Transport restrictions eased

The government has announced plans to introduce a temporary extension to road haulage cabotage rules to alleviate pressures with the supply chain due to lorry driver shortages and other global supply issues. The term cabotage in this context refers to specific restrictions on foreign lorry drivers on the amount of work they can do within the UK over a set period.

Under the current rights, the UK allows EU heavy goods vehicle (HGV) drivers to undertake 2 cabotage journeys within 7 days of entry into the UK. The government is proposing allowing unlimited cabotage movements of HGV’s for up to 14 days after arriving on a laden international journey into the UK before returning home. The proposal is that this extension will apply for 3 or 6 months, subject to ongoing review. The proposals are also looking at extending these changes to hauliers from Norway and Switzerland (who do not currently enjoy these rights), as well as to non-EU countries more widely.

The measures are subject to a short consultation but are not expected to come into effect until towards the end of the year as further work will be required to legislate for this change.

Announcing the move, Transport Secretary Grant Shapps said:

‘The temporary changes we’re consulting on to cabotage rules will also make sure foreign hauliers in the UK can use their time effectively and get more goods moving in the supply chain at a time of high demand.’

Haulage company charged with loan fraud

An interesting case has seen a haulage company based in the West Midlands have their operator licence revoked. This followed a public inquiry into the company by the traffic commissioner for the West Midlands.

The traffic commissioner found that almost all the company’s financial resources had been provided by a £50,000 Bounce Back loan in May 2020. The Bounce Back Loans scheme was launched in May 2020 to provide financial support to businesses across the UK that were losing revenue, and seeing their cashflow disrupted, because of the COVID-19 pandemic. The scheme allowed qualifying small businesses to borrow between £2,000 and £50,000 with no fees or interest to pay for the first 12 months.

However, the company in question had a turnover that was far below the £200,000 necessary to qualify for such a loan – the maximum permissible being 25% of turnover or £50,000, whichever is the lower.

There were also issues with the company’s bank statements that were provided as evidence of financial standing. The company also had a very poor maintenance record and numerous tachograph infringements. 

Claiming tariff quotas to reduce import duties

Tariff quotas are a special mechanism for importing limited supplies of specific goods at a lower rate of customs duty than would normally apply. The quotas usually apply to imports from specific countries. Most tariff quotas operate on a first come first serve basis and when the quota runs out, the duty rate returns to normal.

There is no requirement to claim a tariff quota if there is a lower option or if the same rate of duty available under:

  • other preference arrangements
  • an import duty suspension

There are online tools available to check which goods are covered and a claim should ideally be made when the goods are entering free circulation. In certain circumstances it is possible to make a backdated claim up to 3 years after the goods have been imported but only if the tariff quota remains available. 

HMRC’s new guidance on claiming quotas states that they can be:

  • open – the quota is not expected to exhaust for some time and a lower rate of duty can be given automatically to any valid claim.
  • critical – the quota may be nearing exhaustion or there is no information to base a prediction of how quickly it will be used up.
  • quota exhausted – all claims will be rejected.

Self-Assessment filing deadlines

The 2020-21 tax return deadline for submitting your paper Self-Assessment returns is 31 October 2021. The tax deadline for submitting online returns is 31 January 2022. Late submission of a Self-Assessment return will become liable to a £100 late filing penalty. The penalty usually applies even if there is no liability or if any tax due is paid in full by 31 January 2022.

If you are still submitting paper tax returns, we would recommend that you consider the benefits of submitting the returns electronically. This includes gaining an additional three months (until 31 January 2022) in which to submit your return. You will also receive instant confirmation that a return has been filed and not need to rely on the vagaries of the postal service. 

If you received a letter informing you to submit a paper return after 30 July 2021, then you have an extended deadline which runs for three months from the date you received the letter to submit a paper return.

It is also important to remember that taxpayers are required to declare if they received any grants or payments from COVID-19 support schemes up to 5 April 2021 (i.e., during the 2020-21 tax year) as these are taxable. If you received furlough payments, then these should be reflected on your P60 form. Details of any Self-Employment Income Support Scheme or received Coronavirus Job Retention Scheme grants will need to be included on your Self-Assessment form. The £500 one-off payment for working households receiving tax credits does not have to be reported as part of the Self-Assessment submission.

Payments received after company is dissolved

Any assets or rights (but not liabilities) remaining in a 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.

The final step in bringing a company to a legal end is when the company is dissolved. Payments received after a company has dissolved are not bona vacantia as they are not an asset of the company immediately prior to dissolution. HMRC’s pursuit of a company debt should also cease as soon as the company is dissolved.

In fact, HMRC’s internal manuals state that:

Any payments voluntarily made by an ex-official after the company is dissolved (i.e., no action was taken to recover the debt after the company was dissolved) should be used in satisfaction of any company debt arising for a period before the date of dissolution. If no such debt exists, or there is an excess of funds, then steps should be taken to send the overpayment back to the sender. Any sums that cannot be returned should be allocated to Permanent Overpayments.

VAT Margin Scheme bad debt relief

The VAT bad debt relief rules allow businesses to claim bad debt relief and reclaim the VAT they have paid to HMRC. This can happen when an invoice has been issued to a customer and no payment has been received after an extended period (usually 6 months after the due date) has elapsed.

Under the normal VAT accounting rules, a business supplying goods or services usually accounts for VAT at the time an invoice is raised irrespective of whether payment has been received or not. There are conditions which must be met to claim bad debt relief.

Bad debt relief may be claimed in respect of supplies made under margin schemes, subject to a maximum of the VAT on the margin. If the debt is equal to or less than the profit margin, bad debt relief may be claimed on the VAT fraction of the debt. However, if the debt is greater than the profit margin, bad debt relief is limited to the VAT fraction of the profit margin – since this is the amount of VAT that the supplier has paid to HMRC.

Letting agencies and the Money Laundering Regulations

HMRC is responsible for the money laundering supervision of certain businesses including letting agencies. Businesses that HMRC is responsible for supervising should be aware of the requirement to register with HMRC and the penalties for failing to register. It is a criminal offence to trade as a letting agency business (as defined within the Regulations) without being registered for money laundering supervision.

You may need to register with HMRC if your business operates as a letting agency business.

A letting agency business means a firm or sole practitioner whose work consists of things done in response to instructions received from a:

  • prospective landlord seeking to find another person to let land to,
  • prospective tenant seeking to find land to rent.

This is for a term of a month or more and over €10,000 per month. This covers both residential and commercial property lettings.

A lettings agent carrying out lettings activity not defined within the Regulations, for example, below €10,000 per month, is not required to register.

There are penalties for not registering in a timely manner. If you think you should have been registered or need further clarification, we would be happy to help.

Have you claimed your Child Trust Fund cash?

Young persons who turned 18 on or after 1 September 2020 may have cash waiting in a dormant Child Trust Fund (CTF) account. This could be as much as or more than £1,000. The actual amount on deposit depends on certain factors.

Children born after 31 August 2002 and before 3 January 2011 were entitled to a CTF account provided they met the necessary conditions. These funds were invested in long-term saving accounts for newly born children. HMRC has confirmed that there are many thousands of teenagers that have turned 18 and not yet claimed the cash to which they are entitled.

Around 7 million CTF accounts were set up since the scheme was launched in 2002, roughly 6 million by parents or guardians and a further 1 million set up by HMRC where parents or guardians did not open an account.

Around 55,000 accounts mature each month and HMRC has created a simple online tool to help young people find out where their account is held.

Economic Secretary to the Treasury, John Glen, said:

‘It’s fantastic that so many young people have been able to access the money saved for them in Child Trust Funds, but we want to make sure that nobody misses out on the chance to invest in their future.’

If you’re unsure if you have an account or where it may be, it’s easy to track down your provider online.

The actual CTF accounts are not held by HMRC, but by CTF providers who are financial services firms. Anyone can pay into the account, with an annual limit of £9,000, and there’s no tax to pay on the CTF savings interest or profit.

Valuing property for ATED

The Annual Tax on Enveloped Dwellings (ATED) is a tax payable by certain Non-Natural Persons (NNPs) that own interests in dwellings valued at more than £500,000. These provisions affect certain companies, partnerships with company members and managers of collective investment schemes described in the legislation as NNPs.

To value a property, you can use a professional valuer or determine your own valuation. The valuation of the property must be in pounds sterling. Valuations must be on an open-market willing buyer, willing seller basis and be a specific amount.

The valuation date depends on when you owned the property.

The valuation dates are:

  • an initial valuation date,
  • a revaluation date.

There are fixed revaluation dates for all properties, every 5 years after 1 April 2012, for example on 1 April 2017, 1 April 2022 and so on, regardless of when the property was acquired.

The value of the property for any chargeable period is therefore the later of:

  • its initial valuation date,
  • the revaluation date.

There is no ATED or ATED-related Capital Gains Tax payable if an individual owns a property directly, rather than through a company. There are also reliefs if a property is used for commercial purposes.

What goods are eligible for the margin scheme?

There are a few VAT margin schemes. The margin schemes work by allowing qualifying businesses to account for VAT on their profit margin i.e., on the difference between the cost of acquiring an item and its sale price rather than on the full selling price.

Without the margin scheme the business would have to account for VAT on the full selling price of each item. If an item is sold for less than was paid for it, then no VAT is due on the sale.

The eligible goods are:

  • Second-hand goods – defined as tangible movable property that is suitable for further use as it is or after repair, other than works of art, collectors’ items, or antiques and other than precious metals or precious stones as defined.
  • Works of art and collectors’ items. The legal definition of works of art includes pictures, paintings, collages, and drawings executed by hand by the artist
  • Antiques. The legal definition of an antique is an item, other than a work of art or a collectors’ item, which is over one hundred years old.

It is the businesses responsibility to provide satisfactory evidence of an item’s eligibility for the scheme. A list of ineligible goods can be found in Notice 718 The VAT Margin Scheme and global accounting.