Following Brexit on 31st December 2020, the rules relating to VAT for EU sales have changed. Here’s how…
First we’ll look at ‘export of Services’. These rules are different to exporting Goods as there is no general VAT relief for the export of services. Services supplied within the UK may be exempt, zero-rated, standard-rated, or liable to VAT at a reduced rate.
You will need to work out who is liable for the VAT in order to determine how much VAT to charge on your service. So first establish who is being supplied – Is it a business or a consumer?
The VAT treatment differs slightly for supplying to businesses (B2B) or consumers (B2C).
VAT for business to business services
‘Business to business’ or B2B simply means supplies made from your business to another business.
B2B services must follow existing place of supply (POS) rules.
So, if the POS is in the UK, standard VAT treatment applies. But if the POS is outside of the UK, it’s out of the scope of UK VAT. Ie. no UK VAT is chargeable where the place of supply is outside the UK
The general rule is that the service is supplied where the customer ‘belongs’ – either in the UK or outside of the UK. However, there are some exceptions to the following services:
Business to consumer services
‘Business to consumer’ or B2C services can mean you’re supplying to:
B2C electronic services
In the case of B2C electronic services, existing VAT MOSS (Value Added Tax: Mini One Stop Shop) users must now register with the non-union MOSS scheme in another EU country. Or alternatively, register for VAT in all countries in which you supply.
It’s important to note that you must register by the 10th of the month following your first supply.
Selling goods to the EU
When selling goods to the EU, you must do so at zero rate – as you would with sales to the US and other countries outside the EU.
To do this, you need to obtain an Economic Operator Registration and Identification Number (EORI number). You may also need to be registered for VAT in an EU country.
If you’re VAT registered, your EORI number will be an extension of your VAT number, but you do need to apply for an EORI number – click this link to complete the online form
There is a checker online to find out if you are EORI Registered EORI checker.
Buying goods from the EU
You will need to make a customs declaration, or your agent can do this for you. You must have an EORI number. Import VAT and duty will be due on all imports over £135. and can be dealt with on your own VAT Return.
You will be able to download a monthly statement which will detail the import VAT (similar to the current C79 form) Your tax agent will not be able to access this; it can be found in your HMRC Business Tax online account.
We are co-hosting a webinar on the 23rd March 2021 with Quickbooks looking at their Mobile App.
Here is What You'll Learn
An Overview of the QuickBooks Mobile App
Learn to navigate around the QuickBooks app, and discover the biggest time-saving features
Insight into Reporting
Learn about some of the basic reporting that you can undertake using QuickBooks to gain a greater understanding of your business
Quick Invoicing & Quicker Payments
Learn how send invoices and estimates on the go, get paid quicker, and automate your payment reminders
You'll have an opportunity to ask questions throughout the webinar, but we'll have a dedicated time for a Q&A at the end
If you deferred your VAT payment that would have been due from March to June 2020, and cannot afford to pay by 31st March 2021, you can now join the VAT deferral payment scheme, and pay the VAT owed over a longer period.
Joining the scheme will allow you to make up to 11 monthly instalments, interest free. The earlier you join, the more months you will be able to spread payments across, so if you plan on joining, make sure you do so asap! To use the online service, you must:
SCHEME OPENS 23RD FEBRUARY 2021
Domestic reverse charge VAT legislation is a change in the way CIS business handle and pay VAT.
It moves the VAT liability from the Supplier (subcontractor) of a service in the construction industry to the customer (contractor)
It comes in in the UK on 1st MARCH 2021.
The scheme is designed as an anti-fraud measure and intends to cuts down on 'missing trader' fraud, where companies receive high net amounts of VAT from their customers but have no intention of paying the VAT to HMRC.
You will be affected by this if you are a business involved in buying and selling construction services. It does not apply to zero-rated supplied of construction services eg. new build dwellings. So for example if you are a plumbers, builder, joiner or electrician and you usually fall under the current CIS Tax Scheme then this will apply to you.
There are some quite specific conditions that must be met before applying the reverse charge.
When ALL of the following conditions are met then you must apply the reverse charge VAT rules...
1.Specified services - generally if it falls within CIS Scheme *See further info at the bottom of the page
2. Standard rated or reduced rate - 20% or 5% VAT would usually be charged.
3. You are VAT Registered
4. You are CIS Registered
5. The customer intends to make an onward supply of construction services to another party
The supplier and the customer must not be connected.
Reverse charge does not apply if the customer has notified the supplier that they are an end user.(In writing!)
What is an End User?
For reverse charge purposed consumers and final customers are called end users.
They are businesses, or groups of businesses, that are VAT and CIS registered but do not make onward supplies of the building and construction suervices supplied to them.
How does it work in practice?
example from a subcontractors point of view:
ABC Electrical is VAT registered, a subcontractor and supplies services and materials to their subcontract Colins Builders.
Under the new rules ABC Electrical issue a Sales Invoice to Colins Builders for only the NET VALUE of the goods and services and No Vat will be charged on their invoice.
The accounts software will have a code called 'Reverse Charge' to account for this.
Subcontractors may find they receive regular VAT repayments from HMRC
example from a contractors point of view:
Colins Builders receive a purchase invoice from ABC Electrical for goods and services.
There is no VAT charged on the invoice. There is a statement confirming 'Domestic Reverse Charge at 20% VAT on Income' indicating that they must account for the output VAT on their VAT Return.
The accounts software will have a specific code! Colins Builders will pay the VAT on this invoice direct to HMRC, instead of paying to ABC Electrical.
As long as the correct VAT code is used within the accounting software the VAT will be input into the correct boxes on the VAT Return!
When the contractor is at the top of the supply chain their customer will be the End User.
In the example above the Contractor Colins Builders is issuing their end user, Owens Developments plc with a sales invoice.
Because Owens Developments plc are the END USER, Colins Builders will issue the sales invoice in the normal way with standard 20% VAT.
DOWNLOAD HMRC FLOWCHART to help you decide whether DRC Rules apply - click the download link at the bottom of this page.
*Info - when do CIS Rules apply?
CIS rules generally define construction as building, making, assembling or putting together,
and its activities may include:
•Groundworks and preparation of site
•General building works like bricklaying, plastering, and roofing
•Electrical works and plumbing
•Painting and decoration works
•Maintenance and general repairs
•Demolition and dismantling works
•Erecting scaffolding structures
•Extending an existing building structure
•Landscaping and tree planting when done as part of a new housing development project
•Assembling of pre-fabricated housing units either on- or off-site and site facilities
•Assembling of parts of a prefabricated housing structure that is then transferred to a
different site for final installation.
Updates on the Coronavirus Job Retention Scheme
HMRC have been called on by the Chancellor to urgently direct financial support to whered businesses need it most. The first wave of this is the launch of the Coronavirus Job Retention Scheme.
Claims should not be made by phone, it will be an online service.
The Coronavirus Job Retention Scheme (CJRS)
In response to the coronavirus pandemic, the Chancellor announced a series of measures to support businesses and their employees. One of those measures is the CJRS, that allows employers to claim 80% of the wages of staff (up to a maximum of £2,500 per employee) that they have furloughed (been put on temporary leave).
HMRC is working at pace to deliver the service that will allow businesses to make a claim.
Businesses and Agents that are authorised to act on behalf of clients for PAYE matters, will be able to claim.
Service launch - the scheme should be ready to launch on 20th April 2020.
Businesses will need the following information on each of their furloughed employees:
If we are your Agent then we will go through this process for you - as soon as we are made aware that the process is ready to begin then our payroll team will submit claims for those staff that you have advised are to be furloughed. We will liase with you before submission is made.
HMRC are asking that you do not ring them with a query, get in touch with us preferably via email and we'll get back to you as soon as we can.
The latest guidance on CJRS can be found on GOV.UK by searching for 'Coronavirus Job Retention Scheme'.
HMRC will also be providing you with further information on our support for businesses and workers over the coming weeks, including more detail on the Coronavirus Self Employment Income Support Scheme.
We would like to thank you for your help to businesses at this time of national need. HMRC is working day and night, prioritising the need to get the financial support out to those who need it.
Self-employed individuals are to be paid 80% of trading profits, up to £2,500 a month, to help them cope with coronavirus crisis. This will be based on figures for the last three years TRADING PROFIT up to £50k. It will cover those who earn a MAJORITY of their income from being self employed and they must have filed a 2019 tax return.
It looks as though the function to claim this grant is not going to be up and running until the beginning of June 2020. Meanwhile, the Chancellor is recommending that people apply under the Universal Credit system to get help straight away.
If you haven't filed your tax return for April 2019 then the Chancellor is giving extra time to get your return filed. So if you missed your deadline and still haven't filed you have the chance to catch up and still be eligible for this grant.
A furloughed employee is one who has been given a temporary leave of abscence due to the needs of an employer. This means a furloughed worker can return to work in the future and will get paid. The salary payment could be at 80% which the government are covering and it is up to the employer if they wish to cover the 20% to make up the salary.
The scheme is said to be going to run for 3 months from 1st March but they may potentially extend it. The maximum amount of time a worker can be furloughed is one year.
Specific Covid-19 plans..
If an employer cannot cover staff costs due to COVID-19, they may be able to access support to continue paying part of staff wages, to avoid redundancies.
If an employer intends to access the Coronavirus Job Retention Scheme, they will discuss with staff becoming classified as a furloughed worker. This would mean that employees are kept on the payroll, rather than being laid off.
To qualify for this scheme, employees should not undertake work for the employer while they are furloughed. This will allow the employer to claim a grant of up to 80% of wages for all employment costs, up to a cap of £2,500 per month.
As a payroll service provider we will be keeping you up to date with the latest developments and hope to find out exactly how to apply very soon.
Certifying absence from work
By law, medical evidence is not required for the first 7 days of sickness. After 7 days, employers may use their discretion around the need for medical evidence if an employee is staying at home.
We strongly suggest that employers use their discretion around the need for medical evidence for a period of absence where an employee is advised to stay at home either as they are unwell themselves, or live with someone who is, in accordance with the public health advice issued by the government.
If evidence is required to cover self-isolation or household isolation beyond the first 7 days of absence then employees can get an isolation note from NHS 111 online or from the NHS website.
What to do if an employee needs time off work to look after someone
Employees are entitled to time off work to help someone who depends on them (a ‘dependant’) in an unexpected event or emergency. This would apply to situations related to coronavirus (COVID-19). For example:
The Self Employed
Every self-employed person can now access, in full, Universal Credit at a rate equivalent to Statutory Sick Pay for employees
Support for individuals
https://www.understandinguniversalcredit.gov.uk/coronavirus/ or new style Employment and Support Allowance.
Coronavirus Job Retention Scheme
Coronavirus Business Interruption Loan Scheme
• A new temporary Coronavirus Business Interruption Loan Scheme, delivered by the British Business Bank, will launch early next week to support primarily small and medium-sized businesses to access bank lending and overdrafts.
• The government will provide lenders with a guarantee of 80% on each loan (subject to a per-lender cap on claims) to give lenders further confidence in continuing to provide finance to SMEs. The government will not charge businesses or banks for this guarantee, and the Scheme will support loans of up to £5 million in value.
• Businesses can access the first 12 months of that finance interest free, as government will cover the first 12 months of interest payments.
• You are eligible for the scheme if:
Cash grants for retail, hospitality and leisure businesses
Support for businesses that pay little or no business rates
Support for larger firms through the COVID-19 Corporate Financing Facility
Support for businesses paying tax: Time to Pay service