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Brexit countdown importers

As we have reported previously, the UK government has confirmed that it will neither accept nor seek any extension to the Brexit transition period which expires on 31 December 2020. The EU has formally accepted this position. This means that the process for importing goods from the EU will change from 1 January 2021.

HMRC has published guidance to help those importing goods to prepare.

Some important points to bear in mind from 1 January 2021 are as follows:

  • You will need to make customs declarations when you import goods from the EU. These rules currently apply to importing goods from the rest of the world, including Switzerland, Norway, Iceland and Liechtenstein.
  • You will need to make customs declarations when you import goods from the EU.
  • The rules for importing some types of goods will change.
  • You will need an EORI number that starts with GB to import goods.
  • You will need to pay customs duties and VAT on all imports.
  • You will need to make customs declarations when you import goods from the EU. Under certain circumstances, it will be possible to delay making a declaration for up to 6 months after you imported the goods.

Note, this guidance applies to England, Wales and Scotland. Separate guidance on moving goods into, out of and through Northern Ireland is expected to be published shortly.

Source: HM Revenue & Customs Wed, 21 Oct 2020 00:00:00 +0100

Brexit countdown exporters

The Brexit transition period is due to end on 31 December 2020 and this means that the process for exporting goods to the EU will change from 1 January 2021.

Current guidance published by HMRC states that from 1 January 2021, businesses will need to make customs declarations when exporting goods to the EU. This is what you currently have to do if exporting goods to any country outside of the EU, including Switzerland, Norway, Iceland and Liechtenstein.

Businesses, especially those that currently only trade with EU should be making the necessary preparations for how they will trade with the EU next year. Businesses can make customs declarations themselves or hire a third party such as a courier, freight forwarder or customs agent to do the paperwork.

HMRC has published guidance to help those exporting goods to prepare.

Some important points to bear in mind from 1 January 2021 are as follows:

  • Make sure you have an EORI number that starts with GB. You will need an Economic Operator Registration and Identification (EORI) number starting with GB to import/export goods from 1 January 2021.
  • Check the rules for your type of goods. For example, check what import/export licences or certificates you need, check the labelling and marketing standards for food, plant seeds and manufactured goods and check the rules for importing/exporting alcohol, tobacco and certain oils.
  • Find out if you can charge VAT at 0% on goods exported to the EU.
  • Check if the EU business you're exporting to is ready. The EU business importing your goods will also need to prepare for 1 January 2021 changes.

Note, this guidance applies to England, Wales and Scotland. Separate guidance on moving goods into, out of and through Northern Ireland is expected to be published shortly.

Source: HM Revenue & Customs Wed, 21 Oct 2020 00:00:00 +0100

Distributions in anticipation of striking off rules

The Extra Statutory Concession (ESC) – C16 was a well-used extra-statutory concession that allowed company directors to treat final distributions as a capital disposal and close down their business in an efficient manner. ESC C16 was withdrawn in March 2012 and replaced by s1030A Corporation Tax Act 2010 (CTA 2010) provisions.

This move meant that from 1 March 2012, the concessionary treatment provided by ESC C16 were replaced by more restrictive statutory rules which included the introduction of a new £25,000 threshold.

Under the legislation, distributions made in anticipation of dissolution under the striking off process will not be taxed as ‘income’ distributions provided:

  • at the time of the distribution, the company has secured, or intends to secure, payment of debts due to it, and similarly has satisfied, or intends to satisfy, debts due from it, and
  • the amount of the distribution, or total amount of distributions if more than one, does not exceed £25,000.

Directors with more than £25,000 of reserves will not be able to treat the final distributions as a capital disposal but rather as ‘income’ distributions.

Source: HM Revenue & Customs Wed, 21 Oct 2020 00:00:00 +0100

New Freeports to cope with Brexit

The government is moving ahead with plans to build free trade zones – known as Freeports – across Britain after Brexit. Freeports are a special kind of port where normal tax and customs rules do not apply. In their place, simplified customs procedures and duty suspensions on goods applies. 

The initiative would allow firms to import components and other pre-manufactured goods into a Freeport without paying taxes. The goods would then be processed into a finished product to be built in the UK. In these new Freeport areas, no duties would be charged on goods or materials until they leave the zone as a finished product for the UK domestic market. There should be no UK tariffs payable when the finished product is re-exported directly from the Freeport.

The Freeport bidding process in England is expected to open before the end of the year and the first Freeports on track to be open by the end of 2021. In this opening series of applications, sea, air and rail ports in England will be invited to bid for Freeport status.

The Chancellor of the Exchequer, Rishi Sunak, said: “Our new freeports will create national hubs for trade, innovation and commerce, regenerating communities across the UK and supporting jobs.

The government is also working with the devolved administrations to establish at least one Freeport in each nation of the UK and will introduce a package of tax reliefs for business investment in the Freeports. This will include speeding up the planning process to accelerate development. We are also told there will be new initiatives to encourage innovators to generate new ideas to create additional economic growth and jobs. 

Source: HM Revenue & Customs Wed, 14 Oct 2020 00:00:00 +0100

Property not let at commercial rates

There are special rules that apply when a property is let at less than a commercial rate or is not let on commercial terms. These rules also apply if a property is occupied rent free or at less than a commercial rate, for example, a property is occupied by a family member at a reduced or nil rent.

In these circumstances, HMRC can take the view that unless the landlord charges a full market rent for a property and imposes normal market lease conditions, it is unlikely that the expenses of the property are incurred ‘wholly and exclusively’ for business purposes.  Problems may also arise when considering the deduction of expenses during periods when the property is lived in by ‘house sitters’ who do not make any payment whilst staying at the property.

HMRC generally accepts that if a property is let at below the market rate (as opposed to providing it rent-free), the landlord can deduct the expenses of that property up to the rent they receive from letting the property. This means that the affected property produces neither a profit nor a loss. Any excess expenses cannot be carried forward to be used in a later year.

If the landlord is actively seeking a tenant and a relative house sits while it is empty, relief will not be restricted as long as the property remains genuinely available for letting. Relief for capital expenditure on uncommercial lettings may also be restricted.

Source: HM Revenue & Customs Wed, 26 Aug 2020 05:00:00 +0100

Implementation of the loan charge

HMRC has published further guidance on the implementation of the loan charge and has made clear there will be no special settlement terms.

This follows an independent review earlier this year into whether the loan charge was an appropriate way of dealing with loans schemes (also known as disguised remuneration tax avoidance schemes) that have been used by some employers and individuals in order to try and avoid paying Income Tax and National Insurance Contributions (NICs).

The government agreed a series of changes to the loan charge following the review. The amendments went before Parliament in July 2020 and became law following Royal Assent. One of the main changes following the review was confirmation that the loan charge would not apply to users of disguised remuneration avoidance schemes between 6 April 1999 and 5 April 2016 who settled the tax due with HMRC on or after 16 March 2016 and before 11 March 2020.

Most people who have used disguised remuneration schemes will fall into one of 5 main groups, depending on their circumstances.

This will determine what they need to do next, although taxpayers with more complex affairs may fall into several different categories. These groups are:

  1. Taxpayers who have settled with HMRC and are not due a refund
  2. Taxpayers still settling with HMRC
  3. Taxpayers who have not settled and will pay the loan charge
  4. Taxpayers who have settled and are due a refund or waiver following the independent review
  5. Taxpayers who no longer have to pay some, or all, of the loan charge but have not settled all of their use of DR schemes

Taxpayers that have outstanding disguised remuneration loans that are subject to the loan charge need to file their 2018-19 Self Assessment tax return by 30 September 2020, including a report of any loan balances subject to the loan charge, and put in place any arrangements they need to pay the charge due on that date. Taxpayers can now elect to spread the loan balance over 3 tax years.

Source: HM Revenue & Customs Wed, 19 Aug 2020 05:00:00 +0100

New measures to tackle promotion of tax avoidance

HMRC has published a series of a consultations together with details of proposed legislative changes to existing anti-avoidance regimes to strengthen HMRC’s ability to further clamp down on the market for tax avoidance.

The proposals include:

  • ensuring HMRC can effectively issue stop notices to promoters, under the Promoters of Tax Avoidance Scheme (POTAS) rules, to make it harder to promote schemes that do not work
  • preventing promoters from abusing corporate entity structures to avoid their obligations under the POTAS rules
  • ensuring HMRC can obtain information about the enabling of abusive schemes (for the purposes of the Enablers Penalty Regime) as soon as they are identified and ensuring enabler penalties are felt without delay when a scheme has been defeated at tribunal
  • ensuring that HMRC can act quickly and decisively where promoters fail to provide information on their avoidance schemes under the Disclosure of Tax Avoidance Schemes (DOTAS).
  • making further technical amendments to the POTAS regime so that it continues to operate effectively and to ensure that the General Anti Abuse Rule (GAAR) can be used to counteract partnerships as intended.

The consultation is open for comment until 15 September 2020. The new measures are expected to be included in the Finance Bill 2020-21.

Source: HM Revenue & Customs Tue, 28 Jul 2020 05:00:00 +0100

Making Tax Digital next steps

HM Treasury has confirmed the extension of Making Tax Digital (MTD) to cover businesses with a turnover below the VAT threshold and for certain individuals who file Income Tax Self-Assessment tax returns. This announcement provides much-needed clarity of the way forward for this scheme.

MTD started in April 2019 (for VAT purposes only) when businesses with a turnover above the VAT threshold of £85,000 became mandated to keep their records digitally and provide their VAT return information to HMRC using MTD compatible software. Since the launch more than 1.4 million businesses have joined the programme.

The first part of the further roll-out of MTD will start April 2022, when MTD will be extended to all VAT registered businesses with turnover below the VAT threshold of £85,000. This will be followed one year later (April 2023) when MTD will be extended to taxpayers who file Income Tax Self-Assessment tax returns for business or property income over £10,000 annually.

HMRC has said that the long lead-in time will allow businesses, landlords and agents time to plan. It also gives software providers enough notice to bring a range of new products to market, including free software for businesses with the simplest tax affairs.

Financial secretary to the Treasury Jesse Norman said:

'We are setting out our next steps on Making Tax Digital today, as we bring the UK’s tax system into the 21st century. Making Tax Digital will make it easier for businesses to keep on top of their tax affairs. But it also has huge potential to improve the productivity of our economy, and its resilience in times of crisis.'

The government has also confirmed that it remains committed to extending MTD to other taxes. The government will also consult later this year on the detail of extending MTD to incorporated businesses with Corporate Tax obligations.

Source: HM Treasury Wed, 22 Jul 2020 05:00:00 +0100

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