TAXANGLES A newsletter for proactive planning... In this edition... December 2020 Issue Grants for businesses affected by national restrictions www.compassaccountants.co.uk Have you got your EORI number? Postponed VAT accounting from 1 January 2021 Should I reduce my payments on account? Utilise the trivial benefits exemption to provide tax-free Xmas gifts Compass Babies!
PAGE 2 Grants for businesses affected by national restrictions Many businesses have been forced to close as a result of the national and local restrictions introduced to slow the spread of Coronavirus. Where this is the case, the business may be eligible for a grant from their local authority. The following grant support is available to businesses in England during the second national lockdown. Grants to businesses in Wales, Scotland and Northern Ireland are subject to devolved rules. Businesses closed due to national retractions Business that were previously open as usual, but which were required to close between 5 November 2020 and 2 December 2020 as a result of the second national lockdown in England may be eligible for a grant from their local council for the 28-day period for which the national lockdown applies. A business may qualify for a grant if it meets the following conditions: • it is based in England; • it occupies premises in respect of which it pays business rates; • it has been required to close between 5 November 2020 and 2 December 2020 as a result of the national lockdown; and • it has been unable to provide its usual in-person service from those premises as a result. Businesses that qualify may include non-essential shops, leisure and hospitality venues and sports centres. Business that normally operate as an inperson venue but which have had to modify their services as a result of the lockdown also qualify.
PAGE 3 An example here would be a restaurant that is not allowed to provide eat-in dining but which stays open for takeaways. Businesses are only entitled to claim one grant for each non-domestic property. A business which has exceeded the permitted state aid limit – set at €200,000 over a three-year period – is not eligible for further funding but may qualify for help under temporary Covid-19 measures. Local restrictions Amount of the grant The amount of the grant is based on the rateable value of the business premises on the first day of the second national lockdown. Where the rateable value of the business premises is £15,000 or less, the business will receive a grant of £1,334 for each 28-day period for which the restrictions apply. Where the rateable value of the business premises is between £15,000 and £51,000, the business will receive a grant of £2,000 for each 28-day period for which the restrictions apply. Where the rateable value of the business premises is £51,000 or above, the business will receive a grant for each 28-day period for which the restrictions apply. Applications should be made to the local council following the application procedure on the relevant council’s website. Excluded businesses A business is not eligible for a grant if it can continue to operate during the restrictions because the business does not depend on providing in-person services from their premises. Businesses that would fall into this category would include accountants and solicitors. Businesses that are not required to close, but which choose to, are also ineligible for a grant. Where local restrictions are in force, businesses may qualify for separate grants if they are either forced to close or, where they can remain open, their business is severely impacted as a result of those restrictions. Details of the grants available where local restrictions apply can be found on the Gov.uk website.
PAGE 4 Have you got your EORI number? If you do not already have an EORI number, you will need to obtain one in order to move goods between Great Britain and the EU. You may also need one you move goods between Northern Ireland and nonEU countries. Applying for an EORI number From 1 January 2021, you will need an EORI number that starts with ‘GB’ to move goods between Great Britain and other countries. If you do not already have an EORI number that starts with ‘GB’ and you have yet to apply for one, this should be done as soon as possible. Applications for an EORI number can be made online. To make an application, you will need: • your VAT number and the effective date of your registration (which can be found on your VAT registration certificate); • your National Insurance number (if you are applying as an individual); • your Unique Taxpayer Reference (UTR); • the date that your business started and its Standard Industrial Classification (SIC) code (which can be found on the Companies House register for a company); and • your Government Gateway User ID and password. Making an application using the online service should only take 5—10 minutes. You will receive your EORI number straight away unless HMRC need to make further checks, in which case it will take up to five working days. 5 g p -t n o C From 1 January 2021, you will need an Economic Operators Registration and Identification (EORI) number to move goods between Great Britain and the EU. Prior to 1 January 2021, you only needed an EORI number if you move goods between the UK and non-EU countries.
PAGE 5 Once an application has been made, the status of that application can be checked online. Moving goods between Great Britain and Northern Ireland The Northern Ireland Protocol comes into effect on 1 January 2021. Special rules apply to the movement of goods between Great Britain and Northern Ireland. From that date, an EORI number that starts with ‘XI’ will be needed to: • move goods between Northern Ireland and other countries; • make a declaration in Northern Ireland; or • get a customs decision in Northern Ireland. To obtain a EORI number that starts with ‘XI’ you will need to have one that starts with ‘GB’ – if you don’t, you will need to apply for one first. If you already have an EORI number that starts with ‘GB’ and HMRC have identified that you are likely to need one that starts with ‘XI’, then they should send you one automatically, Expect to receive this from mid-December 2020. Trader Support Service If you move goods between Great Britain and Northern Ireland, sign up to the Trader Support Service (see www.gov.uk/guidance/trader-support-service) for help and support on moving goods between Great Britain and Northern Ireland. Postponed VAT accounting from 1 January 2021 The Brexit transitional period comes to an end of 31 December 2020 and various changes come into effect from 1 January 2021. One of these changes is the introduction of postponed VAT accounting. This will affect you if you are a VAT-registered business and you import goods into the UK, particularly if you do not use duty deferment. Nature of postponed VAT accounting Under postponed VAT accounting, you declare and recover VAT on the same VAT return. This is beneficial as it means that you do not have to pay the VAT upfront and recover it later. Normal VAT rules continue to govern what can be reclaimed. 6 gp no tnoC
You can use postponed VAT accounting from 1 January 2021 if your business is registered for VAT in the UK and you import goods into Great Britain from anywhere outside the UK or into Northern Ireland from outside the UK and the EU. There are no changes to the VAT treatment of goods moved between Northern Ireland and the EU, or in the way in which the VAT is accounted for. Accounting for import VAT on your VAT return You can account for import VAT on your VAT return if: • you import goods for use in your business; • you include your EORI number, which starts with ‘GB’ on your customs declaration; and • you include your VAT number on your customer’s custom declaration if required. If you use customs special procedures, you can account for the import VAT on your VAT return when you submit the declaration to release those goods into free circulation. Completing your VAT return The introduction of postponed VAT accounting means that there are some changes to the way in which you will complete your VAT return from 1 January 2021. You will need to download a monthly statement which shows the total import VAT postponed for the previous month which you will need to include on your VAT return. There are also changes to what you need to enter in Boxes 1, 4 and 7. • In Box 1, include the VAT due in the period on imports accounted for through postponed accounting. • In Box 4, include VAT reclaimed in this period on imports accounted for through postponed accounting. • In Box 7, include the total of all imports of goods shown on your online monthly statement, excluding any VAT. Consignments not exceeding £135 Where the value of the consignment is less than £135, VAT will be collected at the point of sale rather than at the point of importation.
PAGE 7 Utilise the trivial benefits exemption to provide tax-free Xmas gifts The Covid-19 pandemic has placed the office Christmas party firmly off the menu this year. Regardless of what restrictions are in place over the Christmas season, many employers will want to take the opportunity to spread some seasonal cheer amongst workers, who may have been furloughed or working from home for much of 2020.
PAGE 8 The impact of any goodwill gesture is somewhat diminished if it comes with an associated tax bill. This is where the trivial benefits exemption can come into its own, enabling employers to provide employees with tax-exempt Christmas gifts, while keeping the costs low at a time when many businesses are struggling financially. Personal and family companies can similarly make use of the exemption. As it would be impracticable to work out the exact cost of the turkey provided to each individual employee, the average cost of £48 is taken as the cost of the benefit. Assuming all the other conditions are met, the gift of the turkey falls within the trivial benefit exemption and is free from tax. Nature of the exemption Care should be taken using gift cards which are topped up on several occasions. Rather than evaluating each use of the card separately for the purposes of the trivial benefits exemption, HMRC look at the total cost of providing benefits via the card in the tax year in question. The following example illustrates the trap. Under the trivial benefits exemption, a benefit is exempt from income tax and National Insurance if all of the following conditions are met. • The cost of providing the benefit does not exceed £50. • The benefit is not in the form of cash or a non-cash voucher. • The employee is not contractually entitled to the benefit. • The benefit is not provided in recognition of, or in anticipation of, services performed as part of the employee’s employment duties. Where a benefit is provided to a group of people and it is impracticable to work out the exact cost of providing it to each recipient, the average cost is used to determine whether the benefit is trivial. Directors of close companies (together with members of their family or household) can only receive tax-free trivial benefits to a maximum value of £300 in a tax year. For other recipients, there is no annual limit (but each individual trivial benefit must cost £50 or less). Seasonal gifts The following example illustrates how the trivial benefits exemption can be utilised to provide tax-free Christmas gifts to employees. Example 1 An employer purchases 100 turkeys to be given to employees at Christmas. The total bill is £4,800. The turkeys vary slightly in weight but are not priced individually. Gift card trap Example 2 An employee is given a gift card at Christmas which can be exchanged in a particular store for a gift. The card costs the employee £30 to provide. The card is topped up by a further £30 on the employee’s birthday. Although each top-up costs the employer less than £50, the total cost of providing the employee with a gift card is £60 for the tax year. As this exceeds the £50 trivial benefit limit, the exemption does not apply. Instead, the employer should give the employee separate gifts costing £30 each, both of which would be exempt.
PAGE 9 Compass Babies! 2020 has been an unusual year for all of us, but we are delighted to say, that it hasn't stopped the Compass family from growing! Senior Administrator, Stacey Leggett (above left), had a baby boy called Jesse on the 6th July 2020. Jesse weighed 7lb 5oz. Client Manager, Sam Beavan gave birth to Sienna (above right) on February 16th whilst in lockdown. Sienna weighed 8lb 10 ½ oz. Welcome to the family Jesse and Sienna!
Fleepit Digital © 2021