The automatic deferment of VAT payments is coming to an end on 30 June, so clients who owe VAT for the quarter or month ending on 31 May 2020, will have to pay as usual by 7 July.
Where the business cancelled its direct debit mandate to ensure that VAT due in the period from 20 March to 30 June was not collected, it will have to reinstate that direct debit to ensure the VAT as reported on returns from May onwards is collected automatically again. If the direct debit is not reinstated in time, the business will need remember to make an electronic transfer of the VAT due.
If the business cannot pay its VAT bill on time, it should apply to HMRC for extra time to pay. The best way to do this is to call the HMRC payment support service on 0300 200 3835 before the tax becomes overdue. You can help to negotiate a Time to Pay arrangement with HMRC on behalf of your client.
HMRC is also starting to chase up VAT registered businesses to sign-up for MTD if they have not already done so.
Second homes have been subject to a 3% SDLT surcharge since April 2016, and similar surcharges apply in Wales (3% LTT) and Scotland (4% LBTT).
These surcharges are not supposed to apply to the purchase of a main home, but purchasers can be caught out if they buy a replacement main
home before completing the sale on their old home.
Where the buyer holds two or more homes at the end of the day of completion the surcharge applies. But this surcharge can be reclaimed if the old home is sold within a specified window, set at three years for property purchases in England, Wales and Northern Ireland, but just 18 months in Scotland.
As the UK property market was effectively frozen due to the coronavirus shut-down many sales fell through and some buyers have been left holding two homes for longer than expected. The UK and Scottish Governments have reacted by extending the window for sale of the old home in slightly different ways.
Scottish home-owners can enjoy a limited extension to the window for sale to three years, where the new home was purchased between 24 September 2018 and 24 March 2020. This is legislated for in the Coronavirus (Scotland) (No.2) Act 2020, Schedule 4 part 5.
Home-owners in England or Northern Ireland have been given an open-ended flexibility for the sales window where the new home was purchased on or after 1 January 2017. If the buyer can show that exceptional circumstances applied to prevent the sale of the old home, such as the coivd-19 pandemic, the sales window for the old home is extended.
The taxpayer will be expected to complete the sale of their old home as soon as reasonably possible after the exceptional circumstances have ceased. HMRC will only make a judgement on whether the exceptional circumstances condition applies once the former home is sold and a SDLT refund application has been submitted.
The Welsh Government has made no similar adjustment to the rules for the LTT surcharge.
As we explained in our newsletter on 7 May 2020, the self-employed income support scheme (SEISS) was rolled out without access for tax agents. This means your clients have had to submit their own claims, and will no doubt turn to you to sort out any muddles.
If your client has been told by HMRC that he is not eligible to claim SEISS, this may be due to fat finger mistakes when typing the UTR or NI numbers. You can double check the SEISS eligibility by using the online eligibility checker. There is an option at the end to complete a form to request a review by HMRC. You can do this as the taxpayer’s agent.
You may have told your self-employed clients how much SEISS grant to expect. Your client can forward to you the calculation of the SEISS grant which is reflected to him at the end of the claims process. If this figure is not what you expect you or your client can request a review.
The taxpayer should do this as part of the SEISS claim process, but you need to request the review through your own agent’s portal. You will need the following data about the client to hand:
grant claim reference
national insurance number
You will also need to say why you think the HMRC calculation of the grant is wrong.
We outlined how the SEISS grant would be calculated in our newsletter on 16 April 2020, but HMRC has recently added more examples of how it uses the figures reported in the tax returns for 2016/17 to 2018/19. Read this guidance before appealing.
Many employees are now required to work at home as their workplace is closed. Some employers have been very supportive of their employees, providing all the equipment required, and reimbursing expenses, others not so much.
As we explained in our newsletter on 9 April 2020, employers can pay their employees a homeworking allowance to compensate for the additional household expenses incurred when working at home. Where the allowance doesn’t exceed £6 per week (£26 per month) the employee is not required to provide evidence of additional costs, and the payment is tax-free and NIC-free (ITEPA 2003, s 316A).
If the employer doesn’t pay the homeworking allowance, HMRC’s view was the employee could only claim a tax deduction for additional homeworking costs under ITEPA 2003, s336, which has much stricter conditions.
However, on 15 May 2020 HMRC changed its policy as set out in the Employment Income Manual (EIM32815). It will now accept claims for homeworking expenses from employees of £6 per week (£26 per month) under ITEPA 2003, s 336 with no proof of the costs required. The cost of business telephone calls can be claimed in addition to this deduction.
HMRC also implies that homeworking expense claims for periods before 6 April 2020 will be accepted using the rate of £4 per week (£18 per month). Such claims can be submitted on the SA tax return or using form P87, but they must be made within four years of the end of the tax year to which they apply.
In our newsletter on 9 April we also warned that where the employee has purchased office equipment to allow them to work from home, any reimbursement of those costs by the employer could create a taxable benefit. However, that problem will now be resolved by a change in regulations.
There will be a temporary tax exemption where employees are reimbursed for the cost of equipment needed solely for them to work at home, where the payment is made to the employee between 16 March 2020 and 5 April 2021.
The UK-wide stay at home instruction arrived so quickly that many people were not able return a company car that they were no longer permitted to use. In such circumstances the car remains available to the employee to use privately and hence the taxable benefit continues.
HMRC will accept that the company car is “not available” and not taxable (even where it is parked at the employee’s home) in two circumstances:
The contract to lease or provide the car has been terminated, and the car keys have been returned to the employer or to an approved third party (eg the dealer).
The lease contract has not been terminated, but the car keys have been returned to the employer or approved third party, then 30 days after the keys were returned the car will be considered to be “not available”.
Remember all electric company cars have zero taxable benefit in 2020/21 (our newsletter 28 November 2019), so its not necessary to change the lease on the director’s Tesla.
Where the employee is using their company car or their own car for voluntary work during the coronavirus crisis, and the employer is reimbursing the mileage costs, those reimbursements are taxable. This is because the journeys undertaken for voluntary work are not business journeys. The reimbursed amounts must be reported on the P11D or included in a PAYE settlement agreement.
Some employees are living away from home while continuing to work, to avoid infecting members of their household with the coronavirus. Where the employer is paying for that alternative accommodation, that amounts to a taxable benefit, which must be reported on the P11D for the relevant tax year.
Employees who live on the site of their permanent employment, are taxed on the value of that accommodation unless one of these conditions are met:
Its necessary for the employee to live there to properly carry out their duties
The accommodation is provided to allow the employee to better perform their duties and it is customary for such employees to use such accommodation; or
There is a threat to the employee’s security and special security arrangements are in force that require the employee to live in that accommodation.
NB: HMRC has not confirmed whether “security arrangements” includes health security, as it normally means a terrorist or stalker type threat.
On 30 April the Government announced two VAT rate changes from standard rate to zero rate, for digital publications and personal protective equipment (PPE), both to take effect from 1 May 2020.
The rate change for digital publications was due to apply from 1 December 2020, as announced in the March 2020 Budget, timed so subscriptions taken out as Christmas presents would qualify for the lower rate.
However, during this coronavirus lockdown sales of physical newspapers and magazines have plummeted, while students are having to use digital materials to continue their studies. The Government has therefore decided to lower the VAT rate immediately.
Publishers may have missed this change in the middle of the other chaos, so check that your clients have changed their systems to account for the correct VAT rate from 1 May 2020. Pricing policies may also need to be reviewed.
Clubs and societies which distribute a physical magazine will also benefit as currently they need to apportion part of their membership subscriptions to the zero-rated magazine. Now they will not be penalised by switching to 100% digital publications.
The change in VAT rate for PPE is only temporary; it applies for sales made between 1 May 2020 and 31 July 2020 inclusive. Where businesses have recently started to produce say hospital gowns or face masks, check that VAT has been correctly accounted for.
The VAT due for the quarter to 31 March 2020 is payable by 7 May 2020, and where a direct debit is set up the amount due would normally be collected by 10 May. However, as 8 to 10 May is a long bank holiday weekend, the DD will be collected on 7 May 2020.
Where your client wants to take advantage of the deferral of VAT payments between 20 March and 30 June remind them to cancel their DD for paying VAT. This can be done the online VAT account or by contacting their bank. Agents can’t change banking details on behalf of a client.
HMRC has updated its guidance concerning the VAT deferral, confirming that annual account advance payments due between 20 March and 30 June can also be deferred, but not VAT MOSS payments or import VAT. Any deferred VAT will have to be paid on or before 31 March 2021.
Many businesses may be due a VAT repayment in the current VAT period as they have little or no sales, but still have bills that include VAT. To obtain these repayments quickly the business can change to monthly VAT returns by altering their VAT periods in their online VAT account.
If you have taken on a new client and you want authorisation to act for VAT, the online authorisation form asks for the box 5 figure from the “last VAT return”. However, since the VAT returns submitted under MTD enter HMRC via an API, the authorisation system can’t see them. To answer the question correctly you need to supply the box 5 figure from the last VAT submitted before MTD.
The annual tax on enveloped dwellings (ATED) is payable for UK residential properties worth over £500,000 which are owned by companies or other non-natural persons. The 2020/21 chargeable year runs from 1 April 2020, and the ATED return and payment must be received by HMRC by midnight on 30 April 2020.
You may believe that no ATED charge is due because the property is commercially let, or some other relief applies. In that case an ATED relief declaration must be filed by 30 April, but this form can cover a number of properties.
The quickest way to submit ATED returns and relief declarations is to use the ATED online service. You need to register with this service as an agent to submit your clients’ ATED forms. Each client must also be registered using their UTR number, and appoint you as their agent for ATED.
All overseas companies that let UK residential properties should now have a UTR number for corporation tax, as they need to pay corporation tax on their UK property income from 6 April 2020.
The online ATED service will calculate the ATED charge due, but you need to chose the valuation band for the property. This will be the value as at 1 April 2017 or the acquisition date if later.
If the property value is within 10% of a band boundary you can use the structured email form to ask for an ATED banding check, but it could take 30 days or more to get a reply. To avoid penalties for late ATED forms, it would be better to submit the ATED return using the valuation you have and amend it later.
HMRC is encouraging tax agents to correspond with it by email where possible and has introduced a number of temporary concessions to avoid processing paper forms.
VAT errors in excess of £10,000 normally have to be reported on form VAT652, but during the coronavirus shutdown the VAT post room is closed so you need to submit this form by email to: firstname.lastname@example.org
The IHT400 and IHT100 forms normally require a “wet” signature of the trustees or personal representatives, but where there is a professional agent acting for the estate HMRC will accept a printed signature accompanied by a statement from the agent confirming that all PRs or trustees have seen and agreed the account. All payments for IHT due should be made electronically or by phone as HMRC is not accepting payments by cheque.
All work on tax enquiries has been paused so HMRC will not press you for replies to queries or ask for new information or documents until the coronavirus lock down is lifted.
The First Tier Tax Tribunals have not been sitting since 24 March, and are due to resume again on 21 April, but that shutdown period is likely to be extended. If you want to appeal to the tax tribunal against a HMRC decision you should do so within the normal 30 days, but use the online appeals service, or email.
The Government has urged everyone to work from home if they can. This allows millions of people to stay at home, protect the NHS and save lives.
Working at home will increase the running costs of the property slightly as more energy and water is used. The employer can help the employee with these costs by paying them an allowance of £6 per week (£26 per month) from 6 April 2020.
This is allowance was increased from £4 per week in the Spring budget, and is tax free when the employee is working at home under homeworking arrangements. HMRC has indicated that home working arrangements will exist where the employee’s workplace has closed or the employee is following advice to self-isolate.
Where the employer pays for the necessary equipment needed to work from home such as; laptop, monitor, keyboard, desk and chair, no taxable benefit arises. However, if the employee buys those items personally and the employer reimburses the cost, that reimbursed amount will be taxable as it is difficult for the employee to prove the items are “necessarily” required for their work. The employer could pick up the extra tax due in a PAYE settlement agreement.