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Archive for September, 2020

Reverse VAT for construction firms delayed until March

 

The start of a new scheme for the way construction firms handle their VAT for certain kinds of services has been pushed back from October 2020 until March 2021 due to the Covid-19 pandemic.

The VAT Domestic Reverse Charge for Building and Construction Services means contractors will be required to pay the VAT directly to HMRC on the construction services provided by their sub-contractors. 

It’s an important change and one which businesses need to be fully aware of. It will make the process more complicated for firms employing sub-contractors but easier for the sub-contractor.

The deferment of the scheme, which is basically an extension of the current Construction Industry Scheme, will give companies additional time to understand and comply.

What does it mean?

The scheme will apply to transactions between VAT-registered contractors and their sub-contractors, with those providing construction services no longer being responsible for the VAT – that responsibility switches to the contractor.

It’s basically a major overhaul of the way VAT is paid on construction and building invoices and is seen as an important move to cut down on fraud in the industry. So, in simple terms, it’s the customer receiving the service who will need to pay the VAT directly to HMRC from March instead of paying the supplier, if they report under the Construction Industry Scheme.

Exclusion rules

There is an exception which is worth knowing about but, in order to comply, businesses must inform sub-contractors in writing that they are intermediary suppliers or end users in order to fulfill the requirement of being excluded from the reverse VAT charge scheme. 

This brings clarity and certainty in ensuring that both parties are left in no doubt whether or not the supply is excluded from the reverse charge.

Providing businesses follow this procedure and register their status, they will have the reassurance of knowing that they have headed off any potential challenge from HMRC.

HMRC says it is committed to identifying and tackling construction supply chain fraud and is providing support and guidance on the changes before they come in next March. It is hoped that by raising awareness now, everyone affected by the VAT Domestic Reverse Charge will fully understand what is required and not be caught out.

Clear as mud??

If you have any concerns or questions about the reverse charge, please give us a call on 01952 216872 or email us at info@kewaccountants.co.uk

Record-breaking rise in business start-ups a cause for optimism?

We love working with new businesses – and it’s been really encouraging to see such a growth in new business start-ups in the wake of the coronavirus outbreak.

Indeed, according to the Centre for Entrepreneurs think tank, the West Midlands is leading the way with a record-breaking 60% rise in business formations in June 2020.

Our own experience here at KEW Accountants is that there has been a clear surge in people setting up their own businesses since the lockdown.

Should I set up a business now?

It’s a natural question to ask, and from speaking to our range of new clients there does seem to be some common themes about why the coronavirus lockdown has led to a big growth in new businesses being established.

Firstly, it’s a sad fact that there have been some redundancies over the past few months. Redundancy can be viewed quite differently by different people – for some it’s a disaster, but for others it can be a release and a chance for a fresh start.

It certainly seems to be the case that a lot of people have seen it as the chance to make that leap and set up on their own.

The other recurring theme amongst our new clients is that the lockdown gave them a chance to take some time out and take stock. Was their job fulfilling? Was it what they wanted to be doing for the rest of their working life?

For those who were furloughed, having an extended period of time away from work really made them evaluate their priorities – and for a lot of people that meant stepping away from their jobs and starting their own business.

A trend across the UK?

According to figures compiled by the Centre for Entrepreneurs, using Companies House data, the growth in new businesses has been seen all over England, but less so in Wales and Scotland.

Despite a drop from March to May, a record-breaking number of registrations in June was a clear indication of recovery.

Business formations dropped year-on-year by 19% in March, 29% in April, and 3% in May, before growing 47% in June. The whole of the UK saw growth in June, with the West Midlands and London leading with 60% increases.

The devolved nations experienced the sharpest fall in formations during lockdown and the slowest recovery in June. Scotland and Northern Ireland are down nearly 20% year-on-year, while Wales is down 11%.

Despite these major drops, overall startup figures between March and June are down by only 3%, and London actually emerged from lockdown with 6% more new businesses than the same period last year.

Need help setting up a business?

We specialise in helping new businesses – whether it’s setting up your finances or deciding whether to be a sole trader, partnership or limited company, it’s vital to get everything right at the outset.

Get in touch for a friendly chat and we’ll go from there! Give us a call on 01952 216872 or email info@kewaccountants.co.uk