Insights – February 2021
Insights – February 2021
So, the “31 January come 28 February” self-assessment filing deadline for 2019/2020 is almost upon us. As we accountants breathe a sigh of relief moving into March, it genuinely does feel like Spring is in the air – the daffodils are shooting up, the birdsong rings out in the brighter mornings and more and more of the population are getting vaccinated against Covid-19.
The chink of light at the end of the tunnel may at last be brightening.
We received great feedback on our January Insights email. Here’s our take on this month’s key focus points:
1.VAT reverse charge on construction services – subcontractors
From Monday 1st March, a new reverse charge arrangement is coming into force for VAT registered subcontractors in the construction sector who are not supplying services to the end user. If you are a VAT registered subcontractor and are supplying services to a main contractor, then you no longer charge VAT on your invoices from next week. Instead your customer (the main contractor) accounts for the input VAT and the output VAT on their VAT return. As well as changes being required to subcontractor and main contractor accounting systems, this change will affect your cashflow depending which side you are on.
Full details on the new scheme can be found here https://www.gildernewandco.com/2021/02/26/changes-to-vat-in-construction-sector/
2.VAT deferral scheme opens
Many businesses deferred UK VAT which was due for payment between 20 March and 30 June 2020. The government online portal to set up your payment plan to pay off this debt opened this week. If you set up your payment plan on the portal before 19 March you will be able to split the liability over 11 months. Click on the link here: Pay VAT deferred due to coronavirus (COVID-19) – GOV.UK (www.gov.uk) or contact HMRC by telephone on 0800 024 1222.
3.Bounce Back Loan terms extended
Businesses who took out Bounce Back Loans of up to £50,000 will shortly be due to start repayments. The Chancellor recently announced a number of changes to the loan terms including options for extending interest only periods, payment holidays and stretching repayment periods to 10 years. Under the changes, lenders are required to contact all customers and make them aware of what is required to change terms. Lenders are expected to begin corresponding with customers in the coming weeks. Remember, Bounce Back Loans are still available until 31st March 2021.
4.Year-end tax planning
The 2020/2021 tax year ends in just under 40 days. There’s still time to take some steps to help mitigate your personal tax liability which will fall due next January. Remember, many of the Covid-19 support grants are taxable income. Options which you may wish to take advice on are:
- Capital investment – 100% tax relief on capital spend of up to £1m remains available under the Annual Investment Allowance;
- Pension contributions – making a payment into your personal pension can help reduce your tax bill by extending your 20% tax bracket. There are limits – speak to us or your financial advisor to find out more;
- Maximise your ISA allowance – you can put up to £20,000 of taxed income into an Individual Savings Allowance each tax year. No income tax or capital gains tax is charged on any growth, income or withdrawals from an ISA. You need to utilise your allowance before 5 April 2021;
- Capital gains tax exemption – have you investments? Make sure you consider cashing in qualifying investments to make the most of your annual capital gains tax exemption of £12,300. This is in addition to your tax-free allowance for income tax of £12,500 per annum.
As always, professional advice is always recommended to ensure you maximise all reliefs available.
5.Insolvency enforcement action remains on hold
Many individuals and businesses have been hit hard by Covid-19 restrictions and closures. Despite the financial pressures, insolvency activity remains relatively low – primarily due to the moratorium in place which restricts creditors taking action through the courts. The courts are slowing beginning to work through the backlog of cases but in our view it will still be some time before we see the courts dealing with claims by creditors who are owed money. Those in debt should still take advice – and our experienced Restructuring & Insolvency team can help.
Most importantly, if you are burdened with debt or you think someone you know is struggling with debt, reach out, speak to someone. A problem shared is definitely a problem halved. Don’t leave it too late.
6.Budget Day next week
The UK Spring Budget takes place next Wednesday 3rd March. We will circulate full details of what’s in the Chancellor’s Red Box following his announcement in the House of Commons next week.
Should you have any queries on any of the above, please do not hesitate to contact us on 028 8772 4697 or at info@gildernewandco.com.
Take care and keep safe.
Everyone at Gildernew & Co.
Gildernew & Co. Ltd make every effort to ensure the accuracy of the information herein. However, no reliance should be placed on any of the above without seeking independent professional accountancy, legal and/or financial advice.
Posted on February 26, 2021
