VAT and food supplies

Posted on 18th August 2022 by Solutions Accountancy

HMRC’s VAT Notice 701/14: food explains what types of foods are zero rated and standard rated for VAT. The notice includes many examples of different food categories. The notice covers some general VAT liability rules. For example, food supplied in the course of catering is standard rated for VAT. This includes hot take-away food. Most basic food stuffs intended for human consumption and not supplied in the course of catering are zero rated for VAT. However, the definition of 'basic' is not straightforward.

The following food and drinks must usually be standard rated:

  • Ice cream, similar products, and mixes for making them. Note that frozen yoghurt that’s designed to be thawed before being eaten is zero rated.
  • Confectionery, apart from cakes and some biscuits. Drained cherries and candied peel are zero rated.
  • Alcoholic beverages.
  • Other beverages, and preparations for making them. Exceptions that are zero rated include milk and milk drinks, tea, maté, herbal tea, coffee and cocoa, preparations of yeast, meat and egg.
  • Potato crisps roasted or salted nuts and various other savoury snack products.
  • Products for home brewing and wine making.

Produce that’s unfit for human consumption, such as waste and contaminated food products (including used cooking oil), may be eligible for zero rating as animal feeding stuffs.

Do you qualify for the marriage allowance?

Posted on 11th August 2022 by Solutions Accountancy

HMRC is using the wedding season to issue a reminder to married couples and those in civil partnerships to sign up for marriage allowance if they are eligible and haven’t yet done so.

The marriage allowance applies to married couples and those in a civil partnership where a spouse or civil partner doesn’t pay tax or doesn’t pay tax above the basic rate threshold for Income Tax (i.e., one of the couples must currently earn less than the £12,570 personal allowance for 2022-23).

The allowance works by permitting the lower earning partner to transfer up to £1,260 of their personal tax-free allowance to their spouse or civil partner. The marriage allowance can only be used when the recipient of the transfer (the higher earning partner) doesn’t pay more than the basic 20% rate of Income Tax. This would usually mean that their income is between £12,570 to £50,270 in 2022-23. The limits are somewhat different for those living in Scotland.

This could result in a saving of up to £252 for the recipient (20% of £1,260), or £21 a month for the current tax year. In fact, even if a spouse or civil partner has died since 5 April 2018, the surviving person can still claim the allowance (if they qualify) by contacting HMRC’s Income Tax helpline.

If you meet the eligibility requirements and have not yet claimed the allowance, you can backdate your claim to 6 April 2017. This could result in a total tax-break of up to £1,242 if you can claim for 2018-19, 2019-20, 2020-21, 2021-22 as well as the current 2022-23 tax year. 

Using the Customs Declaration Service

Posted on 11th August 2022 by Solutions Accountancy

The Customs Declaration Service (CDS) is a new customs IT platform that has been designed to modernise the process for completing customs declarations for businesses that import or export goods from the UK. A phased launch of the service started during August 2018. The CDS is used for making import and export declarations when moving goods into and out of the UK.

The closure of the old Customs Handling of Import and Export Freight (CHIEF) service is imminent. The CHIEF system is over 25 years old and has struggled to cope with complex reporting requirements that could not easily or cost-effectively be accommodated within the existing service. 

The complete closure of the CHIEF system is marked for 31 March 2023. However, the CHIEF system is being withdrawn in two stages. The first stage, on 30 September 2022, will see the ability to make import declarations on CHIEF closed. This is a critical date. Businesses that have not moved across to the CDS will be unable to import goods into the UK from 1 October 2022.

Even businesses that use a customs agents need to ensure they take the following steps:

  • subscribe to the CDS;
  • choose a payment method;
  • check their standing authorities are correctly set up; and 
  • give their customs agent customs clearance instructions.

The CHIEF system will fully close on 31 March 2023 when the ability to make export declarations will also be withdrawn. 

Reminder that the plug-in grant has ended

Posted on 11th August 2022 by Solutions Accountancy

The government plug-in grant was first introduced 11 years ago to help drivers make the move to owning an electric car. Since the scheme was introduced the amount of the grant available reduced significantly as did the range of cars to which the grant applied.

Significant changes to the low-emission vehicles plug-in grant scheme became effective on 15 December 2021 in response to soaring demand for electric vehicles and to help target those buying the most affordable zero emission cars. Just under six months later, on 14 June 2022, the government announced it was closing the plug-in car grant scheme to new orders.

The government is now focusing on helping to expand the public charge-point network and has committed £1.6 billion to this effort. In addition, £300 million in grant funding will be used towards extending plug-in grants to boost sales of plug-in taxis, motorcycles, vans and trucks and wheelchair accessible vehicles.

The sale of all new petrol and diesel cars and vans is expected to be phased out by 2030. Interestingly, battery and hybrid electric vehicles (EVs) now make up more than half of all new cars sold. Fully electric car sales have risen by 70% in the last year, now representing 1 in 6 new cars registered.

Reminder of compensation limits for bank deposits

Posted on 11th August 2022 by Solutions Accountancy

The bank deposit guarantee limit is the amount of money that is guaranteed for savers in UK banks and building societies should the institution become insolvent. The Financial Services Compensation Scheme (FSCS) guaranteed amount is currently £85,000 per person, per authorised bank or building society.

There is additional protection available to savers with certain types of temporary high balances, for example proceeds from a house sale, benefits payable under an insurance policy and inheritances. The additional FSCS protection is for amounts up to £1m per depositor per life event and is available for up to six months. The FSCS offers unlimited cover for personal injury claims.

The limit is enough to cover the deposits of most savers in the UK. However, savers with more than £85,000 should consider opening multiple bank accounts with separate banks and building societies in order to increase their guaranteed savings limits. The FSCS was set up to assist private individuals, although some businesses and small local authorities (such as parish councils) are also covered. The compensation limit is doubled for joint account holders.

Bona Vacantia – dissolved companies

Posted on 11th August 2022 by Solutions Accountancy

The final step in bringing a company to a legal end is dissolution. However, one if the important points to consider when doing so is that the dissolved company can no longer do or receive anything including receive a tax refund. It is the responsibility of the company directors to ensure that all of a company’s assets and liabilities are all dealt with before it is dissolved.

Any assets or rights (but not liabilities) remaining in the company at the date of dissolution will pass to the Crown as ownerless property. This happens under what is known as 'bona vacantia' which literally means vacant goods. The bodies that deal with bona vacantia claims vary across the United Kingdom, but they all ultimately represent the Crown.

Only formally dissolved companies are caught by bona vacantia. A company 'in liquidation' or 'being wound up' is on its way to being dissolved but is still in existence. Until the company is dissolved its property and rights will not be bona vacantia.

It may also be possible for a company to apply to be restored to the register if it was dissolved less than six years ago. This would mean that the bona vacantia ceases to exist. However, this process is by no means straightforward. Accordingly, any assets or rights owned by the company should be properly dealt with before a company is dissolved.

Termination payments

Posted on 11th August 2022 by Solutions Accountancy

The tax treatment of termination payments has changed significantly over recent years. The changes have aligned the rules for tax and secondary National Insurance contributions (employer (NICs)) by making an employer liable to pay NICs on termination payments they make to their employees. 

Employees do not pay tax and National Insurance on:

  • Contributions their employer makes to a registered pension scheme as part of their termination payment – tax will be due on any employer contributions that go above the Annual Allowance.
  • Legal costs related to the settlement that their employer pays directly to their solicitor.
  • A termination payment they receive because of an injury, illness or disability that prevents them from being able to continue to do their job.

Employees do not usually pay tax on the first combined £30,000 of:

  • statutory redundancy pay;
  • additional severance or enhanced redundancy payments your employer gives you; and
  • non-cash benefits, for example company property you keep after your employment ends.

Employees are required to pay tax on any amount over a combined total of £30,000.

An employer is required to pay employer Class 1A NICs on any part of a termination payment that exceeds the £30,000 threshold.

Employees are liable to pay tax and National Insurance on payments they would have earned whilst working. This includes lump sum payments in lieu of notice (PILONs), pay on ‘gardening leave’ and part of any severance, enhanced redundancy or non-cash benefits they receive (known as Post-Employment Notice Pay (PENP).

Tax Diary September/October 2022

Posted on 8th August 2022 by Solutions Accountancy

1 September 2022 – Due date for Corporation Tax due for the year ended 30 November 2021.

19 September 2022 – PAYE and NIC deductions due for month ended 5 September 2022. (If you pay your tax electronically the due date is 22 September 2022)

19 September 2022 – Filing deadline for the CIS300 monthly return for the month ended 5 September 2022. 

19 September 2022 – CIS tax deducted for the month ended 5 September 2022 is payable by today.

1 October 2022 – Due date for Corporation Tax due for the year ended 31 December 2021.

19 October 2022 – PAYE and NIC deductions due for month ended 5 October 2022. (If you pay your tax electronically the due date is 22 October 2022.)

19 October 2022 – Filing deadline for the CIS300 monthly return for the month ended 5 October 2022. 

19 October 2022 – CIS tax deducted for the month ended 5 October 2022 is payable by today.

31 October 2022 – Latest date you can file a paper version of your 2021-22 self-assessment tax return.

Duty free limits if you are travelling abroad

Posted on 4th August 2022 by Solutions Accountancy

Here is a reminder of any duty payable and tax-free allowances if travelling abroad this summer.

If you are travelling from outside the UK and arriving home in Great Britain (England, Wales and Scotland), you are allowed to bring the following back to for your own use without any UK tax or duty liabilities.

  • 200 cigarettes or 100 cigarillos or 50 cigars or 250g of tobacco or 200 sticks of tobacco for electronic heated tobacco devices. This allowance can be split, so you could bring in 100 cigarettes and 25 cigars (both half of your allowance).
  • 18 litres of still table wine.
  • 42 litres of beer.
  • 4 litres of spirits or strong liqueurs over 22% volume or 9 litres of fortified wine (such as port or sherry), sparkling wine or other alcoholic beverages of less than 22% volume. This allowance can be split, for example you could bring 4.5 litres of fortified wine and 2 litres of spirits (both half of your allowance).
  • £390 limit for of all other goods including perfume and souvenirs. If you are lucky enough to be arriving by private plane or boat for pleasure purposes, you can bring in goods up to the value of £270 tax free.

Northern Ireland

There are no limits on tobacco or alcohol brought into Northern Ireland from another EU country. This means that no duties or tax will be payable as long as you can demonstrate that the goods are for your own use and that you paid the relevant taxes and duties on the purchase.

However, HMRC provide the following guidelines as to an acceptable maximum for personal use. If you exceed these limits, you are more likely to be subject to further questioning.

  • 800 cigarettes 
  • 200 cigars 
  • 400 cigarillos 
  • 1kg of tobacco 
  • 110 litres of beer 
  • 90 litres of wine 
  • 10 litres of spirits 
  • 20 litres of fortified wine (for example port or sherry).

Tax-free trivial benefits

Posted on 4th August 2022 by Solutions Accountancy

There is a benefit in kind (BiK) trivial exemption that applies to small non-cash benefits like a bottle of wine, or a bouquet of flowers given occasionally to employees or any other BiK classed as 'trivial' that falls within the exemption. By taking advantage of the exemption employers can simplify the treatment of BiKs whilst at the same time offering a tax efficient way to give small gifts to employees.

The trivial benefit rules provide a great opportunity to give small rewards and incentives to employees. The main caveat being that the gifts are not provided as a reward for services performed or as part of the employees’ duties. However, gifts to employees on milestone events such as the birth of a child or a marriage or other gestures of goodwill would usually qualify.

The employer also benefits as the trivial benefits do not have to be included on PAYE settlement agreements or disclosed on P11D forms. There is also a matching exemption from Class 1A National Insurance contributions.

The tax exemption applies to trivial BiKs where the BiK:

  • is not cash or a cash-voucher; and
  • costs £50 or less; and
  • is not provided as part of a salary sacrifice or other contractual arrangement; and
  • is not provided in recognition of services performed by the employee as part of their employment, or in anticipation of such services.

The rules also allow directors or other office-holders of close companies and their families to benefit from an annual cap of £300. The £50 limit remains for each gift but could allow for up to £300 of non-cash benefits to be withdrawn per person per year. The £300 cap does not apply to employees. If the £50 limit is exceeded for any gift, the value of the benefit will be taxable.