Just a reminder that the PAYE thresholds, National Insurance thresholds and the Minimum Wage all increase from 01/04/2021.
The HMRC page on this is here: https://www.gov.uk/guidance/rates-and-thresholds-for-employers-2021-to-2022
In the Budget last week there were three points that are relevant for small businesses:
There is a new VAT scheme for contractors and sub-contractors from the 1st of March 2021, called the Domestic VAT Reverse Charge procedure.
Please note this only applies where the CIS scheme already applies, and where:
It doesn’t apply where you are providing services to the end user (typically the customer).
In summary it means that instead of the contractor paying the amount of the sub-contractor’s invoice in full (including the VAT) to the sub-contractor, the contractor will pay the sub-contractor the amount net of VAT, and then pay the VAT element over to HMRC direct. This is the same principle as happens now with the 20% income tax under CIS.
There is a straightforward guide to how this will work: https://www.tide.co/blog/business-tips/vat-reverse-charge/. It explains the basics well. Please note I have linked to this website as an aide, and I do not intent to breach copyright on the article.
If you are the sub-contractor sending your invoice to a contractor, then ideally your invoice going forward needs to include one of these three wordings:
There should be no impact on your profit and loss because of this change, it’s simply about paying the cash to different places.
There is more guidance on HMRC’s website.
I feel that I am in a lull between two storms at the moment. We have battled through the first HMRC tempest of COVID-19, helping clients through furlough and the Coronavirus Job Retention scheme, and the Self-Employment Income Support Scheme. I am now just waiting for the second stage of the Coronavirus Job Retention scheme which is more complicated. Still I like a challenge...