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Immigration rights of EEA citizens in the event of a no-deal Brexit

The Government has now announced the revised transitional arrangements that will apply in the event of a no-deal Brexit to EU, EEA and Swiss citizens and their close family members arriving in the UK after Brexit, replacing those set out in a January 2019 policy paper issued under the previous Prime Minister, Theresa May. The Government’s new policy paper means that law-abiding EU, EEA and Swiss citizens arriving in the UK after a no-deal Brexit and before the end of 2020 will be able to enter, live, work and study as they do now. The new transitional arrangements provide that:

  • There will be a transition period from the date of Brexit until 31 December 2020, during which time EU, EEA and Swiss citizens who move to the UK will be able to apply for a three-year temporary immigration status, to be called European Temporary Leave to Remain (Euro TLR). Although applications will be voluntary, EU, EEA and Swiss citizens will need to apply for Euro TLR if they wish to remain in the UK beyond 31 December 2020.
  • Applications made under the new Euro TLR scheme will be free of charge and will be made after arrival in the UK. It will involve a simple online process and identity, security and criminality checks. Successful applicants will be given a digital status, granting them three years’ leave to remain in the UK, running from the date the leave is granted.
  • EU, EEA and Swiss citizens wishing to stay in the UK after their Euro TLR expires will need to make a further application under the UK’s future new points-based immigration system (to be based on skills) which is due to be implemented from January 2021. This is likely to mean that low-skilled workers may need to leave their jobs and the UK when their three years’ Euro TLR expires if they do not meet the requisite criteria to have a right to remain in the UK under the new immigration system.
  • Any EU, EEA and Swiss citizens who move to the UK after Brexit and do not apply for Euro TLR will need to leave the UK by 31 December 2020, unless they have applied for and obtained an immigration status under the new immigration system by that date. Otherwise, they will be here unlawfully and will be liable to enforcement action, detention and removal as an immigration offender.
  • Time spent in the UK with Euro TLR status will count towards settlement.
  • Employers will not be required to distinguish between EU, EEA and Swiss citizens who arrive before and after Brexit until the new immigration system is introduced from January 2021. This means that right to work checks for employers will remain the same until January 2021, so EU, EEA and Swiss citizens can start work by providing a passport or ID card until this date, or they can use their digital status granted under the Euro TLR scheme to prove their right to work via the Home Office’s digital status checking service. Employers will not be required to make retrospective right to work checks of EU, EEA and Swiss citizens who start work before 1 January 2021, but anyone employed after this date will need to show that they have a valid UK immigration status.

There will also be some new border controls to make it harder for serious criminals to enter the UK.

EU, EEA and Swiss citizens are their family members who are already living in the UK before Brexit still have until at least 31 December 2020 to apply to the EU Settlement Scheme for settled or pre-settled status.

Irish citizens’ rights are unaffected by the new arrangements, and they can continue to come to the UK after Brexit to live and work.

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Information Commissioner’s Office publishes no-deal Brexit guidance for small and medium-sized organisations

The Information Commissioner’s Office (ICO) has published dedicated guidance to assist small and medium-sized businesses in their preparations for a no-deal Brexit and has urged them to “prepare for all scenarios” to maintain data flows when the UK leaves the EU. The guidance for small and medium-sized businesses is not entirely new as the ICO has, in fact, tailored its previously published no-deal Brexit guidance to be more relevant and accessible to smaller businesses. 

At the moment, personal data flow is unrestricted because the UK is a member of the EU. In the event of no deal, EU law will require additional measures to be put in place when personal data is transferred from the EEA to the UK in order to make such data transfers lawful. The ICO’s guidance sets out steps to take to keep personal data flowing, such as using pre-approved contract terms. It says that:

  • if you are a UK business that already complies with the GDPR and has no contacts or customers in the EEA, you do not need to do much more to prepare for data protection compliance after Brexit
  • if you are a UK business that receives personal data from contacts in the EEA, you need to take extra steps to ensure that the data can continue to flow after Brexit
  • if you are a UK business with an office, branch or other established presence in the EEA, or if you have customers in the EEA, you will need to comply with both UK and EU data protection regulations after Brexit and you may need to designate a representative in the EEA.
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Duty-free shopping to make a comeback?

The Chancellor of the Exchequer Sajid Javid has said that the Government will reintroduce duty-free shopping with EU countries in the event the UK leaves the EU without a deal.  This would mean that passengers travelling to EU countries would be able to buy beer, spirits, wine and tobacco without duty being applied in the UK.

According to HM Treasury, the decision to reintroduce duty-free shopping in UK ports, airports and international train stations would mean that:

  • UK excise duty will no longer be due on alcohol and cigarettes bought when leaving the UK. A bottle of wine purchased in Heathrow duty free on the way to the EU could be up to £2.23 cheaper.
  • At the point of leaving the EU, people can continue to purchase and bring home unlimited alcohol and cigarettes in Europe if they pay duty on it there – as is the case currently.
  • People will now also have the alternative option to buy limited amounts of duty-free alcohol and cigarettes at duty free shops in Europe instead. For example, a holidaymaker could save more than £12 on two crates of beer.
  • The travel industry has been calling on the Government to re-introduce duty-free, which stopped when the EU Single Market was introduced.

This change would entitle travellers leaving the UK to visit EU destinations to benefit from the duty-free prices currently available to those travelling to non-EU destinations. The Government has also confirmed that a consultation will be launched to examine its long-term duty-free policy.

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Claiming Entrepreneurs’ relief

Entrepreneurs' relief applies to the sale of a business, shares in a trading company or an individual’s interest in a trading partnership. Where this relief is available, CGT of 10% is payable in place of the standard rate. There are a number of qualifying conditions that must be met in order to qualify for the relief.

When the relief was first introduced there was a lifetime limit of £1 million for gains. This was increased to £2 million from 6 April 2010, to £5 million from 23 June 2010 and to £10 million from 6 April 2011. This is a lifetime limit which means that individuals can qualify for the relief more than once subject to an overriding total limit of £10m of qualifying Capital Gains. There are time limits that must be met to make a claim.

To qualify for relief, you should be either an officer or employee of the company and own at least 5% of the company and have at least 5% of the voting rights. There are other qualifying conditions that must be met in order to qualify for the relief.

The minimum period during which certain conditions must be met in order to qualify for Entrepreneurs' relief increased from one to two years from 6 April 2019.

There is also a sister relief called Investor’s relief which has a separate £10 million lifetime cap. This is useful for investors who do not meet the officer or employee requirement for Entrepreneurs' relief.

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Options to close down a limited company

There are a number of reasons why a limited company may no longer be required and can be shut down. This may be because the limited company structure no longer suits a client's needs, the business is no longer active, or the company is insolvent. You will usually need the agreement of all the company’s directors and shareholders to close down the company.

The method for closing down a limited company depends on whether it is solvent or insolvent. If the company is solvent, you can apply to get the company struck off the Register of Companies or start a members’ voluntary liquidation. The former method is usually the cheapest. You should also make sure that no business assets are left as any funds in business bank accounts could revert to the Crown.

Where a company is insolvent, the creditors’ voluntary liquidation process must be used. There are also special rules where the company has no director, for example if the sole director has passed away.

A company can also elect to become dormant. A company can stay dormant indefinitely, however there are costs associated with this option. This might be an option if, for example, a company is restructuring its operations or wants to retain a company name, brand or trademark. The costs of restarting a dormant company are typically less than forming a new company.

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Reporting employee changes

There are rules that businesses must follow when they are reporting employee changes. These changes must be sent to HMRC using a Full Payment Submission (FPS). The FPS is a submission that you need to make to HMRC every time you pay your employees and must be submitted on or before the usual date you pay your employees. The information provided on an FPS helps HMRC ensure that they have the up-to-date information on your employees.

Additional information is required on your FPS if:

  • it includes a new employee
  • an employee leaves
  • you start paying someone a workplace pension
  • it’s the last report of the tax year
  • an employee changes their address

You may also need to tell HMRC if an employee:

  • becomes a director
  • reaches State Pension age
  • goes to work abroad
  • goes on jury service
  • dies
  • joins or leaves a contracted-out company pension
  • turns 16
  • is called up as a reservist
  • changes gender
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Planning a Christmas party?

Now is the time that many businesses are planning a Christmas celebration for staff as well as possibly for partners/spouses, clients and prospective clients.

The cost of a staff party or other annual entertainment is generally allowed as a deduction for tax purposes. If you meet the various criteria outlined below, then there is no requirement to report anything to HMRC or pay tax and National Insurance. There will also be no taxable benefit charged to employees.

  1. An annual Christmas party or other annual event offered to staff generally, is not taxable on those attending provided that the average cost per head of the function does not exceed £150.
  2. The event must be open to all employees. If a business has multiple locations, then a party open to all staff at one of the locations is allowable. You can also have separate parties for separate departments, but employees must be able to attend one of the events.
  3. There can be more than one annual event. If the total cost of these parties is under £150 per head, then there is no chargeable benefit. However, if the total cost per head goes over £150 then whichever functions best utilise the £150 are exempt and the others taxable. Note, the £150 is not an allowance and any costs over £150 per head are taxable on the full cost per head.
  4. It is not necessary to keep a running total by employee but a cost per head per function. All costs including VAT must be considered. This includes the costs of transport to and from the event, food and drink and any accommodation provided.

VAT incurred on Christmas parties for your staff can be recovered subject to the usual rules. If staff partners/spouses or clients are also invited to the event, the input tax has to be apportioned as the VAT applicable to non-staff is not recoverable. However, if non-staff attendees make a contribution to the event, all the VAT can be reclaimed and of course output tax should be accounted for on the amount of the contribution.

It is important to pay attention to the nuanced tax rules to ensure that your party is tax exempt.

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What is the Annual Investment Allowance?

The Annual Investment Allowance (AIA) is a generous tax relief that was first introduced in 2008. The AIA allows for the total amount of qualifying expenditure on plant, machinery, commercial vehicles and other qualifying equipment to be deducted from your profits before tax.

The AIA can be claimed by an individual, partnership or company carrying on a trade, profession or vocation, a UK non-residential property business or a furnished holiday let. Only partnerships or trusts with a mixture of individuals and companies in the business structure are unable to qualify for AIA.

The AIA was permanently set at £200,000 for all qualifying expenditure on or after 1 January 2016. However, this limit has been temporarily increased to £1 million for a 2-year period from 1 January 2019 to 31 December 2020. This increased limit is a generous allowance and should cover the annual spend of most small and medium sized businesses. 

The AIA does not apply to purchases of cars.

If you are thinking of incurring large items of capital expenditure for your business over the coming months, you should ensure that any purchase is properly timed to take full advantage of the temporary increase in the AIA limit.

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Get information about a company

There is a significant amount of information that can be obtained from Companies House. Companies House is responsible for incorporating and dissolving limited companies, examining and storing company information and making company information available to the public.

Much of the company information available can be accessed free of charge. This is in line with the Government’s commitment to free data and means that all publicly available digital data held on the UK register of companies is accessible in this way. These records provide access to over 170 million digital records on companies and directors.

This includes:

  • company information, for example registered address and date of incorporation
  • current and resigned officers
  • document images
  • mortgage charge data
  • previous company names
  • insolvency information

There is also a service called WebCHeck. This allows you to view a company's filing history and purchase copies of document images as well as a selection of company reports. You can also elect to monitor a company and receive email alerts of any new documents filed at Companies House. This can be a useful thing to sign up for as this would help you ensure there are no unexpected filings made for your own company.

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VAT changes for CIS Sub-contractors delayed

The VAT rule changes for building contractors and sub-contractors that were expected to come into effect imminently, have been delayed for 12 months until 1 October 2020.

This surprise announcement followed intense lobbying by the construction industry who have long argued that many businesses in the sector were unprepared for the change. The planned introduction of the new rules was also conflicted with the current EU exit deadline next month.

In fact, a coalition of fifteen of the UK’s leading construction associations had written to the Chancellor last month asking for the impending changes to be delayed for 6 months. Delaying the introduction of the new rules should reduce the burden on the construction industry at a critical time.

The new rules will make the supply of construction services between construction or building businesses subject to the Domestic Reverse Charge. The reverse charge will only apply to supplies of specified construction services to other businesses in the construction sector. From 1 October 2020, sub-contractors will no longer add VAT to their supplies to most building customers, instead, contractors will be obliged to pay the deemed output VAT on behalf of their registered sub-contractor suppliers. This is known as the Domestic Reverse Charge.

HMRC has said that they recognise some businesses have already changed their invoices to meet the needs of the reverse charge and cannot easily change them back in time. Where genuine errors have occurred, HMRC will consider the fact that the implementation date has changed.

The news of the 12-month delay has been warmly welcomed by the construction industry and will give businesses who had not properly prepared for this change time to act. However, the very short notice of this delay will impact on those businesses who had acted diligently and spent time and money preparing for the change, as they will now have to reverse their changes and moth-ball them until next year.