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Welcome to November’s Tax Centre of Excellence (Tax CoE) Customer Bulletin. The following aims to provide a snapshot of tax news/updates and signpost to more information where relevant. The Tax CoE is a central resource for tax advice and services available to the public sector. We can provide advice on a wide range of complex tax matters not limited to topics discussed here.
For more information please visit our website on OneFinance. Note that you need to register on OneFinance to access the content but this is a quick and easy process. If you have any issues getting access to OneFinance then please contact us. Quick tip - you can click “Add notification” on any page to receive alerts when our guidance is updated.
Tax Centre of Excellence VAT Forum
Notes from the previous VAT forum, held on 8 July are available on our website. This includes some important HMRC updates to the original responses provided in the Q&A session so please take the time to read these.
The Tax CoE will be hosting the next VAT Forum on Tuesday 14 December 2021. This will be an online session, open to tax practitioners across government and the public sector. The agenda for the forum will be shared nearer the time.
New working group formed between Tax CoE, HMRC and HMT
The Tax CoE, HMRC and HMT have formed a new working partnership, involving key personnel from HMT, HMRC Compliance and Policy Teams, the Tax CoE as well as colleagues from the NHS Sector. The group meets regularly to discuss changes to and key issues that impact the public sector. By bringing together stakeholders that own the rules, enforce the rules and better understand the practical difficulties of these rules, the aim is to improve understanding through better guidance that will ultimately result in increased compliance and an applied consistency across the sector as a whole.
Having previously produced new guidance for those organisations that engage with the Government Property Agency, our current areas of focus include: Section 41 reform; an interim review of COS Heading 14 (IT Services); and providing supplementary guidance for COS headings 52 (professional advice and opinion) and 65 (training).
HMRC update for public bodies on public sector VAT reform
HMRC have recently issued the following update in response to questions from various bodies who recover COS VAT under Section 41(3) VAT Act, about the status of the reform, including its scope and potential timings for implementation if reform is to take place. Although planning is still ongoing between HMT and HMRC, they have prepared a brief update below for circulation:
- HMT and HMRC are grateful for the continued engagement from relevant bodies on potential reform to Public Sector VAT refunds.
- As noted in our response paper, further work is required to ensure that we have considered all potential issues with regards to the full refund model before a decision is taken on implementing the reform.
- However, to provide clarity, we can confirm that any potential reform would not be implemented within this parliament (i.e. before 2024-25).
We can also confirm that, following engagement on this issue, we will consider S33E bodies as part of future potential reform, rather than leaving them out of scope.
Finance Bill 2022 draft legislation
The Finance Bill 2021-22 was published on 4 November. Details can be found on gov.uk with the Finance Bill 2021 -22 and explanatory notes on the Parliamentary website. Amongst other things, it includes reform to the basis period approach for income tax for the self-employed, clamping down on promoters of tax avoidance, changes to the “Pension Scheme Pays” reporting and payment deadlines and an increase to the Normal Minimum Pension Age.
HMRC publish TIIN on health and social care levy
HMRC have published a Tax Information and Impact Note (TIIN) covering the new health and social care levy. This measure provides a temporary 1.25% increase to the main and additional rates of Class 1, Class 1A, Class 1B and Class 4 National Insurance contributions for the 2022/23 tax year. Revenue raised will fund NHS and equivalent bodies across the UK. From April 2023, this temporary measure will be replaced by a new 1.25% Health and Social Care Levy which will be used to fund UK health and social care bodies.
Direct Tax Technical Sessions – Overseas Workers and Pensions Taxation
Recordings are available on our website of the previous two technical calls held on 28 September and 26 October which were focused on:
- Tax issues relevant to overseas workers; and
- pensions taxation (to be published very soon).
Informal payrolling of benefits in kind
HMRC have confirmed in their August Employer Bulletin that they will only accept new informal payrolling arrangements for benefits-in-kind during the 2021-22 tax year. As informal arrangements can only be in place for a maximum of one tax year, this essentially means that any organisations that previously used informal payrolling arrangements are expected to register for formal payrolling of benefits before April 2022 for the 2022-23 tax year.
We would encourage all organisations to consider whether they are currently payrolling any benefits-in-kind without a formal arrangement in place.
VAT rate for hospitality, holiday accommodation and attractions
On 1 October 2021, a new VAT rate of 12.5% was introduced for supplies relating to hospitality, hotel and holiday accommodation and admissions relating to certain attractions. In relation to these supplies, the following VAT rates apply:
- A temporary reduced rate of 5% for supplies made between 15 July 2020 and 30 September 2021; and
- a new rate of 12.5% for supplies made between 1 October 2021 and 31 March 2022.
HMRC guidance on this can be found here. The Tax CoE website also has some guidance, including implications and next steps in relation to implementing the temporary reduced rate.
Off-payroll Worker Rules – HMRC Webinars
HMRC are holding a webinar on Contracted out Services and Statements of Work on 15, 16 and 18 November. This webinar will explain HMRC’s view on what constitutes a fully contracted out service and the effect of statements of work in the context of the off-payroll working rules. You can register here to join the webinar.
You can also access a series of pre-recorded HMRC webinars covering various aspects of off-payroll worker rules on gov.uk.
New HMRC guidance for businesses using temporary workers
We would encourage all organisations that use temporary workers to familiarise themselves with HMRC’s new guidance on supply chain due diligence and how to spot non-compliant umbrella companies.
There are potential consequences for end-clients that use non-compliant supply chains including tax compliance checks, penalties, tax liabilities and reputational damage.
HMRC Employer Bulletin
HMRC have issued their October 2021 Employer Bulletin. This issue covers a wide range of updates on tax matters and it is important to read and understand these.
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