As we near the Christmas holidays, we would like to inform you about some important developments in the United Kingdom. Our Brexit update has information on what we can expect in the next months and how businesses in the UK can best respond to Brexit. Digital transformation is also making further advancements in the UK tax industry, with HMRC’s long-awaited “Making Tax Digital” initiative seeing its first stage of implementation in the first half of 2019.

Brexit uncertainty continues

Following a turbulent few months of discussions, EU divorce negotiations appeared to have made progress as the EU and UK came to an agreement at the end of October. The deal would provide some certainty for UK businesses, through a transition period in which most of the trading rules in Britain would remain the same at least until another agreement is made between the two parties. It is still difficult to predict what businesses can expect after the planned 21-month transition phase, or when a new agreement would take effect.

Last Tuesday, Theresa May dramatically deferred the House of Commons vote on the transition agreement due to lack of support from Ministers of Parliament (MPs). While she attempted to reopen discussions with the EU and rally more support from MPs, many saw the postponement as a humiliating defeat for the prime minister. The stakes are high and without passing the withdrawal agreement in UK parliament, a hard Brexit becomes an ever more likely outcome.

What can businesses do to prepare for Brexit

Businesses that move goods to and from the UK should get ready to deal with customs procedures in the event that the UK leaves the EU without a deal on 29 M‌ar‌c‌h 2019.

Actions you should take now:

Movement of Goods

• register for a UK Economic Operator Registration and Identification (EORI) number if you do not already have one
• decide whether you will use a customs agent/freight forwarder to make import and/or export declarations or if you will make the declarations using specialist software
• contact the freight company to find out if they will need to supply additional information to complete safety and security declarations, or whether you will need to submit these declarations themselves

Tax goes digital

Making Tax Digital (MTD), one of the government’s latest financial innovations aims to implement a more efficient tax system in real time for both individuals and businesses. The HMRC driven initiative will require taxpayers to keep transaction-level records digitally and use MTD compatible software to submit VAT returns.

For VAT periods starting on or after the 1^st April 2019, VAT-registered businesses with taxable turnover above £85,000 will be required to keep digital records and submit returns using compatible software. Businesses below the VAT threshold are expected to comply one year following this date, in 2020. Some businesses have been given later start dates such as overseas businesses, which are UK VAT registered but do not have an establishment in the UK and are expected to comply from the 1st October 2019.

HMRC has outlined requirements for digital linking of software to ensure that data transfer, capture or modification is mirrored across all software solutions. This will dispense with the traditional methods such as cut and paste and ensure that all records remain consistent across different platforms.

With a variety of complex rules and requirements, MTD will be impacting most of our clients and we will shortly be contacting businesses to ensure everyone will be digitally compliant before deadline.

Data Protection

In line with year’s introduction of the new data protection laws, we have been reviewing our systems to ensure our client’s confidential information is protected. We recently made changes to how you access payroll documents and more such changes are planned for other services in the next year. We will be contacting clients in the new year with further details.

Budget 2018

Employer’s Allowance

From April 2020, the National insurance tax saving of up to £3,000 per employer will be restricted, so that only businesses with NIC bills of less than £100,000 will be able to benefit from the relief.

IR 35 tax legislation and Professional Services companies

IR35 regulations are aimed at ensuring employees that work through intermediaries are correctly classified and pay the correct tax and pension contributions through PAYE. The new rules mean that clients of contractors will be responsible for determining their subcontractor’s employment status.

Digital Services Tax

Government plans to implement a digital services tax is expected in April 2019. It could be difficult to impose a tax in the technology sector whilst ignoring other industries, but for now only large companies are affected. Under the proposed EU-wide rules, only companies with EU revenues exceeding €50m would be subject to the tax.

Pension auto-enrolment contributions rising

From April 2019 the minimum contributions for UK auto-enrolment pension schemes will be going up for both

Employers, from 2% to 3% and employees, from 3% to 5%. Employers should inform their staff before the increased pension contributions take effect.