MHA Moore and Smalley strengthens indirect tax team as demand soars for Brexit-related advice

MHA Moore and Smalley has added to its VAT and indirect tax team with the appointment of Steve Forster.

Steve joins us as VAT and indirect tax senior manager and will assist our clients at a time of unprecedented demand for advice on tax and international trade issues caused by Brexit.

A hugely experienced tax advisor, Steve’s most significant role was his 18 years spent with The Co-operative Group where he became head of indirect tax and played a leading role in developing the group’s tax policy for managing VAT, customs and excise duties and insurance premium tax.

In a recent role in professional services, Steve completed a seven-month secondment as part of the Amazon VAT advisory team where he was involved in a number of significant global and UK projects. This experience will be invaluable for clients who use Amazon as their online marketplace.

Jonathan Main, indirect tax partner at MHA Moore and Smalley, said:

“Steve has a huge amount of VAT experience and knowledge, particularly as a result of his in-house roles in highly complex and diverse organisations.

“As we reach the end of the Brexit transition period, demand for specialist tax advice is at an all-time high and Steve will be an incredible asset to the firm and our clients at this critical time.”

Steve, who lives in Kirkham and is a former Kirkham Grammar School student, added:

“I started my career as a VAT inspector for HM Customs and Excise, and have worked for several of the largest professional services firms in the UK. My time at the Co-op exposed me to complex VAT issues within sectors as diverse as food retail, travel, healthcare, farming, property, banking, insurance, even funerals.

“The demand for advice on import and export matters is at its highest for over 40 years, so I’ve joined MHA Moore and Smalley at a very busy time. The firm’s membership of the Baker Tilly International network sees it advising clients not just in the UK, but around the world. I’m looking forward to helping businesses and their management teams bring a sense of clarity to indirect tax matters as the UK navigates the choppy waters of Brexit.”

Steve began his career as a VAT inspector in 1986 before joining Ernst & Young in Liverpool in 1994, becoming a VAT manager in 1997. He took on the role as the first senior VAT manager at Grant Thornton in Liverpool in 1998 before joining the Co-op in 2001.

Timeline for next phase of MTD now published

HMRC have recently announced their timeline for the next phase of their Making Tax Digital (MTD) programme.

The key changes and timings are set out below:

The first and most pressing change is in April 2021 when digital links for VAT become compulsory. Currently these are not compulsory although many businesses already comply.

What do you as a MTD VAT registered business need to consider?

  1. Do you use linked digital software for all your accounting processes and submit direct from that software to HMRC?
  2. Do you use linked digital software for all your accounting processes and then download a return and digitally link this to bridging software, and then submit this way to HMRC?
  3. Do you have some manual records still?
  4. Do you use bridging software but manually type in the figures because you can’t or don’t download from your bookkeeping software?
  5. Do you use excel for all your records?
  6. Do you use separate pieces of software for various bookkeeping tasks and then manually enter this information into your bookkeeping software?

If you answered yes to only 1 or 2 then you are compliant. If you answered yes to either 3, 4, 5 or 6 then you need to speak to your accountant as soon as possible to get a plan in place to ensure you comply with the new, stricter, rules from April 2021.

Contact us

Please get in touch with Judith Dugdale, Corporate Services Director and Head of Digital Solutions, if you need support, or alternatively contact us here.

Budgeting for January 2021 tax liabilities

As we are fast approaching the deadline for 2019/20 Self Assessment tax returns to be filed and self assessment tax liabilities to be settled in January 2021 there may be an extra amount to be taken into account if you availed yourself of the option to defer the July 2020 tax payment on account due to having been affected financially due to COVID.

Personal finances may be constrained due to various issues such as a reduction in outside earnings or practice cash flow issues due to certain income streams reducing. If this has been identified as a cashflow issue by practice managers there may have been a reduction in drawings to ensure working capital is maintained.  This may have resulted in less available money to pay your tax bill in January.

Therefore early notice of your 31 January 2021 tax liabilities is vital to ensure you have enough in the bank (either personal if you pay it yourself or the practice bank account if this is paid via the practice) to settle the July 2020 payment on account and the January 2021 balancing payment for 2019/20 and the first payment on account for 2020/21 which will also be due in January 2021.

However a lifeline has been offered if individuals are experiencing financial difficulties due to the COVID-19 pandemic with Self Assessment customers being able to apply online for additional support to help spread the cost of their tax bill into monthly payments without the need to call HM Revenue and Customs (HMRC).

HMRC have said:  

The online payment plan service can already be used to set up instalment arrangements for paying tax liabilities up to £10,000. From 1 October 2020, HMRC has increased the threshold to £30,000 for Self Assessment customers, to help ease any potential financial burden they may be experiencing due to the coronavirus pandemic.

The increased self-serve Time to Pay limit of £30,000 follows the Chancellor of the Exchequer’s announcement on 24 September to increase support for businesses and individuals through the uncertain months ahead.

As part of his speech, the Chancellor announced that Self Assessment customers could pay their deferred payment on account bill from July 2020, any outstanding tax owed for 2019 to 2020 and their first payment on account bill for this current tax year in monthly instalments, up to 12 months, via this self-serve tool. Customers who need longer than 12 months to settle their tax liabilities are invited to contact HMRC in the usual way.

Customers who wish to set up their own self-serve Time to Pay arrangements must meet the following requirements:

  • they need to have no:
    • outstanding tax returns
    • other tax debts
    • other HMRC payment plans set up
  • the debt needs to be between £32 and £30,000
  • the payment plan needs to be set up no later than 60 days after the due date of a debt

Customers using self-serve Time to Pay will be required to pay any interest on the tax owed. Interest will be applied to any outstanding balance from 1 February 2021.

If your Self Assessment debts are over £30,000, or you need longer than 12 months to pay your debt in full, you may still be able to set up a Time to Pay arrangement by calling the Self Assessment Payment Helpline.

If you anticipate that profits have reduced in the 2020/21 tax year please contact us to consider reducing your 2020/21 payments on account due January and July 2021. We can prepare draft calculations to estimate your 2020/21 tax liability. Fees will be available on request.

Contact us

If you require any advice regarding the above please get in touch with Lisa Pennington, Healthcare Services Director, or alternatively contact us here.

Protect yourself/business now with our Tax Investigation Service

With a budget deficit of over £300 billion, we fully expect HMRC to raise more enquiries this year  and next to increase tax revenue to plug the hole left in the Government’s finances by the economic damage caused by Covid-19.

For those who have relied on a Covid-19 support scheme such as the CJRS (furlough scheme) and the SEISS (self-employed scheme), it is likely that HMRC will be looking a lot more closely at tax returns, payments and compliance history. Tax and VAT repayments will also be checked more rigorously alongside the usual full tax investigations.

Last year, HMRC
collected £34.1 billion through tax investigations and enquiries. What’s more,
HMRC can target anyone who submits a tax return and their highly efficient
‘Connect’ software is accessing and trawling through financial information
right now. 83% of tax investigations are triggered by the ‘Connect’ system.

Better safeguarding for you and your business

With this increased activity and higher numbers of tax investigations, it’s never been more important to protect yourself and/or business with our tax investigation service. For a small yearly fee, we will:

  • Defend you if you are selected for a HMRC tax investigation
  • Cover all costs included in the service so that you know where you stand
  • Support you through the process and minimise any hassle and stress.

What happens if I don’t protect
myself/business?

HMRC can investigate anyone at random at any
time. If you’re not protected, the costs of a tax investigation can go into
thousands of pounds and last months.

Dealing with a
tax investigation isn’t included in our normal costs, so it
pays to act now and safeguard yourself/business against the cost and stress of
a tax investigation.

Act now to protect yourself/business

As your accountants, we want to make sure you’re safe, secure and protected in every possible way. That’s why we strongly recommend you take advantage of our Tax Investigation Service.

Please visit
our website
 for more information – then sign up online
to subscribe.  It’s one small thing you can do today that
could make a big difference to your future.

VAT Return Submissions – Voluntarily Registered Businesses Changes from April 2021

VAT registered businesses with turnover above the VAT threshold were mandated into the MTD regime in April 2019, with these businesses now submitting quarterly updates, keeping digital records and using MTD compatible software.  In a recent, not widely publicised, update from HMRC, there will be a change in how VAT returns are submitted for those under the VAT threshold who are voluntarily registered, from April 2021.

The change sees the end of the current VAT mainframe for VAT return submissions.  Businesses who are not yet signed up to MTD will be required to make the following choice:

  1. Submit your VAT returns yourself through your Business Tax Account or,
  2. For an agent to continue filing your returns from April 2021, you will be required to sign up to MTD and comply with all the MTD rules in place.

For any customers using XML to file VAT returns this will also no longer be compatible and a change will be required from April 2021.

Whilst there is no legal requirement for voluntarily registered businesses to sign up to MTD until 1 April 2022, this change will likely push many businesses to make the transition sooner than planned.

Initially, changing software for keeping records and filing returns may require financial investment and it will take time to learn and adjust business practices.  Once the initial settling period is over, the use of MTD compliant software can provide a number of benefits, such as:

  • A reduction in input errors
  • Faster bookkeeping
  • Automatic upload of information
  • Quick and easy tax position
  • Using the software to assess business performance and create forecasts

At MHA Moore and Smalley we have assisted a large number of our clients to become MTD compliant and also understand the potential benefits.  For those looking to make the change now, please contact a member of our team and we will be happy to assist.

Further information on the full requirements for MTD can be found here:

https://www.gov.uk/guidance/making-tax-digital-for-vat

The full publication from HMRC can be read here:

https://www.tax.org.uk/sites/default/files/Final%20version%20sent%207%20Oct%202020.pdf

If you are interested in discussing any of the content discussed in this blog further, please get in touch with Tax Planning Consultant Andy Purcell on 01772 821 021 or andy.purcell@mooreandsmalley.co.uk

Small companies to be subject to cap on R&D Tax Credit Repayments

Companies in receipt of repayable Research and Development (“R&D”) tax credits under the small companies (SME) scheme might be impacted by a new cap on the amount of repayment receivable, coming into effect for accounting periods beginning on or after 1 April 2021.

This provision had been scheduled to come into effect on 1 April 2020, but due to the uncertainty caused by the Covid pandemic, was shelved for a year.

The detail has now been unveiled in next year’s finance bill.

Companies will be limited to receiving £20,000, plus 300% of its PAYE and NIC liabilities (and potentially 300% of the PAYE and NIC liabilities of connected companies).

The inclusion of a £20,000 threshold protects those with small claims, which will be a welcome relief for a lot of businesses.

Whilst this will come as a blow for some claimants, it targets those who subcontract large amounts of their R&D to third parties so a lot of companies should be unaffected by the cap.

There is also an exemption to the cap, for companies who meet two conditions:

Condition A

Condition A requires the company to be creating, preparing to create or managing intellectual property. These activities must be undertaken largely by employees of the company, and the company must have the right to exploit the intellectual property (IP).

This is a similar requirement to the patent box regime, but this test is focussed on the management activities around the exploitation and development of IP rather than ownership. This means formulating plans and making decisions in relation to the development or exploitation of the rights, to include activities such as:

  • Being involved in planning or decision-making activities associated with developing and exploiting the IP;
  • Deciding whether to grant licences, expand research activities or product analysis, and development from their IP;
  • Deciding on maintaining and extending protection in other jurisdictions.

Condition B

Condition B requires that the total of the company’s qualifying expenditure with connected persons (on externally provided workers and subcontracting R&D) is no more than 15% of its qualifying expenditure.

These provisions are designed to exempt companies with low PAYE and NIC, but which are nevertheless themselves engaged in genuine, substantial R&D.

Contact us

If you want to understand whether this will affect your claim, please contact our tax team.

This update originally appeared on the website of our colleagues at MHA Tait Walker

Changes to the Annual Investment Allowance

The temporary increase in the Annual Investment Allowance (AIA) limit to £1,000,000 has been extended to 31 December 2021.

What is the AIA?

The AIA is a 100% upfront allowance which enables a business to write off expenditure on qualifying plant and machinery up to a specified amount each year. It is intended to encourage greater levels of investment in the economy by providing an increased incentive for businesses to invest in plant and machinery.

Most assets that qualify as plant and machinery for capital allowances will qualify for AIA. Some common examples are computers, office furniture and equipment, vans and lorries, machines used for business purposes, certain fixtures such as air conditioning, and certain parts of a building referred to as ‘integral features’.

Assets that are excluded from AIA include buildings, cars and assets used solely for business entertainment. For sole traders and partnerships, there is a restriction on AIA entitlement for assets that are used partly for private purposes.

Although cars do not qualify for AIA, expenditure incurred before 1 April 2021 on electric cars or cars which have CO2 emissions not exceeding 50g/km will qualify for 100% first year allowances, provided that the cars are acquired new and unused.

The maximum amount

The AIA limit has changed a number of times since it was first introduced in The Finance Act 2008. The amount was temporarily increased to £1,000,000 from 1 January 2019 and was due to revert back to the permanent limit of £200,000 from 1 January 2021. In a statement made on 12 November 2020, the government announced that the increased limit will remain in place for another year and will revert back to £200,000 on 1 January 2022.

The change is intended to stimulate investment by supporting businesses with 100% up-front tax relief during the continuing uncertainty caused by COVID-19.

The AIA limit applies to a 12-month accounting period and transitional rules will apply where a business has a chargeable period that spans 1 January 2022.

Expenditure in excess of the available AIA will be dealt with under the standard rules for capital allowances and will qualify for writing down allowances in the general pool or special rate pool.

Contact us

If you would like to discuss how the extension of the increase in Annual Investment Allowance could affect your business please get in touch with our tax team.