Posts
15/07/2024 Just a reminder for businesses using the services of subcontractors that it is CIS return time again. The return needs to be filed with HMRC by 19th July and paid by 22nd July. Even if you haven't used any subcontractors in June don't forget to file a nil return.
08/07/2024 Just a reminder that the next self assessment payment on account is due with HMRC by 31st July.
In the Budget last week there were three points that are relevant for small businesses:
- The Coronavirus Job Retention Scheme (CJRS) has been extended until September 2021, so lots more of the lovely furlough calculations. However from July 2021 employers will have to pay a contribution of 10% in July, and 20% in August and September. No doubt more details will follow in due course.
- The Self-Employment Income Support Scheme (SEISS) has also been extended to September 2021, being the 4th and 5th grants. The fourth grant will be worth 80% of three month's average trading profits, paid out in a single instalment and capped at £7,500 in total. This covers February to April 2021, and can be claimed from late April 2021. The fifth grant covers May to September 2021, and will only be available if your turnover has fallen. If turnover has fallen by more than 30% then the grant will be worth 80% of three month's average trading profits, paid out in a single instalment and capped at £7,500 in total. If turnover has fallen by less than 30% then the grant will be worth 30% of three month's average trading profits, paid out in a single instalment and capped at £2,850. This grant can be claimed from late July. Again I expect there will be lots more detail in due course.
- The Corporation Tax has been increased to 25% from 2023 for business with profits over £250,000. Business with profits under £50,000 will continue to be taxed at 19%. A tapered rate will be introduced for those businesses with profits between £50,000 and £250,000, although it remains to be seen what that tax rate will be.
- As there is a more generous capital allowance scheme coming, it may be worth thinking about the timing of buying equipment, plant, etc so as to keep taxable profits below £50,000 or £250,000 as applicable.
Just a reminder that the PAYE thresholds, National Insurance thresholds and the Minimum Wage all increase from 01/04/2021.
The HMRC page on this is here: https://www.gov.uk/guidance/rates-and-thresholds-for-employers-2021-to-2022
There is a new VAT scheme for contractors and sub-contractors from the 1st of March 2021, called the Domestic VAT Reverse Charge procedure.
Please note this only applies where the CIS scheme already applies, and where:
- You are a VAT registered sub-contractor providing services to a VAT registered contractor, or
- You are a VAT registered contractor using sub-contractors who are VAT registered
It doesn’t apply where you are providing services to the end user (typically the customer).
In summary it means that instead of the contractor paying the amount of the sub-contractor’s invoice in full (including the VAT) to the sub-contractor, the contractor will pay the sub-contractor the amount net of VAT, and then pay the VAT element over to HMRC direct. This is the same principle as happens now with the 20% income tax under CIS.
There is a straightforward guide to how this will work: https://www.tide.co/blog/business-tips/vat-reverse-charge/. It explains the basics well. Please note I have linked to this website as an aide, and I do not intent to breach copyright on the article.
If you are the sub-contractor sending your invoice to a contractor, then ideally your invoice going forward needs to include one of these three wordings:
- Reverse charge: Customer to pay VAT to HMRC
- Reverse charge: VAT Act 1994 Section 55A applies
- Reverse charge: S.55A VATA 94 applies
There should be no impact on your profit and loss because of this change, it’s simply about paying the cash to different places.
There is more guidance on HMRC’s website.
I feel that I am in a lull between two storms at the moment. We have battled through the first HMRC tempest of COVID-19, helping clients through furlough and the Coronavirus Job Retention scheme, and the Self-Employment Income Support Scheme. I am now just waiting for the second stage of the Coronavirus Job Retention scheme which is more complicated. Still I like a challenge...