Our newsletter this month highlights: Changes to contractor VAT, why you need to apply for an EORI number, will we have an autumn budget this year and a reminder that the Trivial Benefit rules should be considered.
Changes to contractor VAT from 1 October 2019
We have alerted building contractors and sub-contractors in previous newsletters of changes to the VAT rules from 1 October 2019.
In a nut-shell, if you are subject to the Construction Industry Scheme and if you are registered for VAT, from the 1 October 2019 you may need to change the way you account for VAT on supplies between sub-contractors and their contractor customers.
At present, sub-contractors registered for VAT are required to charge VAT on their supplies of building services to contractors. From 1 October this approach is changing.
From this date sub-contractors will not add VAT to their supplies to most building customers, instead, contractors will be obliged to pay the deemed output VAT on behalf of their registered sub-contractor suppliers.
This does not mean that contractors, in most cases, are paying their sub-contractors’ VAT as an additional cost.
When contractors pay their sub-contractors’ VAT to HMRC they can claim back an equivalent amount as VAT input tax; subject to the usual VAT rules. Accordingly, the two amounts off-set each other.
The change is described as the Domestic Reverse Charge (DRC) for the construction industry. It has been introduced as an increasing number of sub-contractors have been registering for VAT, collecting the VAT from their customers, and then disappearing without paying the VAT collected to HMRC.
Beware cash flow concerns
However, the change to DRC may create cash flow issues especially if you use the VAT Cash Accounting Scheme or the Flat Rate Scheme.
We recommend that all affected CIS readers contact us so we can help you make the necessary changes to your invoicing and accounting software and reconsider the use of VAT special schemes if your continued use would adversely affect your cash flow.
Why you may need an EORI number
The end of next month, 31 October 2019, is the latest deadline for our exit from the EU and the recent hiatus seems to be pushing the UK ever closer to a no-deal outcome.
Accordingly, if you are involved in buying or selling goods to EU countries, you should apply now for an Economic Operator Registration and Identification (EORI) number.
Without an agreed withdrawal with the EU, you will need an EORI number that starts with GB to move goods in or out of the UK. Additionally, if you want to trade with an EU country you will also need an EU EORI number. It will start with the country code of the EU country you got it from. You should apply for one from the customs authorities in the EU country you will trade with.
Apparently, you do not need an EORI number if you are only moving goods between Northern Ireland and Ireland.
If you do not apply, you may be faced with increased costs and delays. For example, if HMRC cannot clear your goods you may have to pay storage fees. Clearly, these delays could have serious repercussions if your exported goods are mired in red-tape at border crossings – your EU customers may look elsewhere for supplies – or your production and delivery in the UK may be affected if you cannot affect delivery of supplies from the EU.
There is a simple online application process to apply and there is no obligation to use the number if by some miracle we agree withdrawal terms with the EU before 31 October.
Autumn Budget 2019
If there was a measure of stability in UK politics, we would be expecting the usual dispatch-box presentation by the Chancellor before Christmas. The annual budget is usually presented November each year.
This may still happen this year, but present uncertainties regarding the Brexit outcome, and the present government’s slim majority may scupper that timetable – we may have two budgets this Autumn or none at all.
Never-the-less, we will advise if and when a date is agreed. If we do leave the EU with no-deal, gripping the sides of your chair may be in order as the fiscal changes required (changes to taxation) to meet the resulting economic consequences, may be significant.
We will keep you posted.
Are you making the most of “Trivial Benefits”?
Earlier this year we highlighted the tax concession afforded by the so-called Trivial Benefit rules.
It is possible to make small tax-free payments to employees, including directors?
Employers and employees don’t have to pay tax on such a benefit if all of the following apply:
HMRC describes these payments as a ‘trivial benefit’.
You can’t receive trivial benefits worth more than £300 in a tax year if you are the director of a ‘close’ company. A close company is a limited company that’s run by 5 or fewer shareholders.
Readers who manage a business may want to integrate a formal process into their benefits strategy to take advantage of this opportunity.
Every little helps.
Tax Diary September/October 2019
1 September 2019 – Due date for Corporation Tax due for the year ended 30 November 2018.
19 September 2019 – PAYE and NIC deductions due for month ended 5 September 2019. (If you pay your tax electronically the due date is 22 September 2019)
19 September 2019 – Filing deadline for the CIS300 monthly return for the month ended 5 September 2019.
19 September 2019 – CIS tax deducted for the month ended 5 September 2019 is payable by today.
1 October 2019 – Due date for Corporation Tax due for the year ended 31 December 2018.
19 October 2019 – PAYE and NIC deductions due for month ended 5 October 2019. (If you pay your tax electronically the due date is 22 October 2019.)
19 October 2019 – Filing deadline for the CIS300 monthly return for the month ended 5 October 2019.
19 October 2019 – CIS tax deducted for the month ended 5 October 2019 is payable by today.
31 October 2019 – Latest date you can file a paper version of your 2019 self-assessment tax return.
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