Steps have been taken to simplify VAT guidance for overseas sellers that sell goods online into the United Kingdom to help reduce the tax gap.

The guidance published by HMRC, Selling goods using an online marketplace or direct to customers in the UK, has also been translated into simplified Mandarin to support sellers exporting goods from China to comply with UK import and VAT regulations.

In 2022, the UK imported £83.3 billion in goods and services from China and Hong Kong. Online shopping accounted for 26.5 per cent of all UK retail sales in 2022, with a substantial number of goods being bought from international sellers via online marketplaces.

Marc Gill, HMRC’s Director for Individuals and Small Business Compliance, said: “We have been working closely with international partners to better understand what information overseas sellers need in order to comply with their UK tax obligations.”

HMRC is encouraging UK agents and shipping companies to share the simplified guidance with their customers.

The information explains when and how VAT and import duties must be charged to customers by international sellers. It explains the different processes for direct to customer sales, and for sellers using online marketplaces.

“We have acted on feedback from businesses to simplify and compile this online guidance into one, easily accessible place on GOV.UK. We have also recently published a simplified Mandarin translation of our guidance following research conducted with Chinese businesses.

“By making our VAT and import duty rules easier to understand, we will be able to increase tax compliance levels for online sellers. We are asking UK freight, customs and shipping agents to help us reduce the tax gap by sharing this simplified guidance with their customers. By working together, we can help everyone pay the right amount of tax at the right time.”

HMRC’s updated guidance has been published following detailed consultation and research with overseas sellers and brings together all relevant guidance in one place on GOV.UK. By making the process clearer and easier to follow, it will support overseas sellers to comply with their tax obligations and help HMRC to reduce the tax gap.

In 2018, HMRC signed an updated Memorandum of Understanding (MOU) with the General Administration of Customs China (GACC). During the 10th UK-China Economic and Financial Dialogue in 2019, HMRC agreed to provide Chinese businesses with appropriate tax and customs guidance.

In 2020, HMRC commissioned research with Chinese online sellers. The report, Knowledge and attitudes of online sellers in China to UK tax compliance, was published in 2021. Recommendations from that research led to the development of new guidance and its translation into simplified Mandarin.

• If you need any help with VAT, get in touch and we will help.

The biting cost of living crisis and yet another rise in interest rates means families need all the financial help they can get.

With the Easter school holidays nearly here, HMRC is reminding mums and dads not to miss out on Government help to pay for childcare to help lift some of the burden.

Tax-Free Childcare can pay for any approved childcare for children aged 11 or under, or 16 if the child has a disability. More than 405,000 families used the scheme in December 2022, with each benefitting from a share of £41.5 million in government top-ups.

Victoria Atkins, Financial Secretary to The Treasury, said: “Tax-Free Childcare provides extra help with childcare costs which could make all the difference to working families and make childcare expenses more manageable. I would urge families to go online today to find out how it can help you.”

Working families, where each parent or carer earns up to £100,000, can use it, meaning for every £8 paid into an online account they will receive an additional £2 from the Government. This means parents and carers can receive up to £500 every three months (£2,000 a year for each child), or £1,000 (£4,000 a year for each child) if their child is disabled.

for every £8 paid into an online account they will receive an additional £2 from the Government. This means parents and carers can receive up to £500 every three months (£2,000 a year for each child), or £1,000 (£4,000 a year for each child) if their child is disabled.

Whether children go to nursery, a childminder, attend breakfast, after school or holiday clubs, as well as out of school activities, Tax-Free Childcare could be used.

Myrtle Lloyd, HMRC’s Director General for Customer Services, said: “Childcare is so important for working families, especially during school holiday time. Tax-Free Childcare provides financial support when it’s needed the most. Search ‘Tax-Free Childcare’ on GOV.UK to find out how it could help you.”

A Tax-Free Childcare account can be opened online in just 20 minutes. Money can be deposited at any time to be used straight away, or whenever it is needed. Unused money in the account can be withdrawn at any time.

Families could be eligible for Tax-Free Childcare if they:

• have a child or children aged 11 or under. They stop being eligible on 1 September after their 11th birthday. If their child has a disability, they can receive support until 1 September after their 16th birthday
• earn, or expect to earn, at least the National Minimum Wage or Living Wage for 16 hours a week, on average
• each earn no more than £100,000 per annum
• do not receive tax credits, Universal Credit or childcare vouchers

A full list of the eligibility criteria is available on GOV.UK.

Also, check GOV.UK to find out what other cost of living support, including help withchildcare costs , families could be eligible for.

As a new tax year approaches, business owners need to prepare their payroll and ensure compliance with the latest tax laws and regulations.

April is also an excellent time for businesses to review their financial situation, identify areas for improvement, and plan ahead.

Here are some essential tasks for the start of the new tax year:

1. Review and update employee information

Before the start of the new tax year, business owners should review and update employee information, such as contact details, pay rates, and tax codes. This will ensure that the payroll is accurate and up-to-date.

        2. Check tax codes

HM Revenue and Customs updates tax codes annually, and business owners must ensure that the correct tax code is used for each employee. This can affect the amount of tax deducted from their pay, so it’s essential to review this information carefully.

        3. Check for changes in National Insurance contributions

The National Insurance contribution rates and thresholds change every year, so it’s important to check these and ensure that the correct amounts are deducted from employees’ pay.

        4. Review pension contributions

Employers are required to make pension contributions on behalf of their employees, and these rates can change from year to year. It’s essential to review and update the pension contributions to ensure compliance with the latest regulations.

         5. Complete payroll year-end tasks

Before the start of the new tax year, business owners need to complete payroll year-end tasks, such as issuing P60s to employees and submitting the final Full Payment Submission (FPS) to HMRC.

It’s also an excellent time for business owners to review their financial situation, identify areas for improvement, and plan ahead. Here are some essential steps business owners should take at the start of the new tax year.

1. Review and update financial records

Take the opportunity to review and update financial records, including income and expenses, bank statements, receipts, and invoices. Keeping accurate financial records is crucial for meeting tax obligations and making informed business decisions.

        2. Set financial goals and budgets

Business owners should use the start of the new tax year to set financial goals and budgets for the coming year. This could include revenue targets, expense reductions, or investment plans. Having clear financial goals and budgets can help business owners make informed decisions about spending, pricing and investment.

         3. Understand tax changes

Each new tax year brings changes to tax laws and regulations. Business owners should familiarise themselves with any tax changes that may affect their business, such as changes to tax rates, allowances, or deductions. Seeking advice from a tax professional can help ensure that businesses are fully compliant with tax laws and regulations.

         4. Plan for pension contributions

The new tax year is also an excellent time to plan for pension contributions. Business owners should consider whether they are making the maximum contributions possible and whether there are any changes to contribution limits or tax relief. Pensions are an essential aspect of retirement planning, and ensuring adequate contributions are made can provide future security.

The start of April is a pivotal time of the year for business owners. Just as individuals make new year resolutions on January 1, companies can make their own resolutions on April 6.

• If you need any help with planning for a new tax year, get in touch and we will help.

A £27 billion tax cut for business to drive investment and growth featured among the headlines of Jeremy Hunt’s Spring Budget.

A ‘full expensing’ policy introduced from 1 April 2023 until 31 March 2026 and an extension to the 50 per cent first-year allowance in the same period is a transformation in capital allowances which will benefit businesses over three years.

Aimed at achieving long-term, sustainable economic growth that delivers prosperity, the Spring Budget focused on breaking down barriers to work, unshackling business investment and tackling labour shortages head on.

Chancellor of the Exchequer, Jeremy Hunt said: “Our plan is working – inflation falling, debt down and a growing economy.

“Britain is on a lasting path to growth with a revolution in childcare support, the biggest ever employment package and the best investment incentives in Europe.”

Childcare bonus

The Chancellor announced 30 hours of free childcare for every child over the age of nine months, with support being phased in until every single eligible working parent of under 5s gets this support by September 2025.

The Government will also pay the childcare costs of parents on Universal Credit moving into work or increasing their hours upfront, rather than in arrears – removing a major barrier to work for those who are on benefits. The maximum they can claim will also be boosted to £951 for one child and £1,630 for two children – an increase of around 50 per cent.

The Chancellor went on to set out plans to continue to support households with cost-of-living pressures, including keeping the Energy Price Guarantee at £2,500 for the next three months and ending the premium that over four million households pay on their prepayment meter, bringing their charges into line with comparable customers who pay by direct debit.

Taken together with all the Government’s efforts to help households with higher costs, these measures bring the total support to an average of £3,300 per UK household over 2022-23 and 2023-24.

Fuel duty rise cancelled

To help household budgets further, the planned 11 pence rise in fuel duty will be cancelled, maintaining last year’s 5p cut for another 12 months, saving a typical driver another £100 on top of the £100 saved so far since last year’s cut.

The Chancellor also set out a comprehensive plan to remove the barriers to work facing those on benefits, those with health conditions and older workers.

An increase in the pensions Annual Allowance from £40,000 to £60,000 and the abolition of the Lifetime Allowance will remove the disincentives to working for longer.

A new ‘Returnerships’ skills offer for older workers and more stringent Universal Credit job search requirements also feature in the plan that will boost the UK’s workforce, fill vacancies and support economic growth.

Boost for business growth

In line with the government’s vision for the UK to be the best place in Europe for companies to locate, invest and grow, a new policy of ‘full expensing’ will be introduced for the next three years to boost business investment in an effective cut to corporation tax of £9 billion per year. This makes the UK the joint most competitive capital allowances regime in the OECD and the only major European economy to have such a policy.

The independent Office for Budget Responsibility (OBR) forecast that this will increase business investment by three per cent for every year it is in place. Mr Hunt signalled an intention to make this scheme – which covers equipment for factories, computers and other machinery – permanent when responsible to do so.

Accompanying forecasts by the OBR confirm that with the package of measures Mr Hunt set out, the economy is on track to grow with inflation halved this year and debt falling – meeting all of Prime Minister Rishi Sunak’s economic priorities.

• If you are affected by any Budget announcements and would like to discuss them, give us a call.

As expected, the Chancellor, Jeremy Hunt, resisted pressure to reduce taxes in any significant way, and the majority of his announced changes were already in the public domain. According to the Chancellor, the UK economy is on track to grow in the coming year with inflation halving.

We have listed any new variations in the UK tax rates, allowances, reliefs and other matters of interest in the update set out below.

Impact on personal finances

Increase in pensions’ tax support

The present £40,000 cap on annual pension contributions that qualify for Income Tax relief is being increased to £60,000 from 6 April 2023.

The present Lifetime Allowance is being abolished.

Both of these changes are intended to incentivise older employees to continue in work whilst continuing to build additional pension savings.

In addition, the Money Purchase Annual Allowance will increase from £4,000 to £10,000 and the minimum Tapered Annual Allowance will increase from £4,000 to £10,000 from 6 April 2023.

The adjusted income threshold for the Tapered Annual Allowance will also be increased from £240,000 to £260,000 from 6 April 2023.

Childcare support increased

Childcare support in England is being expanded to include children over the age of 9 months. The announcement confirmed 30-hours of free childcare for every child over the age of 9 months, with support being phased in until every single eligible working parent of under 5s gets this support from September 2025.

The changes will be introduced in phases, with 15-hours of free childcare for working parents of 2-year-olds coming into effect in April 2024 and 15 hours of free childcare for working parents of children from 9 months from September 2024.

Parents receiving Universal Credits as well as being in employment will receive financial support to include upfront payment of childcare costs. The maximum they can claim will also be boosted to £951 for one child and £.1,630 for two children – an increase of around 50%

Extension of Energy Price Guarantee

It was announced that the Energy Price Guarantee cap of £2,500 would be extended for the next three months until 30 June 2023. From 1 July 2023 (rather than 1 April 2023 as previously announced), this guarantee will change so that the typical household will pay on average £3,000 a year (an increase of £500).

Also, from 1 July 2023, the government will adjust the Energy Price Guarantee premium that over 4 million households pay for their prepayment meter. This will bring their charges into line with comparable customers who pay by direct debit.

Duties on fuel frozen

The proposed 11p rise in fuel duty will be cancelled thus maintaining last year’s 5p cut for another 12-months.

Draught Relief

Draught Relief has also been significantly extended from 5% to 9.2%, so that the duty on an average draught pint of beer served in a pub, from 1 August 2023, will be up to 11 pence lower than the duty in supermarkets. The commitment to duty on a pub pint being lower than the supermarket has been termed the “Brexit Pubs Guarantee” by the Chancellor, and this change will also be enjoyed by every pub in Northern Ireland thanks to the Windsor Framework.

Access to employment reforms

Major set of reforms to support people into work, removing barriers that stop those on benefits, older workers, and those with health conditions who want to work.

Impact on UK businesses

Full expensing

The major announcement affecting business investment, and to reduce the impact of the forthcoming increase in Corporation Tax from April 2023, is the ability of companies to “fully expense” the purchase of qualifying plant and other equipment.

This will include spending on, but is not limited to, warehousing equipment such as forklift trucks, tools such as ladders and drills, construction equipment such as bulldozers and excavators, machines such as computers and printers, vehicles such as tractors, lorries and vans, office equipment such as chairs and desks, and some fixtures such as kitchen and bathroom fittings and fire alarm systems.

Effectively, qualifying purchases can be written off completely against company taxable profits.

The ‘full expensing’ policy will be introduced from 1 April 2023 until 31 March 2026.

The 50% First Year Allowance (FYA)

This current allowance lets taxpayers deduct 50% of the cost of other plant and machinery, known as special rate assets, from their profits during the year of purchase. This includes long life assets such as solar panels and thermal insulation on buildings.

The 50% FYA was introduced alongside the super-deduction and was due to end on 31 March 2023. It will now be extended by three years to 31 March 2026. For each year following the first year, 6% of the remaining cost will be written off via Writing Down Allowances (WDAs).

The 50% FYA allows for faster relief than under the default WDAs-only regime, which is worth 6% each year, including year one.

As part of his commitment to maintain a stable economy, the Chancellor’s long-term ambition is to make the 50% FYA permanent.

Simplifying tax system

Changes to simplify the tax system of the UK were underlined by a number of changes to positively impact the lives of small business owners. They are:

• Changes to the Enterprise Management Incentives (EMI) scheme from April 2023 to simplify the process to grant options and reduce the administrative burden on participating companies. This includes, from 6 April 2023, removing requirements to sign a working time declaration and setting out details of share restrictions in option agreements.
• Delivery of IT systems to enable tax agents to payroll benefits in kind on behalf of their clients – allowing agents to better support their clients and reducing burdens on employers.
• The government will extend the Help to Save scheme by 18-months, on its current terms, until April 2025. A consultation will also be launched on longer terms options for the scheme.
• Measures to simplify the customs import and export processes, including improvements to the Simplified Customs Declaration Process, and the Modernising Authorisations project.

R&D tax credits

A £500 million per year package of support for 20,000 research and development (R&D) intensive businesses through changes to R&D tax credits was announced. In full, the Chancellor’s announced changes in this important area are:

• The scheme is targeted specifically at loss making R&D intensive SMEs. Focusing support towards those most impacted by the rate changes introduced at Autumn Statement 2022.
• A company is considered R&D intensive where its qualifying R&D expenditure is worth 40% or more of its total expenditure.
• Eligible loss-making companies will be able to claim £27 from HMRC for every £100 of R&D investment, instead of £18.60 for non-R&D intensive loss makers.
• Around 1,000 claiming companies will come from the pharmaceutical and life sciences industry. This will support the development of life saving medicines.
• Around 4,000 digital SMEs will be from the computer programming, consultancy, and related activities sector. This will support the development of AI, machine learning and other digital based technologies.
• Around 3,000 other manufacturing firms, and another 3,000 professional, scientific, and technical activities firms will also qualify for the enhanced support.
• This builds on previously announced changes to support modern research methods by expanding the scope of qualifying expenditure for R&D reliefs to include data & cloud computing costs.
• The permanent increase from 13% to 20% for the R&D Expenditure Credit rate announced at Autumn Statement 2022 also means the UK now has the joint highest uncapped headline rate of tax relief in the G7 for large companies.

Creative sector tax concessions

Newly announced reforms to tax reliefs for the creative sectors will ensure theatres, orchestras, museums and galleries are protected against ongoing economic pressures and will continue to guarantee that more world-class productions are made in the UK.

UK AI research support

£900 million of funding was committed for an AI Research Resource and an exascale computer – making the UK one of only a handful of countries to have one – and a commitment to £2.5 billion ten-year quantum research and innovation programme through the government’s new Quantum Strategy.

Levelling up

The following measures were announced to help level-up growth across the UK:

• Greater responsibility for local leaders to grow their local economy.
• Over £200 million for high quality local regeneration projects in areas of need, from the transformation of Ashington Town Centre to a skills and education campus in Blackburn.
• Over £400 million for new Levelling Up Partnerships for twenty areas in England, such as Rochdale and Mansfield.
• Business rates retention expanded to more areas in the next Parliament.
• Delivering trailblazer devolution deals for the West Midlands and Greater Manchester Combined Authorities that include single multi-year settlements for the next Spending Review, alongside a commitment to negotiate further devolution deals in England.
• 12 Investment Zones across the UK including 4 across Scotland, Wales and Northern Ireland.
• £8.8 billion over the next five-year funding period for a second round of the City Region Sustainable Transport Settlements.

Many of the Budget decisions on tax and spending apply in Scotland, Wales and Northern Ireland. As a result of decisions that do not apply UK-wide, the Scottish Government will receive around an additional £320 million over 2023-24 and 2024-25, the Welsh Government will receive £180 million, and the Northern Ireland Executive will receive £130 million.

Previously agreed changes effective from April 2023

Changes to personal or business finances (from April 2023) that were agreed or announced prior to the Budget presentation by Jeremy Hunt on 15 March are listed below:

• £900 Cost of Living Payment for households on means-tested benefits in 2023-24
• £300 Pensioner Cost of Living Payment in 2023-24
• £150 Disability Cost of Living Payment in 2023-24
• Business Rates: freezing the multiplier in 2023-24
• Business Rates: 75% relief for Retail, Hospitality and Leisure sectors in 2023-24, up to £110,000 cash cap
• Business Rates: three-year transitional relief to limit bill increases at the revaluation
• Business Rates: three-year supporting small businesses scheme for properties losing Small Business Rates Relief or Rural Rates Relief
• Business Rates: delay improvement relief by one year to April 2024
• Business Rates: relief for property improvements from 2024-25
• Income Tax and National Insurance: maintain thresholds at 2023-24 levels until April 2028
• Inheritance Tax: maintain thresholds at current level until April 2028
• Income Tax: reduce the dividend allowance from £2,000 to £1,000 from April 2023 and then £500 from April 2024
• Income Tax: reduce the additional rate threshold from £150,000 to £125,140 from April 2023
• Capital Gains Tax: reduce the annual exempt amount from £12,300 to £6,000 from April 2023 then £3,000 from April 2024
• Vehicle Excise Duty: equalise treatment of electric and internal combustion engine vehicles from April 2025
• National Insurance: maintain the secondary threshold for employer contributions at current level from April 2023 until April 2028
• R&D tax reliefs: rebalance generosity of reliefs from 1 April 2023
• VAT: maintain registration threshold at current level, £85,000 to 31 March 2026
• Van benefit charge: uprate with CPI in 2023-24
• Car fuel benefit charge: uprate with CPI in 2023-24
• First Year Allowance for electric vehicle charge points: extend for a further two years until April 2025
• Pension Credit: uprate Standard Minimum Guarantee by CPI in 2023-24
• Benefit cap levels: uprate by CPI in 2023-24
• Capital Gains Tax: extend the period for no gain/no loss transfers to three years for couples that separate or divorce
• Annual Investment Allowance: permanently set at £1m from April 2023
• Income Tax: basis periods reform for the self-employed from April 2024 with transition year in 2023-24
• Corporation Tax: 19% rate for profits up to £50,000, tapering to main rate of 25% for profits over £250,000, from April 2023

OUR SUMMARY

One thing is for sure, our tax code and the supporting business regulations are becoming more complex in spite of the promoted changes towards simplifying matters.

We encourage readers who are concerned or interested in more information on any of the announcements described in this short update, to pick up the phone to discuss how you may be affected.