We hope this finds you safe and healthy, and whilst the continuing challange of COVID19 is still affecting businesses, there are a number of changes and key dates that affect businesses that have already had an impact or are coming in soon and therefore preparation is key. We have therefore included a roundup of the changes:
– VAT Deferral Scheme
– Changes in CJRS
– SEISS – Grant 5
In addition some other more general items to be aware of:
– Stamp Duty Land Tax – Non-Residents
– Gift Aid
VAT deferral scheme
If you took advantage of the VAT deferral scheme in 2020, where you opted to defer VAT payable between 20th March 2020 and 30th June 2020 and that has not yet been repaid.
There are three options:
- Pay the deferred VAT in full by 30th June 2021
- Join the VAT deferral scheme by 21st June 2021 – more info below
- Contact HMRC by 30th June 2021 if you need more help
If you wish to join the VAT deferral scheme, you will need to register for the scheme by 21st June 2021. This will allow you to make repayment in eight equal instalments.
Here is the link to register: https://www.gov.uk/guidance/deferral-of-vat-payments-due-to-coronavirus-covid-19
Please let us know if you need any assistance.
If you are not planning on joining the deferral scheme by 21st June 2021 or paying in full by 30th June 2021, you will need to indicate to HMRC how you are planning to make repayment by no later than 30th June 2021 or risk receiving a penalty of 5% of the outstanding amount on 30th June 2021.
Changes in the Job Retention Scheme
The Coronavirus Job Retention Scheme is currently in place until the end of September 2021.
From the 1st July 2021, you must continue to pay any furloughed employees 80% of the employees wages but employers will only be able to claim part of the cost from HMRC.
– July 2021 – Claim 70% of wages for hours not worked up to a maximum of £2,187.50 per month, therefore employers will need to contribute 10% of wages for hours not worked up to a maximum of £312.50
– August 2021 – Claim 60% of wages for hours not worked up to a maximum of £1,875.00 per month, therefore employers will need to contribute 20% of wages for hours not worked up to a maximum of £625.00
– September 2021 – Claim 60% of wages for hours not worked up to a maximum of £1,875.00 per month, therefore employers will need to contribute 20% of wages for hours not worked up to a maximum of £625.00
Employers can continue to choose to top up your employees’ wages above the 80% total and £2,500 cap for the hours not worked at your own expense.
Claims continue to have to be made by the 14th day following the month and flexible furlough remains in place.
SEISS – Grant 5
A fifth grant covering May 2021 to September 2021 will be open to claims from late July 2021.
Further guidance for claiming the grant will be available by the end of June 2021.
When must you have traded
You must have traded in the tax years:
– 2019 to 2020 and submitted your tax return on or before 2 March 2021
– 2020 to 2021
You must either:
– be currently trading but are impacted by reduced demand due to coronavirus
– have been trading but are temporarily unable to do so due to coronavirus
Your trading profits must be no more than £50,000 and at least equal to your non-trading income.
Deciding if you can claim
You must declare that:
– you intend to continue to trade
– you reasonably believe there will be a significant reduction in your trading profits due to reduced business activity, capacity, demand or inability to trade due to coronavirus from May 2021 to September 2021
You must keep evidence that shows how your business has been impacted by coronavirus resulting in less business activity than otherwise expected.
HMRC expects you to make an honest assessment about whether you reasonably believe your business will have a significant reduction in profits.
Calculating the Grant
The amount of the fifth grant will be determined by how much your turnover has been reduced in the year April 2020 to April 2021. More information on how to calculate this will be released by HMRC by the end of June 2021.
You will get the following based on how much your turnover has reduced:
– 30% or more reduction – 80% of 3 months’ average trading profits – capped at £7,500
– less than 30% reduction – 80% of 3 months’ average trading profits – capped at £2,850
The online claims service for the fifth grant will be available from late July 2021. The grant is taxable and payable in one installment.
Stamp Duty Land Tax – Non-Residents
Since 1 April 2021, any non-UK resident purchasing UK residential property is liable to a 2% surcharge where the property is located in England or Northern Ireland, and cost more than £40,000. This applies to both individuals and companies.
The definition of “non-UK resident” for the purposes of the surcharge has a different meaning than for income tax and CGT, both of which are determined by the statutory residence test (SRT). For SDLT purposes, an individual will be non-UK resident if they were not present in the UK for at least 183 days in the 12 months prior to the purchase. It is therefore a relatively simple test compared to the SRT, but the discrepancy between the two definitions could mean that an individual that is UK resident under the SRT is treated as non-UK resident for the purposes of SDLT.
Example. Clive has lived in South Africa all his life. On 1 May 2021 he moved to the UK to take up an offer of employment. He purchases a house and the transaction completes on 1 July 2021. Clive will clearly be UK resident for 2021/22. However, because he has only been in the UK for two months in the 12 months prior to the purchase he will have to pay the SDLT surcharge.
The good news for people in Clive’s position is that they will be able to claim a refund of the surcharge if they are present in the UK for at least 183 days in any continuous 365-day period starting one year before the purchase and ending one year after. In Clive’s example, he will be able to claim a refund in November 2021.
Companies will be non-UK resident (or deemed non-UK resident) if either of the following two conditions are met at the date of purchase:
– the company is non-UK resident for the purposes of the Corporation Tax Acts, i.e. not subject to UK corporation tax; or
– the company is resident in the UK, e.g. because it was incorporated here, but:
1. it is a close company; and
2. it meets the non-UK control test (see below); and
3. the transaction is not an excluded transaction, e.g. by an OEIC.
The non-UK control test will be met if a participator controls the company, or is attributed with controlling the company, and they personally meet the non-UK resident test for individuals, i.e. they are not present in the UK on at least 183 days in the 12 months prior to the purchase.
It is important to note that the surcharge is in addition to any of the normal rates of SDLT. If the purchase is of a second (or subsequent) residential property, the 3% surcharge will be payable as well as the new 2% surcharge. The top rate of SDLT may therefore be 17% in some circumstances.
There is a break for married couples and civil partners. If the property is held jointly, the new surcharge will not apply as long as one buyer relationship meets the UK resident criteria.
Most people give to charity in one form or another at some point. This could be by donating unwanted clothes, books, and so on to the local charity shop. There can also be a donation via a site like Just Giving, or there may be ongoing payments by direct debit – commonly for qualifying memberships such as the National Trust, or English Heritage etc.
In light of the impact of Covid-19 on finances it is a good idea to review these arrangements now in order to avoid any unwanted tax consequences relating to the gift aid rules. When making a donation or signing up for a membership there will usually be a form asking for confirmation that the individual is a UK taxpayer. If this is the case, the charity can claim the equivalent of basic rate tax on the donation from HMRC. For example, if an individual pays £80 for admission to an estate looked after by a qualifying charity, the charity can reclaim an additional £20 from HMRC if the individual completes the gift aid declaration.
In order for this to have no consequences for the individual, there must be enough tax for the year to cover the additional amount. If there isn’t, the additional amount is payable to HMRC. This may be affecting many people at the moment, particularly if they have been furloughed or made redundant.
There isn’t anything that can be done to “undeclare” taxpayer status on historic one-off gifts, but it’s possible to contact the recipient of recurring payments and ask that the gift aid declaration be cancelled going forward.
At the other end of the scale, higher and additional rate taxpayers should be vigilant as things they pay for that might attract additional tax relief. It has been reported that the additional relief available to such individuals is often overlooked. This may partially be down to a lack of knowledge about the types of things that can qualify, such as entrance fees or membership fees. Records should be kept supporting claims, so it is a good idea to review this on an ongoing basis rather than after the year
end. Reviewing bank statements is a good place to start, as well as checking emails – most places are currently requiring advanced booking which helps create supporting documents.
This information is current as of June 2021 and is subject to change without notice. The information within this newsletter is intended as a guide and individual circumstances may differ and you should seek professional advice before taking any actions.