UK Tax News & Updates July 2021
As UK businesses continue to recover from COVID-19 and adapt to the new normal we wanted to report tax updates to be aware of; this month’s highlights:
- COVID-19 Self Employment Income Support Scheme (SEISS)
- How SEISS is Taxed
- Making Tax Digital Update
- HMRC Collecting Tax Debts
- VAT Rate for Electric Vehicle Charging
COVID-19 Self Employment Income Support Scheme (SEISS)
HMRC have recently published the eligibility guidance for the 5th Self Employment Income Support Scheme (SEISS). The online claim should be made to HMRC by 30 September 2021.
To be eligible the claimant must have traded for the tax year 2019/2020 and 2020/2021 and have filed their 2019/2020 Tax Return to HMRC by 2 March 2021. Plus their 2019/2020 trading profits must be at least equal to their non-trading income (e.g. a part time job or a pension) but their 2019/2020 trading profits are not above £50,000.
In addition the claimant must declare that they intend to keep trading in 2021/2022 and reasonably believe that there will be a significant reduction in their trading profits due to Covid-19 between 1 May 2021 and 30 September 2021. To support the above claimants will need to provide two turnover figures: the first being for the any year starting between 1 April 2020 and 6 April 2020 and the second turnover figure for either 2019/2020 or 2018/2019.
The 5th SEISS taxable grant is then calculated by reference to the amount the claimant’s turnover has reduced when comparing the above-mentioned two turnover figures. If the turnover is down by 30% or more then the SEISS taxable grant will be 80% of the 3 months average trading profits; where turnover is down by less than 30% the taxable SEISS grant will be at 30% of the 3 months average trading profits. The overall maximum 5th SEISS taxable grant payable is £2,850.
How SEISS is Taxed
HMRC have also taken the opportunity when announcing the 5th SEISS guidance rules to remind claimants as to how the SEISS grants as made available to date are to be taxed. The 1st 2nd and 3rd SEISS grants received in the tax year to 5 April 2021 need to be declared on the claimant’s 2020/2021 Tax Return in the correct ‘separate’ Self Employment Income Support grant box. HMRC are making this announcement as after reviewing the 2020/2021 Tax Returns that have already been filed to HMRC they are investigating some 12,000 Tax Returns as there are disparities between the HMRC SEISS info and the SEISS grant income amounts being declared by the taxpayers and in some cases not being declared at all!
Please ensure you check that you are declaring on your 2020/2021 Tax Return -using the correct declaration box on the Return- the correct total amount of SEISS grant income that you have received from HMRC during the tax year to 5 April 2021.
Making Tax Digital Update
In the first to report is that HMRC continue to push forward on the Making Tax Digital for Income Tax (MTDfIT) processes. As a reminder the HMRC plan is to introduce MTDfIT as from 6 April 2023 for all individuals that are self-employed and property rental businesses with an annual income of £10,000-despite pressure from the accountancy/tax advisory professions that the proposed MDTfIT annual property rental income limit of £10,000 is far too low it looks like HMRC will not be moved!
HMRC are inviting individuals that will be required to register for MTDfIT that they register for the HMRC’s current MDTfIT pilot scheme. Not a bad idea if you want to ensure you are up to speed with MTDfIT come the start date of 6 April 2023.
The other issue to be warned of is that HMRC have introduced a two-step verification or 2SV requirement for all businesses and organisations using the Government Gateway to access the HMRC online services. So if you have not logged on recently via the Government Gateway then we suggest you do so asap and then set up the 2SV by following the online instructions.
HMRC Collecting Tax Debts
It is a sign that the tax World is moving back to normal when HMRC announced that their relaxed approach to collecting tax debts in the COVID-19 period is over. HMRC are restarting its debt collection work taking enforcement action where necessary. HMRC are also using a relatively new method of going after taxpayers who they believe may have underdeclared tax – namely the ‘nudge letter’. The idea is that a HMRC nudge letter will encourage taxpayers to declare to HMRC any errors on their tax returns which has led to an undeclaration of tax.
As the HMRC nudge letters are sent following information received by HMRC then the recipient taxpayer should on no account ignore these nudge letters. However, in view of the seriousness of the HMRC nudge letters the recipient of such letters should take professional advice before replying to HMRC and completing the HMRC Certificate of Tax position which is sent with the nudge letter.
VAT Rate for Electric Vehicle Charging
Finally a shock to report, despite the tax relief support available encouraging individuals and businesses to use electric cars – HMRC recently confirmed the ‘shocking news’ that the VAT rate applicable to the cost of the electricity used to charge electric vehicles at the electric vehicles charges (EVC) based at public places is 20% and not the expected lower 5% VAT rate that applies to the cost of electricity supplied for domestic use. It appears that the cost of electricity supplied from a home EVC will be at the 5% VAT rate.
Given the Government’s apparent commitment to replacing fossil fuel vehicles with electric vehicles then surely ensuring that the cost of electricity to recharge electric vehicles should be as low as possible including legislating for the 5% VAT rate to be applied to all EVC wherever based!
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