New Year, new changes for business owners

New Year, new changes for business owners

While we are glad to see the back of 2020, the new year will no doubt see changes that business owners must be aware of.

It seems like there are daily updates about government rules during this year and we will always keep you up to date with what is changing.

But as we start 2021, here are three issues you need to be aware of in the first four months of the year. Be ready to take action on these changes if they affect you! Our clients can always ask for our assistance.

VAT deferral

As part of the Winter Economy Plan, the government announced a change for those who deferred VAT due from March 20 to June 30 2020. You now have the option of paying in smaller payments over a longer period.

Instead of paying the full amount by the end of March 2021, you can make smaller payments up to the end of March 2022, interest free.

Once you opt in, your deferred VAT liabilities will not need paying by the end of March 2021.

The VAT deferral scheme requires a direct debit being set up as part of the digital opt-in process. This must be done by the authorised bank account holder only.

HMRC will communicate the details of the scheme and its operation in time for you to complete the opt-in process.
If you can pay your deferred VAT, you should still do so by March 31, 2021. You should contact HMRC’s Time to Pay service if you need more help to pay deferred VAT.

Check out the government website for more information.

VAT reverse charge for construction industry

The building and construction trade took a big hit during the Covid-19 pandemic. This reverse charge measure – originally due for introduction from October 1 – comes into play on March 1, 2021.

Every VAT registered construction business will have received a letter in September 2020, advising them to check if they may be liable for the reverse charge.

Key factors include:

• It will apply to standard and reduced-rated supplies of building and construction services made to VAT registered businesses, who in turn also make onward supplies of those building and construction services.
• The contractor will be responsible for paying the output VAT due rather than the sub-contractor. They can continue to reclaim this amount as input tax. The scope of supplies affected is closely aligned to the supplies required to be reported under the Construction Industry Scheme. It does not include supplies of staff or workers for use by the customer.

More information is available from the government’s website.

Rule change for non-payroll workers

From April 2021, the rules for engaging individuals through personal service companies are changing. The responsibility for determining whether the off-payroll working rules (sometimes known as IR35) apply will move to the organisation receiving an individual’s services.

There are a few steps you can take to prepare:

  1. Look at your current workforce, including those engaged through agencies and other intermediaries. Identify those individuals who are supplying their services through personal service companies.
  2. Determine if the off-payroll rules apply for any contracts that will extend beyond April 2021. You can use HMRC’s Check Employment Status for Tax service to do this.
  3. Start talking to your contractors about whether the off-payroll rules apply to their role.
  4. Put processes in place to determine if the off-payroll rules apply to future engagements. These might include who in your organisation should make a determination and how payments will be made to contractors within the off-payroll rules.

If you are concerned about any of these changes, you can contact us for more information.