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Going Green, Global Tax Reform, Taxation of E-Commerce & Latest News on Making Tax Digital – September 2021

27/09/2021

This month we report on several developments in the world of accounting and beyond, including Kent’s County Council’s ‘Going Green’ announcement, Global Tax Reform, the EU’s E-Commerce VAT rules brought in as of July 2021, and a recent report from the Institute of Chartered Accountants of Scotland (ICAS) on HMRC’s Making Tax Digital.

Green Plan for Kent County

The Kent County Council (KCC) launched last month the Kent Green Action.

Given the ever-worrying climate emergency the KCC have taken the initiative to encourage Kent’s individual residents, business owners and visitors to cut emissions in support of protecting the planet. Their pledge includes such things as installing insulation, changing to green energy tariff, using renewable energy sources and water-saving devices. Advice is also given regarding greener modes of transport such as electric cars, with encouragement to those that can to walk and cycle more.

Check out the Kent Green Action web site link above for more details. As somebody once said, every little helps!

UK Power Networks support for Small, Medium Enterprises (SMEs)

In association with the Federation of Small Businesses the UK Power Networks has issued a guide to the use of electric vehicles. The online guide provides advice on buying electric vehicles, checking power consumption and the practical lessons to learn. The online guide has case studies and information to SMEs to support them in the move to zero carbon emissions for their business vehicles.

Global Tax Reform

The global digital economy’s ongoing growth in activity along with the continuing non-payment of tax by the digital economy players- including those very large, profitable and well-known multinational platforms- has resulted in the G7 (the World’s largest economies) announcing in June 2021 that there will be a political agreement for multilateral international tax reform.

A few weeks later 132 of the 139 countries within the OECD also agreed to the key principles of international tax reform. That is the good news. Yet unsurprisingly, the economies forming the G20 emphasised the need for a detailed plan to be agreed by October 2021 based on the OECD’s ‘two pillar’ approach as develop way back in 2017.

In short, the OECD Pillar one suggests that a multinational’s taxable profits should be allocated to a country based on the sales the multinational made within that country. Pillar two is that for the larger multinational (annual turnover of more than €750m) there should be a minimum tax rate on profits realised in each country of 15%. As mentioned above the all-important detail is still to be worked out and then agreed to by the countries of the World.

A real stumbling issue to any global tax reform is the complications of the US political system and whether the current Biden administration can have any Global Tax Reform deal passed by the US Congress. Watch this space!

Post-Brexit EU VAT rules as of July 2021 and how they impact UK businesses

At last, all UK E-Commerce businesses who trade with businesses or consumers based in the EU have been provided with the EU VAT rules, becoming operative as of 1st July 2021.

These new rules are complicated and although some experts have suggested that they provide opportunities to UK businesses, it is difficult to see that they support the promised Brexit benefits! However, we are where we are, and UK E-Commerce businesses that trade or intend to trade with the EU must ensure that these new EU E-Commerce VAT rules are reviewed and thoroughly understood. You can find The European Commission’s full details here.

The impact of the EU’s new VAT rules will depend on whether the UK E-Commerce business is exporting goods or services to the EU.

As for goods sold from the UK, the EU VAT is payable depending on the location and movement of the goods. In view of this, the UK based E-Commerce goods seller’s supply line needs to be thoroughly reviewed and the freight carrier selected depending on their experience and understanding as to how the new EU VAT rules operate to ensure the goods are not held up at the EU border giving rise to additional transport costs.

In addition, for the necessary EU Import One-Stop Shop Scheme (IOSS) registration the UK based E-Commerce goods seller will need to appoint an EU established intermediary who will have to agree to a joint and several liability for all relevant debts. This will entail guarantee and higher management fees to be charged by the intermediary.

The one redeeming provision within the new EU E-Commerce VAT rules for goods sold by a UK based E-Commerce business to the EU is if the goods are sold via an online marketplace (OMP)-such as Amazon- the EU VAT due on the goods sold via a OMP will be collected and remitted by the relevant OMP.

HMRC’s crusade to Making Tax Digital (MTD): Comments from the UK accountancy professional body ICAS

A report by a professional body of accountants, namely the ICAS, on UK taxation could be considered a highly technical fiscal matter to be overlooked by busy business folk. However, there are key issues with the HMRC zeal for MTD that need to be made more widely known.

It must be said that the HMRC machine has recently operated relatively smoothly in providing the necessary cash to the UK businesses under the various UK Government Covid-19 support schemes. However, this should not be the green light for the Government to pass on even more non-tax collecting responsibilities for HMRC to manage without providing them the additional resources required.

In this respect, leaving the Covid-19 support schemes to one side, HMRC are also responsible for the administration of non-tax collecting matters such as: money laundering, tax credits, student loans and the high-income child benefit charge. Such additional duties mean that HMRC must put off dealing with other projects such as introducing the single tax account – a worthwhile tax simplification tool – and the basic service of maintaining adequate staffing levels for their customer service requirements. Anybody who has recently tried to contact the HMRC either by telephone or post knows the long delays in the HMRC response.

There is also the need for the HMRC to consult with the professional accountancy & taxation bodies on the long overdue consolidation of the existing UK tax statutes and to transform the tax laws so that they deal with the automated system such as MTD and the single taxpayer account.

As regards MTD it is not the principle of MTD that is of concern but more the pace of the HMRC’s introduction of MTD for Income Tax. The ICAS’s recent report reveals that it is essential there is a proper trial period for MTD for Income Tax-there is the current pilot scheme, but this needs to be expanded before MTD for Income Tax is fully operative. There is also the need for the simplification of the tax system to happen before MTD for Income Tax and not the other way around.

There have been some recent digital changes made by HMRC that appear to exclude tax agents e.g. tax agents were cut out from their clients’ claims for the Government’s Covid-19 support schemes. On top of this, it is not possible for a tax agent already registered with HMRC under Self-Assessment to set up the separate online UK Property Account required to declare to HMRC the CGT liability for their client who has sold a UK residential property, bearing in mind that such CGT liability needs to be paid to HMRC within 30 days of the sale completion date of the UK residential property.

HMRC need to realise that their successful administration of the UK tax system depends on the work and support of tax agents. One hopes that HMRC will therefore be looking to include the tax agent as a default setting so that it will become easier to add the tax agent for access to future HMRC digital services.

What’s more, it is best for HMRC to work in partnership with the UK’s professionally qualified tax agents to develop and bring the UK tax system into the digital world. HMRC should accept that it takes time and resources to ensure that digital tax programmes, such as the MTD for Income Tax, work properly and that it is appropriate for all UK taxpayers. For example, they should consider a realistic annual de minis taxable income threshold – it is suggested the proposed £10,000 annual taxable income threshold for MTD for Income Tax is too low!

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