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Late Tax Returns – Can you use COVID-19 as a ‘reasonable excuse’ for late SA returns?

Nealy 6 million tax returns are expected to be filed in January.

Taxpayers who fail to submit their self assessment return by the 31 January deadline because of difficulties caused by COVID-19 will be able to claim this as a ‘reasonable excuse’ to overturn a late filing penalty, but you want to avoid this if you can.

HMRC will accept Covid-19 as a reasonable excuse for a taxpayer missing a filing date, as long as you can explain how you were affected as grounds for your appeal and submit the return as soon as you can.

An HMRC spokesperson said: “We want to encourage as many people as possible to file on time even if they can’t pay their tax straight away, but where a customer is unable to do so because of the impact of Covid-19 we will accept they have a reasonable excuse and cancel penalties, provided they manage to file as soon as possible after that.”

HMRC has enhanced ‘Time to Pay’ arrangements so that taxpayers who have filed a self assessment return and determined the amount of tax due for 2019/20 and the amount of any payments on account for 2020/21. will be able to make payments over an extended period.

The automated self-serve Time to Pay online service has been changed to enable self- assessment liabilities of up to £30,000 to be paid, in up to 12 instalments. This service enables the taxpayer to set up an instalment arrangement online without having to contact HMRC beforehand. However, Time to Pay arrangements are only available once the return has been filed. 

HMRC said that if taxpayers or their agents are struggling to obtain the required information in time for their self- assessment return to be submitted by the 31 January filing date, they can provide provisional figures on their return and then provide HMRC with the actual figures as soon as they can. They must state that provisional figures are being provided by ticking the appropriate data item box on the return.  

The penalty appeal period has been extended to three months, and HMRC has indicated it is looking into potential changes to make appeals easier and quicker for taxpayers, agents and HMRC.

Remember it will take time to appeal and it is never guaranteed that HMRC will accept the appeal, despite their apparent show of sympathy. In addition, HMRC will inevitably be inundated with appeals so it could be several months before the penalty is reversed.

Tax returners can apply for the payment plan via GOV.UK. However, they must meet the following requirements, they need to have no:

  • outstanding tax returns;
  • other tax debts; and
  • other HMRC payment plans set up.

The debt needs to be between £32 and £30,000, and the payment plan needs to be set up no later than 60 days after the due date of a debt.

Beware the scammers! Be aware of copycat HMRC websites and phishing scams. You should always type in the full online address www.gov.uk/hmrc to get the correct link for your self assessment tax return online securely and free of charge. You also need to be alert if someone calls, emails or texts claiming to be from HMRC, saying that you can claim financial help, are due a tax refund or owe tax. It might be a scam.

Vat after Brexit

Here are some common areas of difficulty.

Sales of Goods to EU Customers

These are now exports from mainland UK (GB) and can be zero-rated with proof of postage/shipment.

Sales to UK consumers via online marketplaces

There is a £135 threshold for goods coming from overseas being sold to GB consumers via a third party Online Market Place (OMP).The OMP is responsible for accounting for the UK VAT on the sale and there are no import implications for the supplier. If the goods are sold direct by the supplier to the consumer, the supplier will have to VAT register in GB and account for VAT.

For consignments over £135 whether direct or via an OMP, businesses will have to check to see who is the importer into GB – themselves or their customer.

Postponed Import VAT Accounting

All goods coming from the EU into GB will now be imports rather than acquisitions. In theory this means import VAT is due at the point of entry and must be paid to release the goods and the VAT recovered later with a C79 form as evidence.

HMRC have introduced Postponed Import VAT Accounting, whereby the VAT can be accounted for as a reverse charge on the VAT return. There is no need to apply postponement but the importer or their agent will have to indicate on the Customs declaration that postponement will be used in order that no VAT is charged at the point of entry.

Supply of Cross Border Services

For B2B services the place of supply for general rule services is still where the recipient belongs. Although the use and enjoyment rules have been extended to outside the UK rather than outside the EC.

There is no longer any need to submit EC Sales Lists, but the customers EC VAT number can still be shown on the invoice where it has already been obtained as it is good evidence of business status. The “reverse charge” wording on the invoice is no longer a requirement, but again it may be prudent to retain as it indicates the onus is on the customer to deal with the VAT accounting rather than the supplier.

B2C services have been impacted significantly and you should refer to the HMRC guidance.

Non-union MOSS

UK businesses supplying digital services to EU consumers can no longer use the Mini One Stop Shop; instead they will have to choose a member state to register for the non-EU version known as Non-union MOSS scheme and account for all their B2C EU sales via that system.

Covid and Business Interruption Insurance Claims

The Supreme Court has ruled that insurance clauses offering cover for notifiable diseases extends to losses resulting from Covid-19 and this  means that many  small businesses forced to shut their doors during the first lockdown will now have their business interruption claims paid. 

Many small businesses in the leisure, property and hospitality industries had to close or suffered losses that prompted them to make claims under their Business Interruption Insurance policies during 2020. However, thousands of policy holders were left empty-handed as most small business policies concentrated on property damage and not on unprecedented scenarios like a global pandemic. 

In order to clarify the contractual uncertainty for policyholders and insurers, the FCA selected a representative sample of 21 types of policy issued by eight insurers. The FCA identified 370,000 policyholders that may be affected by the outcome of the test case. 

The case was not intended to encompass all disputes, but the ruling provides a basis for insurers and policy owners to determine how much is payable under individual policies.

Brexit – Considerations for your business.

Here is a quick guide but remember to take specialist advice if you think you may be affected.

Employers

  • An EU27 citizen has to apply for settled status or pre-settled status in order to be eligible to work in the UK;
  • You will need to appraise your workforce to determine who needs to apply for settled status, and how family units may be affected by the new rules;
  • If you wish to recruit from overseas, you will need to apply to become sponsored employers. This attracts an initial cost of £1,400 approx. and recurring cost (currently £2,000 approx.) thereafter;
  • Applications for sponsored employer status can take at least two months.

Goods

  • Leaving the EU now means a raft of virtual paperwork will need to be completed for goods to cross borders;
  • All goods will need to have their origin confirmed. Tariffs will be charged depending on the commodity classification code;
  • Who will be looking after your customs declarations? Do you need to employ an agent? Freight forwarders will charge to undertake this;
  • Grants may be available to recruit an employee to undertake customs declarations.

Standards

  • Food Standards – Check how the new deal affects you own products
  • Check if there are any new requirements for labeling.
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