New IR35 tax changes came in to force on the 6th of April 2021, which will see thousands of private-sector contractors pay more tax.
IR35 or "Off-Payroll Working" is a term given to someone either in the public or private sector, sometimes known as a Contractor, who provides services through their own Ltd Company, Partnership, Personal Service Company or provides services as an individual.
The rules apply to those, who would otherwise be considered as employed by the person or company they provide services to.
IR35 ensures that the income received is treated as though it was earned as an employee, and is charged broadly the same Tax and National Insurance contributions on their earnings as someone who is employed.
Up until 6th April 2021, the End Client, or engager in the public sector was in charge of assessing whether someone is classed as an off-payroll worker, and for the private sector, most contractors would self certify their status. However now the same certification rules apply to those in the private sector also for those providing services to medium or large private sector clients. However, if you provide services to a small client, you remain in charge of certifying your IR35 status.
Who is affected?
Any worker who provides their services either through an intermediary, a client who receives services through an intermediary or an agency who provide workers services through their own intermediary.
How to check if I fall under IR35?
There's a few tests that will establish your IR35 status but the main ones are:
- Who has control over the work that's completed?
If the company you provide services to can dictate the hours you work or the location you work at that's a good indication IR35 applies.
In other words, once your work is completed, are they required to find more work for you.
- Could someone else take your place?
If for whatever reason you were unable to attend work, could you, and would you be allowed to appoint a replacement worker.
Even if you believe you meet the above tests to fall outside of IR35, in most cases it will be up to the end client to determine your status, and if they consider you to be an off-payroll worker, there's very little you can do about it.
There is a possibility that some companies will cease to take on any new contractors as a result, in some small cases, the companies may decide to employ the contractor instead.
Why would an end client be reluctant to continue accepting services from a contractor?
Well simply put, if they get it wrong, there could be heavy penalties. The end client would be responsible for not only deducting tax and national insurance but would also have to pay Employers national insurance contributions as well.
Why will the contractor pay more tax?
Working through your own Ltd Company, you have the flexibility to reduce the tax you pay on your income, for example, you may decide to pay a minimal salary, which would be tax-free, and take the rest as dividends which attract a lower rate of tax compared to income tax.
IR35 ensures that all income is taxed in the same way as if you were employed while also ensuring that Employers National Insurance contributions are also paid. Therefore any tax savings you made previously will be wiped out under the new rules.
Can I challenge an IR35 determination?
You can, but there's very little you can do if the determination is upheld. What you can do, is determine your status yourself, provide the information to the end client, and try to convince them that their determination is wrong. In some cases, they may agree.
You can also try providing evidence from an independent expert, this would hold more weight than determining the status yourself.
Is there a way to avoid IR35?
In some cases you could work via an umbrella company, these companies don't apply to IR35, but they can come with heavy fees, so you will need to consider them very carefully.
If you currently operate a Ltd Company or provide services as an individual, and have been caught by Off-Payroll Working, you will most likely need to consider closing your company or ceasing to trade as Self Employed, there are steps involved to close your business such as preparing final accounts and submitting applications to strike the company off the register.
If you are unsure how to do this, and require help, why not contact us today.
From 1st March 2021 the Domestic Reverse Charge (DRC) came in to effect for Building and Construction services.
This had been set to come in to effect back in 2019 and 2020 but was delayed each time for various reasons.
The basic principle of the Domestic Reverse Charge is to ensure a reduction in VAT fraud by "missing traders". Missing traders are the names given to companies that exist, purely to charge and receive VAT, but without any intention to pay it over to HMRC.
Who's affected by the Domestic Reverse Charge
The DRC applies to the Construction Industry Scheme (CIS) and VAT registered Contractors and Sub-Contractors who either buy or sell building and construction services. the DRC does not apply to any customer who is NOT VAT registered in the UK.
- The supply of services must be those that carry the standard or reduced rate of VAT (20% or 5%) the DRC does not apply to any exempt supplies.
- The DRC does not apply to End Users and Intermediary supplier businesses. For what is classed as an End User or Intermediary, you can view the gov.uk website
- The DRC does not apply to any employment businesses supplying staff or workers or both.
How does the Domestic Reverse Charge work
Under the DRC rules, the Sub-Contractor who is operating under CIS will no longer charge VAT on the sale of their construction services to the Contractor. This means that a Sub-Contractor under CIS will not charge either 20% or 5% VAT on top of their costs.
Instead, the Contractor will retain the VAT the Sub-Contractor would have charged and instead make an adjustment to their own VAT Return to pay the VAT over to HMRC.
What you must do to ensure you follow the rules
Firstly the Contractor MUST review all their Sub-Contractors to determine whether their supply of services falls within the new rules. Once they have established that they do, they must give written confirmation that you are supplying services that fall within the DRC rules and that the Contractor is not an End User or Intermediary.
If you are a Sub-Contractor who also employs other Sub-Contractors, you will also need to follow the same rules as above.
The Sub-Contractor must state on all invoices that fall within the DRC, that the Domestic Reverse Charge has been applied to the invoice, state the VAT rate to which they would have charged, and instruct the Contractor to account for the VAT Themselves.
Pro's and Con's of the Domestic Reverse Charge
The pros are of course the reduction in fraud, but there can also be an upside to Contractors due to the increase in cash flow.
The cons are obviously the reverse for Sub-Contractors however, the silver lining is that most will likely end up reclaiming VAT instead of paying any over to HMRC.
Sub-Contractors who operate a Flat Rate Scheme VAT will need to establish whether it is cost beneficial to remain on the scheme. If the majority of your sales fall within DRC, you will not benefit from remaining within the FRS because you are unable to reclaim the VAT paid on purchases. It is advised in this situation that you deregister from FRS.
What you need to do now
If you are already using bookkeeping software to record your VAT you must ensure that it is capable of adjusting your VAT returns to account for the Domestic Reverse Charge.
If you are unable to operate bookkeeping software or do not wish to, we can help.
We can provide a fully cloud-based bookkeeping package that will accurately calculate the DRC VAT at a very reasonable monthly cost. Please contact us today if you wish to know more.
The Chancellor Rishi Sunak has increased the third SEISS (Self Employed Income Support Scheme) to 80%.
Previously the Chancellor had announced that the third support payment for the Self Employed, would be capped at 20% of their average net profit over the last three years. However due to mounting pressure after The Prime Minister announced that local areas could now face 3 different lockdown measures, Mr Sunak changed his stance and increased the payment to 80%.
As noted on the HMRC website, "The UK Government recognises the continued impact that coronavirus (COVID-19) has had on the self-employed and has taken action to provide support.
The Self-Employment Income Support Scheme Grant Extension provides critical support to the self-employed in the form of two grants, each available for three month periods covering November 2020 to January 2021 and February 2021 to April 2021."
Starting from 1st November, those who are eligible will be able to claim the third income support payment, and then again in January, a 4th claim will also be available. Its unclear at the moment how much the 4th payment will be.
Who Can Claim.
HMRC sets out the eligibility criteria as follows:
To be eligible for the Grant Extension self-employed individuals, including members of partnerships, must:
- have been previously eligible for the Self-Employment Income Support Scheme first and second grant (although they do not have to have claimed the previous grants)
- declare that they intend to continue to trade and either:
- are currently actively trading but are impacted by reduced demand due to coronavirus
- were previously trading but are temporarily unable to do so due to coronavirus
What the Grant Covers
The extension will last for six months, from November 2020 to April 2021. Grants will be paid in two lump sum instalments each covering a three-month period.
The first grant will cover a three-month period from 1 November 2020 until 31 January 2021. The Government will provide a taxable grant covering 80% of average monthly trading profits, paid out in a single instalment covering 3 months’ worth of profits, and capped at £7,500 in total.
The Government are providing broadly the same level of support for the self-employed as is being provided for employees through the Job Support scheme.
The second grant will cover a three-month period from 1 February 2021 until 30 April 2021. The Government will review the level of the second grant and set this in due course.
The grants are taxable income and also subject to National Insurance contributions.
How to Claim
The details regarding how to claim have not yet been published, but we believe it will be pretty similar to the first two grants, you can find out more information by reading our guide here.
The Chancellor Mr Rishi Sunak has announced an extension to the current job support scheme, which will see government pay the employee two thirds of their usual wage should they face local lockdown restrictions.
This comes after the announcement of the JSS (Job Support Scheme) which we spoke about previously.
Announced on Friday 9th October 2020, dubbed Restricted Furlough 3.0, the announcement was made in light of the increasing numbers of Covid-19 infections.
Mr Rishi Sunak said, that in order to protect jobs, we must "evolve as the crisis and our health response evolves".
To be eligible, an employee must be furloughed for a minimum of at least 7 days at a time, they will then receive 66% of their wages.
They must also have been on an RTI submission before 23rd September 2020.
The employer will be required to make a payment to the employee up front, and cover the cost of National Insurance and Pension contributions, before they are able to claim back the money from the government.
The employer can then claim back the cost of those wages, however they will not be able to claim back the National Insurance or Pension Contributions.
In other words, an RTI submission and a payment to the employer must be made, before any claim can be done.
How is the employee affected
Under the new restricted furlough, the employee must lose around a third of their usual wages, and in most cases their employment contract will need to be amended to allow for these changes.
Employers will not be able to make up the third of wages lost due to being on the restricted furlough.
When can the employer claim
The new portal to make the restricted furlough claim will not open until 1st December 2020, and so employers will need to ensure they have already paid their employees, whether that be by using any cash reserves or applying for a loan to cover the cost.
How long will this scheme last
The scheme will last for six months, running until 31st March, however the scheme will be reviewed by government in January 2021.
Further help for business
Local lockdown grants were announced in September, whereby a business can claim up to £1,500 every three weeks, if they find their business has been affected by local lockdown measures.
However, this has now been revised to include grants of up to £3,000 per month, payable every two weeks.
The amount of grant available will depend on the size of the business, and will be calculated based on the businesses rateable value.
For small businesses with a rateable value below £15,000, up to £1,500 per month will be available to claim.
For those with a rateable value between £15,000 and £51,000 will be able to claim £2,000 per month.
Its important to note that these government grants will only be available to those in England.
Scotland, Wales and N. Ireland will set out their own response to local lockdown measures by using the £12.7 Billion set aside for them from the UK Government.
Courtier and Courtier understand that the new Job Support scheme can be very tricky to get right, and so if you require any help in making sure you claim the correct amount of furlough, contact us today.
If you have ever received an income from letting your property with Airbnb, but have not notified HMRC of this income, you must do so now.
Airbnb have used HMRCS Connect Data Analysis to supply them with all details regarding anyone who have let their properties through Airbnb.
The data will allow HMRC to target any one who has received income from letting their property but have failed to notify them of this via Self Assessment.
The years in which Airbnb have notified HMRC are 2017-18 and 2018-19 as shown in Airbnb's UK Accounts statement for the year 31st December 2019.
The deadline for HMRC to open an enquiry in to 2018-19 is 31st January 2021, or 15 months from when the 2018-19 Self Assessment was submitted.
However, discovery rules means that if HMRC find that the income was not declared or incorrectly declared, they do have the power to enquire in to income up to 20 years previous.
What can I do now?
You do have a number of options available to you, you are able to amend your 2018-19 Self Assessment up to 12 months after the submission, so if you are within that time, this is the easiest route to declaring the income for that year.
If you have undeclared income from prior years, or you are out of time to submit an amendment, you can notify HMRC under their Let Property Campaign Disclosure regime.
The advantage to using the Let Property Campaign is the penalties for failing to disclose this income will be greatly reduced, compared to just letting HMRC catch up with you. Interest will be charged on any tax not paid on time.
What do I need to declare?
If your only letting income from letting part of your property is below £7,500 then this is covered under the Rent-A-Room Relief, and so no tax would be charged, nor would there be an obligation to report it to HMRC, however, if you receive lettings income from more than one property and it is above £1,000 then you are required to report this.
If you let more than one property you can take advantage of the £1,000 Trading Annual Allowance instead of the Rent-A-Room relief.
In any event, its likely, that if you have received any income from letting part of or more than more property, HMRC will be in contact soon to enquire in to non disclosure of that income, so you must act now, to reduce any potential penalties you will receive.
If you are unsure what to do, or need someone to disclose your income for you, we are hear to help. We can make sure any undisclosed property income is declared as soon as possible and mitigate any potential penalties that will arise from not disclosing.
Rishi Sunak the Chancellor has just announced new measures to help Self Employed and Small to Medium sized businesses.
The actual detail will be published shortly, and we will update when we receive it.
The chancellor has announced the following.
CJRS ( Job Retention Scheme)
The Job retention scheme ends in October, however today, Rishi has announced that this will be replaced by a Jobs Support Scheme.
Employees who's usual hours have been reduced, will see the Employer and Government top up their wages. You must work at least 1/3rd of your usual hours to be eligible, the Employer and the Government will top up your pay by 2/3rds.
All small and medium sized businesses are eligible, larger businesses will only be eligible if their turnover reduces. (The detail on what the reduction on turnover should be, will be announced shortly)
The Self Employed is also included in the new Jobs Support Scheme.
The extension will be in the form of two taxable grants. The first grant will cover a three-month period from the start of November until the end of January.
This initial grant will cover 20%of average monthly trading profits, paid out in a single instalment covering 3 months’ worth of profits, and capped at £1,875 in total. The second grant will cover a three-month period from the start of February until the end of April.
The government will review the level of the second grant and set this in due course.
Length of time
The length of time the new Jobs Support Scheme will run for, will be six months, starting from 1st November.
The new Job Support Scheme, will not affect any Job Retention bonus employers will receive around late January.
Any employer claiming the Job Support Scheme can not make any employee they are claiming for, redundant during the period of claim.
Bounce Back Loans
The Chancellor has announced that the Bounce Back Loans, can be extended from 6 years to 10 years in order to further spread the cost of repayments. Businesses will also have the option to make interest only payments, or suspend payments for six months.
None of these extensions or payment suspensions will affect any Credit Ratings.
CBILS (Coronavirus Business Interruption Loan Scheme)
Government backed guarantee will be extended up to 10 years.
All loan applications have been extended up to the end of December 2020.
VAT Payments which were originally deferred up to March 2021, has now been given the option to spread the payment over 11 smaller payments, meaning any VAT bill which was deferred until March 2021 can now be repaid over a further 11 months.
Self Employed January 31st Income Tax Payments
The Chancellor has announced that all Self Employed individuals or Partnerships can now extend their January 31st tax bill for a further 12 months. Its unclear at this time, the detail, but it is likely to be similar to the VAT deferral whereby Income Tax payers can split their January 31st Tax bill over the following 12 months in 12 monthly instalments.
Hospitality and Retail VAT reduction from 20% to 5%
The reduction in VAT from 20% to 5% has been extended until March 31st 2021.
As and when the detail for all the above is published, we will update our website.
Courtier and Courtier are based in Brentwood, Essex. But for many years we have centred our client base around the East of Essex and Greater London areas.
We are now looking to expand our client base to the South of Essex and surrounding Counties.
If you are looking for an accountant to provide services such as, Bookkeeping, VAT Return submissions, end of year Accounts, Self-Assessment Tax Return preparation and submission or payroll, and you are based in the South of Essex, or any surrounding counties, we'd be pleased to hear from you.
We can provide all the above services, individually, or as a complete package, to any type of business. Whether it be a Sole Trader, Partnership or Ltd Company.
For more information regarding the services we provide, please see our Services Page.
Rumour has it that Rishi Sunak may extend the Job Retention Scheme past the 31st October, but rules may change surrounding who is eligible and how it will be implemented.
As discussed in The Times on Wednesday, ministers are bracing themselves for a flood of job losses when the Furlough scheme ends at the end of October.
Its expected that a flurry of job losses will be announced shortly, as we approach the end of the CJRS scheme.
Sunak has been clear that he will not extend the Job Retention Scheme, which has cost more than £27 Billion, however he has told MP's that he will continue to "act in creative and effective ways to support jobs and employment".
This could mean that Rishi plans to carry on with a similar type of scheme as the CJRS, but it could be targeted more towards sectors which are still not able to operate due to Coronavirus, or implement a Furlough scheme for employees who can not work as a result of any local lockdowns.
What we do know so far, is Government have considered introducing a furlough type payment to employers every 3 weeks while they remain unable to work, should their business be affected by any local Covid-19 lockdown measures.
Some accountants have speculated however, that The Chancellor may go one step further and consider extending furlough, whereby HMRC will pay 50% of employees wages, while the employer tops up the other 50%.
September sees the reduction in Furlough pay HMRC will pay employers, previously 80% down to 70%, with the employer making at least a further 10% contribution, and in October this will drop once again to 60% with the employer picking up the tab of the remaining 20%.
Employers can no longer claim any Employers National insurance contributions or Employers share of the Pension Contributions they pay towards employees Pension schemes.
While any extension to the furlough scheme will be welcomed by employees, most believe that this is just delaying redundancies.
And what about the Self Employed? They received SEISS (Self Employed Income Support Scheme) payments in June and August, and now the Chancellor has announced two further payments for November and February, but this time they will be based on 20% of your average monthly net profit, as opposed to the first and second payments being at 80% and 70%.
Its unclear where the additional funds will come from if The Chancellor does decide to extend CJRS in some form or another, but so far Government have continued to try and help businesses by Business Rates payment holidays, Rate Relief Grants, CBILLS and Bounce Back Loans.
There is also an SME Recovery Grant, which we wrote about previously, that can also help small business to pay for financial support.
Whatever the outcome is, its clear that we are far from getting back to where we were in economic terms, prior to lockdown in March, and is likely to take until spring of 2021 before we see any similar growth.
SME Recovery Grant
The government have introduced a new SME Recovery grant to help those who need to pay for financial support. Financial support covers everything from paying a financial advisor to raising funds in order to pay your accountant.
The government has set aside £20 Million of funding available to all SME's as a boost to help recover from the Coronavirus pandemic.
How much is the Grant
The grant that will be awarded is between £1,000 to £3000 and in some exceptional cases, up to £5,000 for those who may require specialist advice.
When can I apply
The grant is based on a first come first served basis, and opens on Tuesday 15th September 2020, if you wish to take advantage of the grant, we advise you do so as soon as possible to avoid missing out.
Where can I place my interest in the grant
You can apply your interest in receiving the grant by following "This Link". You will need to select your local area where you will be redirected to the relevant LEP.
Applications for the grant will be closed once the limit for interest has been met.
How long will I wait to receive the grant
Each application is considered on a case by case basis, but if aproved, the grant will be paid within 10 weeks of initial application.
Am I Eligible
In order to be eligible you must meet the following criteria.
- You need to be or operate a Small to Medium sized business
- Are able to continue to operate your business after surviving the impact of Covid-19
- Needed to have been impacted by the affect of Covid-19 (Business affected by it)
- Must have fewer staff than 250
- Turnover must be below €50million
- Balance sheet lower than €43million
- Any other business state aid already received in the last 3 years can be no more than €200,000.
What can the grant be used for
The whole grant must be used for specialist advice to address your immediate needs. It can not be used for any other purpose. The grant must cover 100% of the cost for the service of product you require.
What do I need to make a claim
Each LEP has its own requirements, however you will likely be asked the following:
- Company name, address and contact details.
- Number of employees, and number at risk of losing jobs.
- Previous year turnover and current year turnover (projected)
- Description on how your business has been negatively impacted by Covid-19
- Description of what you intend to use the grant for, based on guidelines below.
How will my business be assessed
Eligibility checks will also take the following in to account.
- Your businesses potential to respond to the impact of Covid-19
- The ability to identify ability to rebuild your business following the impact of Covid-19
- Ability to deliver within a timescale of 1 month.
Coronavius has impacted us all. Its estimated around 3.5 million people in the UK have become unemployed as a result.
While many businesses have ceased to trade because of the lockdown measures since March, many people have found themselves unemployed.
But this can also be a positive for new business.
As big corporations scale back, more room can open up to small business.
As an example, While many of us decide to work from home, instead of traveling in to large cities, trade in the retail and hospitality sectors have declined in those large cities, but we're starting to see a come back for the smaller retailers in local town centres.
This is likely to be the "new normal" for the foreseeable future. So now is the best time, to consider starting up your own small business, to take advantage.
At Courtier and Courtier, we can help you with starting up your new business. From helping to guide you with what you need to do to get your business off the ground, to making sure you comply with all your tax obligations.
Some new business start ups make the mistake of going at it alone, and considering appointing an accountant at a later stage. This can be costly in the long run.
An Accountant will advise you of a number of things such as, whether the business is likely to make a profit, explaining how to operate and maintain accurate records, and even planning exit strategies with minimal tax implications.
It may be that starting up a new business as self employed is the right or wrong choice, other income and circumstances play a major factor in deciding which type of business model is best suited for you.
Ask any accountant, and they will tell you, one of the first things you should do when considering a new business, is to appoint and accountant.
So why not get in touch with us today, for a free, no obligation consultation, to discuss what we can do for you.