New VAT rules coming into effect on 1st October 2019 – are you ready?

The domestic reverse charge (referred to as the reverse charge) is a major change to the way VAT is collected in the building and construction industry.

This will affect you if you supply or receive specified services that are reported under the Construction Industry Scheme (CIS).

vat rules 300x182 - New VAT rules coming into effect on 1st October 2019 - are you ready?It comes into effect on 1 October 2019 and means customers receiving the service will have to pay the VAT due to HMRC instead of paying the supplier.

It will only apply to individuals or businesses registered for VAT in the UK (although it will not apply to consumers).

What you need to do to be ready for the start of the
domestic reverse charge

You need to prepare for the 1 October 2019 introduction date by:
• Checking whether the reverse charge affects either your sales, purchases or both.
• Ensuring your accounting systems and software are updated to deal with the reverse charge.
• Considering whether the change will have an impact on your cash flow.
• Ensuring all your staff who are responsible for VAT accounting are familiar with the reverse charge and how it will operate.

What contractors need to do

If you’re a contractor you’ll also need to review all your contracts with sub-contractors, to decide if the reverse charge will apply to the services you receive under your contracts. You’ll need to notify your suppliers if it will.

What sub-contractors need to do

If you’re a sub-contractor you’ll also need to contact your customers to get confirmation from them if the reverse charge will apply, including confirming if the customer is an end user or intermediary supplier.

For further information please do not hesitate to contact one of the team on 01277 314000.

2017 07 27 866366 800x380 - Credit card transaction charges to be banned

Credit card transaction charges to be banned

The EU second Payment Services Directive (PSDII) was approved by the European Parliament and European Council in December 2015 and seeks to widen the scope of the existing EU Payment Service Directive (PSD) that defines the information that consumers and businesses must receive when making payments. This includes making reforms to the way payments by debit and credit cards, direct debit, credit transfers, standing orders and other digital payments are transacted. 

The UK government is required to implement the PSDII into UK law by 13 January 2018 to meet its legal obligations and avoid the risk of facing infraction proceedings. This work must still be completed as for the time being the UK remains a full member of the EU.

One of the main changes that will come about as a result of this new legislation will be the removal of extra charges for making payments by credit cards. This practice known as ‘surcharging’ is common across a wide range of businesses including some local councils and government agencies. These new rules will bring an end to the practice entirely.

Planning note:

Most of HMRC’s credit card fees were sharply reduced with effect from 1 April 2016. Since then the credit card fees have varied depending on the type of card used and whether it is a corporate or personal credit card. The lowest fees are for personal Visa or MasterCard credit cards and the highest fees are reserved for corporate credit cards.

From January 2018, HMRC will no longer be able to levy any fees for payment by credit card. As HMRC incurs a fee for processing payments by credit card there is a possibility that the option to make payments of tax by credit card may be removed.

2016 07 21 920306 800x380 - New Finance Bill to be published

New Finance Bill to be published

The government has confirmed that a new Finance Bill will be introduced as soon as possible after the summer recess. The House of Commons returns to Westminster on 5 September 2017.

In a joint press release from HMRC and HM Treasury we are told that the new Finance Bill will legislate for all policies that were included in the pre-election Finance Bill but not included in the Act that was rushed through Parliament before the snap election.

It has also been confirmed that all policies originally announced to start from April 2017 will be effective from that date. This includes the corporate interest restriction, changes to the treatment of carried-forward losses, the money purchase annual allowance, changes to the deemed domicile rules and penalties for enablers of defeated tax avoidance schemes.

The introduction of Making Tax Digital (MTD) will also be legislated for albeit with significant changes to the implementation schedule.

A Written Ministerial Statement on the Finance Bill by Mel Stride, Financial Secretary to the Treasury states:

‘Where policies have been announced as applying from the start of the 2017-18 tax year or other point before the introduction of the forthcoming Finance Bill, there is no change of policy and these dates of application will be retained. Those affected by the provisions should continue to assume that they will apply as originally announced.

The Finance Bill to be introduced will legislate for policies that have already been announced. In the case of some provisions that will apply from a time before the Bill is introduced, technical adjustments and additions to the versions contained in the March Bill will be made on introduction to ensure that they function as intended.’

Planning note

There is still a measure of uncertainty regarding the ability of the government to present this second Finance Bill for 2017, and see it through the various committee stages without amendment. It will be September 2017 at the earliest before the Bill reaches the statute books. We will have to wait and see what proceeds to legislation. 

2017 02 21 135190 800x380 - Making Tax Digital – common sense prevails

Making Tax Digital – common sense prevails

A new timetable for the introduction of Making Tax Digital (MTD) has been announced. The new regime was due to start from April 2018, but was delayed by the snap general election earlier this year. The government now appears to have listened to concerns that the roll-out of the MTD was moving too fast. The original proposals would have required most businesses to upload quarterly figures to HMRC.

Under the new implementation plan these obligations have been substantially changed. They are:

  • Only businesses with a turnover above the VAT threshold (currently £85,000) will have to keep digital records and only for VAT purposes. These businesses will only be required to use MTD compliant upload software from April 2019.
  • Other businesses will not be asked to keep digital records, or to update HMRC quarterly, for other taxes (income tax and corporation tax) until ‘at least’ April 2020, and only if their annual turnover is above the VAT registration threshold.
  • HMRC has also confirmed that the use of MTD by smaller businesses and for other taxes will be voluntary. This means that businesses and landlords with a turnover below the VAT threshold will be able to choose when to move to the new digital system. 

As VAT returns are already submitted on a quarterly basis, the change of pace of MTD implementation means that all businesses and landlords will have at least two years to adapt to the changes before being asked to keep digital records for other taxes.

HMRC’s MTD pilot tests will be extended to pilot MTD/VAT for businesses later this year, with a more extensive testing phase starting in the Spring of 2018. This means that there will be far more time to test the system and iron out any issues before the system goes live.

Planning note

We can help by offering you advice on the changes you will need to put in place to prepare for MTD including the software that you will need to use. It is important to note that even this revised timetable could be subject to change as we await the introduction of the second 2017 Finance Bill that will contain the necessary legislation.