Find out how much State Pension you will get, when you can get it and how you can increase it, if you can…

We are used to reviewing our private pension arrangements on a regular basis, but when was the last time you checked out your State Pension arrangements?

The following notes assume you have not yet reached your State Pension retirement age, but you want to see how many more years National Insurance contributions (NIC) you will need to make to receive a full pension when you retire.

State Pension and your NIC record

Your new State Pension (NSP) is based on the number of NIC contributions you have made when you reach your State Pension retirement age.

To qualify for any NSP you will need at least 10 qualifying years. To qualify for the maximum NSP you will need 35 years if you have no NIC record before 6 April 2016.

What if you had gaps when you did not work?

You may qualify for NIC credits for years you did not work if during those years:

  • you claimed Child Benefit for a child under 12 years of age,
  • if you received Jobseeker’s Allowance or Employment and Support Allowance; or
  • you received Carer’s Allowance.

In certain circumstances you can also make voluntary NIC contributions to fill gaps in your contribution record.

How to apply for a State Pension forecast

There is a simple online process you can use to apply for this forecast.

You can access at https://www.gov.uk/check-state-pension

This will confirm how many years NIC contributions you have made and the current forecast of State Pension you would receive.

NOTE: The government may extend the State Retirement Age or change the rates of NSP you might receive, which is why it is worth applying for a forecast on a regular basis.

You will need to have a Government Gateway account to apply for a forecast. If you need help, please call us on 01242 370298, and we will talk you through what you need to do.

Deadline to join this scheme is 21st June 2021.

Businesses that deferred VAT payments last year have until 21st June to join the new online payment scheme and spread the impact of deferred VAT payments.

Which VAT arrears can be paid off in this way?

The scheme covers VAT deferred – and is still unpaid – from the period 20 March 2020 to 30 June 2020 under the VAT Payment Deferral Scheme.

How will payments be spread under this scheme?

Businesses can pay their deferred VAT in two to eight consecutive instalments without adding interest if they join online by 21 June 2021.

A first payment will be taken when you join.

How to join this scheme:

Before joining, you must:

  • have your VAT registration number,
  • create your own Government Gateway account (if you do not already have one),
  • submit any outstanding VAT returns from the last 4 years – otherwise you’ll not be able to join the scheme,
  • correct errors on your VAT returns as soon as possible,
  • make sure you know how much you owe, including the amount you originally deferred and how much you may have already paid.

To use the online service, you must:

  • join the scheme yourself, your agent cannot do this for you,
  • still have deferred VAT to pay,
  • be up to date with your VAT returns,
  • join by 21 June 2021,
  • pay the first instalment when you join,
  • pay your instalments by Direct Debit (if you want to use the scheme but cannot pay by Direct Debit, there is an alternative entry route for you).

Time to act

If you still have unpaid, deferred VAT from last year this scheme offers a way to get up to date with payments and minimise the impact on your cashflow.

Claims process for the final Self-Employed Income Support Scheme grant will open next month.

The 5th and final grant under the SEISS will be opened to claims from late July 2021. This grant will cover the five-month period 1 May 2021 to 30 September 2021. To be eligible for the grant you must be self-employed, either a sole trader or member of a partnership.

Conditions to qualify for this grant:

  • You must have traded in the tax year 2019-20 and submitted your tax return for that year on or before 2 March 2021 and traded in the tax year 2020-21.
  • You must either be currently trading but impacted by reduced demand due to COVID or have been trading but are presently unable to do so due to COVID restrictions.
  • To be eligible to claim HMRC will check previous years tax returns to see if your trading profits are no more than £50,000 and at least equal to your non-trading income.
  • When claiming you must declare that you will continue to trade and that you reasonably believe that your business activity will be reduced in the period 1 May to 30 September 2021.

The 5th grant is different:

The 5th grant will be determined by how much your turnover has been reduced in the year April 2020 to April 2021.

  • If the turnover reduction is 30% or more, you can claim 80% of 3 months’ average trading profits up to a maximum £7,500.
  • If the turnover reduction is less than 30%, you can claim 30% of 3 months’ average trading profits up to a maximum £2,850.

HMRC have said they will provide more information by the end of June to help you work out how your turnover will be affected.

When can you claim:

HMRC will contact you mid-July to give you a date to make your claim.

We can help

If you need help deciding if you can make a claim contact us on 01242 370298 or email us office@wfrancisandco.co.uk when HMRC issue their extended guidance notes later this month.

In this update we have listed some of the tax incentives you may be able to claim if you choose or are required to work from home.

If you are employed:

  • Employers can provide the equipment and supplies that an employee needs to work from home, such as office furniture, stationery, a computer and suchlike, without a taxable benefit arising, if ownership of the equipment remains with the employer and private use is not significant.
  • Employers can also pay employees a tax-free allowance of £6 per week (£26 per month) to cover the cost of additional household expenses incurred because of working from home.
  • If employers do not pay the above allowance (£26 per month), employees can claim an equivalent deduction from their taxable income.

If you are self-employed:

  • If you are self-employed and working from home, expenses are deductible if they are wholly and exclusively incurred for the purposes of the business. This will apply to costs incurred in running a home office, such as cleaning, heat and light, Wi-Fi costs etc.
  • If you don’t want to keep a track of actual costs you can claim a tax office approved flat rate deduction. This ranges from £10 to £26 per month and depends on hours of business use.

If you run a company from home:

  • Directors can charge their company a rent for use of a home office, but rents received in this way may be taxable.
  • A company can meet costs paid by a director that are exclusively for business purposes.
  • Beware claiming for the exclusive business use of space in your home as this may create a capital gains tax charge when you sell your home. This can be avoided if there is a duality of use, i.e., your home office doubles as a spare bedroom or storage area.

Need more help on this topic?

If you want to capitalize on the tax-free perks that are available to home workers, but you are unsure how to set up the arrangement in the most tax efficient way, please call us on 01242 370298 or email office@wfrancisandco.co.uk, we can help you consider the options available.

Perhaps the most innovative give-away in the recent budget was “Super-deductions for investment expenditure”.

What does this mean?

Companies that invest in qualifying plant and machinery in the period from 1 April 2021 to 31 March 2023 will benefit from enhanced capital allowances. Investments in assets that qualify for the main rate of capital allowances of 18% will benefit from a 130% first-year allowance. This means that for every £100 that you spend, you can deduct £130 in computing your taxable profits. This is equivalent to a tax saving of 24.7%.

What this does not mean?

What this change does not mean is the notion that you can deduct 130% of the cost of a qualifying purchase from your tax bill. The deduction is made from your company’s taxable profits.

For example…

If your company invests say £5,000 in qualifying plant it will be able to write off £6,500 (£5,000 x 130%) against its taxable profits. If your company has taxable profits more than £6,500, it will save £1,235 (£6,500 x 19%) in corporation tax. Which means:

  • Your tax saving is 24.7% (£1,235/£5,000) of your investment cost, and
  • The net cost of your investment is effectively £3,765 (£5,000 – £1,235)

Beware the fine print

As you would expect, there will be circumstances – grey areas – where the legislation that maps out the do’s and don’ts to claiming this relief will deny you the 130% deduction. In their notes describing the proposed changes HMRC said:

“Certain expenditures will be excluded…, there will be exclusions for used and second-hand assets and expenditures on contracts entered into prior to 3 March 2021 even if expenditures are incurred after 1 April 2021. Plant and machinery expenditure which is incurred under a Hire Purchase or similar contract must also meet additional conditions to qualify for the super-deduction…

And there are alternatives

Even if you cannot claim this 130% Super-deduction, your expenditure may qualify for the existing 100% Annual Investment Allowance, a 50% or 100% First Year allowance or a range of writing down allowances.

Check out if you could claim

However, this is a significant incentive to invest if your company is likely to be profitable from 1 April 2021. To ensure that any significant investment you may make will qualify for the Super-deduction or to discuss other tax options, please call us on 01242 370298.

Benefits and the tax consequences

At the end of each tax year, you will usually need to submit a P11D form to the tax office for each employee you have provided with expenses or benefits, for example, a company car.

The total taxable benefits you provide to all employees will also create a Class 1A employer’s NIC charge, and this will need to be reported to HMRC by filing a further return, P11D(b).

Note: If HMRC have asked you to submit a P11D(b), but you have no taxable benefits to report, you can tell them you do not owe Class 1A NIC by completing a formal declaration via your online government gateway account.

What are the filing deadlines for 2020-21?

What you need to do

Deadline

Submit your P11D forms online to HMRC

6 July 2021

Give your employees a copy of the information on your forms

6 July 2021

Tell HMRC the total amount of Class 1A National Insurance you owe on form P11D(b)

6 July 2021

Pay any Class 1A National Insurance owed on expenses or benefits Must reach HMRC by 22 July 2021 (19 July 2021 if you pay by cheque)

Note: You will be charged a penalty of £100 per 50 employees for each month or part month your P11D(b) is late. You will also be charged penalties and interest if you are late paying HMRC.

Talk to us before you file your P11D returns

There may be tax saving opportunities you could discuss with employees that would save them income tax and you the additional NIC charge. We have outlined two ideas for company car drivers you could consider below.

Avoiding the car fuel benefit charge

Employees not only pay additional tax for the use of a company car, but they also pay a hefty additional tax charge if their employer pays for private fuel. The car fuel benefit charge can be avoided if the employee records actual private mileage and repays their employer based on an agreed rate per mile.

Were company car drivers furloughed during 2020-21?

If any of your employees that had the use of a company car were furloughed during 2020-21, and the car was not made available for private use during this period, you can advise HMRC of the “not available” period when you complete their P11D. This will reduce any benefit charges for 2020-21.

Let us help you crunch the numbers

Please call if you would like to discuss options to reduce BiK tax charges for your employees or prepare and file the necessary returns. And do not forget, if you can reduce income tax charges for employees you will not only boost their moral, but you will also lower the amount of Class 1A NIC that you will have to pay as their employer.

 

A reminder that from 1 March 2021, the long awaited VAT changes for CIS registered sub-contractors, who are registered for VAT, will apply. The following notes explain what needs to be done.

Presently, if you invoice a contractor for your construction services, and you are registered for VAT, you will add VAT at the appropriate rate to your invoice. When the contractor pays you, the VAT element you have collected is then paid to HMRC via your VAT returns.

This process will change from 1 March 2021

The process is changing as a growing number of subcontractors have registered for VAT, collected the VAT added to their invoices from contractors and then disappeared without paying over the VAT collected to HMRC.

To counter this, from 1 March 2021, most of your supplies of services to contractors will be subject to the “VAT domestic reverse charge for building and construction services” (DRC).  In plain English this means that you will no longer add VAT to your invoices for affected construction services, instead, your contractor customer will pay the VAT on your supply, to HMRC.

Generally speaking, the DRC will affect supplies of building and construction services supplied at the standard or reduced rates, that also need to be reported under the CIS regulations. The DRC will not apply if the service you supply is zero-rated for VAT purposes.

Unlike the CIS rules, where tax is deducted from your supply of labour, not materials, the DRC change will affect both supplies.

Needless to say, this change has created a number of complex issues that VAT registered sub-contractors will need to adapt to or face the dark-side of HMRC’s penalty regime. Listing all these complications in this update would no-doubt send you to sleep. Instead, we have added below, the actions that you will need to consider before 1 March 2021. Please read this shopping list and then contact us; we will help you make the changes to your accounting processes to keep you the right side of this new legislation.

Matters you need to consider before 1 March 2021:

  • Are your supplies affected? Check to see if your provision of services to main contractor customers comes within the scope of the DRC. In most cases you will have to contact your customers to confirm this. A list of services is appended to this update.
  • Change your invoices. Make sure you understand how to invoice for your DRC services after 1 March – you need to omit the usual VAT charge and add a note explaining that DRC applies.
  • Update your accounts software. Make appropriate changes to your accounts software or other records that create your VAT returns.
  • Beware cash flow consequences. Consider the effects that adapting to DRC may have on your cash flow.
  • DRC may not apply to all your sales. The DRC will not apply to your services supplied to “end users”, i.e., your customer is not a registered CIS contractor but a house-owner for example. You will need to take this into account when invoicing as you will need to add VAT to these supplies in the normal way.
  • Switch to monthly VAT accounting? If most of your work is with CIS contractors you may find that from 1 March 2021 you have little or no VAT to pay to HMRC, but you still have VAT to claim back from your suppliers, merchants etc. To speed up the recovery of this input VAT you might be advised to register for monthly VAT returns instead of the usual quarterly returns.
  • VAT cash accounting scheme. If you are presently using the VAT Cash Accounting Scheme (CAS) continuing use may be compromised under the DRC rules. The CAS cannot be used for the supply of services that are subject to the DRC. This could impact your cash flow and planning may be required.
  • VAT Flat Rate Scheme (FRS. As with the CAS, DRC supplies to your customers cannot be accounted for under the FRS. This may mean that any advantage of using the FRS after 1 March 2021 may no longer apply; in which case you may be advised to stop using the FRS option.
  • Changes to your sales invoices. From 1 March 2021, your invoices will need to include a formal statement if they are a DRC supply.

The above checklist covers the basic issues you will need to consider.

APPENDIX:

You will have to apply the domestic reverse charge if you supply any of these services:

  • constructing, altering, repairing, extending, demolishing or dismantling buildings or structures (whether permanent or not), including offshore installation services
  • constructing, altering, repairing, extending, demolishing of any works forming, or planned to form, part of the land, including (in particular) walls, roadworks, power lines, electronic communications equipment, aircraft runways, railways, inland waterways, docks and harbours
  • pipelines, reservoirs, water mains, wells, sewers, industrial plant and installations for purposes of land drainage, coast protection or defence
  • installing heating, lighting, air-conditioning, ventilation, power supply, drainage, sanitation, water supply or fire protection systems in any building or structure
  • internal cleaning of buildings and structures, so far as carried out in the course of their construction, alteration, repair, extension or restoration
  • painting or decorating the inside or the external surfaces of any building or structure
  • services which form an integral part of, or are part of the preparation or completion of the services described above – including site clearance, earth-moving, excavation, tunnelling and boring, laying of foundations, erection of scaffolding, site restoration, landscaping and the provision of roadways and other access works

The following services are not subject to the reverse charge:

  • drilling for, or extracting, oil or natural gas
  • extracting minerals (using underground or surface working) and tunnelling, boring, or construction of underground works, for this purpose
  • manufacturing building or engineering components or equipment, materials, plant or machinery, or delivering any of these to site
  • manufacturing components for heating, lighting, air-conditioning, ventilation, power supply, drainage, sanitation, water supply or fire protection systems, or delivering any of these to site
  • the professional work of architects or surveyors, or of building, engineering, interior or exterior decoration and landscape consultants
  • making, installing and repairing art works such as sculptures, murals and other items that are purely artistic
  • signwriting and erecting, installing and repairing signboards and advertisements
  • installing seating, blinds and shutters
  • installing security systems, including burglar alarms, closed circuit television and public address systems

 

A reminder that from 1 March 2021, the long awaited VAT changes for CIS registered contractors, who are registered for VAT, will apply. The following notes explain what needs to be done.

What will happen on 1 March 2021?

Presently, if you receive an invoice from a subcontractor for construction services, and the subcontractor is registered for VAT, you will pay the VAT inclusive amount to the subcontractor and claim back the VAT element on your VAT return.

This process is changing from 1 March 2021 as a growing number of subcontractors have registered for VAT, collected the VAT added to their invoices from contractors and then disappeared without paying over the VAT collected to HMRC.

To counter this, from 1 March 2021, most of the supplies of services from VAT registered subcontractors will be subject to the “domestic reverse charge for building and construction services” (DRC).  In plain English this means that subcontractors will no longer add VAT to their invoices for affected construction services. Instead, you will pay the VAT on their supply, to HMRC.

This does not mean that you will have to foot the extra VAT cost for your subcontractors.

You will still be able to recover the subcontractor VAT that you have paid, as input VAT on your VAT return – subject to the usual rules – so there should be no long-term effect on your costs or cash flow (you add the subcontractors VAT to your output tax and claim back the same amount as input VAT).

Generally speaking, the DRC will affect supplies of building and construction services supplied at the standard or reduced rates and which also need to be reported under the CIS regulations. The DRC will not apply if the services supplied to you are subject to the zero-rate for VAT purposes.

Unlike the CIS rules, where tax is deducted from your subcontractors’ supply of labour, not materials, the DRC change will affect both supplies for VAT purposes.

Needless to say, this change has expanded the grey areas that VAT registered contractors will need to adapt to or face the dark-side of HMRC’s penalty regime. Listing all these complications in this update would no-doubt send you to sleep. Instead, we have added below the minimum actions that you will need to consider before 1 March. Please read this shopping list and then contact us; if required, we will help you make the changes to your accounting processes to keep you the right side of this new legislation.

Matters you need to consider before 1 March 2021:

  • Are the supplies from your subcontractors affected? Check to see if the services you request from subcontractors are subject to the DRC. It is up to you to make this distinction not your subcontractor. Not all services are subject to the DRC. Generally speaking, construction services are included but certain specialist services are not. See the definitive list we have added to this update.
  • Review your invoicing to customers. If your customer is classified as an “end user” your supply to that customer is not subject to the DRC rules. An “end user” is a business that does not make onward supplies of building services.
  • Update your accounts software. Make appropriate changes to your accounts software or other records that create your VAT returns.
  • Beware cash flow consequences. Consider the effects that adapting to DRC may have on your cash flow.
  • Changes to your sales invoices. From 1 March 2021, your invoices will need to include a formal statement if they are a DRC supply.

The above checklist covers the basic issues you will need to consider.

APPENDIX:

You will have to apply the domestic reverse charge if you supply any of these services:

  • constructing, altering, repairing, extending, demolishing or dismantling buildings or structures (whether permanent or not), including offshore installation services
  • constructing, altering, repairing, extending, demolishing of any works forming, or planned to form, part of the land, including (in particular) walls, roadworks, power lines, electronic communications equipment, aircraft runways, railways, inland waterways, docks and harbours
  • pipelines, reservoirs, water mains, wells, sewers, industrial plant and installations for purposes of land drainage, coast protection or defence
  • installing heating, lighting, air-conditioning, ventilation, power supply, drainage, sanitation, water supply or fire protection systems in any building or structure
  • internal cleaning of buildings and structures, so far as carried out in the course of their construction, alteration, repair, extension or restoration
  • painting or decorating the inside or the external surfaces of any building or structure
  • services which form an integral part of, or are part of the preparation or completion of the services described above – including site clearance, earth-moving, excavation, tunnelling and boring, laying of foundations, erection of scaffolding, site restoration, landscaping and the provision of roadways and other access works

The following services are not subject to the reverse charge:

  • drilling for, or extracting, oil or natural gas
  • extracting minerals (using underground or surface working) and tunnelling, boring, or construction of underground works, for this purpose
  • manufacturing building or engineering components or equipment, materials, plant or machinery, or delivering any of these to site
  • manufacturing components for heating, lighting, air-conditioning, ventilation, power supply, drainage, sanitation, water supply or fire protection systems, or delivering any of these to site
  • the professional work of architects or surveyors, or of building, engineering, interior or exterior decoration and landscape consultants
  • making, installing and repairing art works such as sculptures, murals and other items that are purely artistic
  • signwriting and erecting, installing and repairing signboards and advertisements
  • installing seating, blinds and shutters
  • installing security systems, including burglar alarms, closed circuit television and public address systems

The Supreme Court has delivered its judgment in the Financial Conduct Authority’s (FCA)’s business interruption insurance test case, with the court’s ruling in the favour of small firms potentially forcing insurers to pay out £1.2bn in CBI claims.

Following the judgement, thousands of policyholders will now have their claims for coronavirus-related business interruption losses paid out.

The court’s decision brings to a close the legal arguments imposed by 14 types of policies issued by six insurers, and a substantial number of similar policies in the wider markets.

The FCA first brought the case against the courts in a bid to “urgently clarify key issues of contractual uncertainty for as many policyholders and insurers as possible”, initially selecting a representative sample of 21 policy types issued by eight insurance groups.

Sheldon Mills, executive director for Consumers and Competition at the FCA, said: “Coronavirus is causing substantial loss and distress to businesses and many are under immense financial strain to stay afloat. This test case involved complex legal issues.

“Our aim throughout this test case has been to get clarity for as wide a range of parties as possible, as quickly as possible, and today’s judgment decisively removes many of the roadblocks to claims by policyholders.”

He added: “We will be working with insurers to ensure that they now move quickly to pay claims that the judgment says should be paid, making interim payments wherever possible.

“Insurers should also communicate directly and quickly with policyholders who have made claims affected by the judgment to explain next steps.”

Huw Evans, ABI director general, said: “Insurers have supported this fast-track legal process every step of the way and we welcome the clarity that the judgment will bring to a number of complex issues. Today’s judgment represents the final step in the appeal process.

“The insurance industry expects to pay out over £1.8bn in Covid-19 related claims across a range of products, including business interruption policies. Customers who have made claims that are affected by the test case will be contacted by their insurer to discuss what the judgment means for their claim.”

He added: “All valid claims will be settled as soon as possible and in many cases the process of settling claims has begun. Some payments have already been made where valid business interruption claims have not been impacted by the test case ruling.

“We recognise this has been a particularly difficult time for many small businesses and naturally regret the Covid-19 restrictions have led to disputes with some customers. We will continue to work together as an industry to ensure customers have the clarity they need when it comes to what they can expect from their business insurance policies.”

Have you filed your tax return yet? Tax-time-300x180

HMRC are urging everyone to file their tax return before the deadline of 31 January 2021. They expect 12.1 million returns to be filed this year and 55% have already been submitted, however there are roughly 5.4 million yet to be done!

Once it is completed, you will know how much tax to pay and HMRC can also help set up payment plans to help spread the cost of the liabilities, up to the value of £30,000. HMRC have said that they are ready to offer support to those who are yet to file their returns or are worried about paying their tax bill, but you must act now so they can help before the deadline.

If you need any assistance with submitting your return, please get in touch on 01242 370298 or email office@wfrancisandco.co.uk