As midnight hit on 31st January, most accountants rejoiced knowing their returns were all submitted on time.
We were no different, immediately turning our attention to the big changes to come throughout 2021.
We thought now would be the perfect time to update you on the major changes in legislation that you may need to be aware of depending on your situation.
Over the course of the coming months we will be going into each topic in more detail but for now, here is a summary on what to expect.
Brexit
A word we have heard a million times, only to be beat by COVID-19 during the past 12 months.
1st January 2021 marked the end of the transition period so was high up on the list of 2021 priorities for most organisations.
Although many new regulations came into play, many of the requirements are to be phased in across 2021 and 2022, all of which we will keep you updated on.
Will this affect you?
If you import and export goods, yes. The new VAT requirements had to be adhered to from 1st January.
What should you do?
First of all, check out our previous blog posts where we have detailed the changes.
There are government schemes in place to try reduce the immediate administrative burden such as deferred customs declarations and postponed VAT accounting.
As with some of the regulations, through 2021 there will be changes in the types of goods to be caught in the net of these requirements such as Sanitary and Phytosanitary goods from 1st April.
EU VAT E-Commerce Rules
There are several new VAT options and requirements coming July 2021 for businesses selling to EU consumers. It means you will be subject to VAT in the destination country and can pay the amount due through a single one stop shop VAT return.
Will this affect you?
If you are selling goods to EU consumers this will affect you, basically online cross boarder sales.
What do you have to do?
The good news is that the One Stop Shop (OSS) VAT return will prevent you from having to register for VAT in every country you supply to if you don’t want to, despite no longer being part of the EU.
This topic is vast and due to it being several months away we will keep you in the picture when actions are required to be taken. For now, we would recommend checking your e-commerce platform to ensure they have plans in place to produce the reports that will be needed.
Coronavirus (Covid-19)
The support given by Government continues into this year and is probably one of the most talked about topics with our clients at the moment.
The budget is currently in the diary for 3rd March during which even more relief measures are expected to be announced. We will do an exclusive blog on the day and be tweeting live as the announcements are made.
Will this affect you?
Undoubtedly the answer is yes to this. In some way, whether it be first hand, or through your supply chain, you will have seen some sort of disruption to business.
For that reason, the Coronavirus Job Retention Scheme (CJRS) is still available to be used on a flexible basis (currently until the end of April) and sole traders can still make applications through the Coronavirus Self-Employment Income Support Scheme (SEISS).
If you are in the hospitality sector, please be mindful that the reduction in your VAT rate is due to end on 31st March 2021.
What should you do?
First of all, ensure you are on our mailing list as we frequently update our clients and contacts about new schemes available and also look through our previous blogs / stay up to date with our future ones (published every Tuesday).
Reach out to us if you need help applying for loans or completing grant applications.
We are dealing CJRS and SEISS applications on a daily basis.
Please be mindful of deadlines such as CJRS ending 30th April and submissions to be made by 14th of the following month, the second SEISS extended period started yesterday and POS systems in hospitality will need to be amended when the VAT reduction ends.
Making Tax Digital (MTD)
Many businesses have made the transition to MTD and did so a couple of years ago, however the roll out continues into 2021 for businesses who are voluntarily registered for MTD.
Will this affect you?
If you are registered for VAT by way of exceeding the threshold then the ‘soft landing’ period (the relaxed approach by HMRC for those who don’t adhere) ends on 1st April.
As at 8th April, HMRC are switching off their XML portal way of submitting returns, meaning you have to do this by digital platform, even if you are voluntarily registered.
What do you need to do?
Luckily for you, we have cloud accounting experts on hand to help. All VAT returns must now be submitted by a HMRC-approved platform. This does not include spreadsheets.
Knowing that other forms of MTD (Eg, corporation tax) are just around the corner, we would recommend speaking with us to upgrade your software to something compatible which will make submissions much easier, or outsourcing your bookkeeping to us to relieve yourself of the ever growing demand of keeping up with legislation
Construction Industry Scheme (CIS) Changes
Those who use the Construction Industry Scheme (CIS) need to be aware of the VAT domestic reverse charge for construction services.
This means those supplying construction services to VAT registered contractors that fall within CIS, no longer account for output VAT themselves.
Those employing the contractor must account for this as a reverse charge on their VAT return.
This has been postponed twice in both 2019 and 2020 but is now due to start 31st March 2021.
Will this affect you?
Many construction businesses will be impacted by this except for those who work solely on private homes and domestic properties (where the customer is not VAT registered).
The reverse charge only applies between VAT registered businesses. The same rules do apply if you are exempt from CIS, therefore you will also be exempt from the VAT reverse charge.
This will impact subcontractors and contractors who are VAT registered and will likely see subcontractors hit hardest in terms of cashflow. Often the VAT element is used for business purposes until the HMRC payment is due which will no longer be an option.
What do you need to do?
Contractors will have to change their invoicing which will create additional administration work.
Subcontractors will still have to determine when reverse charge is to be applied and when it is not, still account for VAT.
We are holding a webinar on 18th February alongside Wilkin Chapman to help you understand this topic in more detail and give you the opportunity to ask any questions.
If you would like to register for the free event, please email BIM@sowerbyllpcouk.wpengine.com
IR35
As part of our event on 18th February, Wilkin Chapman will be covering the topic of IR35 contractors.
This is another regulation that has been deferred. Although the rules haven’t exactly changed, the entity responsible for checking, reporting and paying has. This applied to all payments made after 5th April 2021.
Will this affect you?
This is going to impact large and medium sized businesses, mostly in the information technology sector where there are a lot of contractor workers.
If you work as a contractor through a limited company you need to be mindful about how many customers you have. If you are only working for one organisation HMRC may see you as a ‘disguised’ employee.
What do you need to do?
We will be publishing the things to look out for, such as working 9-5 or having your own desk at a premises you regularly work at.
If you do not meet these requirements the company for which the contractor is doing work for must pay the contractor a Deemed Employer Payment, this means deducting NI and tax from their payment.
The company who is paying the contractor must also issue a Status Determination Statement (which can prove difficult where agencies are involved) and keep records of contractors.
There we have it, a quick summary of what is to come in 2021.
More detailed blogs will be published weekly about all the topics listed and we are always on hand should you have any additional questions (01482)888820.