Archive for November, 2021

Christmas shopping warning

Tuesday, November 30th, 2021

If you are buying Christmas gifts online this year, take care that you are not presented with unexpected VAT, excise duty or customs duty charges before you can take possession of your purchases. HMRC is urging shoppers to consider certain custom’s issues before they start browsing to buy gifts online. Otherwise, they may be hit with unexpected customs charges and end up over budget this holiday season.

Changes introduced on 1 January 2021 mean that in the same way that consumers have previously had to pay charges when buying certain items from non-EU sellers, they may now also need to do so when buying goods from the EU.

HMRC recommends you consider seven key areas to determine whether there will be charges on their goods. If there are charges to pay, shoppers are being warned that they may also need to pay a ‘handling fee’ to the courier company before their goods are released.

1: Be aware of where you, the recipient, are based

Shoppers based in Northern Ireland won’t be affected by these changes due to the Northern Ireland Protocol, however those in Great Britain should be prepared for potential changes.

2: Check if your order contains goods subject to excise duties, such as tobacco, alcohol or perfume

Unlike other items, there is no lower threshold for customs charges when it comes to excise goods, so there will be charges due no matter the value or origin of your goods.

Shoppers buying excise goods will need to pay import VAT and excise duty and may also need to pay customs duty (be mindful of the Bonus Tip below).

3: Check if your order is worth more than £135, before extra costs, such as shipping, and insurance are applied

Shoppers buying stocking fillers or small value items, not including excise goods, don’t need to worry as goods sent in consignments worth less than £135 should not attract additional charges, as UK VAT is collected by the seller on behalf of HMRC at the point of sale. This will also apply to goods being purchased from non-EU countries.

Anyone buying a more expensive product from abroad – over £135 – will now need to pay import VAT and may need to pay customs duty. The amount due will depend on a range of factors, including shipping and insurance costs so, to avoid surprises, consumers should consult their seller.

Shoppers who already know they will need to pay import VAT should make sure their seller does not charge them VAT, otherwise they may be charged twice. See Top Tip 5.

4: Remember there are new charges if you’re sending presents overseas – or if someone abroad sends gifts to you

If you’re lucky enough to receive a gift from someone based in the EU and it is valued at less than £39 and it does not contain excise goods, it will be exempt from import VAT and customs duty. Above the £39 threshold, import VAT will be due and once the value of the gift reaches £135, customs duty will also be payable. You could also be charged a “handling fee” – see Top Tip 5

If you are planning on sending a gift to someone based overseas, you should check guidance published by the relevant customs authority to check their specific rules and charges.

5: Be aware of how and when you could be notified of charges

Anyone needing to pay customs charges will be contacted by the courier company and asked to pay the charges before they can receive their goods. Alternatively, the seller may arrange to pay any charges upfront on your behalf, but you should check with the seller to avoid any unwelcome surprises.

6: Check the guidance available to you

To help shoppers navigate these changes, HMRC has produced diagrams outlining 3 fictional scenarios about buying goods from the EU and has published a simple guide on GOV.UK, which also contains essential information on how to dispute a charge, return unwanted goods and to get a refund on the charges paid.

Bonus Tip: Check with the seller whether the goods originated in the EU and whether they qualify for a zero tariff

Customs duty won’t be due on goods if they meet criteria set out in the EU-UK Trade and Cooperation Agreement and a zero tariff can be correctly applied.

The Rules of Origin requirements mean that even if your parcel is valued above £135, if the goods you are buying originate in – or have been sufficiently worked or processed within – the EU, the seller confirms this and the zero tariff is claimed on the customs declaration, you will not need to pay any customs duties although import VAT will still be due.

If customs duty is due, the rate – or the tariff – for each item can be found within the trade tariff tool but it’s recommended you check with your seller to find out exactly what you will owe.

Stealth tax

Thursday, November 25th, 2021

One aspect of the budgets this year, that may have passed you by, is the freezing of most of the tax rates and bands for a number of years.

Whilst these frozen allowances do not on their own increase your tax bills, if your income, gains, or assets increase in the same period, all of the increases may be subject to tax. (i.e., none will be covered by increased tax-free allowances.)

And what about inflation?

With a 4% inflation rate now a certainty before the end of 2021, any pay rises up to this amount will only maintain your purchasing power, you won’t be any better off as the extra pounds earned will have depreciated.

Inflation tends to prompt businesses to increase their prices of goods and services in an attempt to maintain profits. If the goods they supply are ‘necessities’ (for example, food and fuel) we will be obliged to pay the extra of reduce our consumption.

Inflation at 4% or above is also likely to prompt the Bank of England to increase interest rates. Increases in rates will no doubt increase mortgage repayments and the cost of borrowing money.

Tax by stealth

Accordingly, freezing tax allowances and rates is a roundabout way of increasing the Treasury’s tax-take. They may be charging the same rates of taxes, but they will be applied to increased income, gains and wealth as the economy seeks to counter the effects of inflation.

 

Income tax planning, what to do?

Unfortunately, our tax system is progressive, as your income increases you may be pushed into paying higher rates of income tax. For 2021-22, the maximum we can earn and only pay income tax at the basic 20% rate, is £50,270. £12,570 of this income is tax-free the remainder taxed at 20%. Over this threshold income tax rates increase to 40%.

If your pay rises push you over this £50,270 threshold, you will only keep 60% of the increase. Combined with the effects of inflation this is not good news.

There are strategies that you may want to consider countering some of these effects and we would be happy to discuss them with you.

The Chancellor’s strategy of freezing allowances can be spun as not increasing taxes, and yet, as we have outlined above, this is far from the truth of the matter.

Beware tax scams

Tuesday, November 23rd, 2021

HMRC have issued a press release that sets out the scale of criminal activity, convincing taxpayers to part with bank or personal details under threat of arrest or court action.

The scale of these self-assessment scams is staggering, apparently over 800,000 tax-related scams were reported to HMRC is the past year.

Why is this activity increasing now?

Self-assessment tax returns for 2020-21 have to be filed electronically by the 31 January 2022. This provides an excuse for scammers to up their game, as taxpayers would expect more communication from HMRC in this period.

And some of the emails you receive on tax matters will be from HMRC.

 

How to tell genuine from bogus communications

HMRC have issued the following advice:

“More than 4 million emails and SMS will be issued this week to Self-Assessment taxpayers pointing them to guidance and support, prompting them to think about how they intend to pay their tax bill, and to seek support if they are unable to pay in full by 31 January.

“However, the department is also warning taxpayers not to be taken in by malicious emails, phone calls or texts, thinking that these are genuine HMRC communications referring to their Self-Assessment tax return.”

HMRC’s Director General for Customer Services continues:

“Never let yourself be rushed. If someone contacts you saying they’re from HMRC, wanting you to urgently transfer money or give personal information, be on your guard.

HMRC will also never ring up threatening arrest. Only criminals do that.

Scams come in many forms. Some threaten immediate arrest for tax evasion, others offer a tax rebate. Contacts like these should set alarm bells ringing, so if you are in any doubt whether the email, phone call or text is genuine, you can check the ‘HMRC scams’ advice on GOV.UK and find out how to report them to us.”

There are even bogus websites that look just like HMRC’s webpages, where you are encouraged to submit your outstanding tax return.

If in doubt

If you do receive a phone call, email, or text purporting to be from HMRC, either threatening arrest, court action, promising a rebate, or some other urgent matter; before continuing with a conversation or replying to an email or text, end the call, do not reply to text or email and instead, contact HMRC directly using the contact numbers on the GOV.UK website, or login to your HMRC personal tax account.

And if you have a tax adviser, call them.

 

Take your time

It is very unlikely that HMRC staff would contact you demanding money or information without first sending out reminders. Before you reply, check that the communication you have received is from HMRC.

Business exit planning

Thursday, November 18th, 2021

Unless you are committed to dying with your boots on, there will come a day when you desire to exit from your business and retire or try something different.

The way that you organise your business, and in particular, the way you organise your finances, will have an impact on the value (£’s) you can expect to receive when you hand over the keys.

Who will you sell your business to?

There are a number of options. For example:

  • Hand over the business to a family member.
  • Sell the business to a competitor.
  • Sell the business to your management team.

What factors will increase the value of your business?

A key item that a potential outside buyer will be interested is your customer list. Do you have a number of regular, high value customers, or are you reliant on one or two key customer relationships? If the latter, this will tend to devalue goodwill as the loss of one or more of these high-value customers may have a serious impact on the buyer’s ability to maintain profitability.

Another issue that would help a buyer achieve a success transition is if you are willing to stay on, after your sale is completed, and support the transition process for a fixed period.

Building a competent team, and the systems to run your business effectively, will also add value to the selling price of your business.

Planning is critical

Business exit planning should be close behind business building activity. It can and should be planned for…

And the planning process is not a one-off affair. It is something you should review on an annual basis. In this way you can build your business with a clear end goal in view and make decisions that will not only maximise returns while you are in charge, but also increase the value of your business to an eventual buyer.

If you would like to discuss your business exit options, we can help.

New to import and export red tape?

Tuesday, November 16th, 2021

If you are importing goods into the UK for the first time you may be advised to seek the assistance of a qualified customs agent. The process of creating and filing the correct documentation, such that the goods can pass through border controls with no hold-ups, and any duties or import VAT are paid, is not a process for the faint-hearted.

For example, a Duty Deferment Account (DDA) is the main payment method for customs and excise duty. It can also be used to pay import VAT. Having a DDA lets you defer payments for customs duty, excise duty and import VAT. It also lets you make monthly payments to HMRC through Direct Debit, instead of paying for individual consignments immediately at import, or when released from a duty suspensive procedure such as customs warehousing or excise warehousing. If payments are above £20million this will need to be paid by CHAPS.

If you import non-controlled goods into Great Britain from the EU and use delayed declarations, you will need to have access to a DDA when submitting your first supplementary declarations. You will have 175 days to attain a DDA and submit a full declaration from the day the goods arrive in GB.

Either you or your agent must also be authorised to use Simplified Customs Declarations Processes and have a DDA.

In order to successfully obtain an account, you must meet certain authorisation criteria. Once your application is successful you will be sent a Deferment Approval Number (DAN). The DAN used for declarations must always be quoted on all declarations.

All account holders must continuously satisfy the authorisation criteria in place, even after the application is successful. When making an application, you will need to provide information about your business such as an EORI number, Business Address associated with your EORI number, correspondence address; and you might require your VAT number (VAT numbers are usually not required for DDA).

Moving goods across the UK’s borders in either direction requires compliance with a whole raft of red tape. Unless you have the tenacity and time to burrow into the various customs clearance and duty/VAT payments processes, we again suggest that you consider the services of an experienced customs agent to take care of these chores for you.

What are ULEVs?

Thursday, November 11th, 2021

ULEV expands to Ultra Low Emission Vehicles. It is an acronym that we will see on a more frequent basis as climate issues climb in importance.

Most families have cars, some use commercial vehicles. The majority are presently fuelled by petrol or diesel.

As manufacturers commit investment to the development of carbon-free transport options, primarily the use of electric powered units, these same families will be faced with ever-rising incentives to ditch their petrol or diesel vehicles and join consumers encouraged to buy electric.

Government seems committed to this change in its attempt to achieve a carbon net-zero economy by 2030.

A few of the present incentives to buy electric are set out below:

  • Electricity is not considered to be a combustible fuel, and therefore fuel duty would not be added to electricity consumed to power electric vehicles.
  • VAT added to present road fuels is 20%. Electricity used to charge a car at home would incur a 5% VAT charge.
  • Zero or low CO2 rated electric vehicles will incur a much lower benefit in kind charge than petrol/diesel alternatives.
  • As electricity is not a fuel, the car and van fuel benefit charges – for private use fuel provided by employers – will not apply. However, it can apply to plug-in hybrid cars.
  • Electric company cars may attract higher capital allowances.
  • Plug-in grants are available for the purchase of qualifying cars and commercial vehicles. These grants are administered by the vehicle dealerships.

Price continues to be a brake on a rapid uptake to ULEVs, but as demand increases, new developments in the technology of low-carbon transport will evolve and prices will fall.

Other challenges, a dearth of charging points and journey ranges between recharges, are gradually being addressed.

The future of transport seems to be electric or other “clean” fuel alternatives. We may be fast approaching the day when diesel and petrol pumps are solitary features in the coming ULEV charging and refuelling stations.

Chips are down

Wednesday, November 10th, 2021

Mention the words chips to most people and fried potatoes would come to mind.

 

Suggesting that there is a growing shortage of chips would no doubt generate a stampede to the local supermarkets. This sudden rise in demand would double up the pressure on farmers to increase supply and within a short time the price of potatoes would soar as supermarket shelves emptied.

Consumers seem to lose all sense of proportion when items they consider are necessities are in short supply. Even if prices rise exponentially, forages to seek out and purchase chip potatoes would likely rank with the pursuit of gold in the Klondike.

It all comes down to elasticity. If there are substitutes for consumer items, shortage of supply will simply encourage buyers to seek out the substitutes. Problems arise when there are no substitutes. Frying chopped carrots or parsnips just doesn’t hit the spot.

This example servers to illustrate the significance of the present shortage in supply of another, non-organic variety of chip, the computer chip.

Toyota announced a 40% cut in production of new cars in September and more recently Apple iPhone announced that production of the new iPhone 13 would be affected, in both cases, by the continuing supply issues for computer chips.

The pandemic bought huge swathes of the global economy to a grinding halt, and lockdown restrictions extended this process for well over a year.

Backlogs of items waiting to be shipped languished in Asian ports. When the brakes started to come off, it was if the global economy had to start over. Goods released had to begin their journey to Europe, the trips leaving manufacturers with dwindling stocks until much needed containers were delivered.

It will take time for the global network that manufactures and supplies computer chips to meet outstanding orders and restore some semblance of normality. Until then, we should expect shortages in the supply of consumer items that rely on computer chips.

If you have electronics on your Christmas list you might be advised to buy now, if you can find a supplier in stock.

Computer chips are not down, but it will be some time before supply catches up with demand. Time to ease frustrated expectations, anyone for chips?

Tired of slow internet connectivity?

Thursday, November 4th, 2021

In a recent press release the government confirmed that more than 500,000 rural homes in the UK are to receive access to better broadband plans. They said:

 

• 570,000 more rural premises in line for best broadband available via £5 billion Project Gigabit

• Includes Cheshire, Devon, Dorset, Somerset, Essex, Herefordshire, Gloucestershire, Lincolnshire, East Riding and North Yorkshire

• Follows £8 million broadband boost for 3,600 rural homes and businesses in northern Scotland announced at Budget

“More than half a million more rural homes and businesses will be given access to better broadband as part of plans to level up the country with improved internet connectivity, Digital Secretary Nadine Dorries has announced.

“An estimated 567,000 hard-to-reach premises across Cheshire, Devon, Dorset, Somerset, Essex, Herefordshire, Gloucestershire, Lincolnshire, East Riding and North Yorkshire are in line to benefit from the government’s £5 billion Project Gigabit, which is bringing next generation gigabit-capable broadband across the UK.

“Project Gigabit is the biggest broadband rollout in UK history and part of the Prime Minister’s plan to level up communities with the future-proofed connectivity they will need for the next forty years.

“Most of the gigabit-capable connections will be delivered through full fibre broadband cables. This provides the speed and reliability needed for several people to work from home, stream ultra-high definition video content and play next-generation online games all at the same time.

For families in all the affected areas, particularly those who need to accommodate multiple connections, this will be welcome news.

However, don’t hold your breath. The start date for this project is not planned until June 2022 at the earlies and be completed across all the affected regions by late summer 2024.

Budget planning opportunities

Wednesday, November 3rd, 2021

It was difficult to find any changes proposed in the budget last week that gave rise to great optimism or that swept away the nagging feeling that we are not out of the woods just yet.

We have summarised below some of the issues that will affect actions that we should perhaps consider between now and the end of the present tax year.

When reading these suggestions please bear in mind that you should take advice before acting on any of the ideas shared. Every business and individual has, to some degree, unique circumstances, and these must be carefully considered before making any changes to your tax planning options.

We have restricted our comments to ideas that it may be wise to consider before the end of the 2021-22 (before April 2022).

 

  • To counter the freezing of the income tax personal allowance and higher rate threshold, it may be beneficial to consider any planning options that would reduce your taxable income for the current year and next year. These could include deferring bonuses, increasing pension contributions, considering charitable donations, and reducing taxable benefits.
  • As NIC contributions and tax on dividends are increasing next year (by 1.25% to meet health and social costs) now may be an opportune time to consider reworking how you extract funds from an owner/managed company.
  • Benefits in kind will also increase from April 2022. This may be due to increases in taxable benefit rates and increased employer Class 1A NIC charges. Time to reconsider any benefits you take or provide? A change to electric cars for example.
  • If you were born after 6 April 1973, you may have spotted that the minimum age that you can access your pension savings without incurring unauthorised tax charges, is changing. Presently, it is age 55, but from April 2028 it is increasing to age 57. If this affects you, and you are in business, you may need to rethink your business exit options. Effectively, you may need to work for a further two years.

These are just a few of the issues that you may be wise to consider before April 2022. To ensure all your bases are covered, please call when you have read this post and we will look at all your planning options.

Tax Diary November/December 2021

Tuesday, November 2nd, 2021

1 November 2021 – Due date for Corporation Tax due for the year ended 31 January 2021.

19 November 2021 – PAYE and NIC deductions due for month ended 5 November 2021. (If you pay your tax electronically the due date is 22 November 2021.)

19 November 2021 – Filing deadline for the CIS300 monthly return for the month ended 5 November 2021.

19 November 2021 – CIS tax deducted for the month ended 5 November 2021 is payable by today.

1 December 2021 – Due date for Corporation Tax payable for the year ended 28 February 2021.

19 December 2021 – PAYE and NIC deductions due for month ended 5 December 2021. (If you pay your tax electronically the due date is 22 December 2021)

19 December 2021 – Filing deadline for the CIS300 monthly return for the month ended 5 December 2021.

19 December 2021 – CIS tax deducted for the month ended 5 December 2021 is payable by today.

30 December 2021 – Deadline for filing 2020-21 self-assessment tax returns online to include a claim for under payments to be collected via tax code in 2022-23.

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