Construction Industry & VAT
With effect from 1st October 2019, a massive change is taking place with regard to how VAT is collected and accounted for. A reverse charge will affect supplies of building and construction services subject to the CIS scheme involving labour, or materials and labour, at the standard or reduced VAT rates.
If a contractor receives a service subject to the VAT reverse charge from it’s subcontractor, it must account for the VAT in box 1 of it’s VAT return and also recover it simultaneously on the same return in box 4, subject to the normal rules for input tax deduction. The subcontractor will no longer be required to charge VAT but will in future inform the contractor of the amount of the VAT reverse charge applicable. The subcontractor will also inform the contractor that the invoice is subject to the reverse charge and that the contractor is required to account for the VAT. The final contractor in the chain will be required to account for and pay VAT on their service.
If you are affected by the reverse charge scheme you will need to keep separate records. We have prepared pro forma spreadsheets to assist you if required. Please contact us if you wish to take advantage of these or if you require further details on your future responsibilities.
PLEASE NOTE THIS HAS NOW BEEN DELAYED UNTIL OCTOBER 2020
Autumn Budget 2018
2019/20 personal allowance due to increase to £12,500, higher rate threshold is now £50,000.
Corporation tax rate confirmed to reduce to 17% in 2020.
Annual investment allowance (AIA) to increase to £1 million on qualifying investments in plant & machinery with effect from 1st January 2019. Special rate qualifying plant & machinery to reduce from 8% to 6% with effect from April 2019.
VAT taxable turnover threshold for registration will remain at £85,000 until April 2022.
Deregistration threshold to remain at £83,000 up until the same date.
As previously announced, Making Tax Digital for VAT will commence on 1st April 2019. Please see further details below.
HMRC Preferential Creditor Status
From 6th April 2020, when a business enters insolvency, HMRC will be treated as preferential creditor in respect of taxes collected and held by business on behalf of other tax payers. (VAT, PAYE income tax, Employee NICs & Construction Industry Deductions). Creditor rules will remain unchanged for taxes owed by business themselves such as Corporation Tax and Employer NICs.
Capital Gains Tax
Annual exempt amount to increase to £12,000 per annum from 2019/20, (trusts £6,000 per annum).
Private residence relief from April 2020 will only apply where the owner of the property is in shared occupancy with the tenant. Final period exemption to be reduced from 18 months to 9 months.
With effect from 6th April 2020, gains arising on the disposal of residential property will need to be declared and any tax arising paid within 30 days of the disposal.
Inheritance tax nil rate band to remain at £325,000 for 2019/20
Employment allowance to remain at £3000 per annum for 2019/20.
Lower earnings limit to increase to £118 per week from 6th April 2019. Primary threshold to increase to £166 per week.
National Minimum Wage and National Living Wage rates
The table below gives the current rates and those applicable from April 2019.
|Year||25 and over||21 to 24||18 to 20||Under 18||Apprentice|
|April 2018 (current rate)||£7.83||£7.38||£5.90||£4.20||£3.70|
Government to look into increasing pension participation and savings persistency among the self employed.
Personal Service Companies (PSC)
Where a PSC provides the services of a worker to a public body, such as a government department, NHS Trust or local authority, the public body should be responsible for deciding where the intermediaries legislation (also known as IR35) should apply. If it finds that the rules should apply then it would also have to pay HMRC the tax and National Insurance on the deemed employment payment, deducting those amounts from the amount it pays to the PSC.
The public body should not deduct the normal 5% flat rate deduction from payments for the workers services in computing the deemed employment payment. With effect from April 2020, the above regulations will apply to larger private companies.
For further details on the Autumn Budget please visit: https://www.gov.uk/government/publications/budget-2018-documents/budget-2018
Making Tax Digital for VAT
Businesses whose taxable turnover exceeds the VAT registration threshold will need to keep their records digitally, using Making Tax Digital (MTD) functional compatible software, and create the VAT return from that (or a combination of) software, for return periods starting on or after 1 April 2019.
Digital records must be maintained in what is defined as “functional compatible software” i.e. software or spreadsheets (or combination of both), which will connect to HMRC via an Application Programming Interface (API). These records must be digitally maintained for 6 years.
Changes to VAT Return Submission
VAT returns must be submitted to HMRC by means of a business’s functional compatible software communication digitally via HMRC’s API platform. Businesses will no longer be able to manually enter figures onto the HMRC portal.
“Soft Landing Period”
For VAT return periods commencing between 1 April 2019 and 31 March 2020, HMRC will not enforce the requirements to have digital links between software programmes. This is known as the “soft landing period”. After this period, all transfers of data between digital records must be transferred digitally.
There is no “soft landing period” for the digital submission of the VAT return.
Submission of VAT Returns under MTD
We have obtained VAT filing software that enables us to file VAT returns online. If you are unable to file using an API, we will be able to do so on your behalf, should you wish to use this service.
National Insurance and the Higher Income Child Benefit Charge (HICBC)
Higher rate tax payers should beware that failure to claim the HICBC could result in the spouse not obtaining child benefit credits. It may well be beneficial to claim the benefit but to elect not to receive the payments.
Please contact us if you wish to discuss further.