From 1 March 2021 the domestic VAT reverse charge must be used for most supplies of building and construction services.

The charge applies to standard and reduced-rate VAT services:

• for individuals or businesses who are registered for VAT in the UK
• reported within the Construction Industry Scheme

When the reverse charge applies, a supplier of building or construction services does not charge VAT on those supplies to the customer. Instead the customer accounts for the VAT that would have been due on the supply as output tax on their VAT return, and (subject to the usual rules) claims it back as input tax on the same return.

This may put suppliers of such services in a position of regularly claiming refunds of VAT, as they no longer receive VAT on sales. They may therefore wish to consider moving to monthly VAT returns to improve their cashflow. Sub-contractors should also be aware that their customers will no longer be paying VAT, which will reduce the gross value of payments coming into the business. They will need to consider and plan for the impact of this on day-to-day cashflow.

There are various exceptions to the reverse charge, including certain services which, when supplied on their own, are excluded. Details are given in HMRC guidance (links below)

For reverse charge purposes consumers and final customers are called end users. They are businesses, or groups of businesses, that are VAT and Construction Industry Scheme registered but do not make onward supplies of the building and construction services supplied to them. The reverse charge does not apply to supplies to end users where the end user tells their supplier or building contractor in writing that they’re an end user.

Intermediary suppliers are VAT and Construction Industry Scheme registered businesses that are connected or linked to end users. If intermediary suppliers buy construction services and re-supply them to a connected or linked end user, without making material alterations to the supplies, they’re all treated as if they’re end users and the reverse charge does not apply. The reverse charge does not apply to supplies to intermediary suppliers where the intermediary supplier notifies their supplier or building contractor in writing that they’re an intermediary supplier. Intermediary suppliers can refer to themselves as end users.

Suppliers of building and construction services need to:

• Check if the customer has a valid VAT number
• Check the customer’s CIS registration
• Review each contract to decide if the reverse charge will apply, and tell customers if so
• Ask customers if they are an end user or intermediary as described above
• Record the reverse charge in their accounts

Buyers of building and construction services need to:

• Check if the supplier has a valid VAT number
• Tell the supplier whether you’re an end user or intermediary
• Account for the charge

The above is a brief overview, HMRC’s detailed guidance is at: https://www.gov.uk/guidance/vat-domestic-reverse-charge-for-building-and-construction-services#whentouse
and https://www.gov.uk/guidance/vat-reverse-charge-technical-guide

Please contact us if you need any further information.

In the eleventh hour move, HMRC have announced that they are extending the tax self-assessment deadline by a month, from 31 January to 28 February as there are more than 3 million people who have still not filed their 2019/20 tax return.

It is hoped that the extension will be a sigh of relief for many individuals who HMRC say are faced with “immense pressure” due to the current pandemic. In usual circumstances individuals would have received a late filing penalty of £100 if their return were not submitted by 31 January.

However, HMRC have advised that taxpayers are still obliged to pay any tax that they owe for the 2019/20 tax year by 31 January and interest would be applied to any balance due from 1 February.

HMRC’s Chief Executive, Jim Harra yesterday stated that he would still encourage tax returns to be filed on time, but accepted this may not always be possible:

“We want to encourage as many people as possible to file their return on time so we can calculate their tax bill and help them if they can’t pay it straight away.

We recognise the immense pressure that many people are facing in these unprecedented times and it has become increasingly clear that some people will not be able to file their return by 31 January.

Not charging late filing penalties for late online tax returns submitted in February will give them the breathing space they need to complete and file their returns, without worrying about receiving a penalty.

We can reasonably assume most of these people will have a valid reason for filing late, caused by the pandemic.

https://www.express.co.uk/fina…

We would always encourage self-assessment tax returns to be filed by 31 January, especially if you are an individual with tax liabilities of up to £30,000 and need additional time to pay. HMRC will only allow a Time to Pay arrangement to be set up using the online tool once your 2019/20 has been submitted and there is no outstanding return, debt or existing payment plan in place. 

With a new national lockdown from 5 January, the Treasury announced another round of one-off cash grants for retail, hospitality and leisure businesses to help them through to the spring. There is also further discretionary funding to support other impacted businesses.

The new grants are only for businesses situated in England, with the devolved administrations of Scotland, Wales and Northern Ireland providing their own support.

Grants will be paid on a per-property basis, with the amount dependent on the property’s rateable value:

To qualify, a business needs to be legally required to close and not able to operate effectively remotely. The new grants are in addition to any previous business support, such as the recent local restrictions support grant. Grants may well be paid automatically but keep an eye on your local authority’s website in case you need to register or apply.

Discretionary grants

Businesses not eligible for a cash grant can apply to their local authority for financial help if they are affected by the restrictions. Help is aimed at smaller businesses which do not pay business rates but have relatively high ongoing fixed property-related costs. This might include:

• those in shared offices or other flexible work spaces;
• market traders;
• bed and breakfast businesses paying council tax instead of business rates.

Other recent announcements

Just before parliament broke for Christmas, the Chancellor extended the employee furlough scheme by another month to the end of April, with the government-backed bounce back loan scheme now available up to 31 March – it was due to end on 31 January. The business interruption loan schemes have been similarly extended.

The job retention bonus that was due to be paid to employers in February 2021 of £1,000 for each eligible employee returning from furlough has been postponed due to the recent further extension of the furlough scheme.

You can find out what Covid-19 financial support is available for your business by working through the government’s business support finder.

In order to support individuals who require additional time to pay, HMRC is encouraging use of its online tool to set up an instalment plan for self-assessment tax payments via a Time to Pay arrangement.

The online tool can be used for tax liabilities of up to £30,000.

This is a self-serve process which means you must apply online yourself, unfortunately, we cannot do this on your behalf.

Provided all the criteria are met, a short-term payment arrangement can be put in place without having to discuss this with HMRC directly, and without having to provide details of current income and expenditure.

Please note that arranging the instalment plan does not avoid incurring interest charges. Interest at 2.6% per annum will still be charged from 1^st February 2021 on unpaid amounts. However late payment penalties are avoided if the payment plan is in place and payments are made as agreed.

The online tool can only be used after your 2019/20 return has been submitted, and there must be no outstanding return, debt or existing payment plans with HMRC.

The payment plan must be in place within 60 days of the 31^st
January 2021 payment becoming due and payments must be made by direct debit.

If you wish to set up a payment plan online please follow the link below, scroll to “If you cannot afford to pay your latest bill” and there is a direct link which will require you to enter your Government Gateway ID:

https://www.gov.uk/pay-self-as…

If you wish to discuss any of the above in further detail with a member of our tax team, please give us a call on 01226 298 298.

As a proud Yorkshire based accountancy firm founded over 50 years ago, we are overjoyed to share the news of our inclusion to the Handpicked Accountants network which shortlists the highest calibre of trusted accountants across the country. Our extensive and experienced team of business consultants, accountants, auditors, tax advisors, payroll and legal compliance experts are part of our business journey, assisting in upholding our reputation as a respectable service provider across Barnsley and Leeds. We cater to businesses across Yorkshire, providing a broad range of services which encompass all your business needs, from business valuation, tax consultancy to audit and assurance.

Handpicked Accountants is an online platform which filters the best performing accountants across the country, regardless of their market share or national presence. Businesses on the hunt for a local accountant can turn to Handpicked Accountants to source a reputable provider in their local vicinity, now featuring gbac under the Yorkshire region. Each accountant is rigorously tested to ensure that they meet high customer service standards and have a strong understanding of the industry.

At gbac accountants, we believe in acting on our values to help us deliver unmatched service, driven by our heavyweight management team. We have a dedicated office in Barnsley, which best places us to reach businesses across the North of England.

David Tattersall, Head of Client Relations at Handpicked Accountants, said: “Gbac accountants are an established accountancy firm with a loyal customer base due to business longevity and a team with an impeccable history in the accountancy trade. We are happy to welcome them to the Handpicked Accountants family and adding them to our directory of outstanding accountants.”

The profile for gbac accountants is now active on Handpicked Accountants.

“Our health emergency is not yet over. And our economic emergency has only just begun”.

These were the stark words from the Chancellor, Rishi Sunak yesterday as he delivered the 2020 Spending Review; with little indication as to how the Government intended on balancing the books and instead provided a heavy emphasis on spending in 2021/22:

• There is an extra £38 billion of support for public services in this financial year, bringing the total spending on the Covid-19 response in 2020/21 to over £280 billion.
• In 2021/22 there will be a further £55 billion of support for the response to Covid-19 including provision of PPE, the test-and trace system and the roll out of vaccines.
• There will be £100 billion of capital spending in 2021/22 aimed at kickstarting growth and supporting jobs – £27 billion more in real terms than last year.
• As part of a new National Infrastructure Strategy, a UK infrastructure bank will be created “to catalyse private investment in projects across the UK”. The new bank will be headquartered in the north of England and will start work next spring.
• A new Levelling Up Fund was announced, worth £4 billion. It will be managed jointly between the Treasury, the Department for Transport and the Ministry of Housing, Communities and Local Government. Any local area will be able to bid directly to fund local projects.
• Core spending power for local authorities will rise by an estimated 4.5% in cash terms in 2021/22. Local authorities will be able to increase their council tax bills by 2% without needing to hold a referendum and social care authorities will be able to charge an additional 3% precept to help fund pressures in social care. There will be £254 million of additional funding to help end rough sleeping.
• The business rates multiplier will be frozen in 2021/22, saving businesses in England £575 million over the next five years. The government is also considering business rates reliefs.
• Public sector pay will be constrained in 2021/22. NHS workers will receive an increase. So too will the 2.1 million public sector workers earning less than £24,000 a year, who will be guaranteed a pay increase of at least £250. Outside these two groups there will be no pay rise.
• The National Living Wage (NLW) will increase by 19p from next April to £8.91 an hour, in line with the recommendation from the Low Pay Commission. The age at which the NLW will start to apply will be cut from 25 to 23. The National Minimum Wage rates will also increase.
• £2.9 billion will fund a new three-year UK-wide programme to provide support to help over 1 million long-term unemployed people.
• Spending on overseas aid will be cut from 0.7% of GDP to 0.5% in 2021/22. The cut will be restored “when the fiscal situation allows”.

This ultimately means that Government borrowing is only set to increase. Seven months into the pandemic and with Government support already offered by the way of the Job Retention Scheme (JRS), Self-Employed Income Scheme (SEISS) and local Government grants, albeit to name a few; it is expected that the Government has already borrowed around £215bn in response to the pandemic and with the total expected to hit £394bn this year, this is the highest level seen since the 1960’s.

Underlying the OBR’s (Office for Budget Responsibility) picture of the future path of the UK economy are a range of assumptions and projections, some of which Mr Sunak mentioned in his speech. On the OBR’s central scenario:

• The UK economy is forecast to contract by 11.3% in 2020 without returning to its 2019 level until the final quarter of 2022.
• After 5.5% economic growth in 2021 and 6.6% in the following year, growth tails off to around 1.8% in 2024 and 2025.
• Unemployment will peak at 7.5% in the second quarter of 2021 and then will fall to 4.4% by 2025.
• Borrowing will drop dramatically in 2021/22. This is the result of higher taxes in a recovering economy and an end to many of the temporary financial support measures, such as the CJRS.
• From 2022/23 onwards, borrowing will settle at around £42 billion higher than the OBR had forecast in March.

It is not yet clear how the Chancellor is expected the cover the increase in Government spending over the next few years but the OBR alongside the Institute for Fiscal Studies and Resolution Foundation suggested that around an extra £40bn a year in additional tax would be required over the medium term. This would mean raising tax receipts by around 2% of GDP. Such an increase would require a range of measures across the full tax spectrum.

As the second lockdown took effect on 5 November, the Chancellor returned to Parliament to announce a further extension to the furlough scheme through to March 2021.

The extension of financial support under the Coronavirus Job Retention Scheme (CJRS) will now run past the original new cut-off of 2 December through to the end of March. Provision is at the same level as that given for August, with employees receiving 80% of their salary for hours not worked, capped at £2,500 per month. Employers have to cover National Insurance contributions (NICs) and workplace pension costs.

Two new job support schemes (JSS Closed and JSS Open) set out in the Chancellor’s Winter Economy Plan will now not take effect, if at all, until the furlough scheme ends.

Differences

One important difference from the previous furlough scheme is that claims can be made for employees notified to HMRC with an RTI submission by 30 October. Otherwise, the extension is similar to the old scheme:

• Employees recently made redundant can be rehired and furloughed if they were employed up to 23 September.
• Businesses will be paid upfront to cover their salary costs.
• Flexible furloughing is allowed, with the employer paying as normal for hours worked. For hours not worked, the employer can make up the employee’s full pay if they wish.
• Employees can be on any type of contract.
• Hours not worked will be calculated by reference to the usual hours worked by the employee.
• The employer’s furlough claim must be for a minimum period of seven consecutive days.
• Neither the employer nor the employee needs to have previously used the furlough scheme prior to 1 November.

The extension will be reviewed again in January to determine whether there is scope to increase employer contributions, depending on economic circumstances.

Additional measures are also available for businesses and individuals affected by this second lockdown, including:

• Cash grants for closed businesses up to £3,000 a month.
• Extension of the mortgage payment holiday for homeowners.
• One-off payment grants from local authorities.

Government-backed loan schemes and the Future Fund are likely to be extended through January in plans yet to be announced, plus options to top-up Bounce Back Loans.

If you require any assistance in assessing your companies situations and requirements, please don’t hesitate to get in touch with a member of our team on 01226 298 298  

INTRODUCTION

Today’s ‘Economic Update’ by the Chancellor, Rishi Sunak, arrived six months and a day after the Prime Minister announced the start of lockdown on 23 March. Twelve days earlier the Chancellor had made his Budget debut, announcing a “temporary, timely and targeted” package of measures to “deal with the coronavirus”. Their estimated total cost was £12 billion.

That figure now looks like small change in terms of the cost of the pandemic so far. This week’s HMRC statistics on the response to Covid-19 show that to 20 September:

• The total value of claims made under the Coronavirus Job Retention Scheme (CJRS) was £39.3 billion, covering 1.2 million employers and 9.6 million jobs. The CJRS will finish at the end of next month. From the start of October employers will have to meet an additional 10% of the CJRS payments, as well as NIC and pension liabilities.
• The Self-Employment Income Support Scheme (SEISS) received 4.9 million claims across its two payment periods, totalling £13.4 billion.
• Over £58 billion of finance had been approved under the government’s four loan schemes. Almost two-thirds of this was represented by the Bounce Back Loan Scheme (BBLS) under which the government provides 100% guarantees for lenders to more than 1.25 million small borrowers.

These figures tell only part of the story. There is also the cost of one year’s business rates relief, grant funding and enhancements to social security benefits. The latest (August) central scenario projection from the Office for Budget Responsibility is for government borrowing to reach £372.2 billion in 2020/21 against the £54.8 billion estimate it made at the time of the Spring Budget.

The latest statement from the Chancellor will increase this year’s borrowing further. However, the consensus among economists is that for now, life support for UK plc trumps any consideration of public debt levels. Today Mr Sunak has divided that support into three main areas:

1. Employment
2. Loan arrangements
3. Taxation

EMPLOYMENT

Job Support Scheme

The Chancellor made clear that the CJRS will end on 31 October, as planned. Its replacement will be the Job Support Scheme (JSS), which will run for six months from 1 November. Under the terms of the scheme:

• Employees will need to work a minimum of 33% of their normal hours.
• For every hour that is not worked, the employer and the government will each pay one third of the employee’s usual pay, with the government contribution capped at £697.92 a month. Employees working at least one third of their normal hours will receive at least 77% of full pay, subject to the government cap. Employers will pay at least 55% of normal wages.
• The employer will be reimbursed in arrears for the government contribution.
• The employee must not be on a redundancy notice.
• The scheme will be open to all employers with a UK bank account and a UK PAYE scheme. All small and medium-sized enterprises will be eligible; large businesses will be required to demonstrate that their business has been adversely affected by Covid-19. The government expects that large employers will not be making capital distributions (such as dividends) while taking advantage of the scheme.
• Claims for the JSS will not affect eligibility for payment of the £1,000 Job Retention Bonus announced in July and due from February 2021.

Self-Employment Income Support Scheme

The SEISS will be extended in a new form for six months from 1 November 2020. The scheme’s new terms are:

• The new SEISS grant will only be available to self-employed individuals currently eligible for the existing scheme who are actively continuing to trade but are facing reduced demand due to Covid-19.
• The extension will be in the form of two taxable grants:
• The first grant will cover a three-month period from the start of November until the end of January. This initial grant will cover 20% of average monthly trading profits, paid out in a single instalment covering three months’ worth of profits, and capped at £1,875 in total.
• The second grant will cover the following three-month period starting in February. The government will review the level of the second grant and set this in due course.

LOAN ARRANGEMENTS

The closing application date for the four main loan schemes will be extended to 30 November.

Bounce Back Loan Scheme

The BBLS provides loans of between £2,000 and £50,000, capped at 25% of turnover, with a 100% government guarantee. Under the original BBLS, the borrower did not have to make any repayments for the first 12 months, with the government covering the first 12 months’ interest payments. The maximum loan repayment term was six years.

Under new ‘Pay as You Grow’ options for BBLS:

• New and existing borrowers will have the option to repay their loan over a period of up to ten years.
• UK businesses will also have the option to move temporarily to interest-only payments for periods of up to six months. This option can be used up to three times.
• Alternatively, businesses can pause their repayments entirely for up to six months, although this option is only available after six payments have been made and can be used just once.

Coronavirus Business Interruption Loan Scheme

CBILS lenders
will be allowed to extend the term of a loan up to ten years, while retaining the benefit of the 80% government guarantee.

Coronavirus Large Business Interruption Loan Scheme

The Coronavirus Large Business Interruption Loan Scheme (CLBILS) will continue in its current form until the end of November.

Future Fund

The operation of the Future Fund, which provides matching convertible loans to innovative businesses will continue in its current form until the end of November.

Covid-19 Corporate Financing Facility

The Covid-19 Corporate Financing Facility, targeted at large businesses and operated by the Bank of England, will remain open until 22 March 2021. Where a company has exhausted all other options, and is of strategic importance to the UK, the government may also consider providing bespoke financial support.

TAXATION

Temporary VAT cut for hospitality and tourism

The reduced (5%) rate of VAT will continue to apply to supplies of food and non-alcoholic drinks from restaurants, pubs, bars, cafés and similar premises, and to supplies of accommodation and admission to attractions across the UK until 31 March 2021 rather than ending on 12 January 2021.

VAT deferral

A ‘New Payment Scheme’ for VAT deferral will offer businesses that deferred VAT due in March to June 2020 the option to spread their payments over the financial year 2021/22 in 11 equal instalments. All businesses that took advantage of the VAT deferral are eligible and can use the scheme. However, they will need to opt in using a process HMRC will launch in “early 2021”.

Self-Assessment Tax Deferral – Enhanced Time to Pay

The self-employed and other taxpayers will be given more time to pay taxes due in January 2021, building on the self-assessment deferral provided for payments on account in July 2020.

Taxpayers with up to £30,000 of self-assessment liabilities due will be able to use HMRC’s online self-service Time to Pay facility to secure a plan to pay over an additional 12 months. The application for time to pay will be agreed automatically when the taxpayer applies using an online form. If the liability exceeds £30,000 or the taxpayer needs longer to pay, the telephone service will still be available to agree a bespoke plan.

This means that self-assessment liabilities originally due in July 2020, and any liability becoming due in January 2021, will not need to be paid in full until January 2022. Any self-assessment taxpayer not able to pay their tax bill on time, including those who cannot use the online service, can continue to use HMRC’s Time to Pay Self-Assessment helpline to agree a payment plan.

If you have any queries on the above information, please do not hesitate to call our office on 01226 298 298 and a member of a team will be able to provide advice and support.

The scheme has been extended and a second grant can be paid to those who are eligible from today’s date (17th August).

If you were eligible for the first grant and can confirm to HMRC that your business has been adversely affected on or after 14 July 2020, you’ll be able to make a claim for a second and final grant from 17 August 2020. The deadline for making a claim is 19 October 2020.

The scheme allows you to claim a grant worth 70% of your average monthly trading profits, paid out in a single instalment covering 3 months’ worth of profits, and capped at £6,570 in total. The grant does not have to be repaid but will be subject to income tax and self employed National Insurance.

As with the first grant HMRC will contact you if you’re eligible, alternatively when the scheme goes live on the 17^th August you can follow the link below to check if you are eligible to make a claim.

https://www.gov.uk/guidance/claim-a-grant-through-the-self-employment-income-support-scheme#claim

Eligibility for the second grant will be worked out in the same way as the first grant.

You can make a claim for the second grant if you’re eligible, even if you did not make a claim for the first grant.