2021 – A year in review from a tax expert

2021 – A year in review from a tax expert

11.1.2022 | Tax

2021 – A year in review from a tax expert

From bumper pandemic budgets to freeports and the furlough scheme, it has been a busy year in the world of finance.

So, another pandemic year is behind us. 2021 has been a year of turbulence, for sure, but also one of resilience, of heart – of keeping (relatively) calm and carrying on.

Here, Andrew Diver, Head of Taxation at Beatons Group, takes a look back at the big financial goings-on of 2021.

The situation
This was a chaotic year for the freight and shipping industry as container chaos crossed the world.

From the Ever Given blocking the Suez Canal to a shortage of containers in Asia, this has been a turbulent time for the industry.

Although it was a turbulent time, it has left businesses with sky-high profits – and headaches over how to deal with higher tax liabilities, expansion to meet demand or whether to cash in their chips.

But it hasn’t all been plain sailing.

Brexit really does mean Brexit
While Brexit officially happened on January 31, 2020, the transition period meant the benefits of EU membership continued to apply throughout the year. But from December 31, that all came to an end.

More changes are now on the way from the New Year with the end of the delayed customs declarations period. All goods entering the UK from the EU will need a full declaration, meaning there will be more customs work for firms to manage.

The Spring Budget
In March, Rishi Sunak delivered his first budget since the pandemic began, with the Chancellor of the Exchequer committing an extra £65billion to protect jobs and livelihoods.

All eyes were on Mr Sunak ahead of the budget, with the locked-down nation clutching at straws over how it could recover the costs of the coronavirus.

The budget included the much-needed extension of the furlough scheme and introduced two new grants to help the more than 600,000 people who became self-employed in 2020.

The freight and logistics industry was also given a helping hand through the freezing of fuel tax, while the super deduction has and will continue to give businesses the ability to reinvest in their future while reducing tax.

One question many will hope the chancellor will address in his Spring budget is bounce-back loans and how businesses will repay them. Paying back these loans could put a lot of pressure on businesses as they look to recover post-pandemic.

The Spring budget also included some important news for Felixstowe…

The Freeport
Announced in Mr Sunak’s Spring Budget, the Port of Felixstowe and Harwich International Port are set to become the new Freeport East.

Goods arriving in the new economic zone will be exempt from tariffs unless moving elsewhere in the UK, while customs documentation is simplified.

The project is expected to create up to 13,500 jobs in the region over the next 10 years – and bring in an additional 1.3million tonnes of international trade volume.

Should things stay on track, the freeport is set to begin operations before the new year, while the poised Gateway 14 business park has also been given the green light.

Making Tax Digital
As well as affecting businesses through lockdown and restrictions, COVID-19 has also led to a delay in HMRC’s Making Tax Digital scheme for income self-assessment.

The initiative, outlined by George Osbourne in 2015, is part of the Government’s tax-modernisation programme and seeks to make tax reporting simpler and reduce errors.

Among those affected include self-employed workers such as freelancers and contractors, as well as landlords with rents totalling more than £10,000.

It was set to be implemented from April 2023, but due to the pandemic, it has now been put back by a year.

The Autumn Budget
While Mr Sunak announced a host of spending in October, there were no new big tax changes announced as he unveiled further plans to rebuild the UK economy through growth.

More positives were revealed for the freight and logistic sectors, including grants for improved lorry parks and the delay of the Heavy Goods Vehicle Levy until 2023.

Corporation Tax rates increases were announced to finance Mr Sunak’s plans, starting from April 2023. Likewise, a new health and social care levy from 2023 was unveiled to help fund the welfare state.

Before then, a 1.25% increase in National Insurance for employees and employers will come into force in April next year.

The year ahead
With the new Omicron Covid-19 variant sweeping across the globe, it can feel a little like we are back to step one going into 2022.

But with the booster campaign in full swing and the infrastructure necessary for handling the pandemic in better shape than it was a year ago, 2022 could be the year life gets back to some semblance of ‘normal’.

If you or your business needs guidance through any of the changes introduced this year, visit the Beatons website or call their friendly team on 01473 659777.

Delayed customs declarations period set to end

Delayed customs declarations period set to end

14.12.2021 | Tax

Delayed customs declarations period set to end

Make sure your business isn’t caught out.

With the New Year comes another important Brexit deadline – this time an end to the period for delayed customs declarations.

The shake-up will have a big impact on trade with the continent, and it is vital businesses are prepared should they wish to avoid chaos at the border.

Here, Andrew Diver, Head of Taxation at Beatons Group, explains why companies should look towards an HMRC stress-free January.

What is the situation?
Businesses importing goods from the EU into the UK have benefited from delayed declarations with HMRC measures meaning they could be declared 175 days from the point of entry.

Why were measures brought in?
The measures, as part of the Brexit transition, were originally set to expire on June 30 this year but were pushed back to New Year’s Eve.

They were designed to make the transition out of the European Union easier for traders and keep international trade flowing without excess delay.

But while these have been a key aid to businesses across Britain, the New Year will bring with it great change.

From the 1st, all goods entering the UK from the EU will need a full declaration – including supplier declarations and statements of origin. Using EU as a country of origin will also be removed, and the relevant member state origin code will now be required.

Postponed VAT accounting will still be available except where HMRC have specifically advised otherwise.

What should businesses do?
Importers should have begun preparations for the changes, with Christmas and the New Year now approaching at an alarming pace.

Putting in place relevant procedures in-house, or engaging with a customs broker, can help make the required full customs declarations for goods imported.

Businesses should get an EORI number from the government before importing goods and entering them into EIDR records.

Moreover, they will also need to account for import VAT.

Also, unrelated to Brexit, commodity codes to classify goods will also change from January 1, 2022, as part of their usual five-year review cycle. Commodity codes which have been used for the past five years may no longer be accurate.

How Beatons can help
The Beatons Group specialises in a wide range of tax, customs, and duty areas, including companies importing from the European Union.

Should your business require assistance, contact the friendly team on 01473 659777.

How to ensure your office Christmas party is tax-deductible

How to ensure your office Christmas party is tax-deductible

30.11.2021 | Tax

How to ensure your office Christmas party is tax-deductible

Claim the costs of entertaining staff as deductible spending for corporation tax purposes. 

With the festive season fast approaching, businesses up and down the country are in the final stages of planning their annual Christmas celebrations.

From turkey dinners to office drinks, the annual party is a big day in the calendar for most businesses – especially after more than a year of pandemic disruptions.

But while a restaurant meal or a night at the cocktail bar can be an expensive soiree, companies are able to claim back spending for corporation tax purposes.

Here, Andrew Diver, Head of Tax from Beatons Group, explains how businesses can ensure their Christmas party is tax-deductible.

How does it work?
While there is no specific “Christmas party exemption”, limited companies can claim the costs of entertaining staff as deductible spending for corporation tax purposes. This will extend to the Christmas party as long as the event is not also intended to entertain customers.

However, it is also important to ensure that the cost of the event isn’t treated as a taxable benefit for employees attending. For the annual event exemption, the event must meet a set of conditions.

How do you qualify?
Expenditure of up to £150 per head on an annual staff function, such as a Christmas party or a summer gathering, can be exempt from both Income Tax charges and employer’s National Insurance. It doesn’t have to be a single function. The exemption can cover several events, so long as the total cost per head does not exceed £150 per tax year.

The £150 per head figure is calculated by taking the costs of the event, transport and accommodation divided by the number of attendees. If the cost of an event exceeds £150 per head, the total cost becomes taxable, not just the excess over £150.

To benefit from this, the events must also be open to all employees. Don’t worry if you have premises in Felixstowe and Liverpool; you don’t all need to go to a single party for the exemption to apply. Where there are company premises in a number of different regions, it is important that all employees in each region are invited.

Virtual parties in the Covid age are also covered by the exemption, meaning associated costs such as gifts for consumption at the party are also tax-deductible.

What if you exceed the limit?
HMRC is strict in ensuring the protocol is followed, with any costs exceeding the limit needing to be reported. Where an event exceeds the limit, it would need to be reported on employees forms P11D, and the employee would then be liable to tax on their share of the cost of the event.

There is, however, the possibility for the company to reach a PAYE Settlement Agreement with HMRC to pay the tax on behalf of the employees.

Can you claim back VAT?
VAT can be claimed back so long as the event falls under “staff welfare” and is not deemed by HMRC as a means of entertaining clients.

Revenues officials may also apply restrictions to how much you can claim depending on the number of non-employees who attend.

For more information on Beatons Group and how their staff can help you and your business with tax-related enquiries, visit beatonsgroup.co.uk

Freeport East – how businesses can take advantage of its special status

Freeport East – how businesses can take advantage of its special status

16.11.2021 | Tax

Freeport East – how businesses can take advantage of its special status

Felixstowe and Harwich’s freeport status predicted to bring business benefits.

Businesses can now apply to reap the benefits of Freeport East – which is set to open in Felixstowe and Harwich.

In March, the chancellor announced that eight Freeports would be created around the country, including one in Suffolk, to help kickstart the economy following the coronavirus pandemic.

The new Freeport will give certain perks to businesses in the area – but they will have to apply to take advantage.
Here, Andrew Diver, Head of Taxation at Beatons Group, has a look at how businesses in the east can benefit from the Freeport.

Special status
There is a raft of benefits to businesses in relation to Felixstowe and Harwich’s freeport status, including tax reliefs and simplified customs procedures.

Imports can enter the freeport zone and then be exported without being subject to duties or importation tax.

Goods can also be processed within the freeport and exported without paying UK tariffs.

However, any goods sold to the domestic market will incur tariffs when they leave the freeport zone.

Businesses operating within the freeport area will also benefit from tax relief on purchasing land and investing in new plant and machinery.

There has also been a promise of reduced employer National Insurance contributions to boost the logistics industries and the UK’s connectivity to the rest of the world.

How to apply
Businesses can now apply for the Freeport Customs Special Procedures, a single authorisation combined with easier declaration requirements.

A business’ application is broadly split between two functions – storage and processing.

The key requirements for both will be that sufficient records are kept, especially in connection to stock records.

Once approved, businesses will be able to declare goods coming into the UK Freeport using form C21, with no supplementary declarations.

If a business already has an existing customs authorisation, these will continue.

HMRC started the application process at the beginning of September.

To apply to become a Freeport customs site operator, download the application form, open it with Adobe Reader and complete it on-screen.

The application form and details on how to apply can be found here.

If you need further advice on how to apply, call Beatons Group on 01473 659777 or visit beatons.co.uk

The Autumn budget – a tax expert’s view

The Autumn budget – a tax expert’s view

2.11.2021 | Tax

The Autumn budget – a tax expert’s view

Welcome measures for the freight and logistics sectors.

The Chancellor’s Autumn budget has received a mixed reception, with many of the headline-grabbing announcements – such as the rise in National Living Wage – leaked to the media days before.

Some in this part of the country have criticised the budget, saying the east of England was left out of the Chancellor’s big plans.

However, there was some news for a number of sectors hit hard in the pandemic – including freight, shipping and haulage.

Here, Andrew Diver, Beatons Group’s Head of Taxation, has a look at the good and not so good in this year’s autumn’s budget.

No big tax changes
Although the Chancellor announced a lot of spending, there were no new big tax changes.

The Chancellor’s plan appears to be to rebuild the UK’s economy through growth.

Mr Sunak announced in March an increase in Corporation Tax rates from April 2023, and it is these changes that are largely funding his spending plans. It will be time company owners might wish to consider some restructuring to mitigate the effects of the increase in rate from 19% to 25%.

As the forecast yield of the tax increase was based on the previous 4.1% growth, the new 6.5% forecast would provide much higher tax revenue.

Freight, shipping and haulage
There were some positives in this autumn budget for the freight and logistics sectors.

Among these are grants for improved lorry parks, the Heavy Goods Vehicle Levy being delayed until 2023 and fuel duty being frozen for the 12th successive year.

These have been welcomed by a number of trade bodies, including the British International Freight Association (BIFA) and the Road Haulage Association (RHA).

Rod McKenzie, the RHA’s Managing Director for Policy and Public Affairs, said of the budget: “These are very welcome measures for the UK’s hard-pressed haulage industry already battling chronic driver shortages and other substantial challenges to maintaining the efficiency of the nation’s supply chain.”

However, some were disappointed the Chancellor did not specifically mention the east of England in his announcements.

Suffolk Chamber of Commerce described the budget as ‘underwhelming’ for businesses in the region, saying while the Chancellor made many geographic references as to where spending might benefit certain areas, there was little mention of the east of England.

As an area vital to the UK trade, I can see why some see it as a snub, although there was much in the budget that will benefit firms in the east.

The big picture
The Chancellor’s budget was a mixed bag, with more Government spending than has been seen in decades because of the effect of the pandemic.

While there was some encouraging news for the freight, shipping and logistics sectors, which should go some way in battling driver shortages and supply issues, some say more still could be done.

I am encouraged however by Mr Sunak’s long-term goal of cutting taxes – but we shall have to wait to see if his plans for growth come into fruition to provide the necessary funds.

For more information about Beatons group, visit beatons.co.uk

Digital self-assessment tax scheme is postponed

Digital self-assessment tax scheme is postponed

5.10.2021 | Tax

Digital self-assessment tax scheme is postponed

HMRC announces delay until 2024.

The Government’s Making Tax Digital scheme for income self-assessment has been delayed yet again following an emergency meeting between HMRC and tax software developers.

Financial Secretary MP Lucy Frazer wrote to the House of Commons advising that this should be postponed for a year to give people a chance to prepare following the disruption caused by the pandemic.

Here, Andrew Diver, Beatons Group’s Head of Tax, explores what the decision means for the self-employed.

Making Tax Digital

The Government’s goal to modernise the current tax system was outlined by Chancellor George Osbourne in 2015.

The idea is to digitise tax reporting to make it simpler and to reduce the number of errors.

The initial plan was to roll out the scheme in a phased basis, starting with small businesses and the self-employed.

However, it was later decided to start with VAT – and Making Tax Digital VAT was launched in 2019.

The hope was that best practice lessons could be learned from the phase to help manage the bigger task of Making Tax Digital for income self-assessment.

The delay

Professional bodies in the accountancy industry have spoken about the impact the switch to digital will have, warning that, in theory, they could see a five-fold increase in work due to the need to produce four digital submissions a year.

Despite the switch to digital expecting to bring long-term gains to the UK economy, the transition not only causes a mountain of work for small businesses and accountants, but it is also a huge change in culture – with many self-employed people still used to handing in bags of receipts to their accountant every year.

Lucy Frazer MP, in her letter to the Commons, wrote that “it’s critical that everyone has enough time to prepare for the change” as we come out of the pandemic.

She added the Government remain “firmly committed” to Making Tax Digital and “building a tax system fit for the 21st Century”.

What does this mean for the self-employed?

First, it gives the Government extra time to inform the self-employed of the system changes and to ensure they understand how the new system works.

It also gives HMRC more time to perfect its software, ensuring it is fit for purpose when the millions of tax assessments start rolling in.

The key will be making the computer systems simple and easy to use – otherwise, the burden may fall on the accountancy industry.

April 2024 may seem like a long way off at the moment, but there is lots of work to be done in the meantime to ensure the transition goes ahead smoothly.

If you are self-employed and need advice on how Making Tax Digital could affect, please get in touch with Beatons Group on 01473 659777 or email info@beatons.co.uk

For more information about Beatons Group, click here.