Government are considering an extension of the VAT reverse charge to include the construction sector. The reverse charge process places the responsibility for paying VAT on the customer instead of the supplier. In their explanatory notes on this topic HMRC said:

What is being done and why

7.1 This instrument, with effect from the 1st October 2019, applies a reverse charge to certain supplies of construction services in order to remove the opportunity for missing trader fraud in the construction sector.

7.2 Missing trader fraud is an organised criminal attack on the VAT system. The fraud is perpetrated through transaction chains in certain business sectors with the loss occurring when the VAT charged by the supplier is not paid to HMRC but is retained by the recipient.

7.3 This type of fraud has been used by criminals to steal billions of pounds in VAT from governments throughout the European Union, both in relation to domestic supplies such as construction services, and also in connection with cross-border intracommunity trading in goods such as mobile telephones, computer chips and emissions allowances. A reverse charge for mobile telephones and computer chips was introduced with effect from 1st June 2007 and one for emissions allowances was introduced with effect from 1st November 2010. Further reverse charge measures were introduced for gas and electricity with effect from 1st July 2014 and for electronic communications with effect from 1st February 2016.

7.4 Construction services have been targeted by criminals because labour-only suppliers in the sector do not incur any significant VAT on their costs but can charge VAT to customers and then go missing, keeping the VAT for themselves. This instrument makes the reverse charge apply to construction services which, for these purposes, have been defined consistently with the activities covered in the Construction Industry Scheme. This is a statutory scheme which is concerned with tackling the risk of direct tax fraud in the construction industry.

7.5 The risk of fraud in the construction industry is principally centred around the supply of construction services between construction businesses in the supply chain and this instrument, therefore, does not require other types of business to apply the reverse charge when receiving construction services and there is also no reverse charge requirement in relation to building and construction materials that are supplied separately and independently of construction services.

7.6 Reverse charge accounting makes it impossible for fraudsters to perpetrate missing trader fraud because the customer rather than the supplier accounts for the VAT direct to HMRC.

7.7 The introduction of the reverse charge in this business sector will mean that businesses will need to adapt their systems and manage their cash flow differently. Due to the large number of small businesses potentially affected by a reverse charge TNA/EM/10-2015.1 3 for construction services the government has given a long lead-in time to help businesses

There are a number of obligations that business owners should be aware, that involve them informing HMRC of changes to their business circumstances. In some cases, failure to comply may result in fines.

We have paraphrased some of occasions when you will need to advise HMRC:

• You must tell HMRC if you decide to change the legal structure of your business, for example if you become a limited company or set up a partnership.
• you’ll need to tell HMRC if you stop being self-employed or close a limited company. To close a partnership, the nominated partner needs to report this on the final partnership tax return.
• You don’t need to tell HMRC a partner is joining or leaving unless the partnership is VAT-registered. If your partnership is VAT-registered, you must tell HMRC when a partner joins or leaves within 30 days – you can be fined if you don’t.

If a partner dies or becomes bankrupt you must:

• If there are 2 partners, the partnership will be automatically dissolved. The remaining partner must re-register for Self-Assessment as a sole trader.
• If there are more than 2 partners, the partnership will be dissolved unless the partnership has agreed otherwise.
• If the nominated partner dies, the partnership must nominate another partner and tell HMRC as soon as possible. If they don’t, HMRC will nominate one and write to the partnership. That partner must then complete any outstanding partnership tax returns.

Additionally, if you start to employ staff you must register as an employer with HMRC.

VAT imposes a number of obligations. You will need to advise HMRC of changes to your turnover, businesses activity or if you become a member of a VAT group, and in most cases, you must tell them, within 30 days of the change.

Readers who are clients can be reassured that will do this for them (as long as we are given the facts). If you are concerned that you may have changes to disclose, please call and we will deal with this for you.

1 June 2018 – Due date for Corporation Tax due for the year ended 31 August 2017.

19 June 2018 – PAYE and NIC deductions due for month ended 5 June 2018. (If you pay your tax electronically the due date is 22 June 2018)

19 June 2018 – Filing deadline for the CIS300 monthly return for the month ended 5 June 2018.

19 June 2018 – CIS tax deducted for the month ended 5 June 2018 is payable by today.

1 July 2018 – Due date for Corporation Tax due for the year ended 30 September 2017.

6 July 2018 – Complete and submit forms P11D return of benefits and expenses and P11D(b) return of Class 1A NICs.

19 July 2018 – Pay Class 1A NICs (by the 22 July 2018 if paid electronically).

19 July 2018 – PAYE and NIC deductions due for month ended 5 July 2018. (If you pay your tax electronically the due date is 22 July 2018)

19 July 2018 – Filing deadline for the CIS300 monthly return for the month ended 5 July 2018.

19 July 2018 – CIS tax deducted for the month ended 5 July 2018 is payable by today.

HMRC will consider extended options for settling your outstanding tax bill. The key is to contact HMRC, explain why you can’t pay on time, and discuss how you can settle any outstanding liabilities.

If you can’t pay before the deadline, call the Business Payment Support Service. Anyone can use this service, not just businesses.

Business Payment Support Service
 

Telephone: 0300 200 3835
Monday to Friday, 8am to 8pm
Saturday and Sunday, 8am to 4pm
 

Nominated partners in business partnerships can negotiate time to pay with HMRC on behalf of the partnership or individual partners.

If you’ve missed your payment date

If you’ve received a payment demand, like a tax bill or a letter threatening you with legal action, call the HMRC office that sent you the letter.

Call the Business Payment Support Service if you haven’t received a bill or letter about payment yet.

Self-assessment

Call the Self-assessment helpline if you’ve missed your payment date.

Telephone: 0300 200 3822
Monday to Friday, 8am to 8pm
Saturday, 8am to 4pm

The following definitions should help to clarify employee and employer rights and responsibilities regarding entitlement to holiday pay.

Almost all workers are legally entitled to 5.6 weeks’ paid holiday per year (known as statutory leave entitlement or annual leave). An employer can include bank holidays as part of statutory annual leave.

Most workers who work a 5-day week must receive at least 28 days paid annual leave per year. This is the equivalent of 5.6 weeks of holiday.

Part-time workers are entitled to less paid holiday than full-time workers. They are entitled to at least 5.6 weeks of paid holiday but this amounts to fewer than 28 days because they work fewer hours per week.

Statutory paid holiday entitlement is limited to 28 days, and so staff working 6 days a week are still only entitled to 28 days’ paid holiday.

Bank holidays or public holidays do not have to be given as paid leave. An employer can choose to include bank holidays as part of a worker’s statutory annual leave. An employer can also choose to offer more leave than the legal minimum. They don’t have to apply all the rules that apply to statutory leave to the extra leave. For example, a worker might need to be employed for a certain amount of time before they become entitled to the additional entitlement.

Additionally, workers have the right to:

• get paid for leave;

• build up (‘accrue’) holiday entitlement during maternity, paternity and adoption leave;

• build up holiday entitlement while off work sick;

• request holiday at the same time as sick leave.

Paid annual leave is a legal right that an employer must provide. If a worker thinks their right to leave and pay are not being met there are a number of ways to resolve the dispute.