JTC NEWSLINE

The Construction Industry Joint Taxation Committee JTC

Issue 135 February 2020

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Continued overleaf

The wheels at HMRC grind slowly but they grind fine. They have now started the publicity to warn everyone about the start of reverse charge VAT on 1 October 2020. This is extremely unlikely to be delayed again. You must find out about it.Tip 1: Collect the VAT numbers and UTRs of your regular customers from now on. Tip 2: Tell your VAT registered subcontractors that you will not pay them VAT after 1 October 2020. Tip 3: Find out if your accounting software can cope with reverse charge VAT, if it can, learn how it would work, if it cannot cope, upgrade. Talk to your software supplier.Tip 4: Learn what your reverse charge invoices will look like. Can you prepare a reverse charge invoice? Can you print one ready to send? Print a specimen of a reverse charge invoice and check you like the format and that it works.Tip 5: Watch out for your HMRC letter (right), it will arrive any day now. Puzzle out how the flow chart works. It is a strange layout and I will send a better one as we get closer to the start. Look at it and discuss it with anyone in construction you know. The more we talk and think the better prepared we will be. A full size copy of the letter is included at the end of this issue of newsline. n

VAT reverse charge

If you have a query on any item in newsline contact Tel: 020 8874 4335 or liz@thetaxbridge.com

Many people are still to submit their tax return for 2018/2019, they have missed the deadline of 31 January 2020. What penalties are due for outstanding tax returns? What penalties are due for late payment?Tax penalties apply for the late filing of tax returns and further penalties for late payment of tax due. There may also be penalties for failure to notify chargeability and for error if there is a mistake in a return.

It is worth noting that the late filing penalty is not reduced even if your tax is paid on time. There are also penalties for late payment, failure to notify, and errors in a return but all these are tax geared: if no tax is due or outstanding, no penalty applies.Late filing penalties can be mixture of fixed-rate and tax geared penalties: it depends on your degree of lateness and tax liability.Interest is charged on both unpaid tax and unpaid penalties.

Late payment: Time to pay agreementsIf you make a time to pay agreement with HMRC the penalty is suspended. You will become liable to the penalty if the suspension agreement is broken.Appealm The taxpayer has 30 days to lodge an appeal with HMRC against a tax penalty.m A late appeal may be accepted at the discretion of HMRC or the tribunal judge.The legislation relevant to each type of penalty provides for the appeal process and it is advisable first off to ensure that any penalty charged has been made correctly according to the legislation.HMRC will not challenge any late filing penalty appeal provided that there is a reasonable excuse for late filing and that an appeal has been made. n

JTC NEWSLINEIssue 135:February 2020

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Penalties: self-assessment late filing, payment, notification & error

Late filing and payment penalties: at a glance

Late filing Late payment

Penalty

Missed filing deadline

£100

30 days late 5% of tax due3 months late Daily penalty £10 per day for up to 90 days (max £900)6 months late 5% of tax due or £300, if greater*

6 months late 5% of tax outstanding at that date12 months late 5% or £300 if greater*, unless the taxpayer is held to be

deliberately withholding information that would enable HMRC to assess the tax due.

12 months late

5% of tax outstanding at that date

12 months late & taxpayer deliberately withholds information

Based on behaviour:m deliberate and concealed withholding 100% of tax due, or £300 if greater.m deliberate but not concealed 70% of tax due, or £300 if greater.Reductions apply for prompted and unprompted disclosures and telling, giving and helping.

JTC NEWSLINEIssue 135: February 2020

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I hope that your firm has some grasp on the changes to the off-payroll working rules and has been doing the CEST tests for all those people who are not on your own PAYE roll but whose faces you know and who work for you regularly on arrangements that look and feel as if they might be akin to employed terms.If you do a CEST test for someone and it shows that they should be working as an employee you are obliged to tell the firm you pay for their services the results of the CEST test. If the firm you are paying is a Personal Services Company which belongs to the worker you are the fee payer and you must apply PAYE to the payments.If you do not know whether the business you are paying is the PSC of the worker, ask when sending the results of the CEST test. Are you the PSC of MR XXXX? Apply PAYE within 45 days if you hear nothing.If they are not the PSC of the worker they must give you reliable reassurance that either they or some other fee payer in the chain is applying PAYE.

Remember if someone doesn’t apply PAYE or you are misled, the liability becomes yours. n

CEST test anyone not on your payroll who;m drives your vehicles,m wears your logos on their work clothes,m has your firm named on their business card,m has a desk or workstation in your offices,m might describe themselves as your worker,m you might call your worker,m has no other employer to the best of your knowledge, or one other,m previously worked for you in PAYE,m you know is working for his own limited company,m you interviewed them and asked them to work for you,m you train,m you pay holiday pay to,m works for you in a regular pattern, for example one day a week.

Off-payroll working

Late filing exampleIn January 2020 Shane goes to Spain on holiday, he has prepared his 2018/19 tax return but forgets to file it because he can’t find his passwords in the rush to go away. He has a tax liability of £100.

He files his return on 1 February 2021 a year and a day too late because it is only when filing his 2019/20 that he realises what has happened. He has been ignoring letters from HMRC because he remembers preparing the return. The HMRC sends him notification of penalties as follows

Trigger date PenaltyMissed filing deadline: 31 Jan 2020

£100

Unfiled after 3 months: deadline 30 April 2020

£10 per day for 90 days

Unfiled after 6 months: deadline 31 July 2020

£300* reduced to £100

Unfiled after 12 months: deadline 31 Jan 2021

£300* reduced to £nil

*The penalties for being 6 months late and 12 months late are subject to a rule which says that taken together they should not exceed 100% the tax due.

The best help comes from https://www.gov.uk/guidance/fee-payer-responsibilities-under-the-off-payroll-working-rules

Late payment exampleMichael is due to make a balancing payment of £10,000 in income tax under self-assessment for the 2018/19 tax year; it fell due for payment on 31 January 2020.If the tax was not paid penalties accrue as follows:

Trigger date PenaltyUnpaid by midnight 2 March 2020 £500 (5%)Unpaid by midnight 1 August 2020 £500 (5%)Unpaid by midnight 1 February 2021 £500 (5%)