Newsletter – May 2020

Enews May 2020

In this month’s Enews, we report on the progress of the government’s schemes to help businesses and the self-employed during the COVID-19 pandemic. Bounce Back loans for small businesses were the latest in a raft of measures announced by Chancellor Rishi Sunak, which are starting to make a practical difference to businesses. We look at the latest guidance and also analyse the impact of COVID-19 on tax policy and the wider economy. As the COVID-19 lockdown continues to dominate the economy, there are lots of issues to update you on.

Government launches small business micro loan scheme

On 4 May 2020 the government launched a micro loan scheme for small businesses as it continues to try and mitigate the economic damage caused by the coronavirus (COVID-19) lockdown.

The Bounce Back Loan Scheme allows small businesses adversely affected by COVID-19 to apply for up to £50,000, with the government guaranteeing 100% of the advance.

Businesses can apply for a minimum of £2,000, up to a maximum of £50,000 with the government paying the interest for the first 12 months.

Businesses will be able to access the loans through the existing network of accredited lenders and the government said it expects most applications to be approved within 24 hours.

Chancellor of the Exchequer, Rishi Sunak, said:

‘I know that some small businesses are still struggling to access credit.

‘They are, in many ways, the most exposed businesses to the impact of the coronavirus, and often find it harder to access credit in the first place.

‘If we want to benefit from their dynamism and entrepreneurial spirit as we recover our economy, they will need extra support to get through the crisis.

‘Some businesses will not want to take on more debt, which is why our focus has been on cash grants, tax cuts and tax deferrals. But for others, loans will be part of the answer.’

Internet link: GOV.UK publications

Lenders relax evidence requirements for business interruption loan scheme applications

On 27 April 2020 the UK’s seven largest small business lenders announced they had relaxed their evidence requirements for applications to the Coronavirus Business Interruption Loan Scheme (CBILS).

The lenders will use their own information when processing and approving applications, rather than relying on businesses providing forecasts and business plans.

In a joint statement, the seven lenders and trade association UK Finance stated:

‘The reforms to CBILS announced by the British Business Bank and HM Treasury with the support of the regulators provide welcome changes that should enable banks to provide finance to businesses more quickly alongside other forms of support including capital repayment holidays.

‘Lenders are working hard to ensure we provide support swiftly and responsibly and we will continue to work closely with customers to help them identify the finance that is right for their business and financial circumstances.

‘Following the changes to the scheme announced today lenders will only ask businesses for information and data they might reasonably be able to provide at speed and we will not require the provision of forward-looking financial information or business plans from businesses applying for CBILS-backed lending, relying instead on our own information to assess credit and business viability.’

Internet link: UK Finance press release

Job Retention Scheme goes live

On 20 April 2020 the government’s Coronavirus Job Retention Scheme went live for applications.

The scheme allows businesses to furlough their employees, with the government paying 80% of their wages up to a maximum of £2,500.

The Coronavirus Job Retention Scheme is open for four months and was backdated from 1 March 2020 to the end of June. Chancellor Rishi Sunak stated that the scheme would be kept under review and extended if necessary.

There were applications from over 430,000 employers covering over three million employees in the first week of the scheme’s operation.

The Chancellor said:

‘We’ve taken unprecedented action to support jobs and businesses through this period of uncertainty, including the UK-wide Job Retention Scheme. With the extension of the coronavirus lockdown measures… it is the right decision to extend the furlough scheme for a month to the end of June to provide clarity.

‘It is vital for people’s livelihoods that the UK economy gets up and running again when it is safe to do so.’

Internet link: GOV.UK publications

HMRC releases guidance for self-employed scheme

HMRC has released guidance on the COVID-19 Self-employment Income Support Scheme.

Under the scheme, self-employed individuals will be able to claim a taxable grant based on an average of their earnings over the past three years. To be eligible, workers must have filed all relevant income tax self assessment returns; have traded in the 2018/19 and 2019/20 tax years, and intend to carry on trading in the 2020/21 tax year. Profits, based on an average of the last three years, must be no more than £50,000, and at least equal to any non-trading income, such as employment income, dividends or rental income.

Directors of their own companies who are paid through Pay as You Earn (PAYE) may be able to get support via the Coronavirus Job Retention Scheme.

HMRC began to contact those eligible in early May and invited them to apply online. Payments are scheduled to start later in May and run for three months, but may be extended if necessary.

Internet link: GOV.UK publications

Government launches support finding tool for business

The UK government launched an online platform to help businesses access financial support during the COVID-19 crisis.

The Coronavirus Business Support Finder Tool will guide businesses through the range of loans, tax reliefs and cash grants to combat the adverse economic effects of the COVID-19 lockdown.

The tool asks business owners to fill out a short online questionnaire. It then directs them to a list of financial support for which they may be eligible.

The tool takes the user through various questions about their business, including location, number of employees and turnover.

Chancellor Rishi Sunak said:

‘We’ve launched an unprecedented package of support to protect jobs, businesses and incomes during these challenging times. Millions are already benefiting and this new online tool will allow firms and individuals to identify what help they are entitled to in a matter of minutes.’

Internet link: GOV.UK publications

OBR predicts UK economy will shrink by over a third

The Office for Budget Responsibility (OBR) has warned that the UK economy could shrink by 35% this quarter due to the COVID-19 crisis.

The OBR said that the outcome was modelled on an assumption that the current lockdown would last for three months. It stated that a three-month lockdown followed by three months of partial restrictions would trigger an economic decline of 35.1% in the quarter to June alone.

The lockdown would push up the UK’s borrowing bill to an estimated £273 billion this financial year, or 14% of Gross Domestic Product (GDP).

However, the OBR said extra spending by the Treasury to support the economy was crucial to limit economic damage.

The OBR’s estimate followed a global economic forecast published by the International Monetary Fund (IMF), which predicted a 3% contraction in global growth.

Rain Newton-Smith, Chief Economist at the Confederation of British Industry (CBI), said:

‘This makes for bleak reading and stresses the need for the right policies to support our economy through this crisis. The need for co-ordinated global action to rebuild confidence has rarely been greater.

‘The government will also need to work with businesses and many parts of civil society here at home to create a plan to revive the economy once the lockdown is lifted.’

Internet link: OBR press release

Government borrowing could rise to £300 billion

The Centre for Policy Studies (CPS) has suggested that government borrowing may rise to £300 billion in 2020 as a result of the COVID-19 pandemic.

The think tank has been working to estimate the cost of the COVID-19 crisis to the government’s finances, and has incorporated official data from the Office for Budget Responsibility (OBR).

The CPS’s COVID-19 counter has put forward an estimated £127 billion in direct bailout costs and £119 million in indirect costs, such as lower tax revenue. The data is based on the OBR’s three-month lockdown scenario, followed by three months of ‘looser restrictions’.

The CPS stated that, when these estimated costs are added to the £55 billion of borrowing already forecast for 2020, a deficit of £301 billion is produced. This represents 15% of GDP.

Robert Colvile, Director of the CPS, said:

‘The government has acted throughout this crisis to save lives and protect livelihoods. But while it is clear to everyone that extraordinary times require extraordinary measures, they also incur extraordinary costs.

‘It is vital to get the most accurate possible picture of the burden the government is taking on in order to assess the full scale of the rebuilding that lies ahead.’

Internet link: CPS press release

HMRC extends late reporting deadline for CGT

HMRC has confirmed it will not charge penalties for the late reporting of capital gains tax (CGT) on disposals of UK residential property by UK residents made by 31 July 2020.

On 6 April changes were made so that if a UK resident sells a residential property in the UK, they now have 30 days to tell HMRC and pay any money owed.

The seller must submit a standalone tax return covering the CGT, which can no longer be included as part of a self assessment return.

Failure to tell HMRC about any CGT within 30 days of completion may incur a penalty, as well as interest on the sum owed.

HMRC stated:

‘To help those selling properties familiarise themselves with the change in the rules and a new online process, HMRC is allowing a period of time to adjust and will not issue late filing penalties for CGT payment on account returns received late up to and including 31 July 2020.

‘For UK residents, this means transactions completed between 6 April and 30 June 2020 and reported up to 31 July 2020. Transactions completed from 1 July 2020 onwards will receive a late filing penalty if they are not reported within 30 calendar days.

‘Interest will accrue if the tax remains unpaid after 30 days.’

Internet link: HMRC guidance

Newsletter – April 2020

Enews April 2020

In this month’s Enews we report on legislation that has been introduced to alter reporting obligations for residential property gains chargeable on UK resident individuals, trustees and personal representatives. We also analyse the support package announced by Chancellor Rishi Sunak to help businesses and the self-employed during the COVID-19 pandemic; regulators’ request for a delay in corporate reporting; and the delay to the introduction of the off-payroll rules to the private sector. With the government announcing many measures to combat the COVID-19 outbreak, there are lots of issues to update you on.

Chancellor’s business support packages for coronavirus pandemic

Chancellor unveils help for self-employed workers

Regulators request delay in corporate reporting

HMRC urges businesses using VAT deferral to cancel direct debits

Get ready for 30-day returns and payments for residential property gains

New tests and new car benefit percentages

HMRC delays introduction of off-payroll rules to private sector

Rise in contactless card payment limit

Chancellor’s business support packages for coronavirus pandemic

On 17 March, Chancellor Rishi Sunak unveiled a £330 billion package of support for the UK economy as it combats the COVID-19 pandemic. The measures dwarf the £12 billion made available in the 2020 Budget. The package includes an increase in government-backed loans, higher cash grants, widened business rates relief for some sectors and mortgage holidays for struggling homeowners. The government has extended the Coronavirus Business Interruption Loan Scheme announced in the Budget from £1.2 million to £5 million, with no interest due for the first 12 months. On 3 April, the Chancellor announced changes to the loan scheme in order to make it easier for small businesses to access loans. The current Business Interruption Loan Scheme has been extended so more small businesses benefit. Lenders will be banned from requesting personal guarantees on loans under £250,000. Additionally, a new scheme has been announced to bolster support for larger firms not currently eligible for loans.

Changes to business rates as a result of the COVID-19 pandemic have been put into place as well as some grants. The latest information for businesses located in England can be found here. Information for businesses in the devolved nations can be found here: Wales, Scotland, Northern Ireland.

Commenting on the measures, Dame Carolyn Fairbairn, Director General of the Confederation of British Industry (CBI), said:

‘This is a landmark package of measures for business, people and jobs. The Chancellor’s offer of substantial payroll support, fast access to cash and tax deferral will support the livelihoods of millions.’

Internet link: GOV.UK publications

Chancellor unveils help for self-employed workers

On 26 March, Chancellor Rishi Sunak announced a scheme to help self-employed workers who have been hit by the COVID-19 crisis.

Under the scheme, the government will pay self-employed people a taxable grant based on an average of their earnings over the past three years. The grant will cover up to 80% of earnings, up to a limit of £2,500 a month.

To be eligible, self-employed workers must have filed a tax return for the 2018/19 tax year and have average trading profits under £50,000 for the past three years. Directors of their own companies who are paid through Pay as You Earn (PAYE) are able to get support using the Coronavirus Job Retention Scheme.

The self-employed scheme will be available from June this year and will run for three months, but may be extended if necessary. In the meantime, the Chancellor said people can access Universal Credit, business loans or keep on working. HMRC will contact self-employed workers if eligible for the scheme and invite them to apply online.

Internet link: GOV.UK publications

Regulators request delay in corporate reporting

Financial regulators have requested a moratorium on corporate financial reports for at least two weeks. The Financial Conduct Authority (FCA) has been communicating with the Financial Reporting Council (FRC) and the Prudential Regulation Authority (PRA) about a package of measures to ‘reinforce trust in the reporting system’.

These will be aimed at ensuring companies and their auditors take the necessary time to prepare appropriate disclosures and address current practical challenges. The FCA says that it is vital that investors can rely on trustworthy information from companies.

However, the FCA added that recent unprecedented events mean that the basis on which companies are reporting and planning is changing rapidly. Consequently, the regulators say companies must give due consideration to the fast-moving coronavirus crisis, and previous timetables may not give them necessary time to do this.

In a statement on 26 March, the FRC said it ‘encourages listed companies and their auditors to consider carefully whether they should delay other corporate reports for the next two weeks, such as interim financial statements and final audited financial statements, except where necessary to meet a legal or regulatory requirement’.

Internet link: FCA press release

HMRC urges businesses using VAT deferral to cancel direct debits

Businesses that have been affected by the COVID-19 pandemic and are seeking to make use of the VAT deferral have been urged to cancel their direct debits ‘as soon as they can’.

Businesses are advised to contact their bank to cancel their direct debits as soon as possible. UK VAT-registered businesses with a VAT payment due between 20 March 2020 and 30 June 2020 have the option to either defer the payment until a later date or pay the VAT due as normal.

A spokesperson for HMRC said:

‘For those customers who are unable to pay VAT due between 20 March and the end of June 2020, you have the option to defer that payment until 31 March 2021.

‘You will not need to apply for deferral as eligibility is automatic. Customers who normally pay by direct debit should cancel their direct debit with their bank if they are unable to pay. Please do this in sufficient time.’

The deferral does not cover VAT MOSS payments, and HMRC will not charge interest or penalties on any amount deferred. Businesses are still required to submit their VAT returns to HMRC on time.

Internet link: GOV.UK publications

Get ready for 30-day returns and payments for residential property gains

Legislation has been enacted to change reporting obligations for residential property gains chargeable on UK resident individuals, trustees and personal representatives. Also introduced is a requirement to make a payment on account of the associated capital gains tax (CGT) liability. For disposals made on or after 6 April 2020:

  • a standalone tax return is required if there is a disposal of UK land on which a residential property gain accrues
  • CGT is required to be computed on the reported gain in the tax return
  • the return needs to be filed and the CGT paid within 30 days of the completion date of the property disposal.

The new requirements do not apply if a chargeable gain does not arise, for example where the gains are covered by Private Residence Relief.

Internet link: GOV.UK publications

New tests and new car benefit percentages

As part of its drive to encourage green motoring, the government has introduced a new emissions test, as well as new car benefit percentages. The scale of charges for working out the taxable benefit for an employee who has use of an employer provided car is computed by reference to bands of CO2 emissions multiplied by the original list price of the vehicle. The maximum charge is capped at 37% of the list price of the car.

In 2017, the government announced that cars registered from April 2020 will be taxed based on the Worldwide harmonised Light vehicles Test Procedure (WLTP). Legislation has now been passed to amend the previously planned benefit percentages for 2020/21 through to 2022/23.

  • All zero emission cars will attract a reduced percentage of 0% in 2020/21 and 1% in 2021/22, before returning to the planned 2% rate in 2022/23.
  • For cars registered before 6 April 2020, the current test procedure will continue to apply and there are no further changes to percentages previously set for 2020/21. These rates will be frozen at the 2020/21 level for 2021/22 and 2022/23.
  • For cars first registered from 6 April 2020, most rates will reduce by 2% in 2020/21 before returning to planned rates over the following two years, increasing by 1% in 2021/22 and 1% in 2022/23.

The WLTP aims to be more representative of real-world driving conditions, compared to the current test known as the New European Driving Cycle. The government estimates that reported CO2 values may be, on average, about 2 – 25% higher under the WLTP when compared to the current test.

Contact us for advice on car benefits.

Internet link: GOV.UK publications

HMRC delays introduction of off-payroll rules to private sector

HMRC has delayed the introduction of off-payroll rules to the private sector as part of its measures to support businesses through the COVID-19 pandemic.

The reforms will shift the responsibility for assessing employment status to the organisations employing individuals. The rules would have applied to contractors working for medium and large organisations in the private sector, and were due to come into effect on 6 April. Steve Barclay, Chief Secretary to the Treasury, stressed that the introduction of the rules has simply been delayed, rather than cancelled. The rules will now take effect on 6 April 2021.

In a statement, HMRC said:

‘This is part of additional support for businesses and individuals to deal with the economic impacts of COVID-19.

‘This means that the different rules that exist for inside and outside the public sector will continue to apply until 6 April 2021.’

The introduction of the off-payroll rules to the private sector, which are known as IR35 and have applied to the public sector since 2017, was reviewed earlier this year. The changes were due to go ahead alongside the implementation of measures to support affected businesses and individuals.

Commenting on the delay, Andy Chamberlain, Director of Policy at the Association of Independent Professionals and the Self-Employed (IPSE), said:

‘The government has done the sensible thing by delaying the changes to IR35 in the private sector.

‘This is a sensible step to limit the damage to self-employed businesses in this grave and unprecedented situation, but we also urge the government to do more. It must create an emergency Income Protection Fund to keep the UK’s crucial self-employed businesses afloat.’

Internet link: GOV.UK publications

Rise in contactless card payment limit

From 1 April the spending limit for contactless card payments rose from £30 to £45.

The decision to increase the payment limit was reached following consultation between the retail sector and the finance and payments industry, and echoes similar increases in other European countries.

UK Finance stated that the change had been under consideration before the outbreak of COVID-19, but has been brought forward in order to support consumers during the pandemic.

Commenting on the increase, Stephen Jones, CEO of UK Finance, said:

‘The payments industry has been working closely with retailers to be able to increase the contactless payment limit to help customers with their shopping at this critical time for the country.

‘This will give more people the choice to opt for the speed and convenience of purchasing goods using their contactless card, helping to cut queues at the checkout.’

UK Finance said that, given the pace at which the change is being rolled out, the new payment limit will take ‘some time’ to be introduced across all retailers.

Consumers spending more than £45 will be able to make use of many other ways to pay, including Chip and PIN, cash and mobile payments.

Internet link: UK Finance press release

Newsletter – March 2020

Enews March 2020

In this month’s Enews we report on a change to the sick pay rules as a result of the coronavirus and confirmation that the off-payroll working rules will be rolled out from 6 April 2020. We also consider the latest HMRC guidance on minimum wage increases, new company car advisory fuel rates, help for business flood victims and a consultation on freeports. With calls to raise taxes in the forthcoming Budget and a reminder to consider year end tax planning, there are lots of issues to update you on.

Coronavirus measure: Statutory Sick Pay from ‘day one’

The Prime Minister, Boris Johnson, has announced that employees will be entitled to Statutory Sick Pay (SSP) from day one when self-isolating rather than having to wait until day four under the SSP waiting days rules.

The change will be included in a package of measures, to be introduced by emergency legislation, to deal with coronavirus.

Updating Parliament on the Government’s response to the virus, Prime Minister Boris Johnson told MPs:

‘I can today announce that the Health Secretary will bring forward, as part of our emergency legislation measures, to allow the payment of Statutory Sick Pay from the very first day you are sick instead of four days under the current rules.

‘No one should be penalised for doing the right thing.’

The Prime Minister had earlier said:

‘We are not at the point yet where we are asking large numbers of people to self-isolate, but that may of course come if large numbers have the symptoms.

‘If they stay at home, they are helping to protect all of us by preventing the spread of the virus.’

The press release advises that the change will be a temporary measure to respond to the outbreak and will lapse when it is no longer required. We will keep you updated on developments.

Internet links: GOV.UK news GOV.UK guidance

Review confirms off-payroll working rules to go ahead from April 2020

The government has confirmed that reforms to off-payroll working rules for the private sector will go ahead from 6 April 2020.

The off-payroll rules have applied to the public sector since 2017 and the government has carried out a review of the roll-out to the private sector. The review has now concluded, and the changes will go ahead alongside the implementation of measures to support affected businesses and individuals.

From 6 April 2020, the new tax rules will use the 2017 changes as a starting point for the extension to medium and large organisations in the private sector. These reforms will shift the responsibility for assessing employment status to medium and large organisations engaging workers via an intermediary, typically a Personal Service Company (PSC).

HMRC said it will take a ‘light touch approach’ and businesses will not have to pay penalties for inaccuracies in the first year, except in cases of deliberate non-compliance.

The government will also introduce a legal obligation on organisations to respond to requested information about their size from the agency or worker, to make it clearer who is responsible for determining the worker’s tax status.

Commenting on the changes, Jesse Norman, Financial Secretary to the Treasury, said:

‘It is only right that the off-payroll rules are applied consistently across all sectors. Two people sitting side by side doing the same work for the same employer should be taxed in the same way.

‘Following a review, the government is announcing a package of measures to help individuals and businesses implement these changes smoothly.’

Internet links: GOV.UK review GOV.UK news

IFS calls for Chancellor to raise taxes in upcoming Budget

The Institute for Fiscal Studies (IFS) has urged Chancellor Rishi Sunak to use the forthcoming Budget to raise taxes.

The think tank stated that the Chancellor either needs to raise taxes or ‘break a fiscal rule’ in order to avoid day-to-day spending cuts beyond 2021.

However, the Conservative Party’s election manifesto promised not to raise income tax, national insurance or VAT.

The IFS has also called on the Chancellor to abolish Entrepreneurs’ Relief and end the ‘ludicrously generous tax treatment of capital gains at death and of inherited pension pots’.

Commenting on the matter, Paul Johnson, Director of the IFS, said:

‘Rishi Sunak’s first Budget could be the most important fiscal event in years. It will set the direction of policy for the next five years. If this new government is going to make radical changes to taxes and spending, this surely is the time to do it.

‘There are plenty of tax rises which would both raise revenue from better off individuals and improve the coherence of the tax system.’

We will update you on pertinent Budget announcements.

Internet link: FS publications

Minimum Wage increases

The National Minimum Wage (NMW) and National Living Wage (NLW) are the legal minimum wage rates that must be paid to employees. Employers are liable to be penalised for not complying with the NMW and NLW rules.

There are different levels of NMW and NLW, depending on age and whether the employee is an apprentice. The rates are due to increase from 1 April 2020 as shown in the following table:

Rate from 1 April 2019 Rate from 1 April 2020
NLW for workers aged 25 and over £8.21 8.72
NMW main rate for workers aged 21-24 £7.70 8.20
NMW 18-20 rate £6.15 6.45
NMW 16-17 rate for workers above school leaving age but under 18 £4.35 4.55
NMW apprentice rate £3.90 4.15

The NMW apprentice rate applies for apprentices under 19 or 19 or over and in the first year of their apprenticeship.

There are no exemptions from paying the NMW on the grounds of the size of the business.

The government has announced that HMRC will continue publicly naming employers that fail to pay their workers the NLW or NMW, following a review of the scheme. The naming scheme will resume calling out businesses failing to pay their workers their minimum wage entitlements.

The government has also increased the threshold for naming employers from £100 to £500, meaning that employers owing arrears of more than £500 in NMW payments to their employees will now be named.

Business Minister Kelly Tolhurst said:

‘Anyone who is entitled to the minimum wage should receive it – no ifs, no buts – and we’re cracking down on companies that underpay their workers.

‘We also want to make it as easy as possible for employers, especially small businesses and those trying to do right by their staff, to comply with the NMW rules, which is why we’re reforming regulations.’

The government is also revising the pay arrangements available to employers engaging ‘salaried hours workers’. These are workers who receive an annual salary in equal instalments for a set number of contracted hours. Under the revised rules, workers who are often paid hourly or per day and consequently receive different amounts of pay every month, such as those in the retail industry, can be classified as salaried workers. The aim of the changes is to provide more flexibility in how salaried workers are paid without reducing protections for workers.

The changes also mean that employers employing these workers are less likely to caught out by the NMW legislation due to the differences in their hours from one month to the next.

If you would like help with payroll matters please get in touch.

Internet links: GOV.UK NMW GOV.UK news

Advisory fuel rates for company cars

New company car advisory fuel rates have been published which take effect from 1 March 2020. The guidance states: ‘You can use the previous rates for up to one month from the date the new rates apply’. The rates only apply to employees using a company car.

The advisory fuel rates for journeys undertaken on or after 1 March 2020 are:

Engine size Petrol
1400cc or less 12p
1401cc – 2000cc 14p
Over 2000cc 20p
Engine size LPG
1400cc or less 8p
1401cc – 2000cc 10p
Over 2000cc 14p
Engine size Diesel
1600cc or less 9p
1601cc – 2000cc 11p
Over 2000cc 13p

Hybrid cars are treated as either petrol or diesel.

HMRC guidance states that the rates only apply when you either:

  • reimburse employees for business travel in their company cars or
  • require employees to repay the cost of fuel used for private travel.

The Advisory Electricity Rate for fully electric cars is 4 pence per mile. Electricity is not a fuel for car fuel benefit purposes.

You must not use these rates in any other circumstances.

If you would like to discuss your car policy, please contact us.

Internet link: GOV.UK AFR

Don’t forget to make tax efficient investments ahead of the tax year end

With the end of the tax year looming there is still time to save tax for 2019/20.

  • Make full use of your ISA allowance – ISAs can offer a useful tax free way to save, whether this is for your children’s future, a first home or another purpose. Individuals may invest up to a limit of £20,000 for the 2019/20 tax year. Savers have until 5 April 2020 to make their 2019/20 ISA investment.
  • Pensions provide significant planning opportunities. The annual allowance (AA) which is the maximum you can contribute to a pension and still get tax relief, is generally £40,000. Exceeding this can result in an AA clawback charge. However, in many circumstances individuals may have unused AA from the three previous tax years which can be used in 2019/20, providing the means of making a significant contribution without incurring a charge. Please contact us for advice specific to your circumstances.

These are only two suggestions that you may wish to consider as part of your tax planning strategy. Contact us for more information.

Internet links: GOV.UK ISAs Pensions Advisory Service AA

Freeports

The government has launched a consultation on proposals to create up to ten freeports across the UK which would have different customs rules than those which apply in the rest of the UK.

The government is considering a UK freeport model which would include multiple customs zones located within or away from a port, as well as a type of special economic zone (SEZ) designated over or around the customs zones and intends to work with the devolved administrations to develop proposals to allow freeports to be created in Scotland, Wales and Northern Ireland, in addition to those in England.

The proposals include the following customs and tariff benefits for businesses bringing goods into a freeport site:

  • duty suspension, with no tariffs, import VAT or excise to be paid on goods brought into a freeport from overseas until they leave the freeport and enter the UK’s domestic market
  • duty inversion if the duty on a finished product is lower than that on the component parts, allowing businesses to benefit by importing components duty free, manufacture the final product in the freeport, and then pay the duty at the rate of the finished product when it enters the UK’s domestic market
  • duty exemption for re-exports allowing businesses to import components duty free, manufacture the final product in the freeport and pay no tariffs when the final product is re-exported
  • simplified customs procedures for businesses accessing freeports.

Freeports are secure customs zones located at ports where business can be carried out inside a country’s land border but where different customs rules apply. Typically, goods brought into a freeport do not attract a requirement to pay duties until they leave the freeport and enter the domestic market. No duty is payable at all if the goods are re-exported.

Internet link: GOV.UK consultation

Additional financial support for flooding victims

The government has pledged thousands of pounds in additional financial support for victims of the recent floods.

The Government has announced that businesses in England affected by the floods will be eligible for 100% business rates relief for at least three months. It also stated that small and medium-sized enterprises (SMEs) that have experienced severe, uninsurable losses will be able to claim up to £2,500 from the Business Recovery Grant.

The government also announced that businesses affected by flooding will be able to apply for up to £5,000 to help make them more resilient to future flooding.

Commenting on the funding, Robert Jenrick, Secretary of State for Housing, Communities and Local Government, said:

Storm Dennis and Ciara have severely impacted a large number of households and businesses, and I recognise how destabilising this can be.

‘This extra support, including new funding, will help people in the worst hit areas to recover and get back on their feet as soon as possible.’

The announcement only applies to businesses in England. Flooding is a devolved issue for Wales, Scotland and Northern Ireland.

Internet link: GOV.UK news

Newsletter – February 2020

Enews – February 2020

In this month’s Enews we report on a number of areas including updates on the Brexit Withdrawal Agreement and the UK and Scottish Budgets. With developments on off-payroll working, overdraft fees, HMRC’s report of bizarre excuses and a new statutory entitlement to leave and pay there are lots of areas to update you on.

Brexit – transition period

The leaders of the UK and European Union signed the Withdrawal Agreement, and the UK left the EU on 31 January 2020. However the UK is now in the transition or implementation period during which time it is ‘business as usual’ as the UK is covered by EU rules until the end of the year. By 2021 the UK aims to have agreed a deal on future arrangements with the EU and the rest of the world.

HMRC has contacted businesses in the UK who may import and export between the UK and the EU to explain what they can do to prepare for changes to customs arrangements after the UK has left the EU.

No change during the implementation period

Between 1 February and 31 December 2020, there will be an implementation period. HMRC has confirmed that there will be no changes to the terms of trade with the EU or the rest of the world during this time.

From 1 January 2021, the way businesses trade with the EU will change and HMRC is reminding businesses that they should prepare for life outside the EU, including ensuring they are ready for customs arrangements.

HMRC is advising businesses to:

  • make sure they have a UK Economic Operator Registration and Identification (EORI) number
  • prepare to make customs declarations.

HMRC has posted letters to 220,000 VAT registered businesses advising them on the current position.

We will advise you on the progress of negotiations and what these will mean for your business.

Internet link: GOV.UK HMRC letters

Scottish Budget

Minister for Public Finance and Digital Economy, Kate Forbes, delivered the 2020/21 Scottish Draft Budget on Thursday 6 February 2020, setting out the Scottish Government’s financial and tax plans.

The current Scottish income tax rates and bands for 2019/20 and the proposed rates and bands for 2020/21 on non-savings and non-dividend income are as follows:

Scottish Bands 2019/20 Scottish Bands

2020/21

Band name Scottish Rates
£12,501* – £14,549 £12,501* – £14,585 Starter 19%
£14,550 – £24,944 £14,586 – £25,158 Scottish Basic 20%
£24,945 – £43,430 £25,159 – £43,430 Intermediate 21%
£43,431 – £150,000** £43,431 – £150,000** Higher 41%
Above £150,000** Above £150,000** Top 46%

* assuming the individual is entitled to a full UK personal allowance

* Assumes individuals are in receipt of the Standard UK Personal Allowance.

** the personal allowance will be reduced if an individual’s adjusted net income is above £100,000. The allowance is reduced by £1 for every £2 of income over £100,000.

In the 2018 Autumn Budget, the UK Government announced that the UK-wide personal allowance would be frozen at its current level of £12,500 in 2020/21. The UK higher rate tax point for 2020/21 is also expected to be frozen at the 2019/20 amount of £50,000 (for those entitled to the full UK personal allowance) and the tax rates for non-savings and non-dividend income are expected to be maintained at 20%, 40% and 45% respectively. The additional rate of 45% is payable on income over £150,000.

Land and Buildings Transaction Tax change to non-residential rates and bands

The Government announced the introduction of a new 2% band for non-residential leases which will come into effect for contracts entered into on or after 7 February 2020. The rates and bands for non-residential LBTT transactions are as follows:

Non-residential transactions

Purchase price

Rate Non-residential leases

Net present value of rent payable

 Rate
Up to £150,000 0% Up to £150,000 0%
£150,001 to £250,000 1% £150,001 to £2 million 1%
Over £250,000 5% Over £2 million    2%

Internet link:GOV.SCOT Budget

Budget Day 11 March

Chancellor Sajid Javid has announced that he will deliver the 2020 Budget on Wednesday 11 March 2020.

The 2020 Budget will be the first to be delivered after the UK’s departure from the EU on 31 January 2020.

It is also Mr Javid’s first Budget as Chancellor, following the cancellation of last November’s planned Budget due to the General Election.

Mr Javid said:

‘People across the country have told us that they want change. We’ve listened and will now deliver.

‘With this Budget we will unleash Britain’s potential – uniting our great country, opening a new chapter for our economy and ushering in a decade of renewal.’

In the Budget announcement, the government said that it will prioritise the environment, and build on recent announcements to boost spending on public services and tackle the cost of living.

We will update you on Budget announcements.

Internet link: GOV.UK news

A decade of bizarre excuses and expense claims

Vengeful witches and pet hamsters feature in HMRC’s list of imaginative excuses and expense claims, which has been published in the run up to the self assessment deadline.

HMRC has compiled a list of the weirdest unsuccessful excuses from the last decade.

The list includes one taxpayer who claimed their mother-in law was a witch who had cursed them, hamsters and dogs that had eaten the post and a taxpayer who was up a mountain without internet access.

HMRC also reported questionable expense claims including pet food for a Shih Tzu ‘guard dog’ and 250 days of claims for a £4.50 sausage and chips meal.

Commenting on the list, Angela MacDonald, HMRC Director General of Customer Services, said:

‘Each year, we try to make it as easy and simple as possible for our customers to complete their tax returns and the majority make the effort to do their’s right and on time.

‘We always offer help to those who have a genuine excuse for not submitting their return on time. It is unfair to the majority of honest taxpayers when others make bogus claims.’

Internet link: GOV.UK news

Off-payroll working

HMRC has now published draft secondary legislation for the off-payroll working rules that are due to come into force in April this year.

In 2017, HMRC introduced new off-payroll rules to the public sector, which saw some contractors’ net income cut significantly. HMRC also shifted the responsibility for compliance from individual contractors to public bodies or recruitment agencies.

From 6 April 2020, the new tax rules will use the 2017 changes as a starting point for the extension to medium and large organisations in the private sector. These reforms will shift the responsibility for assessing employment status to the medium and large organisations engaging the individual worker via and intermediary.

The new draft legislation is open for consultation until 19 February 2020.

Jesse Norman, the Financial Secretary to the Treasury, said:

‘We recognise that concerns have been raised about the forthcoming reforms to the off-payroll working rules. The purpose of this consultation is to make sure that the implementation of these changes in April is as smooth as possible.’

Internet link: GOV.UK consultations

Tax relief on professional fees and subscriptions

Employees are allowed to claim tax relief on their annual professional fees or subscriptions to some HMRC approved professional organisations. The costs are tax deductible generally where the individual must have membership to do their job or it is helpful for their work. Where the fees are paid by the individual’s employer this will not generally result in a benefit in kind charge.

HMRC has updated the list of approved bodies which also includes not only details of the professional bodies that are approved but details of qualifying annual subscriptions for journals.

Internet link: GOV.UK professional subscriptions

Changes to overdraft fees

The Financial Conduct Authority (FCA) has confirmed it will introduce new rules in April this year that it says will make the costs of overdrafts clearer and easier to compare.

The rules will mean banks can only charge for overdraft users a simple annual interest rate – without additional fees and charges.

According to the FCA, seven out of ten overdraft users will be better off or see no change in cost.

Christopher Woolard, Executive Director of Strategy and Competition at the FCA, said:

‘Our changes expose the true cost of an overdraft. We have eliminated high prices for unarranged overdrafts.

‘This will result in a fairer distribution of charges, helping vulnerable consumers, who were disproportionately hit by high unarranged overdraft charges, and many people who use their overdraft from time-to-time.’

However, many banks have responded by hiking the interest rates they charge on overdrafts and several of the largest providers are set to introduce rates of up to 40%.

The FCA has sent a letter to the providers asking them to explain what influenced their decision and to ask how the banks will deal with any customers who could be worse off following the changes.

It said some firms could reduce or waive interest for customers who are in financial difficulty because of their overdraft.

Internet links: FCA press release FCA letter

New right to paid parental bereavement leave

The government has confirmed that parents who suffer the loss of a child will be entitled to two weeks’ statutory leave.

Under the new entitlement working parents who lose a child under the age of 18 will get two weeks’ statutory leave and where they meet the necessary conditions a legal right to two weeks’ paid bereavement leave.

Business Secretary Andrea Leadsom, stated:

‘The Parental Bereavement Leave and Pay Regulations, which will be known as Jack’s Law in memory of Jack Herd whose mother Lucy campaigned tirelessly on the issue, will implement a statutory right to a minimum of 2 weeks’ leave for all employed parents if they lose a child under the age of 18, or suffer a stillbirth from 24 weeks of pregnancy, irrespective of how long they have worked for their employer.

This is the most generous offer on parental bereavement pay and leave in the world, set to take effect from April.’

Under the new rules, parents will be able to take the leave as either a single block of two weeks, or as two separate blocks of one week each taken at different times across the first year after their child’s death.

The right to Parental Bereavement Leave (PBL) will apply to all employed parents who lose a child under the age of 18, or suffer a stillbirth (from 24 weeks of pregnancy), irrespective of how long they have been with their employer.

Parents with at least 26 weeks’ continuous service with their employer and weekly average earnings over the lower earnings limit (£118 per week for 2019/20) will also be entitled to Statutory Parental Bereavement Pay (SPBP), paid at the statutory rate of £148.68 per week (for 2019/20), or 90% of average weekly earnings where this is lower.

The government has confirmed SPBP will be administered by employers in the same way as existing family-related statutory payments such as Statutory Paternity Pay.

Internet link: GOV.UK news

Newsletter – January 2020

Enews – January 2020

In this month’s Enews we consider a number of issues including increases in the minimum wage rates, the independent review of the Disguised Remuneration Loan Charge and the Chancellor’s commitment to review IR35. We also update you on retiring clinicians pensions, Structures and Buildings Allowance, a call for a review of the High Income Child Benefit Charge and a reminder that the self assessment deadline is approaching.

With the latest on deliberate tax defaulters and publication of the Welsh Draft Budget there are lots of issues to update you on.

Minimum wage rates announced

The government has announced a 6.2% increase in the National Living Wage (NLW), which applies to workers aged 25 and over. From 1 April 2020 the NLW will rise from the current rate of £8.21 to £8.72 an hour, in the largest raise since it was introduced two decades ago.

The government has confirmed that the new rate will start on 1 April 2020 and will result in an increase of £930 annually for 2.8 million full-time workers earning the NLW.

Workers aged under 25 earning the National Minimum Wage (NMW) will also see increases of between 4.6% and 6.5%, depending on their age.

Bryan Sanderson, Chair of the Low Pay Commission (LPC), said:

‘The NLW has been an ambitious long-term intervention in the labour market. The rate has increased faster than inflation, faster than average earnings and faster than most international comparators.

‘This has raised pay for millions without costing jobs, although employers have had to make a variety of other adjustments to deal with the increases.’

Internet link: GOV.UK news

Review of the Disguised Remuneration Loan Charge

The government has announced it will make a number of changes to the loan charge rules, in response to Sir Amyas Morse’s independent review of the loan charge policy and its implementation.

The government has announced the following key changes to the loan charge:

  • the loan charge will apply only to outstanding loans made on, or after, 9 December 2010
  • the loan charge will not apply to outstanding loans made in any tax years before 6 April 2016 where the avoidance scheme use was fully disclosed to HMRC and HMRC did not take action
  • affected taxpayers can elect to spread the amount of their outstanding loan balance evenly across three tax years: 2018/19, 2019/20 and 2020/21.

Please contact us for advice with this issue.

Internet link: GOV.UK independent loan charge review

Chancellor commits to review of IR35

The Chancellor of the Exchequer, Sajid Javid has announced that the major review of all aspects of self-employment, promised in the Conservatives’ manifesto, will include the proposed extension of the Off-Payroll working rules to the private sector from April 2020.

Speaking on Radio 4’s Money Box Election Special, Sajid Javid said that, as part of the review, he wanted in particular to look again at the proposed changes to the IR35 rules. He said:

‘I value the work of consultants and I want to make sure that the proposed changes are right to take forward.’

Internet link: economia news

Retiring clinicians payments

The Secretary of State has confirmed that the commitments being entered into, to make payments to clinicians affected by annual allowance pension tax, will be honoured when clinicians retire.

In a written statement Matt Hancock, Secretary of State for Health and Social Care stated:

‘I have agreed to support this proposal from NHS England and NHS Improvement for reasons of urgent operational necessity….

‘The scheme involves employers making binding contractual commitments to be given to every affected NHS clinician so as to ensure that this commitment is honoured. Full details of the terms of the payment arrangements are set out in letters that are being sent to each affected clinician by their employer including the terms and conditions of the offer.

‘Clinicians are therefore now immediately able to take on additional shifts or sessions without worrying about an annual allowance charge on their pensions.’

Internet link: GOV.UK statement

Guidance on Structures and Buildings Allowance

The latest HMRC Agent Update includes guidance on the Structures and Buildings Allowance (SBA). This capital allowance is designed to provide tax relief for businesses and to support investment in constructing new structures and buildings and improving existing ones.

The SBA relieves the construction costs for new structures and buildings used for qualifying purposes and the improvement of existing structures and buildings, including the cost of converting existing premises for use in a qualifying activity.

The SBA is available at a flat rate of 2% a year, for up to 50 years, on the eligible costs of building, converting or renovating non-residential structures or buildings that have been brought into qualifying use. Certain costs are specifically excluded such as those costs that qualify for plant and machinery allowances, planning permission, landscaping, cost of land and integral features and fixtures.

For a claim to be valid the date of the earliest contract for construction of the structure or building must be on or after 29 October 2018. The first use of the structure or building must be non-residential.

The Agent Update confirms claims for the allowance must be made on a tax return. However for tax returns up to April 2020 there is no specific box for SBA claims. HMRC advise affected taxpayers to follow the guidance contained in the notes to the returns.

Internet link: GOV.UK Agent Update 75

Call for review of High Income Child Benefit Charge

The Low Incomes Tax Reform Group (LITRG) is calling on the government to address issues with the High Income Child Benefit Charge (HICBC).

The HICBC is designed to claw back child benefit where the claimant or their partner earns in excess of £50,000. According to LITRG some households think making a child benefit claim is not worthwhile if it will be clawed back in full via the tax charge, with the added administrative burden of needing to complete a tax return. LITRG warns that this trend will have unforeseen consequences for the lower-earning partner and for the child.

LITRG is calling for the Government to reconsider the £50,000 threshold at which the HICBC  starts to apply, if it is retained in its current form.

Victoria Todd, Head of LITRG Team, said:

‘Despite its name, the high income child benefit charge can have consequences for the lower earner in a couple even though the liability to the tax charge falls to the higher earner. This is because where the tax charge applies a household may decide, quite understandably, not to claim child benefit at all. But this means that the lower earning individual may miss out on National Insurance credits, due for the first 12 years, which help to build entitlement towards a state pension.

‘The Government’s solution is to allow couples to claim child benefit regardless and, if they wish to avoid the charge, they can choose not to receive payments – but this is not widely known and to many, claiming and receiving a benefit are the same thing.

‘This is a problem which is affecting an increasing number of families because the £50,000 threshold has remained static since the charge was introduced in 2013. At that time, the HICBC was intended to affect only the top 10 percent of earners, but each year the proportion of those affected increases as wages rise. LITRG recommends that the next Government considers uprating the £50,000 threshold, just like some other tax thresholds and allowances, to minimise the adverse consequences for those families it affects and ensure the policy works in the way originally intended.’

Please contact us for help and advice on HICBC.

Internet link: LITRG press release

Self assessment deadline approaching

The deadline for submitting your 2018/19 self assessment return is 31 January 2020. The deadline applies to taxpayers who need to complete a tax return and make direct payments to HMRC in respect of their income tax, Classes 2 and 4 National Insurance Contributions (NIC), capital gains tax and High Income Child Benefit Charge liabilities.

There is a penalty of £100 if a taxpayer’s return is not submitted on time, even if there is no tax due or the return shows that they are due a tax refund.

The balance of any outstanding income tax, Classes 2 and 4 NIC, capital gains tax and High Income Child Benefit Charge for the year ended 5th April 2019 is also due for payment by 31 January 2020. Where the payment is made late interest will be charged.

The first payment on account for 2019/20 in respect of income tax and any Class 4 NIC or High Income Child Benefit Charge is also due for payment by 31st January 2020.

HMRC revealed that more than 3000 taxpayers filed their return on Christmas Day. If you would like help with your return or agreeing your tax liability, please contact us.

Internet links: GOV.UK self assessment GOV.UK news

Current list of deliberate tax defaulters

HMRC publishes details of deliberate tax defaulters, those people who have received penalties either for:

  • deliberate errors in their tax returns or
  • deliberately failing to comply with their tax obligations.

Internet link: GOV.UK deliberate defaulters

Welsh government publishes Draft Budget

The Welsh government has published its Draft Budget, setting out revenue raising and capital spending plans for 2020/21.

The Draft Budget confirms no changes are proposed to Welsh income tax rates, or Land Transaction Tax rates and bands. The Draft Welsh spending plans for the longer term will depend on the next UK Budget and comprehensive spending review scheduled for 2020.

Internet link: GOV.WALES Budget

Newsletter – December 2019

Enews – December 2019

In this month’s Enews we consider tax free gifts for employees, updated advisory fuel rates for company cars and tips on avoiding Self Assessment scams. We also report on the updated Check Employment Status for Tax tool and temporary pensions arrangements for some NHS staff. With guidance on cryptoassets, the latest HMRC Employer Bulletin and R&D statistics there is lots to update you on.

Making sure gifts to employees are tax-free

Some employers may wish to give a small gift to their employees. As long as the employer meets the relevant conditions, no tax charge will arise on the employee.

A tax exemption is available which should help employers ensure that the benefits provided are exempt and do not result in a reportable employee benefit in kind. In order for the benefit to be exempt it must satisfy the following conditions:

  • the cost of providing the benefit does not exceed £50 per employee (or on average when gifts are made to multiple employees)
  • the benefit is not cash or a cash voucher
  • the employee is not entitled to the benefit as part of a contractual arrangement (including salary sacrifice)
  • the benefit is not provided in recognition of particular services performed by the employee as part of their employment duties
  • where the employer is a ‘close’ company and the benefit is provided to an individual who is a director, an office holder or a member of their household or their family, then the exemption is capped at a total cost of £300 in a tax year.

If any of these conditions are not met then the benefit will be taxed in the normal way subject to any other exemptions or allowable deductions.

No more than £50

One of the main conditions is that the cost of the benefit does not exceed £50. If the cost is above £50 the full amount is taxable, not just the excess over £50. The cost of providing the benefit to each employee and not the overall cost to the employer determines whether the benefit can be treated as a trivial benefit. So, a benefit costing up to £50 per employee whether provided to one or more employees can be treated as trivial. Where the individual cost for each employee cannot be established, an average could be used. HMRC examples consider various gifts including turkeys, bottles of wine and gift vouchers.

Further details on how the exemption works, including family member situations, are contained in the HMRC manual.

However if you are unsure please do get in touch before assuming the gift you are about to provide is covered by the exemption.

Internet link: HMRC manual

Advisory fuel rates for company cars

New company car advisory fuel rates have been published which took effect from 1 December 2019. The guidance states: ‘You can use the previous rates for up to one month from the date the new rates apply’. The rates only apply to employees using a company car.

The advisory fuel rates for journeys undertaken on or after 1 December 2019 are:

Engine size Petrol
1400cc or less 12p
1401cc – 2000cc 14p
Over 2000cc 21p
Engine size LPG
1400cc or less 8p
1401cc – 2000cc 9p
Over 2000cc 14p
Engine size Diesel
1600cc or less 9p
1601cc – 2000cc 11p
Over 2000cc 14p

HMRC guidance states that the rates only apply when you either:

  • reimburse employees for business travel in their company cars
  • require employees to repay the cost of fuel used for private travel

You must not use these rates in any other circumstances.

The Advisory Electricity Rate for fully electric cars is 4 pence per mile. Electricity is not a fuel for car fuel benefit purposes.

If you would like to discuss your car policy, please contact us.

Internet link: GOV.UK AFR

HMRC offers tips on avoiding Self Assessment tax scams

HMRC is giving information to taxpayers to help them avoid scams ahead of the Self Assessment deadline.

HMRC is warning millions of Self Assessment taxpayers to be aware of fraudsters in the run up to the 31 January deadline.

Over the last year, HMRC received almost 900,000 reports from the taxpayers about suspicious HMRC contact, in the form of phone calls, texts or emails. Of these more than 100,000 were phone scams and over 620,000 reports related to bogus tax rebates.

According to HMRC the most common techniques fraudsters use include phoning taxpayers offering a fake tax refund, or pretending to be HMRC by texting or emailing a link to a false page, where their bank details and money will be stolen. Fraudsters are also known to threaten victims with arrest or imprisonment if a bogus tax bill is not paid immediately.

HMRC’s Customer Protection team identify and close down scams but taxpayers should recognise the signs to avoid becoming victims. HMRC does not contact taxpayers asking for their PIN, password or bank details. Taxpayers are warned that they should never give out private information, reply to text messages, download attachments or click on links in texts or emails which they are not expecting.

Internet link: GOV.UK news

Check employment status for tax tool update

HMRC has issued an update to the Check employment status tool (CEST) in advance of the introduction of new tax rules proposed for individuals who provide their personal services via an ‘intermediary’ to a medium or large business. The tool is designed to give HMRC’s view of the status of contracts and has received criticism.

The new rules are expected to apply from 6 April 2020, similar rules were introduced in 2017 for public sector organisations receiving services from intermediaries, typically Personal Services Companies (PSC).

Please contact us for help and advice on whether you are caught by the new rules or should be applying the new rules to someone your business engages via a PSC.

Internet link: GOV.UK CEST

Temporary pensions tax arrangement for NHS staff

In a letter in November 2019, the Secretary of State for Health and Social Care, Matt Hancock, has agreed to a temporary commitment to make payments to certain clinical staff outside of the NHS pension schemes to restore the value of their pension benefits package. These rules apply if they have elected to use the scheme pays facility to settle an annual allowance tax charge arising from their pension saving in the NHS schemes in 2019/20.

Meanwhile, under a temporary measure the Scottish government is introducing, between 1 December 2019 and 31 March 2020, NHS staff in Scotland who can show they are likely to breach the pensions annual allowance for 2019/20 will be able to receive pay in lieu of employer pension contributions.

The announcements follow reports that senior NHS clinicians pension tax charges are making them retire early or change their working habits. The Department of Health and Social Care estimates that a third of consultants and GPs may be turning down extra shifts because of how the NHS Pension Scheme interacts with the wider pension tax rules.

Internet links: GOV.UK letters GOV.SCOT news

HMRC issues guidance on cryptoassets

HMRC has published guidance for people who hold cryptoassets, typically cryptocurrency or Bitcoin, explaining what taxes they may need to pay and what records they need to keep. HMRC has also published further information for businesses and companies about the tax treatment of cryptoasset transactions.

HMRC advises that these papers set out HMRC’s view of the appropriate tax treatment of cryptoassets, based on the law as it stands on the date of publication and that the tax policy in this area may develop as the sector develops.

Internet link: GOV.UK tax on cryptoassets

Latest guidance for employers

HMRC has issued the latest Employer Bulletin. This issue includes articles on a number of areas including:

  • guidance for employers on reporting PAYE information in real time when payments are made early at Christmas
  • electronic payment deadline falls on a weekend
  • Ultra Low Emission Vehicle
  • High Income Child Benefit Charge deadline 31 January
  • Tax-Free Childcare payments
  • update on termination payments: Post Employment Notice Pay for employees paid by equal monthly instalments
  • workplace pensions – remember to keep paying in.

Contact us for help with payroll matters.

Internet link: HMRC Employer Bulletin

Research and Development spend

The Office for National Statistics (ONS) has revealed that UK businesses spent £25 billion on Research and Development (R&D) in 2018.

Data from the ONS showed that total R&D expenditure increased from £23.7 billion in 2017 to £25 billion in 2018.

The report showed:

  • the aerospace industry saw the largest increase in R&D expenditure with a total spend of £210 million
  • the UK telecoms sector also experienced fast growth in R&D spending, increasing by 25.4% in 2018 to £192 million.

According to the ONS, the government’s funding of R&D amounted to £1.7 billion in 2018, which accounted for 6.9% of all R&D expenditure. The data revealed that machinery, equipment and shipbuilding were the biggest beneficiaries from government funding.

Internet link: ONS reports

Newsletter – November 2019

Enews November 2019

In this month’s Enews we report on an IR35 appeal, HMRC’s clampdown on enablers of tax avoidance schemes and an update on probate fees. With a Charity Commission report on fraud protection, the latest guidance for employers and a reminder to complete your self assessment tax return there is a lot to consider.

Budget will not now take place on 6 November

On 25 October 2019 the Chancellor of the Exchequer Sajid Javid wrote to the Treasury Select Committee to confirm that the Budget will not now take place on 6 November 2019 as originally planned. You can read that letter here.

We will keep you informed of developments.

Internet link: GOV.UK Budget

Christa Ackroyd loses IR35 appeal

Former BBC presenter Christa Ackroyd has lost her appeal against a ruling that she was an employee, not a freelance contractor, when she worked for the BBC via a personal service company.

The IR35 rules in broad terms mean that those working via a personal service company have to consider whether, if the services were provided by the individual contractor directly to the client, there would be a contract of employment.

Judges in the Upper Tier Tribunal upheld last year’s First Tier Tribunal ruling that she was a BBC employee when she presented Look North in Yorkshire and was therefore liable to pay income tax and national insurance contributions.

The case related to the tax years 2006/07 to 2012/13, while she worked for the public broadcaster through her personal service company, Christa Ackroyd Media (CAM).

HMRC argued that she owed almost £420,000 in income tax and national insurance contributions, before corporation tax deductions. An HMRC spokesperson said they welcomed the judgment that the presenter was within the intermediary rules.

Employment status is never a matter of choice; it is always dictated by the facts and when the wrong tax is being paid, we put things right.

It is right that an individual who works through a company, but would have been an employee if they were taken on directly, pays broadly the same amount of tax and national insurance contributions as employees.’

The IR35 rules were amended for Public Bodies (including the BBC) from April 2017 and the government will make similar changes for the private sector from April 2020.

Internet links: ICAEW news BAILII cases

Clamp down on enablers of tax avoidance schemes

HMRC says it is clamping down on the promoters and enablers of tax avoidance schemes in the wake of the loan charge controversy.

Penny Ciniewicz, Director General of Customer Compliance at HMRC, told the Treasury Select Committee that HMRC is ‘doubling the resources’ to tackle those in the ‘avoidance supply chain’.

In response to questions about the loan charge, Ms Ciniewicz said:

‘We have more than 100 current investigations into promoters [and enablers], and we’re keeping a very close eye on the market for avoidance. We are spotting schemes as they emerge and we’re tackling them.’

The loan charge policy is currently subject to an independent review. It came into effect on 6 April this year, and applies to anyone who used ‘disguised remuneration’ schemes. The legislation added a 45% non-refundable charge on all loans advanced through the schemes, unless the individual had agreed with HMRC to settle their tax affairs.

Internet link: ICAEW news

Increase in probate fees abandoned

The government has abandoned its planned increase in probate fees. The increase in fees was originally expected to take effect from 1 April 2019. However, in March 2019 HMRC postponed the introduction of the increase, attributing the delay to pressure on Parliamentary time.

As part of the government’s plans, estates that are valued between £50,000 and £300,000 would have been subject to a probate fee of £250. Fees were to rise thereafter to reach £6,000 for estates with a value above £2 million.

Currently, for estates valued at over £5,000, a grant application made by a solicitor is subject to a flat fee of £155. A grant application made by an individual is subject to a fee of £215.

The increase was included in a statutory instrument (SI) however the SI fell away on the prorogation of Parliament in September, but was reinstated when the prorogation was declared illegal.

The government has now announced that the planned increase will not take place. Instead there will be a review of court costs and how they can be covered by the actual service required.

Probate fees apply in in England and Wales.

Internet link: ICAEW post

Charities fraud protection failures

According to a report published by the Charity Commision, the majority of UK charities admit fraud is a major risk, but are still failing to carry out basic tasks in order to protect themselves.

More than 3,300 charities took part in the Charity Commission’s survey into fraud awareness, resilience and cyber security in the sector. Over two thirds of charities agree that fraud is a significant risk. Insider fraud is recognised as one of the biggest threats, the report stated.

The survey found that 85% of charities think they are doing everything they can to prevent fraud, but almost half do not have robust protections in place.

The Commission recommended some simple steps that charities could take to protect their funds, including introducing and enforcing basic financial controls. They should also make sure no single individual has oversight or control of financial arrangements, as effective segregation of duties is a crucial method of preventing and detecting fraud.

The Commission also recommends that employees, volunteers and trustees should be encouraged to speak out when they see something they feel uncomfortable about.

Internet link: GOV.UK news

Guidance for employers

HMRC has published the October 2019 issue of the Employer Bulletin which contains guidance on a number of issues relevant for employers. Topics in this edition include:

  • Changes for UK employers sending workers to the EU, the EEA or Switzerland
  • PAYE Settlement Agreements and Welsh rate of Income Tax
  • Guidance for employers on reporting PAYE information in real time when payments are made early at Christmas
  • Disguised Remuneration
  • Termination payments: Post Employment Notice Pay for employees paid by equal monthly instalments
  • Do your employees have the right tax code?
  • Employment Allowance reform – eligibility rules for the Employment Allowance are changing from April 2020
  • Do you claim the Apprenticeship Levy Allowance or Employment Allowance?
  • Changes to company car tax regime
  • Student and Postgraduate Loans
  • Childcare vouchers
  • Trivial Benefits in kind
  • Paying for fitness equipment

If you would like help with payroll matters please contact us.

Internet link: GOV.UK employer-bulletin-october-2019

HMRC countdown: file your tax return

With less than 100 days until the self assessment tax return deadline of 31 January 2020, HMRC is urging taxpayers to complete their tax returns early, in order to avoid the last minute rush.

HMRC report that last year more than 2,000 people submitted their tax returns on Christmas Day. Taxpayers should consider submitting their returns early to avoid the stress of a last minute rush.

Angela MacDonald, HMRC’s Director General for Customer Services, said:

‘The deadline for completing Self Assessment tax returns is only 100 days away, yet, so many of us wait until January to start the process. Avoid the last minute rush by completing your tax returns on time and then enjoy the upcoming festive period.

We want to help people get their tax returns right – starting the process early and giving yourself time to gather all the information you need will help avoid that stressful, late rush to file.’

Not all taxpayers need to complete a tax return as tax is automatically deducted from the majority of UK taxpayers’ wages, pensions or savings. For people or businesses where tax is not automatically deducted, or when they may have earned additional untaxed income, they are required to complete a Self Assessment tax return each year.

HMRC is also reminding people who are liable for the High Income Child Benefit Charge that they may need to file a tax return before the deadline. Those with income over £50,000 who receive child benefit, or those whose partner gets it, are liable for the charge. Taxpayers can check their annual income via their P60 or Personal Tax Account, and use HMRC’s child benefit tax calculator.

The deadline for filing paper tax returns was 31 October 2019 and the deadline for online tax returns and paying any tax owed is 31 January 2020. If taxpayers miss the deadline, they face a minimum £100 penalty for late submission.

Contact us for help with your self assessment tax return.

Internet link: GOV.UK news

Genuine HMRC contact and recognising phishing emails and texts

HMRC has updated their guidance on how to recognise when contact from HMRC is genuine and how to recognise phishing or bogus emails and text messages.

Internet link: GOV.UK recognising phishing emails

Newsletter – October 2019

Enews – October 2019

In this month’s Enews we report on the delay to the VAT domestic reverse charge and the announcement of an independent review of the loan charge. A consultation has also been launched on clinicians’ pensions. With inheritance tax statistics, latest Brexit guidance, changes to insolvency and money laundering non-compliance there are lots of issues to consider.

VAT domestic reverse charge for building and construction services delayed

HMRC has announced a one-year delay to the introduction of the VAT domestic reverse charge for building and construction services.

The reverse charge represents part of a government clamp-down on VAT fraud. According to the government, large amounts of VAT are lost through ‘missing trader’ fraud. As part of missing trader fraud, VAT is charged by a supplier, who then disappears, along with the output tax. The VAT is thus lost to HMRC. The construction industry is considered a particularly high-risk sector.

The reverse charge when introduced will not change the VAT liability but instead it will change the way that VAT is accounted for. In the future, the recipient of the services, rather than the supplier, will account for VAT on specified building and construction services. This is called a reverse charge. The reverse charge is a business-to-business charge, applying to VAT-registered businesses where payments are required to be reported through the Construction Industry Scheme (CIS).

The charge was due to come into effect on 1 October 2019. It has now been delayed by 12 months until 1 October 2020 due to fears that businesses in the construction sector were not ready.

HMRC says it remains ‘committed to the introduction of the reverse charge’, and has put a robust compliance strategy into place in order to tackle fraud in the construction sector.

Internet link: GOV.UK revenue and customs brief

Independent review of the Loan Charge

The government has initiated a review of the Loan Charge and whether the policy is an appropriate way of dealing with disguised remuneration loan schemes used by individuals who entered directly into these schemes to avoid paying tax.

Sir Amyas Morse, the former Comptroller and Auditor General and Chief Executive of the National Audit Office (NAO), will lead an independent review of the Loan Charge.

The government has asked Sir Amyas Morse to report back by mid-November, giving taxpayers certainty ahead of the January Self Assessment deadline.

Internet link: GOV.UK news

Senior clinicians’ pensions consultation

The government has launched a consultation on proposals to give senior NHS doctors and nurses access to more flexible pensions. The proposals aim to offer senior clinicians more control over their pensions growth.

The consultation follows reports that senior NHS clinicians pension tax charges are making them retire early or change their working habits. The Department of Health and Social Care estimates that a third of consultants and GPs may be turning down extra shifts because of how the NHS Pension Scheme interacts with the wider pension tax rules.

The new proposals are designed to allow those affected to have freedom to individually control how much their pension fund grows, allowing them to maximise the amount they can save without facing significant pension tax bills having breached limits on tax relief.

The new proposals include:

  • a ‘flexible accrual’ option where scheme members can choose an accrual level in 10% increments
  • the option to ‘fine tune’ pension growth towards the end of the scheme year, when total earnings are clearer.

The consultation closes on 1 November 2019.

Internet link: GOV.UK news

HMRC collects record amounts of IHT

The government has announced that HMRC collected a record sum of £5.4 billion in inheritance tax (IHT) during the 2018/19 tax year.

The increase comes on the back of a 15% rise in the number of estates liable for IHT. Between 2015/16 and 2016/17, the number of estates paying IHT rose by 3,600 to 28,100.

Rising asset values, particularly in regard to properties in London and the South East of England, have been a key factor behind the increased number of estates falling into the IHT net. The freezing of the tax-free nil-rate band threshold also played a key role.

The residence nil-rate band (RNRB) gives an additional allowance to people leaving their family home to direct descendants, such as children or grandchildren. The amount of relief is £150,000 for 2019/20, rising to £175,000 for 2020/21.

Despite the increase in estates paying IHT, the tax only applies to 4.6% of deaths in the UK. The average amount of tax paid was £179,000.

Please contact us for advice on estate and IHT planning.

Internet link: GOV.UK IHT statistics

‘Major gaps’ in no-deal Brexit guidance

According to the British Chambers of Commerce (BCC) there are ‘major gaps’ in the government’s no-deal Brexit guidance for UK businesses.

The BCC carried out a review of official government no-deal Brexit guidance for businesses, and found that 31 of 36 critical areas are still marked amber or red, suggesting that businesses have ‘incomplete or insufficient information available to plan thoroughly for a no-deal outcome’.

Dr Adam Marshall, Director General of the BCC, said:

‘While the government has ramped up communication to businesses in recent weeks, there are still big gaps in the guidance available to help businesses to prepare for Brexit, with just weeks to go until 31 October.

Our business communities don’t want to see a disorderly no-deal exit on 31 October, which would lead to an overnight change in trading conditions.

Averting a messy and disorderly exit is still critical. Businesses across the UK want politicians on all sides to come together and find a way forward – fast.’

Internet link: BCC news

Brexit-readiness events for business

The Department for Business has launched a nationwide programme of events to help businesses prepare for Brexit.

The free events are designed to provide free advice on a range of Brexit-related topics, including exporting, importing and employing EU citizens. Attendees will also have the opportunity to hear from senior government officials and access support tailored to their location and business.

More than 30 Brexit-readiness events have been scheduled to take place across the UK.

Internet link: GOV.UK news

Experts warning over insolvency debts

Prioritising HMRC over other creditors in insolvencies will have a ‘negative impact on the UK’s economic growth’, experts have warned Chancellor of the Exchequer Sajid Javid.

The warning was issued in a letter from 11 business organisations and insolvency experts to the Chancellor. Signatories of the letter include the Institute of Chartered Accountants in England and Wales, the Institute of Chartered Accountants of Scotland, the Insolvency Practitioners Association and the City of London Law Society.

The letter says that the proposed change will make it more difficult to rescue businesses. According to the organisations, it will also reduce access to finance for small businesses, increase the harm done to other businesses in insolvencies and could ultimately result in losses to the Exchequer.

Writing in the letter, the organisations said:

‘While we understand that the government wishes to increase the value of taxes repaid in the event of insolvency, there is a serious risk that the wider costs of the government’s approach will outweigh any expected benefit.

This proposed policy would reverse successive governments’ attempts to encourage a culture of business rescue in the UK, and would undermine the government’s recent work to strengthen the UK’s insolvency and restructuring framework.’

The proposal, which was announced in the 2018 Budget and is now included in the draft Finance Bill, will see a change implemented from 6 April 2020. This would entail taxes, including the VAT, Pay as You Earn (PAYE), CIS and employee national insurance contributions (NICs) owed by an insolvent company to be paid to HMRC ahead of floating charge holders and unsecured creditors.

Internet link: Economia news

Money Laundering non-compliance

HMRC has published details of businesses that have failed to comply with the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017.

HMRC is also advising that the published person may have changed their behaviour or no longer be based at the published address. Also that the business currently at the published address may have no connection with the published business, or may have the same name as the published business but could be under new, and completely different, management.

If you would like advice on anti-money laundering procedures please contact us.

Internet link: GOV.UK money laundering non-compliance

Newsletter – September 2019

Enews – September 2019

In this month’s Enews we consider on Customs EORI numbers, calls to simplify apprenticeships and advice for trusts. We also report on the latest guidance for employers and a reminder of self assessment deadlines. With the latest company car advisory fuel rates and the implementation of Strong Customer Authentication for payments there is lots to consider.

Simplify apprenticeship funding

The Institute of Chartered Accountants in England and Wales (ICAEW) has urged the government to simplify the complexities of accessing apprenticeship funding.

The Apprenticeship Levy took effect from 6 April 2017 and changed the way in which apprenticeships are funded. Larger employers are required to pay a levy of 0.5% of their annual pay bill. However an annual allowance of £15,000 is available so employers only pay the Levy if their annual pay bill is over £3 million. The Levy is reported and paid through Pay as You Earn (PAYE).

According to ICAEW, the benefits for non-levy paying employers are particularly enticing, with the government committing to paying 95% of its apprenticeship training costs, however, the complexities in accessing the funds are putting SMEs off applying. Apprenticeship funding is devolved across the UK.

Iain Wright, Director for Business and Industrial Strategy at the ICAEW, said:

‘In our interactions with businesses up and down the country, we find SMEs more and more reluctant to run their own apprenticeship schemes due to the complexity of accessing Levy funds and the lack of flexibility built into the scheme.

‘The SME sector has traditionally been a big recruiter of 16-18 year-olds for apprenticeships, so this is a concerning development which could mean that talented young people are unable to access the skills and training they need to prosper in the workplace.’

Internet link: ICAEW news

HMRC issues Customs EORI numbers

In order to try and ensure that businesses are ready to trade post-Brexit, HMRC is automatically enrolling them in the customs system.

HMRC has confirmed that more than 88,000 VAT-registered businesses across the UK will be allocated an Economic Operator Registration and Identification (EORI) number in order to enable them to keep trading with customers and suppliers in the EU after the UK has left.

The government announced that 72,000 businesses have already registered for EORI numbers and numbers will be allocated to VAT-registered businesses to speed up the rollout of the scheme and help ensure the smooth transit of goods.

EORI numbers are a unique ID number allocated to businesses that enables them to be identified by Customs authorities when doing business with other traders.

HMRC has warned that if businesses do not have an EORI number post-Brexit, they will be unable to continue to trade with EU Member States.

Internet link: GOV.UK news

Trusts with small amounts of savings income

In the latest Trusts and Estates Newsletter HMRC has confirmed the continuation of the interim arrangement for interest reporting.

In 2016 the requirement for payers to deduct tax at source on bank and building society interest was removed and income from these sources is now paid gross. Due to this change, trustees and personal representatives had increased reporting requirements.

HMRC introduced an interim arrangement so trustees do not have to submit returns, or make payments under informal arrangements, where the only source of income is savings interest and the tax liability is below £100.

HMRC has confirmed that these arrangements have been extended to include the 2019/20 and 2020/21 tax years. The situation will continue to be reviewed in the longer term.

Contact us for help with trusts.

Internet link: GOV.UK Newsletter

Advisory fuel rates for company cars

New company car advisory fuel rates have been published which take effect from 1 September 2019. The guidance states: ‘You can use the previous rates for up to one month from the date the new rates apply’. The rates only apply to employees using a company car.

The advisory fuel rates for journeys undertaken on or after 1 September 2019 are:

Engine size Petrol
1400cc or less 12p
1401cc – 2000cc 14p
Over 2000cc 21p
Engine size LPG
1400cc or less 8p
1401cc – 2000cc 10p
Over 2000cc 14p
Engine size Diesel
1600cc or less 10p
1601cc – 2000cc 11p
Over 2000cc 14p

HMRC guidance states that the rates only apply when you either:

  • reimburse employees for business travel in their company cars or
  • require employees to repay the cost of fuel used for private travel.

You must not use these rates in any other circumstances.

The Advisory Electricity Rate for fully electric cars is 4 pence per mile. Electricity is not a fuel for car fuel benefit purposes.

If you would like to discuss your car policy, please contact us.

Internet link: GOV.UK AFR

PAYE late filing and late payment penalties

HMRC has confirmed that it will continue its risk-based approach to payroll Real Time Information (RTI) late filing and late payment penalties this tax year.

Rather than late filing and late payment penalties being issued automatically, HMRC will continue to issue them on a risk-assessed basis during 2019/20. HMRC has also confirmed that penalties for 2019/20 will be issued from September 2019.

The August issue of the Employer Bulletin confirms:

‘HMRC will not charge penalties automatically for 2019/20, provided a Full Payment Submission (FPS) is filed within three days of the payment date. Where there is a pattern of persistent late-filing within three days of the statutory filing date, employers will be reviewed and may be charged a filing penalty as part of HMRC’s risk-based approach.’

The deadline for cleared electronic payments is the 22nd of the month following the end of tax month. For cheque payments or other non-electronic methods, payment is due by the 19th.

HMRC may charge interest on the amount outstanding for late payment, which will accrue until the total amount is paid. Contact us for help with payroll matters.

Internet link: Employer Bulletin

Self assessment deadlines

Two self assessment deadlines are approaching:

  • 5th October 2019

For those individuals who have not previously completed a tax return but need to report a liability for 2018/19.

  • 31st October 2019

For those individuals who have previously submitted ‘paper’ self assessment tax returns the deadline for the 2018/19 return is 31 October 2019. Returns submitted after that date must be submitted electronically or they will incur a minimum penalty of £100. The penalty applies even when there is no tax to pay or the tax is paid on time.

If you would like any help with the completion of your return, please do get in touch.

Internet link: HMRC deadlines

HMRC latest guidance for employers

HMRC has published the latest edition of the Employer Bulletin. This guidance for employers, and their agents, includes articles on:

  • Class 1A liabilities payable on Termination Awards and Sporting Testimonial Payments
  • Off-payroll working rules from April 2020
  • Disguised Remuneration
  • Seasonal Workers
  • Contractors operating CIS – new VAT reverse charge on building and construction services
  • ‘Trivial Benefits’
  • Welsh rates of Income Tax
  • Student Loans
  • Good Work Plan proposals to support families
  • Sickness absence costs £9 billion per year

For help with payroll matters, please contact us.

Internet link: Employer Bulletin

Strong Customer Authentication

The Financial Conduct Authority (FCA) has agreed a plan to give the payments and e-commerce industry extra time to implement Strong Customer Authentication (SCA).

From 14 September 2019, new European Union (EU) rules apply that impact how banks or payment services providers verify their customers’ identities and validate payment instructions. The Strong Customer Authentication (SCA) rules are intended to enhance the security of payments and limit fraud.

The FCA has agreed an 18-month plan to implement SCA with the e-commerce industry which includes card issuers, payment firms and online retailers. The plan reflects the opinion of the European Banking Authority (EBA) that more time was needed to implement SCA given the complexity, lack of preparedness and the potential for a significant impact on consumers.

Jonathan Davidson, Executive Director for Supervision – Retail and Authorisations, said:

‘The FCA has been working with the industry to put in place stronger means of ensuring that anyone seeking to make payments is not a fraudster. While these measures will reduce fraud, we want to make sure that they won’t cause material disruption to consumers themselves; so we have agreed a phased plan for their timely introduction’.

The FCA has confirmed that it will not take enforcement action against businesses if they do not meet the relevant requirements for SCA from 14 September 2019 in areas covered by the agreed plan as long as there is evidence that they have taken the necessary steps to comply with the plan. At the end of the 18-month period, the FCA expects all businesses to have made the necessary changes and undertaken the required testing to apply SCA.

Internet link: FCA press release