This statement has been compiled in accordance with our wider vision, values and aims as an organisation in which we believe in a world in which compassion, cooperation and autonomy are the guiding principles, rather than greed and competition.

B2C sales of goods to EU customers

Currently, if you sell goods to EU customers then the chances are you are charging UK VAT. This will be because the total of your sales to any individual EU country is under the “distance selling threshold”. If you are selling under the distance selling threshold, then it’s just like a UK sale – you charge UK VAT at the point of sale. Distance selling thresholds vary but they are usually around 35,000 Euros. If you sell to an EU country over its distance selling threshold, then you need to register for VAT in that EU country.

On 1 January 2021 Great Britain (not Northern Ireland) leaves the EU VAT system, which means that sales of goods to any EU customer will be zero rated for UK VAT. There are no distance selling thresholds, and all such sales will be subject to local VAT if they are over the de minimis threshold of 22 Euros per consignment. When your customer picks up their parcel from their local post office or other courier company, they will be charged local VAT on the value of the item which you will have declared.

Webshops will need to be reconfigured to zero rate any supplies to the EU. Supplies to the EU will be the same as supplies outside the EU. You may want to lower prices for EU customers as they will be picking up the tab for the VAT, which in many countries is higher than 20%.

B2C digital sales (“BTE sales”)

BTE sales are sales of broadcasting, telecommunications, or electronic services. Examples of BTE sales are an electronic magazine for download; access to a database behind a paywall; a webinar or video or audio streaming; or software subscriptions.

Currently, if you make BTE sales B2C to customers in the EU, then the place of supply is the EU country and VAT is payable in that country. To simplify this, you normally make a quarterly return to VAT MOSS (VAT Mini One Stop Shop) of all BTE sales to all EU countries, pay the VAT to HMRC, and HMRC pays it over to the relevant jurisdictions. But if all such sales are below 10,000 Euros, then you can just carry on charging UK VAT.

From 1 January 2021, the threshold of 10,000 Euros has gone so any BTE sale no matter how small needs to be subjected to EU VAT. To do this, you have to register with a Non-Union MOSS. UK sellers are often registering with Ireland’s Non-Union MOSS, on the grounds that the Irish speak English and so it is easier to do. So after Brexit, if you make any digital sales at all to EU customers who are not in business, you need to register with a Non-Union MOSS and pay EU VAT on those sales.

Get in touch with our VAT team if you have any questions!

But if you make B2C supplies of services from UK to outside EU, no VAT is charged as in this case the place of supply is the place of the customer, so it is outside the scope of UK VAT.

The same applies the other way round: when an EU supplier makes supplies of services to a UK customer, EU supplier charges EU VAT.

Post Brexit transition period

B2C supplies of services from UK to anywhere else in world will be outside the scope of UK VAT.

Similarly, no EU VAT will be charged on B2C supplies of services from an EU supplier to a UK customer.

Charities that have no business activities are “C” so if they receive services from the EU, that is B2C. So from 01/01/21 they will not be charged EU VAT. Neither will ordinary consumers. I suspect there will be a rush to set up professional services firms in Ireland to supply GB and NI charities and consumers.

For details on which services these relate to, See VAT Notice 741a Section 12.

Home working allowance

Employers can pay employees (including part time employees) £6 per week entirely tax and NIC free to compensate them for any incidental costs of working from home.

If employers do not pay employees anything for working from home, the employee can make a claim for £6 a week against their tax. This will be adjusted through their tax code. More information here: https://www.gov.uk/tax-relief-for-employees/working-at-home.

Tax free equipment

A temporary relief has been introduced by the government to facilitate the provision of equipment to employees to enable them to work from home, which runs from 16 March 2020 to 5 April 2021 (although it could be extended). This means that where an employee buys equipment to use at home, and the employer reimburses the exact cost of the equipment, there is now no benefit charge on the employee. This is true even if the employee gets to keep the equipment.

However, if an employer provides equipment to an employee to allow them to work from home, and subsequently allows them to keep it, then there is a tax charge. It’s better for the employees to buy and get reimbursed!

These reliefs apply where there is no significant private use. What this means, and for further details, see https://www.gov.uk/guidance/check-which-expenses-are-taxable-if-your-employee-works-from-home-due-to-coronavirus-covid-19.

Notified state aid

This is where the provider has to make a notification to the EU commission. You can only receive one form of notified state aid for any given project. Examples of notified state aid are:

• R&D tax relief under the SME scheme
• Some grant funding, such as Innovate UK
• Coronavirus Business Interruption Loan Scheme and Bounce Back Loan Scheme

This means for example that you cannot claim R&D tax relief under the SME scheme for a project that is funded by Innovate UK. CBILS and BBL are, and should be regarded as, not project specific.

De minimis state aid

This is aid which is subject to an overall de minimis which is a rolling €200,000 over a three year period. Types of de minimis state aid include:

• Seed Enterprise Investment Scheme
• Social Enterprise Investment Scheme
• Employment Allowance
• Covid-19 support grants under the Small Business Grant Fund and the Retail, Hospitality and Leisure Grant Fund (the £10k or £50k that was received via local councils)

General Block Exemption Regulations

This is aid that does not need to be notified to the EU and does not fall within the de minimis rules.

The Enterprise Investment Scheme is covered by the block exemption. This means it does not affect eligibility for other forms of state aid.

Support which is not state aid

• Coronavirus Job Retention Scheme and Job Support Scheme: these are not selective measures and so do not distort competition and are not regarded as state aid
• Future Fund
• Innovate UK’s continuity grants and loans fall under a temporary framework for state aid which applies until 31/12/20

We have commissioned Ethical Consumer Research Association (ECRA) to review the practices of the providers of three software applications that we currently rely upon; Quickbooks online, Xero and Receipt Bank. We have contacted each of the companies and invited them to comment.

Quickbooks Online

Quickbooks online is a cloud-based accounts and bookkeeping application marketed by Intuit, and is widely used by smaller scale organisations. At first glance, and given the scale of the company’s operations, Intuit come out of the ethical screening relatively well: this is not to say they are particularly good, as there are concerns about trading in oppressive regimes, political funding, company structures associated with tax avoidance, and less than fully adequate environmental reporting, although on this last point there are noted commitments to reduce the company’s carbon footprint and waste output. However, a specific accounting-related concern for Third Sector Accountancy is Intuit’s role in lobbying against the provision of a free online tax filing system by the US internal revenue service; we view this as profit motivated and ethically questionable behaviour. Intuit have not offered any comment on the ECRA report. 

Xero

Xero is similarly a cloud-based accounting and bookkeeping software application, also widely used by smaller scale organisations. Xero’s ethical rating is lower than Intuit’s, although with some important qualification: the company itself is faulted on its environmental reporting, but otherwise is not found to engage in unethical practices. However, as a publicly listed company, Xero has investors with significant shareholdings who, to put it mildly, engage in a wide range of ethically questionable practices. These investors include HSBC,  J. P. Morgan and Citicorp. 

In response, Xero say they have introduced a ‘Net Zero’ policy aimed at offsetting 100% of Xero carbon emissions. They also state that large investment institutions generally act as custodians for investors who are individuals and companies, and that as a publicly traded company they have no control over who holds or invests in Xero. Xero also assert that they have undertaken a number of initiatives under their Social Environmental Impact program, which they claim as evidence of their commitment to ethical investing. We have some sympathy for Xero’s claims, and can acknowledge their stated commitment to ethical practices. However, it remains the case that the decision to become a publicly traded company was made by Xero themselves: consequently, they are responsible for any associations that arise. Xero’s full response can be seen here. 

Receipt Bank

Receipt Bank provides a pre-accounting software package, designed to automate bookkeeping tasks. Receipt Bank’s ethical rating is low, significantly less than for Xero or Intuit, yet like Xero the business itself is faulted only for its poor standard of environmental reporting. Again, the ethical standing of Receipt Bank is significantly affected through its association with shareholders, such as Insight Venture Partners and Kennet Partners, who in turn are known to invest substantially in ethically challenged businesses. Receipt Bank have offered a correction to ECRA’s report (they say they have 10,000 clients globally, and  do have published accounts for which a non-working link was provided). However, they make no substantive rebuttal of the points made in the ECRA report. 

As in many areas of life where aspiring for an acceptable ethical stance, making an appropriate decision presents something of a dilemma: in order to function effectively the co-op has to make use of applications that effectively meet our accounting requirements, and we have found that there is an unfortunate need to trade these requirements off against our ethics policy. We have come to understand that suppliers of accountancy software, who are without question ethical in their practice and also meet our requirements, are impossible to find. At best, we can commit to continue seeking viable alternatives that meet our ethical expectations and professional requirements. We also undertake to share any information we have concerning the ethical behaviour of our software suppliers, and so allow our clients to make their own informed decisions. As it is, ethically grounded alternatives that may be suitable for organisations with less complex bookkeeping requirements are currently available, these being Gnucash (a basic, open source desktop application) and open source spreadsheet applications such as Libre Office and Open Office.

THIRD SECTOR ACCOUNTANCY- a super bunch of people, providing professional services for community organisations, and what a fantastic group of people to work with!  This makes it very difficult to leave, but sadly that is what I am doing.

It is almost 2 years since I joined the practice, which was then still quite new.  I have worked for a charity and so I know what a tremendous legal responsibility is placed on trustees and officers. A great deal of money is often spent on accountants in order to keep the right side of the law, so it is a great benefit to be able to find accredited accountants who are sympathetic with the aims of the charity and charge reasonable rates.  

When I first heard about the idea of creating an accountancy practice to provide services to not-for-profit and not-government organisations I was excited.  Accountancy training focuses on private companies, and there are all sorts of different regulations which impact charities and co-ops, so this is really a quite specialist area.

And when I heard it was to be a workers’ co-operative, I was even more keen to help.  I think this is the only accountancy practice that is a co-op anywhere in the UK. I was keen to use my own qualification and long experience in financial management to help get Third Sector Accountancy up and running, even though I had previously retired.

I have really enjoyed working with third sector clients.  I have been inspired by meeting so many people who give their time to organisations that are making a difference in communities or to achieve a social change, often for no personal reward.  

It has also been a pleasure working with the people who make up Third Sector Accountancy. Everyone shares a commitment to high standards, and a thirst to continually learn and improve.  Their willingness to help each other and share responsibility makes life easier for everyone. Also, you must admire people who are prepared to take lower wages, if necessary, to keep to their principles.

Now I have written all this, I am wondering why on earth I would stop? I suppose the real answer is that the work is so rewarding and so absorbing that it is too easy to get sucked in and find it taking more time than intended.  After several decades of work taking most of my waking time, I am determined to spend more time following other interests – in fact, retiring!

So, thank you to all those clients I have had the pleasure to work with, and I wish you all the best for the future success of your organisations. And thank you to every member of Third Sector Accountancy for your help and support, wishing you every success for the future. I am sure this is just the start of something big and important.  Keep it up!

Best wishes

Stephen

Barnabus – helping the homeless and street sleepers in Manchester

Coffee4Craig – direct assistance for street sleepers in Manchester

Cribs International – homes in Greece for pregnant refugees and babies

Morning Star – the only democratically owned newspaper in the UK

Mustard Tree – tackling poverty and homelessness in Manchester

Shared Interest – ethical investment organisation alleviating poverty across the world

Trees for Cities – improving lives by planting trees in cities

Another reform that will affect the sector in a positive way is that the Mutuals Register is going online so that accounts and the AR30 annual return can be submitted electronically via a new online portal from 1^st April. Long overdue improvements to the format of the AR30 have been made and the difficult statistics page has been simplified. Also, the Register will now be searchable online and documents available to look at and downline free of charge, replacing the current charge of £12 per document. This will make verifying your society’s existence and legal status much easier for third parties and make the details of societies publicly visible in the same way that companies’ details are visible online.

Both of these changes have come about partly through the extensive lobbying of Co-operatives UK, the national federal body for co-ops which is a membership organisation. It is a great example of the powerful impact of working together as co-ops, and if your society is not already a member, why not consider reinvesting the money you’ll be saving from the fees by joining Co-operatives UK?

The names, addresses and dates of birth of directors/management committee members from previous AR30 annual returns will now be fully visible online. On the new return the date of birth will be redacted and only month of birth will be visible on the Registry, as it is at Companies House for company directors. Company directors can choose not to show  their home address at Companies House, but this will not be possible for Society directors.

In order to file accounts and returns online, the Secretary or another director/member of the society will need to apply for authorisation via the new portal. The FCA will then send a code by post to the registered office.

Overall these changes will bring a much more level playing field between societies and companies and should make your annual filing obligations quicker and easier – as well as cheaper!

Do get in touch if you have any queries.

“We warmly welcome the changes introduced by the FCA who were extremely receptive to our suggested improvements. This is a great example of how a strong and open relationship with an exemplary modern regulator can bring about positive results.  We’d also like to say a huge thank you to our members who took the time to respond to the consultation to create the change that will save the sector an estimated £1 million per year.” –
Ed Mayo, Secretary General, Co-operatives UK

For further information: Co-operatives UK

The good news is, the Revenue have finally realised (after losing several cases at tribunal) that there is no legal basis for this and have revised their guidance accordingly.

If you are in this position and have received a notice to file a tax return, then you should phone HMRC and ask them to withdraw the notice. They can still refuse in which case you should file a tax return anyway. But they may agree; and anyway they may take you off the list for an automatic return notice.