Connect with us

Finance

VAT domestic reverse charge set to impact over 1.2 million construction workers from 1st March

Published

on

VAT domestic reverse charge set to impact over 1.2 million construction workers from 1st March 1
  • HMRC’s new VAT domestic reverse charge for building and construction services comes into effect from 1st March 2021
  • Construction firms could see disruption in trader/supplier relationships as well as potential issues with cash flow due to the change

HMRC’s new VAT domestic reverse charge for building and construction services comes into effect from 1st March 2021. With this in mind, specialists from Chartered Accountancy practice, Sheards Accountancy delve into the impact the legislation will have on both the construction and property industries.

The reverse charge will apply to all CIS registered businesses buying and selling construction services that are subject to CIS reporting, apart from those that are zero-rated, up to the point in the supply chain where the customer is the end-user. At this point, the normal reporting and collection of VAT resumes.

Where the reverse charge applies, rather than the supplier charging and accounting for the VAT, the recipient of those supplies accounts for the VAT. In practice, this will mean that where there is a chain of contractors/subcontractors working on a building project, for example, none of those entities will add VAT to their invoices, other than the main contractor who is invoicing the end-user of the property.

Currently, in Great Britain, there are 290,3741 registered construction firms with 1,279,000 people employed in the industry. The construction sector has a monthly output of £14,014 million2 with an average weekly earning in the industry of £6481. But the industry has faced a number of challenges in recent years, which saw 3,502 insolvencies1 in the construction sector in 2019, equating to around a fifth of all insolvencies.

Kevin Winterburn, director at Sheards Accountancy commented: “The changes are a response to what HMRC have described as significant VAT fraud in the industry but they do in a way reflect a lack of trust to those operating in the sector from HMRC. The changes could have huge impacts on a company’s cash flow, so it’s essential that construction workers speak to their advisors, traders and suppliers ahead of 1st March.”

One of the biggest challenges for businesses in the sector is cash flow and a recent survey revealed that 1 in 53 construction companies say cash flow is a constant problem, with 84%4 of construction companies reporting that they had problems with cash flow. When the VAT domestic reverse charge comes into play on the 1st March 2021, experts predict this could have a negative impact on the already stretched cash flow issues in the construction industry, so it’s important for firms to review their existing work pipelines and relationships to prepare for the change.

Specialists from Sheards Accountants share their top considerations to prepare for the VAT domestic reverse charge changes:

  1. From a supplier point of view the legislation change will mean:

  • You will need to continue to validate sub-contractors for CIS purposes as usual
  • You will need to check and validate your CIS services customer’s VAT status
  • You will need to check if you have confirmation that your customer is the end-user – keep a record of it
  • If the customer isn’t VAT registered – no change to the current process, charge 20% VAT on income
  • If the customer is VAT registered but also an end-user – no change to the current process, charge 20% VAT on income
  • If the customer is VAT registered but is not an end-user– reverse charge VAT is applied
  1. From a customer point of view, the legislation change will mean:

  • You will need to inform your supplier whether or not you are the end-user
  • If you are the end-user, you will be charged 20% VAT and you will be able to reclaim it if you are VAT registered
  • If you are not the end-user and the invoice is subject to CIS, the supplier’s invoice should be subject to reverse charge and you can’t reclaim any VAT on it
  1. Review your existing trader relationships. It’s more important than ever to have a clear picture of all the traders and various suppliers you could work with on a project. Reviewing the various traders you will work with ahead of beginning a project will allow you to identify where the VAT should and should not be.

  2. From the 1st March 2021, invoices will have to state that the reverse charge is being applied and no output VAT should be charged. The VAT-registered customers will then need to charge themselves VAT and then claim relief in the normal way. They will do this by using the reverse charge tax rate.

  3. If you are on the flat rate scheme – you may need to leave before 1st March 2021. This should be discussed with your accountant beforehand.

  4. Looking further down the line at work which will begin after the 1st March but which might have already been agreed in contracts, these may need to be reviewed in order to reflect the changes. Contracts should clearly state where VAT is being charged and it’s important that any existing contracts are amended to avoid any issues with payment once a job is complete.

  5. Projects existing prior to 1st of March will need split treatment if they are continuing post 1st of March. If you’re unsure of how to do this, speak to your accountant.

Kevin summarises: “The VAT domestic reverse charge has been a long time coming and it’s something everyone in the industry has been aware of since 2019. But with the 1st March quickly approaching, it’s important for firms in the construction and property industries to start implementing changes to the way they work to make sure they are covered.

“We hope by highlighting the key considerations for everyone in the industry, including suppliers and customers, the changes and responsibilities of each party will be clearer.”

To find out more about the VAT domestic reverse charge please visit: https://www.sheards.co.uk/news/sheards-blog/archive/article/2021/January/vat-domestic-reverse-charge-for-building-and-construction-services

Finance

Global dividend payouts forecast to revive in 2021

Published

on

Global dividend payouts forecast to revive in 2021 2

By Joice Alves

LONDON (Reuters) – Global dividend payments could rebound by as much as 5% this year, a new report estimated on Monday, after the coronavirus caused the biggest slump in payouts since the financial crisis more than a decade ago.

Companies’ payouts to shareholders plunged more than 10% on an underlying basis in 2020 as one in five cut their dividends and one in eight cancelled them altogether.

A total of $220 billion worth of cuts were made between April and December, based on investment manager Janus Henderson’s Global Dividend Index. But there are signs companies are beginning to reinstate at least some of them.

Janus Henderson’s report warned that dividends could still fall 2% this year, in a worst-case scenario. But its best-case scenario sees 2021 dividends up 5% on a headline basis.

“It is quite likely we will see companies pay special dividends in 2021, utilising strong cash positions to make up some of the decline in distributions in 2020”.

Banking dividends will be likely to drive the rebound in payouts in 2021, the report said, after the European Central Bank and Bank of England eased blanket bans for lenders on dividends and buybacks. These were imposed during the first wave of the crisis to prepare for a potential increase in bad loans.

UK lenders Barclays and NatWest resumed payouts this month.

Last year, dividend bans meant banks cut or cancelled $70 billion of payments globally, according to the report.

But the overall global dividend cuts proved less dramatic than expected. In August, Janus Henderson had expected the virus to drive corporates to cut $400 billion worth of dividends, nearly double the eventual outcome.

A resilient fourth quarter of 2020 helped, said Janus Henderson. The likes of German car maker Volkswagen and Russia’s largest lender Sberbank restored payments.

Mining and oil companies cut dividends after a slump in commodity prices, while consumer discretionary companies also took a hit following lockdowns.

European dividends, not including Britain, fell by 28.4% on an underlying basis in 2020 to $171.6 billion. “This was the lowest total from Europe since at least 2009,” Janus Henderson said.

(GRAPHIC: Dividend cuts by region –

Global dividend payouts forecast to revive in 2021 3

In contrast, North American payouts rose 2.6% for the full year, setting a new record of $549 billion, the report said. Canada had the fewest dividend cuts anywhere in the world, the index showed.

Continue Reading

Finance

Former Bank of England Governor Carney joins board of digital payments company Stripe

Published

on

Former Bank of England Governor Carney joins board of digital payments company Stripe 4

By Kanishka Singh

(Reuters) – Mark Carney, former head of the UK and Canadian central banks, has joined the board of U.S. digital payments company Stripe Inc, days after the company was reported to be planning a primary funding round valuing it at over $100 billion.

“Regulated in multiple jurisdictions and partnering with several dozen financial institutions around the world, Stripe will benefit from Mark Carney’s extensive experience of global financial systems and governance”, the company said on Sunday, confirming a report by the Sunday Times newspaper.

Forbes magazine had reported on Wednesday that investors were valuing Stripe at a $115 billion valuation in secondary-market transactions.

A senior Stripe executive told Reuters in December that the company plans to expand across Asia, including in Southeast Asia, Japan, China and India.

The company offers products that allow merchants to accept digital payments from customers and a range of business banking services.

Stripe raised $600 million in April in an extension of a Series G round and was valued back then at $36 billion.

Consumer-facing fintechs have seen a boost to their businesses during the COVID-19 pandemic, as people have been staying at home to avoid catching the virus and have increasingly been managing their finances online.

Carney, who headed the Bank of England and the Bank of Canada, had a 13-year career at Wall Street bank Goldman Sachs Group Inc in its London, Tokyo, New York and Toronto offices.

He is the United Nations special envoy on climate action and finance.

(Reporting by Kanishka Singh in Bengaluru; Editing by William Mallard)

Continue Reading

Finance

The potential of Open Finance and the digitisation of tax records

Published

on

The potential of Open Finance and the digitisation of tax records 5

By Sudesh Sud, Founder of APARI 

The world is undergoing huge changes at the moment. Between coronavirus pushing the economy to the limit and a group of Redditors challenging the financial market hegemony, people are questioning the role of established institutions. If finance doesn’t work to enable the economy, businesses or individuals, then who is it for?

Before the digital revolution, financial experts were seen as a necessity. They knew how things worked, what everything meant, could provide good advice and were employed to sit at the heart of the action. Now, trading can be done by anyone online through established platforms, with a wealth of information available to hand.

Yet, as the 2008 financial crisis proved, established financial institutions have made themselves too big to fail. Simply tearing down the existing financial system would leave many ordinary people, along with businesses and government treasuries, in ruin.

However, as legendary futurologist, Buckminster Fuller, once said: “You never change things by fighting the existing reality. To change something, build a new model that makes the existing model obsolete.”

Traditional banking models are already being upended by technology. Through Open Banking, challenger banks are able to connect services digitally, cutting inefficiencies and costs while speeding up transactions. Now, Open Finance is seeking to build on this model to connect financial services via technology, potentially making the existing financial model obsolete.

Just as Open Banking led to greater democratisation of money, Open Finance has the potential to transfer power back to individuals. Not only would this benefit society as a whole, but it would help minimise the boom-bust cycles that cripple entire economies. No individual would be too big to fail, and bailing people out would cost far less, having minimal impact on the economy overall.

With more information available to them, Open Finance businesses will be able to use technology to make better decisions instantly. Many people struggle to get onto the housing ladder due to a poor credit score, for example, yet they have been paying rent every month of their adult lives. Why, then, can they not access mortgages? A company called Credit Ladder is addressing this through Open Banking, reporting rent payments via challenger banks like Starling to credit agencies, helping good renters to access mortgages.

While it is still very early days for Open Finance, there seems to be an endless raft of possibilities to benefit individuals, businesses and national economies. Faster, more secure, and less risky access to credit can help grow the economy, transforming finance from something that benefits a few wealthy capitalists to something that enables growth in the real economy.

So how else could Open Finance benefit society?

Using Tax Information

Every working adult pays income tax. Some of us via self-assessment while others are enrolled in PAYE. Regardless, we all have tax records with a wealth of financial information that has been verified, at least in part, by HMRC.

This centralised repository of financial information could be put to better use, such as allowing credit reference agencies to better understand an individual’s risk profile or helping to prove income as part of a mortgage application. Unfortunately, HMRC is a black hole of information ‒ its sheer size and power sucks information in, but nothing comes back out again.

However, by Making Tax Digital (MTD), HMRC are effectively allowing individuals to keep validated tax records on the software of their choice. Software providers may then be able to use this information to enable certain aspects of Open Finance. The information doesn’t need to be protected by HMRC, it is the individual’s choice and responsibility over how to use their own information.

As MTD software develops, we will see it connected to Open Banking, allowing self-assessed taxpayers to connect their business account directly to the software, effectively getting their tax return completed for them by an AI program. They would simply check the details, add any adjustments, and click submit. HMRC would then validate the records, providing assurance for any financial institutions using that financial information.

More Growth, Lower Risk

With access to complete and validated financial information, lenders would be able to more quickly and accurately assess individual risk when considering a loan or mortgage application. This would greatly speed up the process of applying for a loan, whether for a business venture or property purchase, for example.

Take residential landlords, for example. They may own a few properties already, with equity coming out of their ears. If that landlord wants to obtain another property, they would need to get their accountant to assemble their financial information, complete a SA302, and send everything off to their mortgage advisors who would then validate the information before submitting the mortgage application.

The application can then take months to approve, slowing down the process and potentially leading to missed opportunities. Since property sales usually occur in a chain (the owner of the property you are purchasing is usually purchasing another property, and so on), these inefficiencies slow the process down for everyone and can have major impacts.

If, however, mortgage applicants could simply share validated financial/tax records, mortgage providers could use that information to make quick decisions with reduced risk. What’s more, applicants could share only relevant, high-level information, rather than expose their entire financial history.

Individual Risk Management

Currently, individuals can manage their credit score/risk profile via third party providers like Experian, Equifax and TransUnion. These credit reporting agencies use limited information, such as credit cards, store cards and loans to assess risk. Individuals need to understand what factors each agency uses in order to ‘game’ the system.

For example, someone who has always been careful with their money, kept to a strict budget and never taken out a loan or credit card will have a far worse credit rating than someone who regularly uses debt to finance their lifestyle. So, even though they may have amassed a good deal of savings, they cannot get a good deal on a loan or mortgage.

With Open Finance, these individuals would be able to quickly prove their earnings, spending, and savings, decreasing their risk profile in line with reality. Rather than crude measures of creditworthiness, financial institutions would be able to use accurate and validated information to make quick decisions based on realistic risk. This both transfers more power to individuals and contributes to faster growth while reducing overall risk.

As a centralised repository for validated financial information, MTD providers will be in a unique position to develop a two-sided marketplace for finance, allowing credit providers to match products to individuals’ risk profiles. When a customer needs a loan, credit card or mortgage, they can simply browse products for which they have already been approved, applying and receiving finance instantly.

Empowering PAYE Taxpayers

Currently, PAYE taxpayers have little, if any, visibility or control over their tax contributions. They will see the amount paid in tax and national insurance, but to claim any allowances requires them to submit a self-assessment tax return. For most PAYE taxpayers, this simply doesn’t seem worthwhile.

Yet, self-employed taxpayers can claim for things like travel to their place of work, a proportion of living expenses when working from home, even their lunch. These things are necessary for productive work yet, for PAYE taxpayers, come out of their already taxed income. Meanwhile, businesses tend to make use of every tax allowance available to them.

This imbalance could be rectified with Open Finance connected to tax software. As MTD becomes a validated system for self-assessed taxpayers, a new version could be developed for PAYE taxpayers, putting them in control of their tax and finances. Not only would they be able to benefit from Open Finance in the same way as self-assessed taxpayers, but they will also be able to claim for reasonable allowances. What’s more, HMRC/the Treasury/the government would be able to hold employers accountable for pay disparities and unreasonable tax avoidance.

Open Finance, then, has the power to speed up and reduce the cost of obtaining and providing finance. It would make the finance system fairer and most transparent while distributing financial power, and help to avoid the creation of too big to fail financial institutions and the boom-bust cycle that has become unfortunate features of modern capitalism.

Ultimately, Open Finance has the potential to help the UK and other nations recover from the seemingly unending series of crises that have plagued the early 21st century by allowing people to access finance quicker in order to grow their business and personal finances while reducing risk, inefficiencies, and costs.

Continue Reading
Editorial & Advertiser disclosureOur website provides you with information, news, press releases, Opinion and advertorials on various financial products and services. This is not to be considered as financial advice and should be considered only for information purposes. We cannot guarantee the accuracy or applicability of any information provided with respect to your individual or personal circumstances. Please seek Professional advice from a qualified professional before making any financial decisions. We link to various third party websites, affiliate sales networks, and may link to our advertising partners websites. Though we are tied up with various advertising and affiliate networks, this does not affect our analysis or opinion. When you view or click on certain links available on our articles, our partners may compensate us for displaying the content to you, or make a purchase or fill a form. This will not incur any additional charges to you. To make things simpler for you to identity or distinguish sponsored articles or links, you may consider all articles or links hosted on our site as a partner endorsed link.

Call For Entries

Global Banking and Finance Review Awards Nominations 2021
2021 Awards now open. Click Here to Nominate

Latest Articles

VAT domestic reverse charge set to impact over 1.2 million construction workers from 1st March 6 VAT domestic reverse charge set to impact over 1.2 million construction workers from 1st March 7
Finance9 seconds ago

VAT domestic reverse charge set to impact over 1.2 million construction workers from 1st March

HMRC’s new VAT domestic reverse charge for building and construction services comes into effect from 1st March 2021 Construction firms...

Report explores the Ceramic Ink Market likely to emerge over a period of 2019– 2029 8 Report explores the Ceramic Ink Market likely to emerge over a period of 2019– 2029 9
Research Reports18 mins ago

Report explores the Ceramic Ink Market likely to emerge over a period of 2019– 2029

Ceramic Ink market players – Torrecid Group, Ferro Corporation, Marabu GmbH & Co. KG, Chromaline, Fenzi Group SpA, Rex-Tone Industries...

Detailed examination of the Micro Robots Market to hold a high potential for growth by 2021 10 Detailed examination of the Micro Robots Market to hold a high potential for growth by 2021 11
Research Reports21 mins ago

Detailed examination of the Micro Robots Market to hold a high potential for growth by 2021

Micro Robots market study depicts an extensive analysis of all the players running in the Micro Robots Market report based on distribution...

Dredging Market Research Report by Type, by Production Technology, by Application, by Function – Global Forecast to 2030 – Cumulative Impact of COVID-19 12 Dredging Market Research Report by Type, by Production Technology, by Application, by Function – Global Forecast to 2030 – Cumulative Impact of COVID-19 13
Research Reports25 mins ago

Dredging Market Research Report by Type, by Production Technology, by Application, by Function – Global Forecast to 2030 – Cumulative Impact of COVID-19

A recent market study published by FMI on the Dredging Market includes global industry analysis for 2015-2019 & opportunity assessment for 2020-2030,...

Synthetic Leather Market 2021 Segmentation and Analysis by Recent Trends, consumption by Regional data, Development, Investigation, Growth by to 2027 14 Synthetic Leather Market 2021 Segmentation and Analysis by Recent Trends, consumption by Regional data, Development, Investigation, Growth by to 2027 15
Research Reports27 mins ago

Synthetic Leather Market 2021 Segmentation and Analysis by Recent Trends, consumption by Regional data, Development, Investigation, Growth by to 2027

Synthetic Leather Market – Global Industry Analysis and Opportunity Assessment 2016–2026 This report by Future Market Insights on the global synthetic...

Automotive Steering System Market In-Depth Analysis on Size, Cost Structure and Prominent Key Players -JTEKT Corporation, Nexteer Automotive Group Ltd., Showa Corporation 16 Automotive Steering System Market In-Depth Analysis on Size, Cost Structure and Prominent Key Players -JTEKT Corporation, Nexteer Automotive Group Ltd., Showa Corporation 17
Research Reports29 mins ago

Automotive Steering System Market In-Depth Analysis on Size, Cost Structure and Prominent Key Players -JTEKT Corporation, Nexteer Automotive Group Ltd., Showa Corporation

FMI offers a 10-year forecast for the Automotive Steering System between 2017 and 2027. In terms of value, the market is expected...

Coating Additives Market Size, Top Key Players, Latest Trends, Regional Insights and Global Industry Dynamics By 2022 18 Coating Additives Market Size, Top Key Players, Latest Trends, Regional Insights and Global Industry Dynamics By 2022 19
Research Reports30 mins ago

Coating Additives Market Size, Top Key Players, Latest Trends, Regional Insights and Global Industry Dynamics By 2022

Coating additives are emerging as a convenient and effective option for improving performance in terms of anti-corrosion, anti-microbial, self-cleaning, and...

Automotive Tire Market In-Depth Analysis, Growth Strategies and Comprehensive Forecast to 2027 20 Automotive Tire Market In-Depth Analysis, Growth Strategies and Comprehensive Forecast to 2027 21
Research Reports38 mins ago

Automotive Tire Market In-Depth Analysis, Growth Strategies and Comprehensive Forecast to 2027

The exhaustive research report titled “Automotive Tire Market: Global Industry Analysis (2012-2016) and Opportunity Assessment (2017-2027)” gives all the guidelines essential to...

Unexpected Growth Seen for Paint Additives Market by 2022 | Akzo Nobel NV, Arkema SA, Ashland Global Holdings, Inc 22 Unexpected Growth Seen for Paint Additives Market by 2022 | Akzo Nobel NV, Arkema SA, Ashland Global Holdings, Inc 23
Research Reports2 hours ago

Unexpected Growth Seen for Paint Additives Market by 2022 | Akzo Nobel NV, Arkema SA, Ashland Global Holdings, Inc

Future Market Insights (FMI) has offered a 5-year forecast for the global paint additives market in its new report titled...

Polymer Coated Fabrics Market Research Development, Top Companies, Trends And Growth 2017 To 2022 | BASF SE, Akzo Nobel NV, Saint-Gobain, PPG Industries, Inc 24 Polymer Coated Fabrics Market Research Development, Top Companies, Trends And Growth 2017 To 2022 | BASF SE, Akzo Nobel NV, Saint-Gobain, PPG Industries, Inc 25
Research Reports2 hours ago

Polymer Coated Fabrics Market Research Development, Top Companies, Trends And Growth 2017 To 2022 | BASF SE, Akzo Nobel NV, Saint-Gobain, PPG Industries, Inc

A new market study on polymer coated fabrics, published by Future Market Insights, reveals the changing demands for technical textiles...

Newsletters with Secrets & Analysis. Subscribe Now