended 2018/19, limited to £6,570 rather than £7,500. The eligibility criteria remain broadly the same as the first grant claim. Self employed profits in 2018/19 must not exceed £50,000 and must be more than 50% of your total income.

If that test is not met, then the same £50,000 and 50% tests are applied to average profits and total income over the three years (or shorter period) to 5 April 2019. Self employed traders need not have claimed a grant under the old scheme to qualify for the August payment and are required to confirm that their business continues to be adversely affected by Covid-19. The deadline for making a claim for a grant under the original SEIS scheme is 13 July 2020.

 

Digitaccs can work with you to make sure your accounting systems are MTD compliant. To find out how, please contact us on 020 3367 1108. 

The Budget – 11 March 2020

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The Budget March 2020 – Any Big Changes?

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CEST Tool: How To Use It To Determine Worker Status

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Did you know that from 6 April 2020 the off-payroll working rules are extended? Under the new rules, medium and large private sector organisations engaging workers providing their services through an intermediary, such as a personal service company, must determine the status of the worker if the services were provided direct to the end client rather than via the intermediary. If, ignoring the intermediary, the worker would be an employee, the off-payroll working rules apply. HMRC’s Check Employment Status for Tax (CEST) tool can be used to fulfil the requirement to make a status determination. This tool was updated in November 2019 in preparation for the extension. And on 7 January 2020, the Government announced they were reviewing the rules to facilitate a smooth implementation. As part of the review, they will evaluate the effectiveness of the enhanced CEST tool, available on the Gov.uk website.

What is CEST?

CEST – Check Employment Status for Tax – a tool created by HMRC, can be used to determine whether, for a particular contract, the off-payroll working rules apply. It can also be used to ascertain whether, for a particular piece of work, a worker is employed or self-employed. If you are a medium or large private sector organisation which uses workers who provide their services through an intermediary, such as a personal service company, you can use CEST to meet your obligation to undertake a status determination, under the off-payroll working rules as they apply from 6 April 2020. You must give the worker a copy of the determination, together with reasons for reaching it. Printing off the CEST decision will tick this box. Although using the CEST tool to make your status determination is not compulsory, it is advised. Not least because HMRC will accept the decision reached by the tool, as long as the information entered is correct.

Using CEST

In case you’re wondering, the tool works by asking a series of questions, the answers to which are used to determine the status of the worker. The CEST tool can be used anonymously. However, please bear in mind that there is no facility to save any of your answers and return to them later. Plus if you close the tool before your determination is complete, your answers will be lost. It will also time out if you leave it idle for 15 minutes. We therefore advise you to ensure you have all the relevant information to hand before starting your determination. Your starting point is the contract of employment. The tool assumes that a contract is in place – this highlights the significance of mutuality of obligation, as without mutuality of obligation, there can be no contract. To use the CEST tool, you will need the following information:

•    Details of the contract
•    The responsibilities of the worker
•    Who decides what work needs doing, when and where
•    How the worker is paid
•    Whether the engagement includes any corporate benefits or reimbursement of expenses

It is then simply a case of you working through the question and selecting the best match answer from the available options. Once you have answered all the questions, you are then given the option of reviewing the answers selected, before the decision is given.

The decision

The CEST tool will use the information you provided in response to the questions, to give you one of the following outcomes:

•    Off-payroll working rules (IR35) do not apply
•    Off-payroll working rules (IR35) apply
•    Unable to make a determination (for whether the off-payroll working rules apply)
•    Self-employed for tax purposes for this work
•    Employed for tax purposes for this work
•    Unable to make a determination (for employed or self-employed for tax purposes).

It will also set out the reasons for the decision reached.

Use of the tool by a worker

If you are a worker providing your services through a personal service company or other intermediary, you can also use the CEST tool to check your status. From 6 April 2020 onwards, you can use it to check a determination given to you be an end client (a medium or large private sector organisation); and if you disagree with the determination given, the CEST decision can be used as the basis for a challenge. Prior to 6 April 2020, and on or after that date where the end client is small private sector organisation, you can use the CEST tool to see if you need to operate the IR35 rules.

Detailed guidance

HMRC produced detailed guidance on using the CEST tool, which can be found in their Employment Status Manual. Check this out before using the CEST tool. The whole area of IR35 and employment status is an area of constantly changing legislation and case law. Remember we’re always here to help you to safely navigate your way through the employment tax minefield.

 

 

Digitaccs can help you make sense out of the Budget and help your business succeed. To find out how, please contact us now 020 3367 1108.

Budget Day: What Are The Announcements To Listen Out For?

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Budget Day Is Now 11 March

We know that the December General Election meant that the Autumn Budget was delayed and we now know that Sajid Javid was going to deliver his first Budget on the second Wednesday in March which is when Budget day used to be! Rishi Sunak, his successor will now be looking to deliver his very first Budget on that same day. We are expecting that the tax measures in the Conservative Party manifesto will be announced again, together with confirmation that changes consulted on last year will be put in place. Key tax announcements to listen out for, include leaving the rate of corporation tax at 19% and an increase in the national insurance threshold. Unfortunately, it is unlikely that the planned roll out of the “off-payroll” working (IR35) rules to the private sector will be delayed. The Chancellor is also expected to again announce a u-turn on the 2019 loan charge, following a review of the legislation by Sir Amyas Morse.

 

The Budget: Review Of Off-Payroll Working Rules

In January the government launched a four-week review of the changes to IR35 “off-payroll” working rules scheduled to come into force in April, as the result of mounting criticism about the way they will operate. The review is scheduled to conclude by mid-February and will see the government hold a series of meetings with stakeholders representative of those affected by the changes. It is unlikely that there will be a significant U-turn, but there may be scope for the impact of the legislation to be reduced in terms of the range of contractors to whom it will apply, or the size of businesses who will be obliged to operate it. The new rules are currently scheduled to apply to large and medium-sized businesses as defined by the Companies Act. The government will also carry out a further review of the enhanced CEST tool designed to assist businesses in checking employment status and public sector bodies’ experience of applying the rules since 2017.

 

The Budget: Changes To Disguised Remuneration Loan Charge

The independent loan charge review, conducted by Sir Amyas Morse, was published on 20 December, having been delayed due to the general election. The loan charge was introduced to collect tax from individuals who had benefited from schemes devised to avoid PAYE and national insurance. The date that the loan was made to the individual is critical in determining whether the loan charge will apply. The major change, which will be legislated in the next Finance Act, is that taxpayers who took loans before 9 December 2010 will not now be subject to the loan charge. This was the day when draft legislation was published, alongside a ministerial statement, to make it clear that disguised remuneration arrangements, including loans, would be specifically taxed as earned income. The current legislation, introduced in 2018, applies retrospectively to such loans and will need to be repealed. Those taxpayers who took loans between 10 December 2010 and 5 April 2016 and who fully disclosed the use of the loan scheme will not be subject to the loan charge if, and only if, HMRC failed to take action because of disclosure. Loans taken out on or after 6 April 2016 and which were still outstanding on 5 April 2019, remain within the loan charge. Such taxpayers can now elect to spread the tax charge over three tax years from 2018/19 to 2020/21.

 

The Budget: Possible U-Turn On Pensions For High Earners?

There have been many stories in the press about GPs and senior hospital doctors refusing to take on extra shifts and additional responsibilities, due to the additional tax they are required to pay, on the extra pension contributions paid by the NHS. A number of solutions have been put forward. There are now strong rumours that the tapering of the annual pension allowance, for those with income over £150,000, may be abolished or amended for all taxpayers, not just those working in the NHS. Listen out for a possible announcement in the Spring Budget, together with other changes to pension tax relief.

 

The Budget: Changes To Paying CGT On Residential Property From 6 April

From 6 April 2020, there is a major change in the reporting and payment of CGT on residential property disposals. From that date, it will be necessary to report the disposal of the property, within 30 days of completion of the disposal and pay CGT on account to HMRC.  This will be a significant acceleration of the payment date as CGT is currently payable with income tax on 31 January, following the end of the tax year. Hence, where completion of a property disposal takes place on 1 April 2020 CGT will be due 31 January 2021. If however, completion were delayed to 1 May 2020, CGT would need to be paid on 31 May 2020. Note that the new 30 day reporting and payment obligation will not apply where no tax is payable such as the disposal of the taxpayers private residence.

 

Another Reason To Sell Property Before 6 April 2020

If the draft legislation issued for consultation last year is enacted in the next Finance Act, there will be important changes to private residence relief for disposals after 5 April 2020.
Firstly, the exemption for the final period of ownership will be reduced from 18 to 9 months. This applies where a former main residence is disposed of and is intended to give relief where the owner has moved to another main residence, until the former residence is sold i.e. “bridging”. Note that for many years this additional allowance was 36 months that led to a tax planning strategy, referred to as “second home flipping” which HMRC are seeking to counteract. The second change will be the abolition of letting relief, except for situations where the taxpayer lives with the tenant. This generous relief currently provides an exemption of up to £40,000 per owner where the former main residence is rented out. As a result of these two proposed changes you might want to consider disposing of a property before 6 April 2020, if you were planning to take advantage of these CGT reliefs.

 

Will Inheritance Tax Be Simplified?

Another announcement to listen out for in the Spring Budget is whether the Chancellor acts on the recommendations of the Office of Tax Simplification (OTS), regarding inheritance tax (IHT). As reported in an earlier newsletter, the OTS suggested simplifying IHT on lifetime gifts, including reducing the period of potential exemption from 7 to 5 years. Such a change would mean that the donor would only be required to survive for 5 years, following a gift for the transfer to be exempt from IHT. The OTS also suggested that the conditions for Business Property Relief might be tightened up by aligning the rules with the definition of a trading company for CGT. This relief currently provides 100% relief on the transfer of shares in an unquoted company. The suggested change would mean that more transfers of shares would potentially be liable to IHT, and may require a careful review of your plans if you are looking to pass on your business.

 

Don’t Be Late In Paying Your Personal Tax Bill

Individual’s 2018/19 income tax, CGT, class 2 and 4 NIC liabilities should have been paid by 31 January 2020. Note that if the balance is still unpaid at the end of February 2020, a 5% surcharge penalty is added in addition to the normal interest charge, unless a time to pay arrangement has been agreed with HMRC.

 

 

Digitaccs can help you make sense out of the Budget and help your business succeed. To find out how, please contact us now 020 3367 1108.

 

Struggling to pay your tax? Set up a time-to-pay agreement!

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Struggling to pay your tax? Set up a time-to-pay agreement

Your self-assessment tax return for 2018/19 must be filed by midnight on 31 January 2020, and you must pay any tax still owed for 2018/19 by the same time, along with the first payment on account of the 2019/20 tax liability. If you are struggling to pay your tax bill, you should not ignore it in the hope it goes away. Rather, you could consider setting up a time-to-pay agreement, allowing you to spread your tax bill, over a number of months.

 

Pay your tax with a time-to-pay agreement

A time-to-pay agreement is simply a payment plan to allow you to pay a tax bill in instalments. Ideally, you should set it up before the date the payment is due. You can consider this for all taxes, not just those due under self-assessment.

 

How to set one up?

To set up a time-to-pay agreement, you will need to call HMRC’s Payment Support Service on 0300 200 3835.

Information you will need

When calling HMRC, you will need to tell them:

  • Your 10-digit unique taxpayer reference
  • The amount of the tax bill you are struggling to pay and why
  • What action you have taken to try and get the money to pay the bill
  • How much you can pay now and how long you will need to pay the balance; and
  • Your bank account details

HMRC will usually ask for information about your income and expenditure, your assets and what you are planning to do to get your tax payments up to date.

Paying in instalments

HMRC will only allow payment to be made in instalments if they think you are genuinely unable to pay the bill on time, but will be able to do so in future. You must make payments under an instalment plan, by direct debit on agreed dates. You will be charged interest on tax paid, after the due date.

 

Missed the self-assessment deadline?

If you have already missed the self-assessment payment deadline, you should call HMRC’s Self Assessment Payment Helpline on 0300 200 3822, in the first instance, rather than the Payment Support Service.

 

Digitaccs can help you make sense out of filing tax returns and help your business succeed. To find out how, please contact us now 020 3367 1108.

 

How Will Property Taxation Affect You in 2020?

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2017  Income Tax – Restriction of finance costs for individual property landlords

Did you know that in his 2015 post-election summer Budget, George Osborne informed residential landlords that from April 2017 their ability to claim higher rate tax relief for finance costs was to be withdrawn over a four year period, as follows:

  • April 2017 the deduction from property income will be restricted to 75% of finance costs, with the remaining 25% available as a basic rate tax reduction.
  • April 2018 the deduction from property income will be restricted to 50% of finance costs, with the other 50% available as a basic rate tax reduction.
  • April 2019 the deduction from property income will be restricted to 25% of finance costs, with the other 75% available as a basic rate tax reduction.
  • April 2020 all financing costs incurred by a landlord will be given as a basic rate tax reduction.

From April 2020, if you are a residential property (not holiday lets) landlord, you will only receive basic rate tax relief on finance costs.

2019  Extension to Non-resident Capital Gains Tax

Since the start of the current tax year (6 April 2019), if you are a non-resident landlord, you would have been required to complete a separate online non-resident Capital Gains Tax return for each property disposal. Including, a computation of gains and losses. Please note that different rules apply for those who are temporarily non-resident and make disposals during a tax year when you were either not resident in the UK or overseas as part of a split year. In addition, corporation tax rather than CGT is now chargeable on chargeable gains linked to UK property or land for all non-resident companies. Non-Resident Capital Gains Tax (NRCGT) is also potentially payable by all non-resident landlords, as the ATED-related gains charge was abolished from 6 April 2019. It now applies to gains arising from the disposal of any type of UK land or property which accrue from 5 April 2015 (residential property) or 5 April 2019 (non-residential property).

2020  Further Capital Gains Tax Restrictions – Coming soon (April 2020)

And did you also know that, as part of his 2018 Budget, the then Chancellor Philip Hammond announced his intention to restrict the Private Residence Relief (PRR) rules from 6 April 2020, by cutting the last period of ownership from 18 months to just 9 months. Please note that, as with the 2014 change, the 36-month exemption period is to be retained for owners with a disability or who are in residential care.  As if that wasn’t enough, he also announced that lettings relief (see below) is to be restricted to owners who share occupancy with a tenant. Lettings relief was introduced in 1980, to allow people to let out spare rooms within their property, on a casual basis without losing the benefit of PRR. But HMRC says that it has found that lettings relief is being used for purposes beyond the original policy intention, benefitting those who let out a whole dwelling that has, at some stage, been their main residence. So what are the current lettings relief rules? Well, where the property has been let at any time, each owner can claim lettings relief to reduce the taxable capital gain, the rules are as follows:

  • This relief can cover gains of up to £40,000 per owner
  • It is only available if the property has been the owner’s main home for a period
  • It is also capped at the amount of PPR relief, due for the period of actual occupation by the owner

At the same time, Hammond proposed that CGT would be payable “on account” within 30 days of completion for all UK residential properties. Originally intended to be effective from 6 April 2019, to coincide with the new NRCGT rules, implementation of the proposal was delayed until 6 April 2020. So If you have no gain to report or the gain is covered by exemptions or losses, you won’t have to complete a property disposal return. After the end of the tax year, you will complete a self-assessment return to disclose the property gain. The ‘on account’ payment will be deducted from the end of CGT liability; this could result in a repayment of CGT for you.

Digitaccs can help you make sense out of filing tax returns and help your business succeed. To find out how, please contact us now 020 3367 1108.

How To File Tax Return in 7 Easy Steps

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You must file your 2018/19 self-assessment tax return online by midnight on 31 January 2020 if you want to avoid a late filing penalty. so, what can you do to help ensure this deadline is met?

 

 

Help us to help you

Tax return season is a very busy time for us accountants and tax advisers. With the best will in the world, there is a limit to the number of tax returns that can be filed on 31 January. To ensure your tax return is filed on time, it is advisable to help us help you, as follows:

 

1. Check what date your accountant needs tax information from you in order to meet the filing deadline, and make sure that you provide the information by that date.

 

2. Collect together all the relevant paperwork and make sure nothing is missing. This will include your P60 and P11D, dividend vouchers, bank statements, details of trading income and expenses, details of rental income and expenses, details of sales of capital assets and associated expenses, and details of pension contribution and charitable donations.

 

3. Make sure your paperwork is organised and easy to follow, whether supplied digitally or in hard copy format.

 

4. Keep copies of the information supplied to your accountant.

 

5. Advise your accountant of any changes in your personal circumstances – such as change of address, whether you have got married or divorced etc.

 

6. Deal with any queries promptly.

 

7. Pay any tax due on time.

 

What are the penalties for late returns?

 

 

Deadlines Apply

You will be charged a late filing penalty if your self-assessment tax return is filed late. The normal deadline for filing the 2018/19 tax return online is midnight on 31 January 2020. A later deadline applies if your notice to file a return was issued after 31 October 2019 – this is three months from the date of the notice.

 

 

Underpayments

If you wanted an underpayment (available for underpayments of up to £3,000) to be collected through PAYE, via an adjustment to your tax code, you would have had to file returns by 30 December 2019. And you would have had to file paper returns by 31 October 2019 (or three months from the date of the notice to file, where this was issued after 31 July 2019) to avoid a penalty – however, if you missed this deadline, you can avoid a penalty by filing online, by 31 January 2020.

 

 

£100 Penalty And More

You should know that returns filed late, attract a late filing penalty of £100. You will be charged even if there is no tax to pay or the tax is paid on time. You will also be charged further penalties, if your return has not been filed three months after the due date – from that point daily penalties of £10 per day start, to accrue for a maximum of 90 days (£900). At the six month and 12-month point, you will then be charged additional penalties set at the higher of 5% of the tax due and £300. You will also be charged penalties if tax is paid late, in addition to any interest that may accrue. The trigger dates you should watch out for are 30 days late, six months late and 12 months late. At each date, the penalty is 5% of the tax outstanding at the trigger date.

 

 

Digitaccs can help you make sense out of filing tax returns and help your business succeed. To find out how, please contact us now 020 3367 1108.