scruttonbland.co.uk
PROPERTY AND CONSTRUCTION
Autumn 2024
Guide to Construction Adjudication
The DIY Housebuilder Scheme
Avoiding Common Construction Tax Mistakes
Contents
3 Welcome To The Autumn 2024 Edition Of Our Property And Construction Newsletter
10 DIY Housebuilder Scheme For New Builds
12 Incentivising Employees With A Slice Of The Action: A Guide to Finding the Right Share Scheme
4 Low Balling to Win Work - A Race To The Bottom or A Sinking Ship?
6 R&D in the Construction Sector - How the April 2024 Changes Affect Tax Reliefs
14 H ow To Avoid Common Tax Mistakes In Construction Accounting
8 A Guide to Construction Adjudication in Disputes for Payments
16 Meet the Team
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Welcome To The Autumn 2024 Edition Of Our Property And Construction Newsletter
Since our Spring publication there have been plenty of changes. We have a new party in government, a long talked about and very overdue drop in interest rates, and an Autumn Budget that featured both tricks and treats for the sector, including increases to Employer NI contributions, SDLT rate increases on second homes, and confirmed spends for the building of affordable homes and removal of dangerous cladding.In this edition, we take a look at what we at Scrutton Bland are seeing in the sector at the moment and both the challenges and opportunities this presents.
I start by looking at what our clients are saying around low balling to win tenders and the impact and significant risks that come with increasing costs and unexpected changes. Our good friends at Prettys Solicitors provide some excellent advice in connection with dealing with disputes for payments, and how an adjudicator may be able to help. With Research and Development expenditure a hot topic we look at where it may apply in the construction sector and the opportunities for tax relief. We look at the important topic of succession in construction businesses and how to incentivise and make sure the individuals this is dependent on are in it for the long term.
Our resident VAT Manager Paula Mason reviews the DIY Housebuilder Scheme for new builds and walks us through what is and what isn’t claimable, as well as how to make the claim. And with a number of new entrepreneurs taking the plunge to set up on their own within construction, our ‘How To’ guide looks at how to avoid some of the most common tax mistakes in construction accounting. We hope that you enjoy this edition of the Property and Construction newsletter. And if you’d like to discuss any of the points raised or if you’d like to see any specific topic covered in future issues, please get in touch with me or your usual Scrutton Bland contact.
Ben Cussons Business Advisory Partner
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Low Balling to Win Work A Race To The Bottom or A Sinking Ship?
With interest rates still way in excess of the pre 2021 rates and highly unlikely to return to those record lows, the costs of funding construction projects continue to increase. So, it’s perhaps unsurprising that developers are adopting a more cautious approach when reviewing the viability of their projects.
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B en Cussons, Business Advisory Partner, shares his thoughts on some of the approaches and the impact and risks of low balling to win work. Back when interest rates were at record lows, the costs to have many projects running at once were low enough that it wouldn’t be uncommon to be highly geared to finance working capital. So now, one of the strategies being commonly adopted is to rationalise the number of projects on the go at any one time, limiting the amount of finance required to fund the developments. With development finance commonly being quoted with a rate of 10% or higher there is a considerable saving to be had by not borrowing as much and being more methodical with the approach. This desire to not have huge sums of money tied up in developments - which in some areas are seeing a reduction in demand as residential properties are deemed unaffordable because of mortgage affordability issues - is no doubt increasing. More and more developers are waiting for a commitment from a purchaser for a new build before they complete the internal fit out. Which in turn means that work available for those sub- contractors who depend on this flow of work to earn a living is increasingly volatile. Additionally, commercial developments are being considered for viability to a much higher level, not unsurprising given the new hybrid working world and the subsequent reduction in demand for office space, further reducing the work put out to tender. So, is Low Balling a good approach? With work out to tender being on the decline, it’s not a surprise that we’re seeing more contractors and sub-contractors low balling on tenders to win work and fill the order book. But with so little room for manoeuvre within the scope of works and profit margin, it’s very feasible that unexpected delays and costs can quickly eat into profit. And without realising it the lucrative project, albeit on tight margins, can suddenly turn loss making and a significant drain on cash. When this occurs it’s quite often the case that the contractor awarded the work will then begin to “borrow” from the next or another project to get this over the line to completion. This in turn compromises future projects and, if not addressed, can very quickly see what was once a successful and profitable company get into financial troubles on the back of one bad project.
Not only does this all come with significant risk to the sub-contractor who has secured the work, there is also a greater risk that the contract defaults and the body awarding the contract will need to reissue making them also vulnerable to increased costs. What to consider when bidding on new contracts It’s first and foremost important that when bidding on contracts, businesses do not tender and aim to win projects with so little margin. Or if margin is tight, as a minimum, businesses must make sure that variations clauses are sufficiently ironed out against unknown delays or cost increases. It is then of even greater importance that the businesses awarding and awarded the contract has robust financial reporting procedures in place, and that they undertake regular reviews of project performance to identify any issues as soon as possible so they can have the opportunity to react accordingly. Because without having regular oversight of the financials, quite often when the issue comes to light it’s already too late. For further discussions regarding your financial reporting procedures please get in touch with Ben or one of our Property & Construction team specialists by calling 0330 058 6559 or emailing hello@scruttonbland.co.uk
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S everal key changes took effect from 1 April 2024, introduced with the government’s goals of tax simplification and reducing fraud. Tyler Hursey, Tax Adviser, shares what this means specifically for the construction sector, and the new opportunities and important considerations these changes offer when claiming R&D tax relief. R&D Tax Relief - Key 2024 Changes For accounting periods commencing on or after 1 April 2024, a new merged scheme now applies to all companies, other than those loss-making R&D intensive SME’s who will continue to use the existing SME scheme. Under this new merged scheme, companies claim relief by way of a taxable ‘above-the-line’ tax credit, equal to 20% of the qualifying expenditure based on the current RDEC Research & Development Expenditure Credit (RDEC) scheme. A notable change here though is that all companies are now able to claim R&D tax relief on work subcontracted out. However, large companies will no longer be able to claim the R&D tax relief if the work has been subcontracted to them, to align with the SME rules. Additionally, qualifying expenditure must generally be incurred within the UK, except where there are:
R&D in the Construction Sector How the April 2024 Changes Affect Tax Reliefs For many companies Research & Development (R&D) tax relief has long been a valuable incentive for those investing in innovation. Encouraging businesses to push boundaries, develop new technologies and enhance products or processes by offering significant tax savings.
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Material factors such as geography, environment,
population, or other conditions that are not present in the UK and are required for the research. Regulatory or other legal requirements that activities must take place outside of the UK.
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Administrative changes to construction R&D
What qualifies for R&D in construction?
From August 2023, all R&D tax relief claims had to be submitted with an Additional Information Form. This form provides HMRC with information regarding the costs being claimed as well as the R&D activities being undertaken. Additionally, companies who have not made a claim for R&D tax relief in the previous 3 years must now submit an advanced notification form to HMRC within 6 months of the end of the company’s accounting period. Innovation in the construction sector For the construction sector, these changes could be both advantageous and challenging. Businesses acting as both main contractors and developers may benefit, as they can now claim for their subcontractors’ activities. Whereas specialist firms working under subcontracting arrangements will now face limitations. Companies will also need to be mindful of the PAYE/NIC cap and the employment arrangements of businesses in the construction sector. Where the trade and employees often exist in separate entities, this may prevent companies from realising relief when in a loss-making position.
While it can be challenging to make R&D claims within the construction sector - the industry is traditionally seen as less innovative compared to sectors like technology - construction companies can still benefit significantly from R&D tax relief. It’s important to note that for R&D activities to qualify, the products and processes developed must achieve an advance in science or technology, and not simply be new to your company. Some of the most common R&D projects we come across within the construction sector are as follows:
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Use of new and eco-friendly materials and processes
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Innovative building methods and overcoming design and engineering uncertainties.
But there are some common areas of qualifying R&D which are often overlooked such as:
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Unsuccessful and internal projects
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Expenditure where there isn’t a new product – R&D can be related to changes or modifications of an existing product or process.
How to make a qualifying claim for R & D in construction Acquainting yourself with the R&D criteria relating to your company will help you to make a compliant qualifying claim. Along with a trustworthy agent who can guide you through the process, and importantly be there for support should HMRC select your claim for detailed scrutiny. At Scrutton Bland, we have a dedicated team here to support you with both identifying projects eligible for R&D, and in guiding you through the process of making a claim. To get in touch please call Tyler on
0330 058 6559 or by emailing hello@scruttonbland.co.uk
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A Guide to Construction Adjudication in Disputes for Payments
The importance of adjudication for those procuring work in the construction sector can’t be overstated. In this article, Peter Blake of Prettys Solicitors offers an expert guide to what this is and how best to utilise adjudication to protect a healthy cash flow.
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The economic climate The construction sector has had a difficult time of late as illustrated by recent high profile corporate failures in the sector. There was a 0.1 % fall in output for the quarter to June 2024. i There are, however, green shoots of recovery evidenced in the form of a rise in output for the month of June 2024 ii . This perhaps reflects a greater confidence in the economy and an improvement in the housing market in anticipation of interest rate reductions - the first of which has already come about, albeit narrowly. The Bank of England will continue to exercise caution in relation to further rate reductions with a continued eye on inflation. But it remains to be seen whether signs of recovery develop. Cash is always king and never has this been truer than in recent times. Recovery or not, the paramountcy of cash will continue for businesses whose cash reserves have diminished or come under pressure more recently. For those involved in the construction sector in any way, particularly one off or first- time employers procuring work, the importance of adjudication in securing or preserving a healthy cash flow cannot be overstated. What is adjudication? Adjudication is a summary form of dispute resolution, which has become the most frequently used process to resolve disputes in the construction sector. It is usually quicker and less expensive than other methods of dispute resolution. Additionally, there is a statutory right to adjudicate on disputes arising under construction contracts at any time. iii And, although the statutory adjudication provisions do not apply to contracts with residential occupiers, most standard form contracts e.g. JCT contain adjudication provisions. iv Notified sums versus true value There are two bases for claims in adjudications; notified sums or true value. Notified sum claims are also referred to as “smash and grab” and they are the amount payable by reference to the notices that are required in any payment cycle. Classically an interim application should be met with a payment notice from the paying party, stating the amount due and the basis on which it is calculated.
Evidence and adjudication Adjudication is a quick process typically lasting between 4 and 8 weeks, although complex claims can take much longer. Although some adjudications will involve meetings it is primarily a paper- based procedure. Therefore, good records are key to success in adjudication. Multiple concurrent documents will usually carry more weight than witness evidence, which will usually be in statement form with no cross examination. In conclusion Adjudication was conceived as a means of maintaining cashflow in the construction industry.
There is then an opportunity for the paying party to serve a pay less notice, stating how much less is to be paid than in the payment notice and the basis on which it is calculated. v The amount due by reference to notices served (or not as the case may be) is the notified sum. If a notice is not served the default position will apply e.g. in the absence of a payment notice the interim application will stand as such. There is a right to payment of a notified sum which will be upheld through adjudication. vi Therefore it is very important that all notices are served on time. If a party does not agree with the notified sum and, subject to payment, if an adjudication decision is obtained, a true value claim may be made. vii This involves proving the value of the work performed by reference to the contract. Other case law Adjudication has evolved over time through case law and statutory amendment. There are nuances to the position as described above which cannot be explored here. Tips for the unwary The statutory regime requires contracts to comply as regards payment provisions. If not, the terms of the Scheme viii will apply.
The courts are predisposed to enforce adjudication decisions as a matter of policy.
And any party, whether procuring or carrying out construction works, ignores the contract payment provisions and their related obligations at their peril. Peter Blake , Head of Construction at Prettys Solicitors LLP pblake@prettys.co.uk 01473 298206 i Office for National Statistics statistical bulletin, Construction output in Great Britain: June 2024 , new orders and Construction Output Price Indices, April to June 2024 published 11th August 2024. ii Ibid iii Section 108 Housing Grants, Construction and Regeneration Act 1996 (as amended). iv Ibid, Section 106 v e.g. Part II of The Scheme for Construction Contracts (England and Wales) Regulations 1998 vi e.g. S&T(UK) Limited v Grove Developments Limited [ 2018] EWCA Civ 2448 vii It is possible to make a notified sum and an alternative true value claim in the same adjudication Bellway Homes Limited v Surgo Construction Limited [2024] EWHC 10 TCC viii The Scheme for Construction Contracts (England and Wales) Regulations 1998
The payment provisions of a contract should be read carefully to ensure they are compliant.
The terminology used can be confusing. ‘Due date’ is the date which triggers the service of notices rather than the date by which payment should be made. Instead that is known as the ‘final date for payment’. The dates for service of notices should be diarised as an aid to compliance or policing to avoid inadvertently allowing a notified smash and grab claim to arise, or missing the opportunity to make one. Failure to enforce payment terms can lead to claims being waived or the contract being varied by conduct. Most adjudication decisions are compiled with function as a catalyst for a settlement. A decision is binding on an interim basis, i.e. until varied through litigation or arbitration. A decision can be enforced through the Technology and Construction Court, which has developed an efficient procedure. There are limited defences available to enforcement, namely: the adjudicator exceeding the jurisdiction given by the notice of adjudication; and breach of natural justice.
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DIY Housebuilder Scheme For New Builds
The DIY Housebuilder Scheme was introduced by HMRC to put people building their own house in the same position as if they had purchased a new build from a construction company. When buying from a construction company, the supply of a new build is zero rated for VAT purposes and therefore no VAT is charged on the purchase price. Therefore, for a DIY builder who is suffering VAT at 20% on building materials purchased for the build, a claim can be submitted to HMRC to refund this back. Paula Mason, VAT Manager, explains the qualification criteria and how to make a claim.
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Qualifying Conditions In order for the claim to be successful, the building has to qualify for the scheme.
Making a Claim
Examples of items incorporated in the building or its site include:
You can claim for any VAT suffered on the building materials incorporated into the building and its site. For information about what building materials you can claim for, you can see these detailed below. It is important to check you have been charged VAT as there will be no VAT to claim on zero rated goods and services, i.e.. if a VAT registered builder has done the work for you and not charged you VAT, or on supplies purchased from non-VAT registered traders. The claim must be accompanied by documents to prove that the work carried out is lawful and that planning permission has been granted. Planning permission could consist of either full planning permission, outline planning permission and approval of reserved matters or permitted development rights, e.g. a local development or neighbourhood development order. If the planning permission has been issued in two parts, as an outline and an approval, both parts need to be sent to HMRC. If the planning permission has been revised or amended, both this and any previous permissions need to be sent. Full plans and a completion certificate also need to be sent with the claim. The completion certificate certifies that the building is complete and is issued by the relevant planning authority. Claims can be made online and must be made within six months after completion. Only one claim is allowed.
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Boilers and radiators
The property being built:
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Wired in Storage Heaters
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Must not be used for business purposes
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Flooring (but not carpets)
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Must be constructed for the use of you or your relatives as a residence or holiday home or purchased as a shell from a developer and fitted out to completion for you or your relatives as a residence or holiday home Must not have direct internal access from it to any other dwelling or part of a dwelling
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Fitted Kitchens (but not white goods, or ovens and hobs)
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Landscaping, including turf
Examples of items not incorporated in the building or its site include:
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Free standing furniture or fitted furniture (with the exception of fitted kitchens)
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Must consist of self-contained living accommodation
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Vanity units and wall units, e.g. bathroom cabinet
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Must have planning permission granted and the construction must be carried out in accordance with this
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Appliances that can be plugged in
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Ornamental works including fishponds
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Must be capable of separate use and disposal
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Sheds and greenhouses
If any of these conditions are not met, a DIY claim cannot be made and any VAT incurred on building materials and services are likely to be charged at the standard rate of 20%.
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Plant, tools, equipment and consumables, e.g. sandpaper
If you would like to discuss the VAT DIY Housebuilders Scheme for new builds or any other VAT property or construction matter please contact Paula by emailing hello@ scruttonbland.co.uk or calling 0330 058 6559.
Examples of non-eligibility would be:
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The construction of a property that cannot be disposed of or used separately due to a condition of the planning permission The construction of a property that neither you or your relatives intend to live in but where the intention is to sell, let or use for any other business purpose. A business purpose includes constructing a property where you need to live for your work
Building Materials VAT on building materials which are
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incorporated into the building can be refunded in full. Being incorporated means being fixed in such a way that its fixing or removal would either need the use of tools or result in the need for remedial work to the fabric of the building or its site or substantial damage to the items themselves.
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Incentivising Employees With A Slice Of The Action: A Guide to Finding the Right Share Scheme We often say that a business’s greatest asset is its people, and we know that in every property and construction company there are individuals who contribute to driving the business to succeed. People who are creatively, technically, or strategically vital to the day-to- day operations. And without whose knowledge and skills the business
would close fewer deals, be less profitable and grow more slowly. G iving staff a stake in the business can assist with the retention of key personnel, increase productivity, and improve cashflow. We asked Sam Stent, Associate Partner in
those that don’t (or where the £250,000 or £60,000 limits are not sufficient), unapproved option arrangements (or other non-advantaged schemes) might be considered. Non-advantaged schemes can be quicker to set up, easier to administer and have other benefits. Unapproved share option schemes for example are particularly flexible because:
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market value of the shares and the price paid by the individual to acquire them (in the same way as if they had received the equivalent amount of salary).
our Tax Advisory Team, to look at ways that property and construction companies can incentivise key employees, and why share schemes are becoming an increasingly popular option in this sector, especially for cash- strapped fledgling companies. The share scheme that’s right for your business will depend on the size of your company, whether you want to give shares now (or options to buy shares in the future) and what you’re hoping to achieve from the scheme. It will also depend on whether you are looking to incentivise all of your employees, just some of them or whether you want to give a stake in the business to someone external to the organisation (eg “sweat equity”).
Other unapproved share arrangements, such as growth shares, have a less punitive tax treatment. This simple arrangement involves setting up a new class of shares and is often used by private companies for employees who have been recruited at a later date to ensure that those individuals only share in the future growth of the business and do not benefit from their predecessor’s efforts. Any income tax or NIC charge will be based on the value of the growth shares at the time the employee acquires them and typically, advisers will argue that these shares have little or no value at that point in time when there has not yet been any growth… although HMRC sometimes has other ideas! Contact Sam Stent or the Tax Advisory Team at Scrutton Bland if you are considering implementing a share scheme and we’ll help you find the one that best meets your needs.
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They can be used to reward external advisers and consultants as well as employees They have no minimum or maximum period during which options must be exercised
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The company can set any exercise price it wishes
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They can also impose restrictions or targets in relation to the shares that align with its plans for future growth of the business. The downside is that there is no tax advantage to be gained, with PAYE being applied to the difference between the
There are 4 share schemes that are approved by HMRC (see opposite page):
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EMIs and CSOPs will almost always be the top choices for companies that qualify but for
Call 0300 058 6559 or email hello@scruttonbland.co.uk
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Enterprise Management Incentive (EMI) Scheme Option permits employee to buy up to £250,000 worth of shares at a later date at a set price. Gains between option grant and exercise date are subject to CGT rather than income tax and NICs. Independent companies with gross assets of £30m or less, less than 250 employees and with a ‘qualifying’ trade (NB Property development is not a ‘qualifying’ trade for EMI purposes).
Company Share Option Plan (CSOP Permits selected employees to buy up to £60,000 of shares at a later date but at the current price. Any increase in value at the date the option is exercised is subject to CGT rather than income tax and NICs. The issuing company must not be under the control of another company (unless it is listed on a recognised stock exchange). No limits on company size or number of employees so can be used by larger companies and those whose trade excludes them from EMI schemes. Can be offered to any employee or full- time working director (unless they already have a material interest in the company).
Save As You Earn (SAYE) Share Incentive Plan (SIP)
Overview
Employee makes regular monthly contributions from net pay to the scheme which are held for a minimum of three years. Employee then has the option to buy shares at up to 20% discount on market value. While an unlisted company is not precluded from operating a SAYE scheme, in practice such schemes are quite complex and mainly tend to be offered by listed companies.
Employee obtains tax and NIC relief when buying shares in employer’s company (‘partnership shares’). The company may also offer free, ‘matching’ shares, which are not subject to income tax. Shares are normally held in trust until retention periods have elapsed. Due to the need to set up and administer a separate trust and the complexity of the arrangements, SIPs are predominantly used by large, publicly quoted companies.
What types of company is the scheme suitable for?
Employee requirements
Can be offered to any full-time employees (unless they already have a material interest in the company).
Has to be made available to ALL employees (Under 5 years service can be excluded).
Has to be made available to ALL employees (Under 18 months service can be excluded).
Minimum share retention period
None.
Three years.
Minimum three years before option to purchase vests, but employer can stipulate longer period. Monthly saving permitted between £10 and £500
Five years retention for full tax advantages, (limited benefits if held between three and five years). Minimum £10 and maximum is the lower of £1,800 pa or 10% salary. Tax relief given when purchasing partnership shares. No tax or NICs due if shares held in trust for 5 years.
Amount of shares that employee can purchase
Up to £250,000
Up to £60,000
Tax and NIC treatment where scheme conditions are met
No tax relief on purchase.
No tax relief on purchase.
No tax relief on purchase.
Income tax is payable if there is any discount on market value at option date, but otherwise, increase in value between grant and exercise date is not taxable on exercise.
When option is exercised, the increase in value is not subject to income tax or NICs.
No tax or NIC due when shares are acquired. Any discount given on share purchase (up to 20%) is tax free.
On sale, CGT is due on proceeds less price paid.
On sale, CGT is due on proceeds less price paid.
No CGT on sale.
On sale, CGT is due on proceeds less price paid.
Business Asset Disposal Relief may be available.
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How To Avoid Common Tax Mistakes In Construction Accounting
In this article Ben Cussons, Business Advisory Partner, looks at some of the common mistakes businesses make when it comes to the accounting of construction related activities, and some useful guidance to ensure compliance.
What do HMRC focus on in construction? It’s fair to say that no matter your industry, no one wants HMRC trawling through everything. It’s a costly and timely exercise and that’s without the current inefficiencies of HMRC to contend with. However, HMRC continue to be of the opinion that the construction sector is plagued with fraud and deceit. So, changes implemented on 1st March 2021 to the VAT regime specifically targeted the construction industry with the introduction of the domestic reverse charge scheme. Introduced to place the onus of reporting and paying to the main contractor in a construction project, and based on HMRC reasoning that many smaller sub-contractors were charging VAT when not even registered. These amounts then didn’t make their way to HMRC and were instead additional undeclared profit. How does Domestic Reverse Charge VAT work? In essence, although declared and shown on the invoice to the contractor, the VAT is deducted
For example:
But whatever side of the transaction you’re on, if you’re getting this right you’ll reduce the likelihood of an HMRC VAT review or enquiry. And whilst HMRC wouldn’t be as explicit as to say so, based on their limited resources and the objective of these reviews being to identify non-compliance, then it would make sense that if you‘re reviewed and they can see that you’re following the guidance, your chances of a future review will be reduced. What is the Construction Industry Scheme? CIS is applied to all sub-contractors in the construction sector when working for another contractor, be that directly for the main contractor or another sub-contractor in the supply chain of the project. CIS is withheld from the payments made to sub-contractors and is deducted either at the main rate of 20%, the higher rate of 30% or if a sub-contractor has gross status, then 0%. So, based on our earlier example, the amounts deducted would be either £2,000, £3,000 or £0 as the amounts calculated for deduction ignore VAT and are only on the supply of labour, not materials.
If a sub-contractor invoices £10,000 for the construction services provided, with the VAT added at 20% it would make the gross value of the invoice £12,000. Under this new regime, the VAT is the retained amount by the main contractor and the net amount due to the sub-contractor (ignoring any CIS implications) is £10,000. The main contractor then shows an output and an input on their VAT return, for VAT due and VAT reclaimed, meaning their cash outlay is lessened by retaining the sub-contractors VAT. This now means the sub-contractor loses out on the cash flow advantage of being paid the VAT and the timing delay in this then being paid to HMRC. The change has seen many construction businesses, particularly those who fully sub- contract, move to monthly VAT reporting to speed up the receipt of the repayments of VAT incurred on their costs, and to aid cashflow.
from the invoice in a similar way to the Construction Industry Scheme (CIS).
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It’s worth a reminder here that gross status is only applicable to larger contractors who can demonstrate they generate enough operations to qualify and who are up to date with payment of all their other taxes. Gross status must be applied for and is not granted automatically. There are obvious cash flow benefits to obtaining gross status as you receive in full 100% of the amounts invoiced, ignoring any retentions. HMRC do sometimes challenge the split of labour and materials on invoices however, providing there is some sort of reasoning to substantiate the amounts charged, then they do tend to be appeased quite easily if you are compliant with your reporting. How do I know what rate to use? When engaging a sub-contractor, the reporting entity must verify the credentials of the sub- contractor with HMRC.
There’s a free tool on the HMRC website to verify sub-contractors and file returns, and many of the software providers have either incorporated this into their core systems (such as Xero), or by creating more bespoke construction focused packages. It’s worth scoping out your requirements before deciding on what software package to use as you want it fit for purpose and not too much or too little. When does CIS apply? The short answer is pretty much all the time when it comes to any form of construction. There is a common misconception that repair work doesn’t fall within CIS as people don’t generally view that as construction, but it does. HMRC’s website is useful here once again, as they provide quite detailed guidance of what is and what isn’t CIS. You can find all the information at gov.uk/what-is-the- construction-industry-scheme How do I report to HMRC and pay? Each month you’ll need to report a CIS return and pay the amounts deducted in the same way as for PAYE. The reporting is based on when payments are made, not invoices received.
HMRC have an option for these to be filed within the entity’s HMRC online account, however an increasing number of businesses are using accounting software to capture the data as part of their day to day bookkeeping rather than it being a separate exercise. We expect HMRC will in time make it mandatory for all businesses to report through accounting software and withdraw the use of the HMRC online account, much like they did for VAT previously. In summary Nobody wants to get on the wrong side of HMRC. And as they are increasingly now starting to make more noise after their slumber during covid, with more compliance checks and enquiries into both VAT and CIS, now is as important a time as ever to get it right . We’ve got a dedicated team here at Scrutton Bland who will be pleased to assist you with your VAT or CIS reporting. To discuss any of the points raised in this article, please reach out by emailing hello@scruttonbland.co.uk or calling 0330 058 6559.
HMRC then matches this to their system to advise the rate to use.
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Meet the Team Our team of property and construction specialists regularly advise a wide range of corporate and owner managed businesses, from large civil engineering contractors to specialist craftspeople and have a thorough understanding of the opportunities and challenges facing the industry.
We seek to build long-term, trusted relationships with our clients. It is important to us that we understand our clients’ business and personal aims and objectives, in order that we can provide bespoke and personal advice.
Get in touch with a member of the team to see how they can help you.
Ben Cussons Business Advisory Partner ben.cussons@ scruttonbland.co.uk 01379 773532
Steven Burgess Audit Partner steven.burgess@ scruttonbland.co.uk 01473 945870
Tyler Hursey Tax Adviser tyler.hursey@ scruttonbland.co.uk 01206 417272
Jason Fayers Managing Partner and Tax Partner jason.fayers@ scruttonbland.co.uk 01473 945817
Sam Stent Associate Tax Partner samantha.stent@ scruttonbland.co.uk 01206 417280
Paula Mason VAT Manager paula.mason@ scruttonbland.co.uk 01473 945823
Mark Smith Corporate Finance Director mark.smith@ scruttonbland.co.uk 01473 945732
Chris George Tax Advisory Partner chris.george@ scruttonbland.co.uk 01473 945836
In 2024, Scrutton Bland became part of Sumer – a collaboration of the best regional accountancy practices with a shared vision to champion local small to medium-sized enterprises. By bringing together the best in business services, Sumer retains the value that community-based practices offer and combines this with the scale, breadth of expertise and technologies that only a national organisation can muster.
To find out more about Sumer, visit our website: www.sumer.co.uk
0330 058 6559 scruttonbland.co.uk
@scruttonbland
0837/09/2024/MKTG
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