Tax warning for Midlands businesses
Businesses across Coventry and Warwickshire are being urged to prepare for major law changes that could impact their cash flow.
Leading Midlands law firm Wright Hassall has highlighted the key legislative changes that are set to come into force for businesses during 2021 - with a particular focus on tax.
From April 2021 all private sector companies must comply with IR35 rules in line with the public sector. This is where the onus will be on private sector companies to determine whether individual contractors that they employ via an intermediary should be classed as an ‘employee’ for tax purposes. As a result, private sector companies will be responsible for an individual contractors’ income tax and National Insurance.
There are significant consequences for construction sub-contractors, too, as they will no longer be able to collect VAT up front. Instead, the customer will be responsible for paying VAT to HMRC. This is known as the VAT Reverse Charge, and will come into effect from 1 March 2021.
Another critical change that businesses are still adapting to is a change in liability for paying VAT under new Brexit rules. One of the most widely reported changes is the requirement for VAT on goods worth £135 to apply at the point of sale, rather than point of importation – and the seller is responsible for accounting for the VAT. This has particular resonance for online marketplaces which act as the ‘de facto’ seller and so will be responsible for accounting for VAT.
Sarah Perry, Managing Partner at Wright Hassall, said: “These upcoming legislative changes underline why it is so important for businesses to be seeking regular professional advice – and not just because of the pandemic.
“Other changes are likely to be in the pipeline. Many eyes will be on the Chancellor’s Budget on 3 March, where, according to observers, there may be a one-off wealth tax – including changes to capital gains tax, entrepreneur’s relief and inheritance tax – to get the country’s finances under control.
“Getting caught out by a change in legislation is the last thing that businesses need whilst trying to recover from the pandemic, so it’s important that business owners take some time out of their day-to-day commitments to prepare for the year ahead from a regulatory perspective.”
