Help and Support for Business’ and the Self-Employed During the Coronavirus Crisis

The government has announced a range of support for business to help them overcome the coronavirus crisis.  There will also be support for the self-employed and freelancers announced soon.  It is expected that the support for self-employed and freelancers will be announced on Friday.

Here is an outline of what has been announced and what is expected:

 

Rate-relief & Grants

If your business was in receipt of rate relief, or had a rateable value of less than £15,000 on the 11th March 2020 you will receive a cash grant from the government of £10,000.

This is being distributed by local councils, so if you are eligible check their website to see how they are distributing grants.  If you have had to close your business it may be worth putting a mail redirect from your business premises to your home address as it is likely many will send a letter.

If your business is in the hospitality, leisure and retail sector and your rateable value was more than £15,000 and less than £51,000 on 11th March 2020 then you will receive a grant of £25,000.

Businesses in the hospitality, leisure and retail sector now eligible for 100% rate relief.

 

Employers

Employers are required to pay sick pay for any employee that is self-isolating from day one of absence.  The government will repay the first two weeks of this sick pay.  It is still unclear how the sick pay will be refunded, and as far as I am aware your payroll software won’t have the capability to do this for you because it is so new.  If you are using a software you will have to manually override the sick pay so that the waiting days are paid.  Check with your software provider for advice on how to do this.

Keep a record of the dates of isolation, the employee name and the amount of sick pay paid to them.  I expect this will be reclaimed in a similar way to SMP, but again HMRC have not announced how this will be done yet.

You can now furlough employees and reclaim 80% of wages from HMRC.  Again, how this will be reclaimed is still unclear.  If you have made redundancies, this scheme is available from the 1st March, so you may be able to reconsider this, you will need to check with HR as to how this will work.  This scheme is set to run for three months from 1st March 2020, however it will be extended if necessary.

 

VAT

If your VAT falls due between 20th March 2020 and 30th June 2020 you can defer this, it must be paid before 31st March 20201.

If you have a direct debit set up to pay your VAT, then you will need to cancel this in order to defer your payment.  If you don’t then you just don’t pay.  VAT returns do still need to be filed.

 

Self-Employed

Self-employed people will receive 80% of their average income up to £2550 per month.

You are eligible if:
You have profit of less than £50,000.
The majority of your income is through self-employment.
You completed a 18/19 tax return.

You now have 4 weeks from today to submit a 18/19 tax return if you haven’t done so already.

HMRC are hoping to have this in place by start of June and you should receive a letter from them asking you to complete an online form if you are eligible.

I know for a lot of you that are just growing your businesses this support will not be enough.  Remember, if you are renting you can speak to your landlord, perhaps consider paying just half of your rent until we are all back on our feet.  If you have a mortgage consider taking a mortgage holiday.

You can also try to apply for universal credits to see if you can get additional support and speak to your local council and see if they can help in any way.

 

I know there are still several people that won’t get the support that they need.  We can only hope that more help will be announced in the coming days and weeks.

 

Stay safe!

Domestic Reverse Charge for VAT Explained

UPDATE:  Friday 6th September 2019

The Government has today announced that this legislation will be delayed until October 2020.

The domestic reverse charge is a big change to the way that VAT is accounted for within the construction industry and is effective as of 1st October 2019.  The reverse charge has been introduced for businesses that fall under the scope of CIS and are VAT registered, the reverse charge does not apply to consumers.  The reason for the reverse charge is to eliminate VAT fraud within the construction industry.  This charge aims to prevent companies from setting up and then closing before VAT is paid to HMRC.

The reverse charge will affect you if you supply or receive specified services that fall under the Construction Industry Scheme (CIS).

 

If your business is not VAT registered and/ or you do not fall under the scope of CIS the reverse charge does not apply to you.  The reverse charge only applies when VAT is charged at the standard rate.

 

So what does reverse charge mean? 

Lets start with individuals or businesses that do fall under the scope of CIS and are VAT registered but the reverse charge will not apply.

End User and /intermediary Supplier Criteria:

If you are classed as an end user or an intermediary supplier the reverse charge does not apply to you.

To meet the criteria of end user you must be the final customer of building and construction services.  An end user is a business or group of businesses, that do not make onward supplies of the building and construction services in question.  For example a building contractor using services from a range of sub-contractors to build a housing estate that upon completion will be sold on as finished products.

To meet the criteria of intermediary supplier you must be connected or linked to the end user by either sharing relevant interest in the land where the construction is taking place or be a part of the same company as defined under section 1161 of the Companies House Act 2006.

If you meet the criteria for either intermediary supplier or end user you will need to notify your customers and relevant suppliers to let them know your position and that standard VAT accounting rules will continue to apply.

Please be aware that whilst you may meet either of the criteria above for one project, it may not be the case for every project and therefor you should monitor your position for each new project you undertake and with each current customer and supplier relationship you have.  

 

If you are a supplying services that fall within the scope of CIS:

If the services you supply fall within the scope of CIS and the business/ individual you are supplying them to are CIS registered and you are both VAT registered then the reverse charge applies, providing your customer does not meet the end user criteria.

This means that as of 1st October 2019 you need to stop applying VAT to invoices that you issue to your customer.  Your customer will be responsible for accounting for the VAT.

It is advisable to contact your customer to let them know that as of 1st October 2019 you will no longer be applying VAT to invoices and the accounting responsibility for VAT will lie with them.  Your customer may respond by informing you that they are an end user and therefore standard VAT rules apply.  In which case it is recommended you keep a record of this and continue as normal.

If you meet the criteria for intermediary supplier you will need to notify your customers of your position and confirm that you will continue to charge VAT as normal.

 

If you are receiving specified services that fall within the scope of CIS, and you are CIS registered yourself:

If you are receiving services under the scope of CIS then the service providers will stop charging you VAT on their invoices as of 1st October 2019 and you will be responsible for accounting for the VAT.

You should expect to receive correspondence from the service provider to confirm they will no longer charge you VAT, it may even be worth you contacting them to clarify your position.

If you are the end user of the services then you need to issue a letter to the service provider to inform them of this and standard VAT rules will continue to apply.

 

You may find that both of the above apply, in which case you will have VAT liability on behalf of suppliers but none on behalf of customers.

 You may also find that some customers / suppliers fall within the scope of the scheme and some don’t and therefor have to vary the way you account for VAT according to who you are accounting for. 

 

What should you do to prepare for the Reverse Charge?

You need to consider how the scheme will effect you.  If you are the end user or intermediary supplier then you will need to issue letters to anyone who you have a business relationship with that will be effected by the reverse charge to state your position.

You will need to consider each business relationship you have to see if the same applies to each relationship.  For example a scaffolding firm providing scaffolding to a large building development may find that the building contractor on this project has end user status and therefore standard VAT rules apply and VAT is charged on services.   The same scaffolding firm providing scaffolding for a roofing contractor whose work will be falling under the scope of CIS will fall into the reverse charge scheme and therefore will not charge VAT on services provided.

Registering For VAT – All You Need To Know

When do I need to register?

The current VAT threshold is £85,000 (18/19) and it is set to remain the same until at least April 1st 2022. This means that if within any 12-month period your earnings reach £85000 you need to register for VAT. This 12-month period is not necessarily your business’ financial year, it is a rolling total.

 

It is advisable that if your monthly turnover is over £6500 that you check your data for the past 12 months and look at your whole turnover figure, and keep a running total so you can see when you cross the threshold.

 

Do consider your registration, if the bulk of your purchases do not come from VAT registered sources then you may be better off signing up to the VAT flat rate scheme. There is more information about the flat rate scheme here: https://www.gov.uk/vat-flat-rate-scheme.

 

How do I register?

You will need to visit the HMRC website here: https://www.gov.uk/vat-registration/how-to-register. You can do this yourself or you can ask your accountant or bookkeeper to do this for you. You will receive a VAT certificate within 30 days of registering.

 

You can reclaim VAT on business expenses leading up to your registration. What you can reclaim is as follows:

  • VAT on services that have been paid for within 6 months prior to your registration
  • Purchases for items you still have or that have been used to make something you still have within the last 4 years.

Please note that you will need to have the VAT receipts for these payments and have information about how these relate to your business now.

 

You may need to provide the figures for these expenses when you register.

 

What happens next?

You need to start charging VAT on your products or services (that are not VAT exempt) from the date of registration. You will not receive your VAT number until your certificate arrives which can take up to 30 days. In the meantime you will not be able to issue a VAT invoice, but you will need to account for (and charge) VAT. You may need to reissue VAT invoices/ receipts to customers once your certificate arrives. How you do this will depend on the type of business you are have and what procedures would be convenient for you and your customers.

 

Your first VAT Return

HMRC give you one month and seven days from the end of your VAT period to file your return. Your VAT return periods will be stated on your registration certificate. For example if your first period-end date is 1st April 2019 your first return will need to be submitted between 2nd April 2019 and 9th May 2019.

 

VAT returns for periods beginning after 6th April 2019 will need to be submitted digitally under the new MTD rules. It would make sense if you are registering now to sign straight up to MTD and start using a software that can submit returns. HMRC have a list of all MTD compliant software on their website, you can view this here: https://www.tax.service.gov.uk/making-tax-digital-software