NEW VAT RULES FOR THE CONSTRUCTION SECTOR

Under new rules due to come in on 1 October 2019 builders, sub- contractors and other trades associated with the construction industry will have start using a new method of accounting for VAT.

Under the new rules, supplies of standard or reduced-rated building services between VAT-registered businesses in the supply chain will not be invoiced in the normal way. Under the reverse charge, a main contractor would account for the VAT on the services of any sub-contractor and the supplier does not invoice for VAT. The customer (main contractor) would then account for VAT on the net value of the supplier’s invoice and at the same time deduct that VAT from the payment to the sub-contractor.

This is intended to ensure that VAT is correctly accounted for on supplies by sub-contractors.

The new reverse charge will apply to a wide range of services in the building trade, primarily those activities covered by the construction industry (CIS) payment rules. Note that normal VAT invoices will continue to be issued to domestic customers.

Please contact us if you are likely to be affected by these changes and we can work with you to ensure you are ready for the new system.

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A STAFF SUMMER PARTY CAN BE A TAX-FREE BENEFIT

Your organisation may have an annual Christmas party for staff, but the tax rules also allow staff parties at other times of the year which are a tax-free benefit if certain conditions are satisfied.

The exemption applies to an annual party (for example, a Christmas party), or similar annual function (for example, a summer barbecue), provided for employees and is available to all employees or available to all employees at that location, where the employer has more than one location.  If the employer provides two or more annual parties or functions, no tax charge arises in respect of the party, or parties, for which cost(s) per head do not exceed £150 in aggregate. For each function the cost per head should be calculated. The cost per head of subsequent functions should be added. If the total cost per head goes over £150 then whichever functions best utilise the £150 are exempt, the other is taxable.

MORE COMPLICATED PENSION RULES

Last month we highlighted the restricted annual pension allowance for those with high income, such as doctors. Note that the deadline for requesting for the additional tax to be paid out of the fund for 2017/18 is 31 July 2019.

There is a further complication for those individuals who have started drawing income from certain money purchase pension schemes. A new £4,000 limit introduced from 6 April 2017 restricts the amount that they can save in their pension and receive tax relief. Our concern is that many taxpayers may unwittingly trigger a tax charge due to this rule change

MAKE SCHOOL HOLIDAYS EASIER WITH TAX-FREE CHILDCARE

Did you know there is a government scheme available that can help contribute towards childcare costs which may mean fewer of your employees will need time off at the same time this summer.

Tax-Free Childcare is a scheme available to working parents with children from 0-11 years and many parents are not taking advantage of the scheme. HMRC would thus welcome help from employers in changing that, so please tell your employees about Tax-Free Childcare and how it can reduce their childcare costs.

Eligible parents can get up to £2,000 per child, per year to spend on qualifying childcare (effectively a 25% top up). Note that Tax-Free Childcare isn’t just for everyday childcare costs, such as childminders and nurseries, parents can also use it to pay towards the cost of:

  • after school clubs
  • summer camps
  • school holiday activities

ADVISORY FUEL RATE FOR COMPANY CARS

These are the suggested reimbursement rates for employees’ private mileage using their company car from 1 June 2019. Where there has been a change the previous rate is shown in brackets.

 

Engine Size Petrol Diesel LPG
1400cc or less 12p (11p)   8p

(7p)

1600cc or less   10p  
1401cc to 2000cc 15p

(14p)

  9p (8p)
1601 to 2000cc   12p

(11p)

 
Over 2000cc 22p

(21p)

14p

(13p)

14p

(13p)

 

Note that for hybrid cars, use the equivalent petrol or diesel scale charge. However, it may be more beneficial to compute the actual cost. You can continue to use the previous rates for up to 1 month from the date the new rates apply.

SOME CARS ONLY QUALIFY FOR 6% TAX RELIEF NOW

The latest Finance Act has reduced the tax writing down allowance for motor cars that emit more than 110 grams of CO2 to just 6% on a reducing balance basis from April 2019. In the case of company cars the vehicle is included in the “special rate” pool which means that even when the car is sold the proceeds are deducted from the pool and the 6% allowance continues until the balance is written off. It may be more advantageous to lease such a vehicle – check with us.

MAKING TAX DIGITAL IS NOW A REALITY

Making tax digital (MTD) is now law for all VAT registered businesses with turnover over £85,000. This new law requiring Digital record keeping and filing of VAT returns via the MTD portal came into force on the 1 April 2019. This means change for many businesses but also a huge opportunity.

Do you want to reduce your running costs and streamline your accounting?

There are significant advantages to going “Digital” and we’ve been working with a number of our clients to help them streamline the way they do their accounts. Just suppose you:

•              Had a system where your bank fed receipts and payments a directly into your accounts on a DAILY basis;

•              Took a photo on your phone of a purchase or expense item invoice and it was posted automatically; and

•              Could see your results, who owes you money, who you owe and your business bank balance 24/7, 365 from your smart phone!

We have a new and exclusive Digital system for helping business owners comply with the law and to give you:

•              A clear picture of your current financial position, in real-time

•              Automatic updates that mean you can spend more time doing what you enjoy

•              Your accounts are 100% online, so there’s no software to install and everything is backed up automatically.  Updates are free and instantly available

•              Upfront accounting software costs are eliminated – upgrades, maintenance, system administration costs and server failures are no longer an issue!

If you want to take your business to a new level please contact us for a demonstration. You are going to love this new way of doing things!