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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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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IFS predicts millions to be worse off next year due to tax rises

IFS predicts millions to be worse off next year due to tax rises

The Institute for Fiscal Studies (IFS) has predicted that millions of people will be worse off in 2022 as a result of spiralling costs and tax rises.

Responding to the Autumn Budget, the IFS predicted that low-income families will be squeezed by a rise in the cost of living. The Office for Budget Responsibility (OBR) recently warned that the cost of living is set to rise at its fastest rate in 30 years.

The IFS stated changes to income tax and National Insurance, alongside rising household bills, will mean slow growth in living standards.

Paul Johnson, Director of the IFS, said:

‘With, in the words of the OBR, inflation quite possibly hitting its ‘highest rate in the UK for three decades’, millions will be worse off in the short term. Next April benefits will rise by just over 3%, but inflation could easily be at 5%. That will be a real, if temporary, hit of hundreds of pounds a year for many benefit recipients.

‘We are not at 1970s levels of inflation, but we are now experiencing enough inflation that real pain will be felt as low income households – most of whom have next to nothing in the way of financial assets – wait more than a year for their incomes to catch up. For some in work that may never happen.’

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

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Autumn Budget 2021

Budget 2021 The Chancellor Rishi Sunak presented his third Budget on 27 October 2021. In his speech he set out the plans to "build back better" with ambitions to level up and reduce regional inequality. Main Budget proposals Tax measures include: a new temporary...

Autumn Budget: R&D Tax Relief to be Reformed

Autumn Budget: R&D Tax Relief to be Reformed

The Chancellor announced in his Autumn Budget that the R&D tax relief regime will be reformed.

The key changes:

  • The scope of the regime will be extended to support modern research methods by including expenditure on data and cloud computing costs
  • The relief will be refocused on innovation carried out in the UK, to discourage outsourcing R&D to offshore territories
  • HMRC aim to target abuse of the system and improve compliance

These changes will take effect from April 2023.

Further details of these changes and the next steps will be announced later in the autumn.

 

What is R&D tax relief?

R&D tax reliefs are HMRC incentives created to encourage innovation and technological advances in the UK.  Further details of the relief can be found here

 

Am I eligible?

Many companies carry out eligible R&D activities without realising that this work qualifies for relief.

R&D tax incentives are not just for niche sectors – eligible companies can be in any sector, any size, and even be loss-making. A common misconception is that R&D incentives are only for those who undertake scientific research in a laboratory, but this is certainly not the case.

 

How we can help?

We have extensive experience of making successful R&D tax relief claims. If you would like to discuss whether your company may be eligible to claim R&D relief, please get in touch with us.

 

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

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Autumn Budget: Changes to Creative Tax Reliefs

Autumn Budget: Changes to Creative Tax Reliefs

Creative tax reliefs have been made even more generous following the Autumn Budget.  Find out here if your company qualifies for these reliefs

 

The Chancellor has announced a temporary increase in the rates of relief for the following tax reliefs:

 

Theatre Tax Relief (TTR)

  • Non-touring (27 October 2021 to 31 March 2023) – 45% (formerly 20%)
  • Non-touring (1 April 2023 to 31 March 2024) – 30%
  • Non-touring (From 1 April 2024) – 20%
  • Touring (27 October 2021 to 31 March 2023) – 50% (formerly 25%)
  • Touring (1 April 2023 to 31 March 2024) – 35%
  • Touring (From 1 April 2024) – 25%

 

Museums and Galleries Exhibition Tax Relief (MGETR)

  • Non-touring (27 October 2021 to 31 March 2023) – 45% (formerly 20%)
  • Non-touring (1 April 2023 to 31 March 2024) – 30%
  • Non-touring (From 1 April 2024) – 20%
  • Touring (27 October 2021 to 31 March 2023) – 50% (formerly 25%)
  • Touring (1 April 2023 to 31 March 2024) – 35%
  • Touring (From 1 April 2024) – 0%

 

The Finance Bill will also extend the sunset clause for MGETR for a further two years until 31 March 2024.

 

Orchestra Tax Relief (OTR)

  • Expenditure from 27 October to 31 March 2023 – 50% (formerly 25%)
  • Expenditure from 1 April 2023 to 31 March 2024 – 35%
  • Expenditure from 1 April 2024 – 25%

 

The Finance Bill will also implement anti-avoidance changes to better target these reliefs and ensure they are safeguarded from abuse.  These changes will apply to companies entering into productions from 1 April 2022.

 

 

What are Creative tax reliefs?

Creative tax reliefs are a group of 8 corporation tax reliefs that were devised by the UK government to help and support the UK creative industries to grow.  The reliefs are as follows:

  • Film Tax Relief
  • High-end Television Tax Relief
  • Children’s Television Tax Relief
  • Animation Tax Relief
  • Video games Tax Relief
  • Theatre Tax Relief
  • Orchestra Tax Relief
  • Museum and Gallery Exhibition Tax Relief

 

Broadly speaking, these creative tax reliefs enables your company to increase its allowable expenditure by way of an enhanced deduction which can reduce the amount of Corporation Tax your company has to pay.

If your company makes a loss as a result of the claim, you may be able to surrender the loss and convert some or all of it into a payable tax credit.

 

How can we help?

At Hawsons our team of experts can take care of your creative tax relief claim for you so you do not have to worry about your claim.

Our team will complete the claim process for you to include the preparation and the final submission of your claim. We will also use our expert knowledge to investigate whether there are any other tax reliefs that could apply to supplement your claim.

If you would like to find out if your business is eligible for a creative tax relief claim please book your free initial meeting here.

Free initial meeting

Craig Walker

Tax Director, Sheffield

0114 266 7141
Annual Investment Allowance Extended

Annual Investment Allowance Extended

The Chancellor announced in the Autumn Budget an extension of the temporary increase in the Annual Investment Allowance (AIA) to 31 March 2023.

Most corporate and unincorporated businesses are able to utilise the AIA to claim 100% tax relief on their qualifying expenditure on plant and machinery.

The allowance was temporarily increased from £200,000 to £1 million for expenditure incurred on or after 1 January 2019 and was due to revert back to £200,000 from 1 January 2022. The Chancellor has announced that the £1 million allowance will now be retained until 31 March 2023.

Transitional rules will apply to accounting periods that span 1 April 2023.

For companies, this aligns the end of the temporary AIA with the end of the ‘super-deductions’ as announced by the government in Spring Budget 2021.

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

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