31 January 2021
This month we’re starting with a reminder that self-assessment tax returns are due by 31st January, at the beginning of the week it was reported that 5.4m taxpayers were yet to submit their 2019/20 tax return. HMRC granted an extension to the due date for the second payment on account (originally due 31 July 2020) which falls due at the end of the month together with any balancing payment in respect of 2019/20 and the first payment on account for 2020/21. HMRC have been understanding in regards affordability and taxpayers are able to request a payment plan via the online portal. That being said, penalties will be levied if the return or payment are late so we would encourage you to take action sooner rather than later.
Working from Home
In a research paper published towards the end of last year it was found that 47% of workers are no longer at the office (a seven-fold increase). It has been suggested that those people are contributing less to the economy by way of direct savings (no travel, work-specific clothing, lunches) and indirect savings via forgone socialising. Employers could, in the long run, also save on reduced costs (rent, refreshments, utilities) if fewer employees are attending the office.
A survey has found that after the pandemic has passed (whenever that might be), more than half of those who have been working from home would like to continue to do so for between two and three days a week.
The research paper proposed a 5% tax on employment income attributable to days spent working from home (once the government advice to do so has ceased). If the employer does not provide the worker with a permanent desk , the tax would be paid by them. If it does, and the employee chooses to work from home, the employee will pay the tax from their salary.
At the moment there has been no indication that this will be considered by the Government, but with the Budget announcement coming on 3rd March it is one of many possibilities being suggested to restock the Treasury as a result of the Covid-19 support packages.
Off-Payroll in the Private Sector
A gentle reminder that, from 6 April 2021, the off-payroll working rules will come into effect in the private sector. In November 2019 HMRC launched an enhanced version of the Check Employment Status for Tax (CEST) tool to assist individuals in obtaining a determination of their status which could be used to counter a challenge from HMRC.
However, published statistics from the past year indicate that, of the 975,416 uses during the period, the tool was not able to determine employment status in 19% of cases. In this circumstance, users are advised to check their information inputs before referring to HMRC’s employment status manual or contacting HMRC directly. If you are in any doubt, we would suggest that professional advice is sought.
The effect of the upcoming changes means that the responsibility for determining employment status falls on the end client if it is a medium or large entity. The end client must inform the fee payer (intermediary company) and the worker of its size. If it is medium or large, then it must deduct and pay tax and NICs via PAYE if the worker is deemed to be an employee. If the end client is small the responsibility remains with the intermediary.
This point was clarified in a statement by the Financial Secretary to the treasury ensuring that intermediaries that are companies are not treated in the same way as intermediaries that are personal service companies thereby correcting an unintended widening of the definition of an intermediary.
Construction Industry Scheme
From 6 April 2021 a number of changes to the CIS will come into force.
HMRC will have the power to amend CIS deductions claimed by sub-contractors where there has been an error or omission or to prevent certain employers from making further claims where they have not provided evidence of eligibility or corrected an EPS upon request.
Under the CIS, the contractor must deduct the relevant percentage from the net payment amount and pay this to HMRC. In calculating that net amount, the contractor should deduct materials costs, but only if it represents the direct cost of materials purchased by a sub-contractor in respect of that particular contract. The new legislation clarifies this point.
The third measure changes the rules for determining so-called ‘deemed contractors’ i.e. those operating outside of the construction industry but who undertake significant construction operations. Rather than looking back at each year end to determine the level of construction expenditure these businesses will need to monitor that expenditure more regularly and apply the CIS when construction expenditure exceeds £3m within the previous 12 months.
Finally, the legislation expands the scope of the penalty for supplying false information when applying for gross payment status (GPS) to include those in a position to exercise influence or control over the person making the application.
VAT Payment Deferral
If you deferred VAT between 20 March and 30 June 2020 and still have payments to make, you can opt into the new VAT deferral scheme and make between 2 and 11 smaller monthly instalments, interest free. All instalments must be paid by the end of March 2022.
To use this scheme you must:
- still have deferred VAT to pay
- be up to date with your VAT returns
- opt in before the end of March 2021
- pay the first instalment before the end of March 2021
- be able to pay the deferred VAT by Direct Debit