Archive June 2021

IMPORT ONE STOP SHOP (IOSS) & ONE STOP SHOP (OSS)

My client supplies digital services to consumers in the EU and runs an e-commerce business selling CDs and MP3 players on their website that are sold in consignments of less than £135/150€.

My client was registered for MOSS in the UK and from the 01 January 2021 they registered in the EU for Non-Union MOSS.

Should my client still charge UK VAT to customers and monitor the distance selling threshold on supplies of CDs and MP3 players?

 

New EU VAT laws come into effect for e-commerce businesses from the 01 July 2021 that are likely to affect the client.

Up until the 01 July 2021 no Import VAT has to be paid for the supply of goods imported into the EU with a value of up to 22Euros. This rule will be abolished from the 01 July 2021 and all commercial goods imported into the EU from a third country will be subject to VAT irrespective of the value.

The European Commission has created a special scheme called the Import One Stop Shop (IOSS) for distance sales of goods imported from third countries to consumers in the EU.

The IOSS facilitates the collection, declaration and payment of VAT on distance sales of imported goods, allowing suppliers of goods to pay the VAT to the tax authorities via a single registration instead of the buyer paying the VAT on the goods imported or the supplier having to VAT register in several member states.

The VAT payment is applicable to purchases made by a buyer in the EU for goods in consignments  not exceeding a total value of £135/150€.

Businesses can register for IOSS from the 01 April 2021 in any EU Member State. Those businesses that are not established in the EU will need to appoint an EU established intermediary to fulfil the VAT obligations for IOSS.

The IOSS Scheme is not mandatory and if the seller does not register for IOSS, then the buyer will be responsible to pay the VAT and any customs clearance fees that are charged by the transporter.

As the client is already registered for Non-Union MOSS, I would suggest they register for IOSS in the same EC Member State.  Incidentally, Non-Union MOSS will become Non-Union OSS from 01 July 2021.

The Non-Union OSS has been extended to include B-C supplies of services where the place of supply is the customer’s country, and can be used by all non-established EU businesses supplying services to consumers in the EU. A non-exhaustive list of examples of these services can be found in the second of the links below.

Further information on all the special schemes can be found on the European Commission website.

Watchdog on workers’ rights

Since the Government confirmed on 8 June 2021 that it will be creating a watchdog to protect workers’ rights, a client would like to know more about this and how it will affect their business.

It is still yet to be confirmed when this new watchdog will begin to operate, however, it will be given powers and responsibilities to combine three bodies, which each cater to different employment law areas, into one. It aims to create a “comprehensive new authority” to ensure that organisations are adhering to their legal responsibilities and that those who “break the rules have nowhere to hide”, namely tackling modern slavery, enforcing minimum wage laws, and offering protection to agency workers.

As part of the announcement, the Government has added that the new watchdog’s powers will be extended to provide a “port of call” for workers. The role of this aspect of the watchdog’s role is, according to the Government, to allow workers to know their rights and blow the whistle on “bad behaviour”. Similarly, the watchdog will offer support to employers, like you client, so they are able to “do right by their employees”. Importantly, the existing Naming and Shaming Scheme – which calls out organisations that fail to pay their staff the correct minimum wage rates, and fines them up to £20,000 per employee – will be managed by the new watchdog.

This Naming and Shaming Scheme will be extended to cover other laws protecting workers’ pay where they are hired through an agency. It is also hoped that vulnerable workers will be helped with issues around holiday pay and statutory sick pay without them having to make a claim to an employment tribunal.

Your client may not need to be too concerned about the creation of this new watchdog as it aims to curb the exploitation of workers. However, your client must keep track of their business procedures to ensure that they do not fall foul of employment law provisions that seek to protect workers’ rights. It is advisable that your client begins to review their business processes and tighten their policies on matters relating to grievance procedures, modern slavery, minimum wage, and more.

Crucially, your client should ensure that employee concerns are listened to, especially where it is observed that the company has not taken steps to safeguard employees’ health and safety in the workplace. In cases such as these, where whistleblowing is concerned, if employees are subjected to a detriment by a manager who believes that they are a ‘troublemaker’ for raising the matter, they can bring an employment tribunal claim against the organisation. Any dismissal on these grounds will also be automatically unfair from day one, which could lead to an expensive compensation award at a tribunal as it considers just and equitable.

 

Gift of land to charity

I’m a director for a company whose trade is manufacturing kitchens and retailing kitchen appliances. The company no longer needs its original site where the business began in the 1980s and the directors are considering giving it to a charity which they know is looking for additional space. We are wondering what Corporation Tax relief might be available?

There is a CT (Corporation Tax) relief for giving away assets in Chapter 3 of Part 6 CTA 2010. If the gift satisfies various conditions, then the company will get a “relievable amount” which may be relieved in the same way as would a donation of money to the charity for that amount, that is it may then be used to reduce the PCTCT (profits chargeable to corporation tax) for the period in which the disposal of the asset takes place.

Not every asset can qualify for this relief; it must be a qualifying investment (S.204 CTA 2010). Fortunately, the freehold of a property held as a fixed asset does fall into a qualifying category.

The relievable amount is calculated by starting with the market value of the asset and adding to that any incidental costs of the disposal incurred by the company. (These are broadly as they are for a capital gain computation). The figure must then be reduced by any benefits, if any, received by the company which result from making the disposal (S.206 CTA 2010).

Once the charity has given the company a certificate identifying what it has obtained from the company and the date of disposal (S.213 CTA 2010), the company may make a claim for the relievable amount. Provided that the company’s PCTCT for the period are at least equal to the relievable amount, the company will save CT of 19% of that amount. That relief may be forfeited if there is a disqualifying event (broadly where the company gets some benefit from the property without paying full market rate) at any time in the six years beginning with the end of the CT600 period in which the company gives the property to the charity. Although, if the company or anyone connected to the company were to benefit at any time because of arrangements linked to the donation, that might be sufficient to taint the donation under Part 21C of CTA 2010, precluding the relief or precipitating its withdrawal.

The other encouragement for the company to gift the property to the charity is S.257 TCGA 1992 which treats the company as disposing of the site for consideration that would give it neither a gain nor a loss, rather than the deemed market value consideration normally required by S.17 TCGA 1992 for calculating gains on gifts. If a close company parts with something for less than its full worth, it is also necessary to consider if a charge to IHT will apply to the participators under S.94 IHTA 1984. However, if the site is being disposed of to the charity unconditionally and the company does not continue to occupy it afterwards, the exemption for transfers to charities at S.23 IHTA 1984 will prevent that charge from being a problem.

Voluntary Redundancy

I have been considering making some roles redundant as my business tries to recover from the impact of the coronavirus pandemic. An employee has now come forward to put themselves up for redundancy; What does this mean for my organisation and should I accept it and how?

Voluntary redundancy is a situation where staff put themselves forward for redundancy as an alternative to their employer having to make this decision. Although during a redundancy procedure, a company could ask if any staff wish to be made voluntarily redundant, it is not uncommon for some to put themselves forward without being asked first.

In situations of voluntary redundancy, there are couple of key things you should bear in mind – you do not have to accept a request from an employee who volunteers for redundancy. This is because the final decision for who should be made redundant does ultimately rest with the company. However, it is important to bear in mind that voluntary redundancy can help make managing the redundancy procedure easier for you, if managed carefully.

If you accept this employee’s application for voluntary redundancy, this should be processed in the usual way as staff who have been selected, usually via a scoring exercise, to be dismissed due to redundancy. This means that you should provide written notification that their employment is coming to an end by reason of redundancy and when their last day will be. Any redundancy pay entitlements and outstanding holiday pay should be made clear.

You should keep in mind that if the employee has worked for the company for at least two years, they will be entitled to receive statutory redundancy pay. If their contract provides for an enhanced payment for redundancy, this is the amount they should receive.

The employee should also be provided notice as specified in their contract. In the absence of any enhanced period of notice, this should be at least the statutory minimum notice in place when dismissing an employee, as follows:

  • one week where the period of continuous employment is one month or more but less than two years
  • one week for each year of continuous employment, up to a maximum of 12 weeks, where the period of continuous employment is two years or more.

It seems that you do not already have a policy on dealing with voluntary redundancies. Going forward, you should think strongly about implementing such a policy to make clear that regardless of whether volunteers are proactively sought or not, volunteering for redundancy does not mean that the employee will definitely be made redundant. Volunteering for redundancy simply means they are putting themselves forward to be considered; the final decision over whether to accept the request lies firmly with you.

This is important, as it will allow you to reject applications from employees working in certain business critical roles. Being able to reject applications will also allow you to retain a balanced skilled workforce, especially in the event they receive more applications than originally required.

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