Following the Chancellor’s recent Budget announcement, we have collated important dates, practical VAT tips, helpful reminders and grant information for your business to consider:
VAT, Compensation and Early Termination Fees
In 2020, HMRC revised their guidance and ruled that income received from early contract termination, cancellation fees, liquidated damages and compensation would be regarded as consideration for a taxable supply. At the time, HMRC advised that the change would have retrospective effect. Following pressure from affected parties, HMRC announced on 25 January 2021 that the change to the VAT treatment of compensation will not have retrospective effect.
Domestic VAT Reverse Charge for Construction Services
The Domestic VAT Reverse Charge came into effect for supplies on 1 March 2021. You can visit the UK Government’s website to check:
- A VAT number of a customer or supplier
- The CIS status of a supplier
- The CIS status of a customer – you will need to ask the customer to confirm that they are reporting under CIS if they are not an end-user or an intermediary
Making Tax Digital
The deadline to have digital links in place is 1 April 2021.
If your VAT registered business is not signed up to Making Tax Digital but pays VAT by direct debit, please ensure that HMRC have a current and valid email address. This is because HMRC will migrate VAT records to a new online platform and must notify a business of the date and how much will be taken by direct debit to comply with banking regulations.
Deferred Customs Declarations and PVA
If a customs declaration has been deferred, a business must use postponed VAT accounting and estimate the VAT. When the customs declaration is made, an adjustment may be needed after the PVA statement has been issued. To access the PVA statement, register for the Customs Declaration Service (CDS). Paragraph 22 of HMRC Notice 252 sets out how to value goods for import purposes.
Green Homes Grant
If you are a homeowner or residential landlord in the private or social rented sector who lives in England, then you may be eligible to apply for the Green Homes Grant voucher towards the cost of installing energy efficient improvements to your home. These improvements can cover insulation of the property and low carbon heating measures for example.
The voucher of up to £5000 can cover the cost of labour, materials and VAT and possible additional works. Vouchers will be valid for 3 months from the date they are issued or until 31 March 2022, whichever is earlier.
Does your Self-Employment Income Support Scheme (SEISS) Grant need to be repaid?
The budget announced investment of over £100m in a taskforce of HRMC staff to focus on fraudulent claims of Covid-19 support packages. This taskforce is focused on tackling serious fraud, however it shows intention by HMRC to check eligibility for the support packages it has made available.
As an application for a SEISS grant did not involve a tax advisor, the end of the tax year would be a good time to review any claims and ensure you have met HMRC’s requirements.
HMRC’s guidance states that for the first two grants, claimants must have been adversely affected by coronavirus i.e. they lost trading profits possibly as a result of illness, shielding or caring for others. Alternatively, the business may not have been able to operate due to supply chain issues, lack of customers or available staff. Finally, trading profits were to be no more than £50,000 and were to be at least equal to non-trading income.
To be eligible for the third grant, the claimant had to be trading but have suffered reduced demand due to coronavirus, or have been trading but temporarily unable to do so due to coronavirus; for example, having to close due to Government restrictions.
There was a requirement for the claimant to confirm the intent to continue to trade and that they reasonably expected there to be a significant reduction in trading profits as a result of coronavirus.
Many people will have claimed the grants in anticipation of a significant reduction in trading profits. If this has not happened, please be aware that under the terms of the grant, HMRC expect the money to be repaid. HMRC have confirmed that penalties will be charged if this does not happen or if HMRC decide that the individual knew they were not entitled to the grant when they made the claim.
Please contact us on 01633 810081 or firstname.lastname@example.org if you require further information or assistance regarding the above.