Considering Brexit changes
The UK officially left the EU on 31 January 2020, and the subsequent transitional period ended on 1 January 2021. Firms doing business with the EU now must make vital changes in order to continue to trade.
In regard to VAT, the UK left the EU VAT Territory on 31 December 2020. Great Britain (England, Wales and Scotland) is no longer subject to EU VAT legislation. Northern Ireland, however, remains subject to such legislation in relation to transactions involving goods, but not for services.
Goods purchased from EU member states are now treated as imports. VAT on acquisitions is no longer declared in Box 2 of the VAT return. Postponed Accounting, a new system, applies to imports from around the world (excluding certain imports – for example, low-value consignments). Using Postponed Accounting, import VAT can be deferred and declared to HMRC in Box 1 of the VAT return for the period of importation. Box 4 on the return should be used to reclaim VAT. This is subject to the usual rules for reclaiming input tax. Further information can be found here.
Goods sold to business customers in EU member states are treated as exports. Provided certain conditions are met, exports are zero-rated.
The UK now operates a full, external border with the EU. New border controls on imports from the EU to Great Britain are being introduced gradually. Customs declarations for goods which are not controlled are delayed until 30 June 2021.
New rates of Customs Duty for imports apply where the UK has not agreed a trade deal with a particular jurisdiction. These are set out in the UK Global Tariff. In principle, trade in goods between the UK and the EU are tariff-free. To check the tariffs that apply to different categories of imported goods, please see here.
Making use of NIC-saving strategies
When extracting profits from your business, the tax-efficient use of benefits can save income tax and may also reduce your national insurance contribution (NIC) liability.
Some strategies which could help to save NICs include:
- increasing employer contributions into company pension schemes (within the prescribed limits)
- utilising share incentive plan
- paying dividends instead of bonuses to owner-directors; an
- paying a bonus in place of an increased salary to reduce employee NICs.
We can provide advice on all aspects of tax planning – please get in touch with us for more information