Changes to VAT penalty regime delayed until 2023

Changes to VAT penalty regime delayed until 2023

The government has announced that the new penalty regime for VAT, which was due to be introduced from 1 April 2022, will now be delayed until January 2023.

The delay is to provide HMRC with extra time to ensure their IT systems are ready and well tested. The new scheme will reform the penalty regime for late submission of VAT returns and late payment of VAT.

Under the new regime, HMRC will issue a single penalty point for each late submission of a VAT return and once a business has exceeded a points threshold for multiple missed returns, a flat penalty of £200 will be charged.

There will also be penalties for late payments. The first charge will be imposed at 2% of the outstanding tax if the tax due on a return remains unpaid 15 days after its due date. After 30 days the penalty increases to 4%. The second late payment penalty is a daily penalty (set at 4% per year of the tax still outstanding at that point), starting from 31 days after the due date until the business pays the tax that is due. Late payment interest will be calculated at 2.5% above the Bank of England rate and will be payable on tax outstanding after the due date.

 

How can we help?

At Hawsons we provide a range of VAT services. Over the past 12 months, we have registered companies, sole proprietors, and partnerships for VAT with HMRC. Using our expertise, we have advised clients whether to register for VAT voluntarily or if they are required to register due to their turnover.

VAT on services is a complicated area. VAT rates may or may not apply depending on who is providing or buying them, where they are provided and the precise nature of the services provided.

More from our tax experts

You can find all of our latest tax articles and tax resources here.

If you are looking for advice in a particular area, please get in touch with your usual Hawsons contact.

Alternatively, we offer all new clients a free initial meeting to have a discussion about their own personal circumstances – find out more or book your free initial meeting here. We have offices in Sheffield, Doncaster and Northampton.

Free initial meeting

Craig Walker

Tax Director, Sheffield

0114 266 7141

Tony Nickson

VAT Consultant, Sheffield

01604 645 600

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HMRC give self-assessment taxpayers one month waiver

HMRC give self-assessment taxpayers one month waiver

HMRC have announced that they will be waiving late filing and late payment penalties by one month for Self-Assessment taxpayers. This is to give them additional time to complete their 2020/21 tax return and pay any due tax if needed.

However, HMRC are still encouraging Self-Assessment tax payers to file and pay on time if they can. The department have announced that out of the 12.2 million people that need to submit a Self-Assessment tax return by 31 January 2022 nearly 6.5 million have already submitted.

HMRC have said that with Covid-19 affecting the capacity of some tax-payers and their agents it is making it increasingly difficult for taxpayers to meet the 31 January deadline. Therefore, HMRC have made the decision to implement a one-month waiver for late filing and late payment penalties.

This is a very welcome concession.

 

What are the new rules for self-assessment taxpayers?

The official deadline for filing and paying your tax return remains as 31 January 2022. The waiver implemented by HMRC will have two fundamental changes:

  • Firstly, anyone who cannot file their tax return by the 31 January deadline will not receive a late filing penalty if they file online by 28 February. Technically the return will have been filed late but the tax-payer will be treated as if they had a reasonable excuse and so the automatic £100 penalty will not be charged.
  • Secondly, anyone who cannot pay their Self-Assessment tax bill by the 31 January deadline will not receive a late payment penalty if they pay their tax in full, or set up a Time to Pay arrangement, before 1 April.

 

However, it is important to note that interest will be charged with effect from 1 February 2022 for those that miss the 31 January deadline. Therefore, we recommend that you pay on time to avoid any interest payments if you can.

 

How can we help?

If you have any questions about the contents of this article, please contact one of our tax experts who will be able to assist you with any queries you may have.

More from our tax experts

You can find all of our latest tax articles and tax resources here.

If you are looking for advice in a particular area, please get in touch with your usual Hawsons contact.

Alternatively, we offer all new clients a free initial meeting to have a discussion about their own personal circumstances – find out more or book your free initial meeting here. We have offices in Sheffield, Doncaster and Northampton.

Free initial meeting

Stephen Charles

Tax Partner, Sheffield

0114 266 7141

David Cairns

Tax Partner, Northampton

01604 645 600

Aaron Hemmington

Tax Partner, Northampton

01604 645 600

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Stamp Duty Land Tax: Consultation launched to reduce perceived abuse of the rules

Stamp Duty Land Tax: Consultation launched to reduce perceived abuse of the rules

HMRC has launched a consultation into the methods used to calculate Stamp Duty Land Tax (“SDLT”) on purchases of mixed-use property. A mixed-use property is where a property is considered as both residential and non-residential. In addition, there may also be a reform on multiple dwellings relief when two or more dwellings are purchased. HMRC considers that these two areas can lead to unfair outcomes, incorrect claims, or abuse of the rules.

 

Mixed property type

Currently, properties which include elements of residential and non-residential property are subject to the non-residential SDLT rates, which can give a substantial SDLT saving.

HMRC has said that some purchasers of property are taking advantage of the rules for mixed-use property, despite the property not having any relevant non-residential features. This enables purchasers to unfairly reduce the amount of SDLT paid. Therefore, the aim of this consultation is to amend the rules to ensure that they are fairer and reduce attempts to abuse the provisions of the relief.

In the consultation, HMRC is currently looking at introducing a new apportionment method for calculating SDLT on mixed-use property cases. This new method would mean that the residential portion of the mixed-use property would be taxed as a residential property with the remaining being taxed as non-residential property. An alternative option would be to introduce a threshold where a property can only be treated as a mixed-use property if the non-residential element of the property is more than a certain proportion, for example, more than 50%. HMRC is currently looking for views on this new method.

HMRC has said that if they were to use this method, they would need to ensure that the threshold would be high enough. This is to prevent purchasers from adding small amounts of non-residential land to class the purchase as a mixed-use property type and reduce their SDLT bill.

 

Multiple dwellings relief

Currently, if a property contains more than one dwelling there is an averaging method which can reduce the overall SDLT liability. There have been a number of cases on this recently where the tax-payer has tried to argue that an annexe is a separate dwelling and therefore the relief can be claimed. However, HMRC have been successful in many of these cases.

In order to reform multiple dwellings relief, HMRC has put forward a number of options.

  • Only allow multiple dwellings relief where all dwellings are purchased for a ‘qualifying business use’
  • Only allow multiple dwellings relief in respect of the dwellings purchased for a ‘qualifying business use’
  • Restrict multiple dwellings relief by introducing a ‘subsidiary dwelling’ rule
  • Only allow multiple dwellings relief for purchases of three or more dwellings

It will be interesting to see the outcome of these consultations.

 

How can we help?

At Hawsons we have a dedicated team of property & construction accountants at our offices in Sheffield, Doncaster, and Northampton.

Having an accountant who understands the challenges of this dynamic sector and is able to help you plan for the future is an advantage in a competitive environment. At Hawsons we have a great deal of experience in advising and helping businesses in property and construction and we can assist you as your business grows.

Free initial meeting

Stephen Charles

Tax Partner, Sheffield

0114 266 7141

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Advisory fuel rates for company cars

Advisory fuel rates for company cars

New company car advisory fuel rates have been published which take effect from 1 December 2021. The rates have increased for petrol cars and also for diesel cars to reflect a slight increase in fuel prices. Rates have also increased for LPG’s.

HMRC reviews the advisory fuel rates quarterly on 1 March, 1 June, 1 September, and 1 December. The rates are based on the fuel type and engine size of the company car.

The fuel rates for journeys undertaken on or after 1 December 2021 are as follows:

PETROL  
Engine size Petrol – amount per mile
1400cc or less 13p
1401cc – 2000cc 15p
Over 2000cc 22p

 

LPG  
Engine size LPG – amount per mile
1400cc or less 9p
1401cc – 2000cc 10p
Over 2000cc 15p

 

DIESEL  
Engine size Diesel – amount per mile
1600cc or less 11p
1601cc – 2000cc 13p
Over 2000cc 16p

Hybrid cars are treated as either petrol or diesel cars for this purpose.

The advisory rate for fully electric cars is 5 pence per mile. Electricity is not a fuel for car fuel benefit purposes.

The rates apply when you either:

  • reimburse employees for business travel in their company cars, or
  • require employees to repay the cost of fuel used for private travel.

The previous rates, which were effective from 1 September 2021, can be used for up to one month from the date the new rates apply, so until 1 January 2022.

Previous rates

From 1 September 2021 to 30 November 2021

Engine size Petrol – rate per mile LPG – rate per mile
1400cc or less 12 pence 7 pence
1401cc to 2000cc 14 pence 8 pence
Over 2000cc 20 pence 12 pence
Engine size Diesel – rate per mile
1600cc or less 10 pence
1601cc to 2000cc 12 pence
Over 2000cc 15 pence

If you would like to discuss your car policy, please contact us.

Free initial meeting

Craig Walker

Tax Director, Sheffield

0114 266 7141
VAT and Making Tax Digital

VAT and Making Tax Digital

On 1 April 2019 (this was not a joke!!) HMRC introduced Making Tax Digital (MTD) for VAT.  Businesses above the current VAT threshold of £85,000 have since needed to submit their VAT returns using “functional compatible software”.

As of 1 April 2022, all VAT registered businesses will be required to use MTD for their VAT accounting and to submit their VAT returns.  This will include an extra 700,000 businesses that are currently VAT registered but are below the current threshold.

Many of these businesses may not have the software available to do this but here at Hawsons, we can help.

Please contact us should you require any information on this or any other VAT problems you may have.

More from our tax experts

You can find all of our latest tax articles and tax resources here.

If you are looking for advice in a particular area, please get in touch with your usual Hawsons contact.

Alternatively, we offer all new clients a free initial meeting to have a discussion about their own personal circumstances – find out more or book your free initial meeting here. We have offices in Sheffield, Doncaster and Northampton.

Free initial meeting

Tony Nickson

VAT Consultant, Sheffield

01604 645 600

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Christmas parties and staff gifts – a tax guide

Christmas parties and staff gifts – a tax guide

Christmas parties and staff gifts – a tax guide

With the festive period now approaching, we are often asked by employers about the tax treatment of providing a staff Christmas party or giving gifts to employees. Here is a quick reminder of the rules for the tax year 2021/22.

 

STAFF PARTIES

 

What is exempt?

There is a tax exemption for employee entertaining if the event is all of the following:

  • an annual party or social function, such as a Christmas party or summer barbecue
  • it is open to all employees (or all employees based at one location)
  • the cost does not exceed £150 per head (inclusive of VAT)

HMRC have confirmed that Virtual Christmas Parties are eligible for the annual function exemption.

 

Calculating the cost

The total cost of the party is the whole cost of the event, from the start to the end.  It includes food, drink, entertainment, taxis home, overnight accommodation, etc.

The limit of £150 per head applies to all those attending the function, not just employees.  So, if employees are allowed to bring guests, the total cost should be divided by the total number of employees and guests.

 

Two or more functions

If there are multiple annual events, they will still be exempt as long at the combined cost is no more than £150 per head.

If you’ve already used up the £150 exemption on an event, you’ll have to report and pay tax on the full costs of any additional events, even if they cost less than £150 per head on their own.

 

Reporting obligations

A taxable benefit in kind will arise if either the limit is exceeded, or the function is not open to all staff or it is not an annual function.

Please be aware that the £150 per head limit is an exemption not an allowance – go just a penny over the £150 and the full cost becomes taxable.

The benefit must be reported on each employee’s form P11D.  The employee will pay income tax on the benefit, and the employer will be charged Class 1A national insurance.

Alternatively, the employer can apply to pay the grossed-up tax through a PAYE Settlement Agreement (PSA).

 

Are costs tax-deductible?

Client entertaining is generally not an allowable expense for corporation tax purposes.  However, the cost of employee entertaining is an allowable expense, and therefore the cost of the staff Christmas party can be deducted.

 

VAT

Input tax on employee entertaining is generally recoverable.  However, please note that the definition of employees for VAT purposes does not include partners/spouses of staff or former employees.  Therefore, if guests are invited it will be necessary to apportion the relevant costs appropriately.

Please also note that if an event is provided only for directors, partners, or sole proprietors, HMRC will not accept that input tax has been incurred for business purposes.

 

GIFTS TO EMPLOYEES

 

Cash bonuses & vouchers

Christmas presents paid in cash to staff will be taxable as earnings in the normal way (subject to tax and national insurance). The same tax treatment also applies to vouchers exchangeable for cash, with the employee taxed on the full value of the voucher.

Vouchers exchangeable for goods and services only (non-cash vouchers) are also taxable and must be reported on the employee’s form P11D.  Class 1 national insurance will normally need to be deducted through the payroll.

Make sure you tell your accountant or the person who prepares the payroll, so they can report the correct figures to HMRC.

 

Seasonal gifts

The employer may wish to give employees a seasonal present, such as a turkey, a bottle of wine, or a box of chocolates.  Provided the cost of the gift is ‘trivial’ – typically less than £50 ahead – the gift will usually not be taxable.

If the gift exceeds this value, it will be taxable and it will need to be reported to HMRC on either a form P11D or through a PSA.

 

Third parties

Employees may receive gifts from third parties as a result of their employment.  As long as the gift does not exceed £250 in cost, it should not be taxable for the employee.

 

How we can help

At Hawsons we have a dedicated team of tax specialists at our offices in Sheffield, Doncaster, and Northampton. Our experts provide proactive, well rounded, technically robust tax advice to businesses and individuals. If you are interested in what tax services Hawsons can offer you please visit our tax services webpage.

If you have any questions on how to treat your festive finances or would like more detailed advice, please do get in touch with us here at Hawsons.

We hope you enjoy the festive period!

More from our tax experts

You can find all of our latest tax articles and tax resources here.

If you are looking for advice in a particular area, please get in touch with your usual Hawsons contact.

Alternatively, we offer all new clients a free initial meeting to have a discussion about their own personal circumstances – find out more or book your free initial meeting here. We have offices in Sheffield, Doncaster and Northampton.

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