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

Newsletter – August 2019

Enews – August 2019

In this month’s Enews we report on changes being introduced from April 2020 including the extension of the off-payroll working rules to the private sector, the introduction of a new Digital Services Tax and Private Residence Relief changes. We also consider HMRC insolvency hierarchy changes and the VAT reverse charge for the construction industry. With wage growth at a high, a reminder on Tax-Free Childcare and how to spot HMRC scammers there is lots to consider.

Off-payroll rules for the private sector

The government has published the draft legislation for the next Finance Bill including the rules for off-payroll working in the private sector. The legislation is open for consultation until 5 September 2019.

The new rules will apply from April 2020 and the effect of these rules, if they apply to intermediaries, typically Personal Service Companies (PSC), will be:

  • the medium or large business (or an agency paying the PSC) will calculate a ‘deemed payment’ based on the fees the PSC has charged for the services of the individual
  • generally, the entity that pays the PSC for the services must deduct PAYE and employee National Insurance contributions (NICs) as if the deemed payment is a salary paid to an employee
  • the paying entity will have to pay to HMRC not only the PAYE and NICs deducted from the deemed payment but also employer NICs on the deemed payment
  • the net amount received by the PSC can be passed onto the individual without the company deducting any further PAYE and NICs.

Please contact us for advice on how these changes will impact your business.

Internet link: GOV.UK finance bill

Digital Services Tax

From April 2020, the government will introduce a new 2% tax on the revenues of search engines, social media platforms and online marketplaces which derive value from UK users. However, this only applies when the group’s worldwide revenues from these digital activities are more than £500m and more than £25m of these revenues are derived from UK users.

Jesse Norman, Financial Secretary to the Treasury and Paymaster General, said:

‘The UK has always sought to lead in finding an international solution to taxing the digital economy. This targeted and proportionate Digital Services Tax is designed to keep our tax system in this area both fair and competitive, pending a longer term international settlement.’

Internet links: GOV.UK news GOV.UK publications

Insolvency hierarchy changes

From 6 April 2020, insolvency legislation will be amended to move HMRC up the creditor hierarchy for the distribution of assets in the event of insolvency by making HMRC a secondary preferential creditor in respect of certain tax debts held by a business (this includes individuals and partnerships) on behalf of their customers and employees. This includes VAT, PAYE income tax and CIS deductions.

The rules will remain unchanged for taxes owed by businesses themselves, such as corporation tax and employer National Insurance contributions.

In addition, directors and other persons connected to companies subject to an insolvency procedure will be made jointly and severally liable for amounts payable to HMRC by the company in certain circumstances. This will apply mainly in cases where the company has engaged in avoidance, evasion or ‘phoenixism’.

Internet link: GOV.UK insolvency

Private Residence Relief changes

The government published draft legislation for the next Finance Bill including draft clauses on the changes to Private Residence Relief (PRR). The draft legislation is subject to consultation which closes on 5 September 2019.

Following consultation this Spring, changes are proposed to the Private Residence Relief (PRR) regime from April 2020. For properties that have not been occupied throughout the period of ownership, available deductions for capital gains tax purposes will be limited as follows:

  • the final period exemption will be reduced from 18 months to 9 months (there are no changes to the 36 months that are available to disabled persons or those in a care home) and
  • lettings relief will be reformed so that it only applies in those circumstances where the owner of the property is in shared-occupancy with a tenant. Letting relief will be restricted or curtailed for disposals on or after 6 April 2020, regardless of when the period of letting took place.

Brian Slater, Chair of CIOT’s Property Taxes Sub-committee, said:

‘HMRC need to put the ‘PR’ into ‘PRR’ and publicise these changes effectively.’

‘Many home owners are still unaware that the final period exemption was reduced from 36 months to 18 months in 2014. A further reduction to just nine months is likely to bring more property disposals within the scope of CGT. Whilst the average time to sell a property is around four and a half months, there will be many exceptions due to regional variations, separation and divorce, and other complexities.’

Another aspect of the relief which is also changing from 6 April 2020 is lettings relief, limiting it to narrowly defined circumstances in which the owner shares occupation of their house with a tenant.

Brian Slater continued:

‘The practical effect of these changes will be that very few sellers will qualify for lettings relief if they sell their home after 6 April 2020. Further, any ‘accrued’ letting relief will be lost, as no apportionment can be made between gains attributable to pre and post 6 April 2020 disposals. Again, this change brings more disposals within the scope of CGT.’

Internet links: GOV.UK changes to CGT ancillary reliefs CIOT press release

Working parents may be eligible for tax-free childcare this summer

The government is reminding working parents that they could ease this summer’s childcare costs by using Tax-Free Childcare (TFC). The scheme is worth up to £2,000 a year for each child and allows parents to save regularly for childcare costs. For each £8 saved the government will make a top-up payment of £2. The money saved can be put towards a range of registered childcare options from more than 68,000 childcare providers. These include summer camps across the UK, as well as before and after school care during term time, nurseries and childminders.

The scheme is open to working parents, including the self-employed, who earn between the 16 hours a week at the minimum wage and £100,000 per year and have children under the age of 12 (or under 17 for children with disabilities).

The government will top-up up to £500 per quarter for each child, or £1,000 if the child is disabled.

Commenting on TFC, Liz Truss, Chief Secretary to the Treasury, said:

‘We understand making arrangements for summer childcare at this time of year is important and can be a stressful time for parents.’

‘TFC makes things easier, putting more money in the pockets of parents and supporting as many families as possible to secure high-quality, affordable childcare.

‘Parents should visit the Childcare Choices website and take advantage of the range of offers to help balance their work and family lives while saving money.’

Internet links: GOV.UK news Childcare choices

VAT changes may cause construction chaos

The Federation of Master Builders (FMB) is warning that a major change in the way that VAT is accounted for in the building and construction sector which takes effect later this year may cause chaos.

The VAT domestic reverse charge for building and construction services applies from 1 October 2019. It is an anti-fraud measure – an administrative change, impacting invoicing and VAT return procedures. With a reverse charge, a VAT-registered recipient of services accounts for VAT, rather than the supplier.

The rules will apply to VAT-registered businesses where payments are required to be reported through the Construction Industry Scheme (CIS), the charge will be used along the supply chain, until the recipient is no longer a VAT-registered business making an onward supply of specified construction services.

With the new rules, suppliers (VAT-registered subcontractors), will state on their invoices that supplies are subject to the reverse charge. Contractors will then use their VAT returns to account for output VAT on supplies received, instead of paying output VAT to their suppliers. Subject to normal VAT rules, the contractor can reclaim VAT on supplies received as input tax, usually leaving no net tax payable on the transaction. Where there is an ‘end user’, it will be expected to provide notification of end user status to suppliers, signalling that a supplier should charge VAT as usual.

Reverse charge will not affect zero-rated supplies: nor some circumstances where suppliers are connected to end users, for example landlords and tenants. The reverse charge covers ‘specified services’ – essentially construction services as defined for CIS purposes. Where services – such as those of architects, surveyors and some consultants – are supplied on their own, they are not covered by the reverse charge. If supplied along with supplies subject to the charge, the whole supply will be subject to the charge. The reverse charge also includes goods, where supplied with specified services.

The FMB are warning that the government has not properly prepared the construction industry for this major VAT change. New data from FMB shows that:

  • over two-thirds of construction SMEs (69%) have not even heard of the reverse charge VAT and
  • of those who have, more than two-thirds (67%) have not prepared for the changes.

Brian Berry, Chief Executive of the FMB, said:

Construction companies are already struggling with Brexit uncertainty, sky-rocketing material price rises and skill shortages and reverse charge VAT is yet another thing for them to deal with. What makes things worse is that HMRC has failed to deliver on its promise to help the industry to prepare. The guidance is not user-friendly and even tax experts are scratching their heads over it.’

‘It’s therefore not surprising that the vast majority of construction SMEs are not aware of the impending changes, despite widespread promotion by the FMB. Small business owners are busy people and clearly they don’t have time to read everything we send them. For those who are aware, they haven’t had a chance to change their systems yet as they were waiting for guidance to be published that has only just emerged. That’s why we are calling on the Government to delay the changes by another six months and to use the extra time to improve the guidance and work with us to undertake a more intensive communications campaign. HMRC should also consider holding workshops across the country to explain the changes.’

Businesses affected by the new rules are recommended to plan now to adapt accounting and IT systems. The reverse charge may also impact business cash flow. Please do not hesitate to contact us for further advice.

Internet links: FMB news GOV.UK guidance

Wage growth at a high

Data published by the Office for National Statistics (ONS) has revealed that UK wage growth increased to 3.6% in the year to May 2019, the highest rate since the financial crisis in 2008.

According to the ONS, wages have been rising faster than inflation since March 2018 and that increases to the National Minimum Wage and the National Living Wage have helped wage growth to accelerate. However, the data also showed that average pay is still lower than pre-2008 levels. When average regular pay of £503 is adjusted for inflation to £468 per week it is £5 less than its pre-recession total of £473 a week.

Commenting on the data, Alpesh Paleja, Principal Economist at the Confederation of British Industry (CBI), said:

‘Despite signs that employment growth is tailing off, the labour market remains tight, with the unemployment rate at a multi-decade low. It’s encouraging that pay growth has picked up further, putting more money in people’s pockets.’

‘But as recent data shows, productivity remains in the doldrums. Reinvigorating efforts to boost productivity is critical. Firms must focus on innovative ways to share new ideas and invest in people and technologies.’

Internet links: GOV.UK bulletins CBI article

Updated guidance on spotting HMRC scammers

HMRC has updated their list of examples of websites, emails, letters, text messages, WhatsApp messages and phone calls used by scammers and fraudsters to obtain an individual’s personal information.

The guidance can be used to help you decide if a contact from HMRC is genuine and provides examples of the different methods that fraudsters use to get individuals to disclose personal information.

You can also read about how to recognise genuine contact from HMRC, and how to tell when an email is phishing/bogus.

Internet links: GOV.UK genuine contact examples GOV.UK phishing examples

Newsletter – June 2019

Enews – June 2019

In this month’s Enews we report on the latest OTS report on simplification of everyday tax for smaller businesses as well as HMRC tackling dishonest dog breeders.

We also update you on the Welsh tax code ‘mix up’ as well as the consultations on various issues including Companies House reforms, Private Residence Relief and letting relief changes.

Finally, with the latest advisory fuel rates for company cars, the P11D deadline looming and non-compliance with minimum wage regulations, there is a lot to update you on.

OTS calls for simplifying everyday tax for smaller businesses

A report by the Office of Tax Simplification (OTS) calls on the government to prioritise action to ‘address long-standing concerns about the experience of smaller businesses’. The report considers the business lifecycle, especially those starting up and provides recommendations in five areas:

  • providing simple step-by-step guidance about the key things a business needs to do in its early days to help things run smoothly
  • improving the operation of the PAYE system
  • implementation of HMRC’s Agents Strategy
  • improving the mechanics of the Corporation Tax return process
  • ensuring that tax changes are built on an understanding of business processes.

If you would like any help with your taxes at any stage of your business life cycle, please do get in touch.

Internet link: GOV.UK simplifying tax

HMRC taskforce tackles dishonest dog breeders

A taskforce has recovered more than £5 million by tackling dishonest dog breeders selling pups on the black market. HMRC set up the taskforce in October 2015 after discussions with animal welfare groups that were concerned that tens of thousands of puppies were being reared in unregulated conditions and sold illicitly every year.

The taskforce uncovered fraudsters selling puppies on a mass scale, for a huge profit and due to the underground nature of the activity, failing to declare their sales.

Using civil and criminal enforcement powers, HMRC has recovered £5,393,035 in lost taxes from 257 separate cases since the formation of the taskforce in October 2015.

The breeders and traders targeted include:

  • two unconnected puppy breeders in the west of Scotland who were handed tax bills of £425,000 and £337,000
  • a puppy breeder in the Midlands who was a former Crufts judge, given a £185,000 bill
  • a dealer in Northern Ireland told to pay £185,000 in tax
  • a Somerset puppy breeder was given a £114,000 bill
  • a puppy dealer in the east of Scotland was handed a tax bill in excess of £400,000
  • a Swansea puppy breeder was given a £110,000 tax bill.

Financial Secretary to the Treasury, Mel Stride MP, said:

‘It is utterly appalling that anyone would want to treat puppies in such an inhumane way and on such a scale. It’s also deeply unfair to all of the legitimate businesses who do pay the right tax, and the total recovered by the taskforce is equivalent to the annual salaries for more than 200 newly qualified teachers.’

‘We continue to work hard with other government agencies and our partners to tackle these traders. We urge anyone with information about tax evasion to report it to HMRC online or call our Fraud Hotline on 0800 788 887.’

Internet link: GOV.UK news

Forms P11D – reporting employee benefits

The forms P11D which report details of benefits and some expenses provided to employees and directors for the year ended 5 April 2019, are due for submission to HMRC by 6 July 2019. The process of gathering the necessary information and completing the forms can take some time, so it is important that this process is not left to the last minute.

Employees pay tax on benefits provided as shown on the P11D, generally via a PAYE coding notice adjustment or through the self assessment system. Some employers ‘payroll’ benefits and in this case the benefits do not need to be reported on forms P11D but employers should advise employees of the amount of benefits payrolled.

In addition, regardless of whether the benefits are being reported via P11D or payrolled the employer has to pay Class 1A National Insurance Contributions at 13.8% on the provision of most benefits. The calculation of this liability is detailed on the P11D(b) form. The deadline for payment of the Class 1A NIC is 19th July 2019 (or 22nd for cleared electronic payment).

HMRC has produced an expenses and benefits toolkit. The toolkit consists of a checklist which may be used by advisers or employers to check they are completing the forms correctly.

If you would like any help with the completion of the forms or the calculation of the associated Class 1A NIC please get in touch.

Internet links: HMRC guidance Toolkit

Welsh taxpayers income tax code mix-up

From April 2019, Welsh taxpayers were assigned new income tax codes beginning with the letter ‘C’. However, HMRC recently revealed that some Welsh taxpayers were mistakenly given Scottish income tax codes by their employers. As a consequence, Welsh taxpayers have been charged income tax using the Scottish income tax rates and bands.

For 2019/20 the Welsh rate of income tax is set at 10% and this is added to the UK rates, which are each reduced by 10%. Therefore, the overall tax payable by Welsh taxpayers continues to be the same as English and Northern Irish taxpayers.

The income tax rates and bands that apply to employment income, self-employed trade profits and property income are different for taxpayers who are resident in Scotland, with tax rates and bands ranging from 19% to 46% rather than the 20% to 45% which apply across the rest of the UK. Tax codes for Scottish taxpayers begin with the letter ‘S’.

HMRC stated that it does not know the full extent of the error or how many Welsh taxpayers have been affected but they will carry out a review of the operation of Welsh tax codes in June 2019.

Llyr Gruffydd, Chair of the National Assembly for Wales’ Finance Committee, said:

‘We raised concerns about the flagging process for identifying Welsh taxpayers during our enquiries into fiscal devolution and the Welsh government’s draft budget.

‘On each occasion, we were told the matter was in hand, and the lessons from the devolution of income tax powers to Scotland, where there were similar issues, had been soundly learned and would be put into effect. We are seeking an immediate explanation of how this has happened and will be asking representatives from HMRC to appear before this Committee in the near future.’

If you have any concerns about tax codes, please get in touch.

Internet links: HMRC letter Welsh Assembly news

Consultation on Companies House reforms

The government has launched a consultation on proposed reforms at Companies House, including a ‘major upgrade’ of its register.

The consultation aims to tackle misuse of the register. It also strives to provide business owners with ‘greater protection from fraud’.

The consultation seeks views on a series of reforms to limit the risk of misuse:

  • knowing who is setting up, managing and controlling companies
  • improving the accuracy and usability of data on the companies register
  • protecting personal information on the register
  • ensuring compliance, sharing intelligence and other measures to deter abuse of corporate entities

Louise Smyth, Chief Executive of Companies House, said:

‘This package of reforms represents a significant milestone for Companies House as they will enable us to play a greater part in tackling economic crime, protecting directors from identity theft and fraud, and improving the accuracy of the register.’

The consultation is open until 5 August 2019.

Internet links: GOV.UK consultation GOV.UK news

Consultation on ancillary capital gains reliefs

A capital gains tax (CGT) exemption applies when an individual disposes of a dwelling that has been used as their only or main residence under the Private Residence Relief (PRR) rules. The exemption applies as long as the relevant conditions are met throughout the total period of ownership. This relief is supplemented by ancillary reliefs that aim to deal with other related situations.

The government has previously announced and legislated to reform two of the ancillary reliefs to better target PRR at owner-occupiers. The reliefs which are being amended are:

  • the final period exemption will be reduced from 18 months to nine months, although the special rules that give those with a disability, and those in care, an exemption of 36 months will not change
  • lettings relief will be reformed so that it only applies where an owner is in shared occupancy with a tenant.

These changes will take effect from 6 April 2020. The government is now consulting on the changes in more detail and on how they will work in practice. It also invites views on some technical aspects of the PRR rules.

Internet link: GOV.UK consultation

Advisory fuel rates for company cars

New company car advisory fuel rates have been published which take effect from 1 June 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 June 2019 are:

Engine size Petrol
1400cc or less 12p
1401cc – 2000cc 15p
Over 2000cc 22p
Engine size LPG
1400cc or less 8p
1401cc – 2000cc 9p
Over 2000cc 14p
Engine size Diesel
1600cc or less 10p
1601cc – 2000cc 12p
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

Non-compliance with minimum wage regulations

A recent Low Pay Commission (LPC) report sets out its findings on the number of people being paid less than the statutory minimum wage.

The LPC found that, in April 2018, 439,000 workers were paid less than the National Minimum Wage (NMW). Of this amount, 369,000 were employees aged 25 and over, who were paid less than the National Living Wage (NLW), an increase from previous years. On 1 April 2019, the NMW and NLW rates rose to the hourly rates detailed below:

Minimum wage rate Hourly rate from 1 April 2019
National Living Wage (for workers aged 25 and over) £8.21
21-24 year-old rate £7.70
18-20 year-old rate £6.15
16-17 year-old rate £4.35
Apprentice rate £3.90
Accommodation Offset £7.55 per day: £52.85 per week

The LPC also revealed that women are ‘more likely’ than men to be paid less than the NMW, and that underpayment is common amongst younger and older workers. In addition, underpayment was more common in certain sectors including hospitality, retail, cleaning, maintenance and childcare.

Commenting on the findings, Bryan Sanderson, Chair of the LPC, said:

‘Our analysis reveals a worrying number of people are being paid less than the minimum wage. We recently celebrated 20 years of the minimum wage – it has raised pay for millions of workers, but it is essential that people receive what they are entitled to.’

‘It is also vital for businesses to be able to operate on a level playing field, and not be illegally undercut on wages.’

Contact us for help with payroll issues.

Internet link: GOV.UK news

Newsletter – May 2019

Enews – May 2019

In this month’s Enews we report on the latest guidance for employers, revised VAT fuel scale charges and the consultation to extend IR35. We also update you on the latest springtime tax scam and the government’s commitment to implement a pensions dashboard. With an update on Money Laundering failings, reaction to the flexible extension to Article 50 and a further delay to Scottish Air Departure Tax, there is a lot to update you on.

Latest guidance for employers

HMRC has issued the latest version of the Employer Bulletin. This April edition has articles on a number of issues including:

  • Cash Allowances, Flexible Benefits Packages and Salary Sacrifice
  • Unpaid work trials and the National Minimum Wage
  • Diesel Supplement Company Car Tax Changes to meet Euro standard 6d
  • Student Loans
  • Construction Industry Scheme – helpful reminders for contractors and subcontractors
  • Welsh rate of income tax and Scottish Income Tax.

If you have any queries on payroll matters please contact us.

Internet link: Employer Bulletin April 2019

VAT fuel scale charges

HMRC has issued details of the updated VAT fuel scale charges which apply from the beginning of the next prescribed VAT accounting period starting on or after 1 May 2019.

VAT registered businesses use the fuel scale charges to account for VAT on private use of road fuel purchased by the business.

Please do get in touch for further advice on this or other VAT matters.

Internet link: GOV.UK fuel scale charges

Consultation on extension of IR35 rules

HMRC has published guidance on the extension of the off-payroll working rules (also known as IR35) to the private sector, a year ahead of its implementation on 6 April 2020.

In the guidance, HMRC state that the responsibility to determine whether the off-payroll working rules apply will fall on the organisation receiving the individual’s service. It outlines a four-step process which can be used to prepare for the changes, starting with identifying any individuals who are supplying their services through PSCs.

The consultation closes on 28 May and asks for responses on several matters, including the scope of the reform and its impact on non-corporate engagers; information requirements for engagers, fee payers and personal service companies (PSCs); and how to address disagreements on an individual’s employment status.

The consultation also sets out HMRC’s plans to provide education and support for those businesses that are affected.

Internet links: HMRC guidance and HMRC consultation

Government confirms implementation of pensions dashboards

The government has confirmed that the initiative to introduce a pensions dashboard will go ahead.

Pensions dashboards will allow those saving for retirement to view information from multiple pensions in one place stating that the dashboard will ‘open up pensions to millions’, and ‘provide an easy-to-access online view of a saver’s pensions’.

The Department for Work and Pensions (DWP) will bring forward legislation that will require pension scheme providers to make consumers’ data available to them through their chosen dashboard. The plan is to include State pension information as well.

Mike Cherry, National Chairman of the Federation of Small Businesses (FSB), said:

‘The government’s commitment to compel pension schemes to share data with platforms through primary legislation is particularly welcome. Some urgency is now required, and we question the three to four-year timeframe for schemes to prepare data for dashboards.’

Internet links: GOV.UK Pensions dashboardfsb press release

‘Springtime’ tax scams target young people

HMRC has warned young people in the UK to ‘stay vigilant’ in order to avoid falling victim to ‘Springtime’ tax refund scams.

Criminals often target young individuals or the elderly as these groups of people are likely to be less familiar with the UK tax system. During the months of April and May, criminals often bombard taxpayers with tax refund scams at the same time as genuine rebates are processed by HMRC.

In the Spring of 2018, approximately 250,000 reports of tax scams were received by HMRC.

Individuals have been warned to be wary of text messages, calls and voicemails purporting to be from HMRC. These are often designed to extract personal or financial information from the taxpayer.

Angela MacDonald, Head of Customer Services at HMRC, said:

‘We are determined to protect honest people from these fraudsters who will stop at nothing to make their phishing scams appear legitimate.

‘HMRC is currently shutting down hundreds of phishing sites a month. If you receive one of these emails or texts, don’t respond and report it to HMRC so that more online criminals are stopped in their tracks.

Internet links: Action Fraud

Money Laundering

HMRC has published a list of businesses that have not met their obligations under the Money Laundering Regulations.

As a supervisor of the Money Laundering Regulations HMRC has a duty to publish details of businesses that have been penalised for not complying with the regulations.

HMRC advises that it considers cases individually to decide whether to publish details in full, anonymously, or not at all. Where a decision is made to publish in full, the following information may be published:

  • the name and address of the business owner or business
  • the nature of the breach or breaches
  • the penalty issued by HMRC
  • the status of any appeal against the penalty

HMRC publishes anonymously if it considers that the effect of publishing details about an individual or business would be disproportionate.

Internet link: GOV.UK money laundering

‘Flexible extension’ to Article 50

Business groups, including the British Chambers of Commerce (BCC) and the Confederation of British Industry (CBI), have commented on the six-month ‘flexible’ extension of Article 50, granted to the UK by EU leaders.

The extension potentially pushes ‘Brexit Day’, the day when the UK officially leaves the EU, to 31 October 2019.

Reacting to the news, the BCC stated that the flexible extension is ‘preferable’ for most businesses. It said:

‘Politicians must urgently agree on a way forward. It would be a disaster for business confidence and investment if a similar late-night drama is played out yet again in October.’

The CBI said that UK businesses will now ‘adjust their no-deal plans’ instead of cancelling them. Carolyn Fairbairn, Director General of the CBI, said:

‘For the good of jobs and communities across the country, all political leaders must use the time well. Sincere cross-party collaboration must happen now to end this crisis.’

Internet links: BCC news CBI article

Scottish Air Departure Tax plans further delayed

The Scottish government has further delayed its plans to replace Air Passenger Duty (APD) with Air Departure Tax (ADT). The plans to introduce ADT have been delayed beyond 2020.

In 2016, as part of the Scotland Act, the Scottish Parliament was given devolved powers to charge tax on travellers leaving Scottish airports. Proposals were put forward to replace the UK-wide APD with an ADT.

The ADT was set to take effect in April 2018, but was delayed due to issues surrounding the current exemption which applies to airports in the Highlands and Islands.

Commenting on the delay, Kate Forbes MSP, Minister for Public Finance and Digital Economy, stated:

‘The Scottish government has been clear that it cannot take on ADT until a solution to these issues has been found, because to do so would compromise the devolved powers and risk damage to the Highlands and Islands economy.

‘While we work towards a resolution to the Highlands and Islands exemption, we continue to call on the UK government to reduce APD rates to support connectivity and economic growth in Scotland and across the UK.’

Internet link: GOV.SCOT news parliamentary business

Newsletter – April 2019

Enews – April 2019

In this month’s Enews we report on tax changes for the new tax year and an update on the Structures and Building Allowance following the Spring Statement. We also consider MTD for VAT which has now come into effect, the delays to the rise in probate fees and the call for a tax on social media businesses.

With ongoing Brexit uncertainties, the government has issued additional Brexit advisory documents for small businesses. We take a look at a case that HMRC has won involving contractor loan schemes and consider form P11D completion.

Reporting Benefits in Kind – Forms P11D

The forms P11D which report details of benefits and some expenses provided to employees and directors for the year ended 5 April 2019, are due for submission to HMRC by 6 July 2019. The process of gathering the necessary information can take some time, so it is important that this process is not left to the last minute.

Employees pay tax on benefits provided as shown on the P11D, generally via a PAYE coding notice adjustment or through the self assessment system. Some employers ‘payroll’ benefits and in this case the benefits do not need to be reported on forms P11D but employers should advise employees of the amount of benefits payrolled.

In addition, regardless of whether the benefits are being reported via P11D or payrolled the employer has to pay Class 1A National Insurance Contributions at 13.8% on the provision of most benefits. The calculation of this liability is detailed on the P11D(b) form. The deadline for payment of the Class 1A NIC is 19th July 2019 (or 22nd for cleared electronic payment).

HMRC has produced an expenses and benefits toolkit. The toolkit consists of a checklist which may be used by advisers or employers to check they are completing the forms correctly.

If you would like any help with the completion of the forms or the calculation of the associated Class 1A NIC please get in touch.

Internet links: HMRC guidance Toolkit

Additional Brexit advisory documents for small businesses

The government has published additional documents containing advice on Brexit for UK small businesses.

According to the government, the information will help business owners to ‘understand how leaving the EU may affect their business’. The advisory documents cover a range of issues, from changes to UK-EU trade following Brexit, to alterations to how businesses send and receive personal data.

Amidst ongoing Brexit uncertainty the government is urging businesses to ‘prepare now’. Businesses that import or export goods to the EU are urged to apply for a UK Economic Operator Registration and Identification (EORI) number if they have not already done so, in order to continue trading with the EU post-Brexit.

Businesses that provide services to or operate in the EU may need to comply with new rules following Brexit. A business could be affected if it has a branch or branches in the EU; it operates in a services sector within the EU; it is planning a merger with an EU company; or if its employees have to travel to EU or European Economic Area (EEA) countries for business.

Meanwhile, businesses that hold intellectual property are warned that they may face changes to their copyright, patents, designs and trademarks following Brexit.

The government is urging small firms to utilise the Exit Tool.

Internet link: EU Exit tool

Delay to rise in probate fees

The government has delayed its planned increase in probate fees indefinitely.

The delay has been attributed to ‘pressure on Parliamentary time‘ caused by Brexit debates and votes.

The increase in fees had been set to take effect from 1 April 2019, but HMRC recently made the decision to postpone the rise. Under government plans, the proposed probate fees are as follows:

Value of estate Proposed Fee
Up to £50,000 or exempt from requiring a grant of probate £0
£50,000 – £300,000 £250
£300,000 – £500,000 £750
£500,000 – £1m £2,500
£1m – £1.6m £4,000
£1.6m – £2m £5,000
Above £2m £6,000

While the changes are pending, a temporary process is in place for applying for probate, and estates will not incur the higher fees if applications are made before the fee changes take effect.

A spokesperson for HMRC said:

‘Probate registries will accept applications before processing by us as long as they are assured the inheritance tax (IHT) forms from us will be coming shortly.

‘Our processes aren’t changing, it’s just that probate registries will be willing to accept applications before our processing is done when normally it would need to be after.’

Internet link: Gov.uk news

Update on Structures and Buildings Allowance

Chancellor Philip Hammond delivered the Spring Statement on Wednesday 13 March 2019 amidst all the Brexit debates.

In his speech the Chancellor provided an update on the economy and responded to the Office for Budget Responsibility forecasts. In addition he launched consultations on various aspects of the tax system together with updates on earlier consultations.

One area subject to consultation is the Structures and Buildings Allowance (SBA). The SBA gives relief for expenditure on certain structures and buildings. The allowance is available for new structures and buildings intended for commercial use, and the improvement of existing structures and buildings. The SBA will be also available on the cost of converting or renovating existing premises to qualifying use. Relief is limited to the original cost of construction or renovation and given across a fixed 50-year period, at an annual flat rate of 2% regardless of changes in ownership.

Only certain expenditure will qualify. The structures or buildings must be brought into use for qualifying activities. These include trades, professions or vocations and certain UK or overseas property businesses – essentially commercial property lettings.

Relief will be given on eligible construction costs incurred on or after 29 October 2018. Where a contract for the physical construction work is entered into before this date, relief is not available. The consultation on draft legislation is open until 24 April 2019.

Internet links: WMS and Consultation

MTD for VAT

HMRC is phasing in its landmark Making Tax Digital (MTD) regime, which will ultimately require taxpayers to move to a fully digital tax system. Under the new rules, businesses with a taxable turnover above the VAT threshold (currently £85,000) must keep digital records for VAT purposes and provide their VAT return information to HMRC using MTD functional compatible software.

The new rules have effect from 1 April 2019 where a taxpayer has a ‘prescribed accounting period’ which begins on that date, or otherwise from the first day of a taxpayer’s first prescribed accounting period beginning after 1 April 2019. For some VAT-registered businesses with more complex requirements the rules will not have effect until 1 October 2019. Included in the deferred start date category are VAT divisions, VAT groups and businesses using the annual accounting scheme.

The government has confirmed that a light touch approach to penalties will be taken in the first year of implementation. Advising that where businesses are doing their best to comply, no filing or record keeping penalties will be issued as the focus will be on supporting businesses to transition to MTD. The government has confirmed that it will not be mandating MTD for any new taxes in 2020.

Figures published by HMRC show that almost 1.2 million businesses are affected by MTD for VAT.

Financial Secretary to the Treasury, Mel Stride MP, said:

‘In a world where businesses are already banking, paying bills and shopping online, it is important that the tax system moves into the 21st century.’

Internet link: GOV.UK

Call for tax on social media businesses

A group of MPs has called on the government to tax the profits of social media businesses.

The All Party Parliamentary Group (APPG) on Social Media and Young People’s Mental Health and Wellbeing recently published a report which outlined the impact of social media on the health of young people.

The APPG has suggested creating a Social Media Health Alliance, which would be funded by a 0.5% tax on the profits of social media companies. MPs hope that the money would be used to fund research and help ‘draw up clearer guidance’ on the impact of social media on health and wellbeing.

Internet link: Royal Society for Public Health

Changes to income tax for 2019/20

The new tax year brings changes to income tax bands and allowances.

The personal allowance is £11,850 for 2018/19 and increases to £12,500 for 2019/20. There is a reduction in the personal allowance for those with ‘adjusted net income’ over £100,000. The reduction is £1 for every £2 of income above £100,000. So for 2018/19 there is no personal allowance where adjusted net income exceeds £123,700. For 2019/20 there is no personal allowance available where adjusted net income exceeds £125,000.

The marriage allowance permits certain couples, where neither pays tax at more than the basic rate, to transfer 10% of their personal allowance to their spouse or civil partner.

The basic rate of tax is 20%. In 2018/19 the band of income taxable at this rate is £34,500 so that the threshold at which the 40% band applies is £46,350 for those who are entitled to the full personal allowance. In 2019/20 the basic rate band increases to £37,500 so that the threshold at which the 40% band applies is £50,000 for those who are entitled to the full personal allowance.

Individuals pay tax at 45% on their income over £150,000.

Scottish residents

The tax on income (other than savings and dividend income) is different for taxpayers who are resident in Scotland to taxpayers resident elsewhere in the UK. The Scottish income tax rates and bands apply to income such as employment income, self-employed trade profits and property income.

In 2018/19 and 2019/20 there are five income tax rates which range between 19% and 46%. Scottish taxpayers are entitled to the same personal allowance as individuals in the rest of the UK. The two higher rates are 41% and 46% rather than the 40% and 45% rates that apply to such income for other UK residents. For both 2018/19 and 2019/20, the threshold at which the 41% band applies is £43,430 for those who are entitled to the full personal allowance.

Welsh residents

From April 2019, the Welsh Government has the right to vary the rates of income tax payable by Welsh taxpayers. The UK government has reduced each of the three rates of income tax paid by Welsh taxpayers by 10 pence. The Welsh Government has set the Welsh rate of income tax at 10 pence which will be added to the reduced rates. This means the tax payable by Welsh taxpayers continues to be the same as that payable by English and Northern Irish taxpayers.

Internet links: GOV.UK GOV.SCOT income tax GOV.WALES income tax

HMRC wins disguised remuneration avoidance case

HMRC has won a legal case over a contractor loan scheme endorsed by Hyrax Resourcing Ltd. As a result, HMRC will now be able to collect more than £40 million in unpaid taxes.

The scheme in question was a disguised remuneration avoidance scheme, which paid users in loans, rather than salaries, to avoid paying income tax and national insurance contributions on earnings.

Hyrax Resourcing Ltd will now be required to disclose details of the tax avoidance scheme, including the names and addresses of 1,180 individuals who used it. Failure to provide the relevant information could result in Hyrax Resourcing Ltd becoming liable for substantial penalties.

Financial Secretary to the Treasury, Mel Stride MP, said:

‘HMRC is cracking down on the unscrupulous promoters who sell these highly contrived tax avoidance loan schemes.

‘Promoters need to take note of this decision and make sure they contact HMRC urgently about schemes they haven’t yet disclosed.’

Internet link: HMRC news

Newsletter – March 2019

Enews – March 2019

In this month’s Enews we report on the ongoing Brexit uncertainties and latest HMRC advice. We also consider National Minimum Wage, National Living Wage and pension contribution increases and the latest guidance for employers.

With confirmed income tax bands for Scottish taxpayers, year end planning, a landline scam warning and new advisory fuel rates there are lots of areas to update you on.

HMRC advice – prepare for no deal

HMRC is urging business owners to make sure they are ready for a potential no deal Brexit.

Business owners are being urged to prepare now and take steps to ensure their businesses can continue to trade with the EU if the UK leaves the EU without a deal.

HMRC advise:

  • Businesses should register for an Economic Operator and Registration Identification (EORI) number. UK businesses that have only ever traded inside the EU will not have an EORI number. HMRC are advising that in the event of a no deal exit, businesses will be unable to continue trading with the EU without an EORI number. HMRC figures show that only 17% of potentially affected businesses have registered so far.
  • Businesses also need to decide how they intend to make the required customs declarations. HMRC advise that most businesses with customs obligations choose to use a customs agent to do this for them.
  • Businesses that import goods into the UK from the EU using roll on, roll off locations, may also wish to register for new Transitional Simplified Procedures (TSP). HMRC advise that ‘TSP will allow businesses to import without having to make a full customs declaration at the border, and postpone paying any import duties. For imports using other locations, and for exports, standard customs declarations will apply.’

Financial Secretary to the Treasury Mel Stride MP said:

‘We want businesses to be able to continue trading with minimal disruption in any scenario but we also know that people tend to leave things until the last minute and we would urge against that.’

Contact us for help in this area.

Internet link: HMRC news

Start date looming for Making Tax Digital for VAT

The Financial Secretary to the Treasury, Mel Stride, has made a statement to the House of Commons setting out HMRC’s progress on delivery of Making Tax Digital (MTD). He confirmed there would be no further delays in implementation.

For most businesses, compliance with the regulations is mandated for VAT return periods beginning on or after 1 April 2019. However, MTD for VAT for some ‘more complex’ businesses has been deferred until 1 October 2019. This deferral applies to trusts; not for profit organisations not set up as companies; VAT divisions; VAT groups; public sector entities such as government departments and NHS Trusts, which have to provide additional information on their VAT return; local authorities; public corporations; traders based overseas; those required to make payments on account; annual accounting scheme users.

Contact us for help and advice on MTD for VAT.

Internet link: Hansard debate MTD

Advisory fuel rates for company cars

New company car advisory fuel rates have been published which take effect from 1 March 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 March 2019 are:

Engine size Petrol
1400cc or less 11p
1401cc – 2000cc 14p
Over 2000cc 21p
Engine size LPG
1400cc or less 7p
1401cc – 2000cc 8p
Over 2000cc 13p
Engine size Diesel
1600cc or less 10p
1601cc – 2000cc 11p
Over 2000cc 13p

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.

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

Internet link: GOV.UK AFR

Scottish income tax bands confirmed for 2019/20

The Scottish Parliament has confirmed the income tax bands that will apply to Scottish taxpayers for 2019/20. The bands confirm the announcement made in the Draft Scottish Budget last December.

The 2019/20 income tax rates and bands for Scottish taxpayers on income (other than savings and dividend income) are as follows:

Scottish Bands £ Band name Scottish Rate
0 – 2,049 Starter 19%
2,050 – 12,444 Basic 20%
12,445 – 30,930 Intermediate 21%
30,931 – 150,000 Higher 41%
Over 150,000 Top 46%

Scottish taxpayers are entitled to the same personal allowance as individuals in the rest of the UK which for 2019/20 is £12,500. The allowance is reduced by £1 for every £2 of adjusted net income in excess of £100,000.

The UK higher rate tax point for 2019/20 is set at £37,500 and the tax rates for non-savings and non-dividend income are 20%, 40% and 45% respectively. The additional rate of 45% is payable on income over £150,000.

Internet link: GOV.SCOT income tax

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 2019 as shown in the following table:

Rate from 1 April 2018 Rate from 1 April 2019
NLW for workers aged 25 and over £7.83 £8.21
NMW main rate for workers aged 21-24 £7.38 £7.70
NMW 18-20 rate £5.90 £6.15
NMW 16-17 rate for workers above school leaving age but under 18 £4.20 £4.35
NMW apprentice rate * £3.70 £3.90

*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.

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

Internet link: GOV.UK NMW

Pensions auto enrolment contributions to rise

Minimum pension contributions are set to increase from 6 April 2019:

Duration Employer minimum Total minimum contribution
Current contributions 2% 5%
6 April 2019 onwards 3% 8%

The Pensions Regulator has produced guidance for employers on dealing with the increase including a letter template to advise employees of the change.

Contact us if you would like help with auto enrolment.

Internet link: TPR increases

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 2018/19.

  • 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 2018/19 tax year. Savers have until 5 April 2019 to make their 2018/19 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 you may have unused AA from the three previous tax years which can be used in 2018/19, providing the means of making a significant contribution without incurring a charge. Please contact us for advice specific to your circumstances.

These are only a couple of options 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

Latest update for employers

HMRC has issued Employer Bulletin (February 2019) which includes a number of interesting articles on:

  • End of year reporting
  • Reporting expenses and benefits
  • Student Loan notices and a new type of Student Loan repayment that employers will need to be able to process via payroll (Post Graduate Loans)
  • Updates to the Starter checklist – used for new employees
  • Reporting the Disguised Remuneration Loan Charge
  • Updates to P9 Notices of Coding
  • Payrolling benefits in kind
  • Scottish Income Tax and
  • the Welsh Rate of Income Tax and new codes for Welsh taxpayers.

For help and advice with payroll matters please contact us.

Internet link: Employer Bulletin

Households with landlines should be vigilant

Over recent years HMRC has increasingly cracked down on email and SMS phishing, and a number of criminals are turning to cold-calling publicly available phone numbers to steal money from taxpayers. These calls are often made to landline numbers. According to Ofcom, nearly 26 million homes have a landline, many of which could be at risk from scams, especially if they are not ex-directory.

Fraudsters often target the elderly and vulnerable using HMRC name as it is well known and adds credibility to a call. HMRC received more than 60,000 reports of phone scams in the six months up to January 2019 (an increase of 360% when compared with the previous six months).

Financial Secretary to the Treasury, Mel Stride MP, said:

‘We have taken major steps to crack down on text and email phishing scams leaving fraudsters no choice but to try and con taxpayers over the phone.’

‘If you receive a suspicious call to your landline from someone purporting to be from HMRC which threatens legal action, to put you in jail, or payment using vouchers: hang up and report it to HMRC who can work to take them off the network.’

Head of Action Fraud, Pauline Smith, said:

Fraudsters will call your landline claiming to be from reputable organisations such as HMRC. Contact like this is designed to convince you to hand over valuable personal details or your money.’

‘Don’t assume anyone who calls you is who they say they are. If a person calls and asks you to make a payment, log in to an online account or offers you a deal, be cautious and seek advice.’

‘The tax authority will only ever call you asking for payment on a debt that you are already aware of, either having received a letter about it, or after you’ve told us you owe some tax, for example through a Self Assessment return.’

During the last 12 months, HMRC has worked with the phone networks and Ofcom to close nearly 450 lines being used by fraudsters.

Internet links: GOV.UK news HMRC examples

 

Newsletter – February 2019

Enews February 2019

In this month’s Enews we consider the unbelievable excuses taxpayers make for not filing their self assessment returns on time, consider advice from the Insolvency Service on protecting your pension pot and the latest post-Brexit Customs guidance. With the Making Tax Digital pilot now open to all eligible businesses there are lots of issues to update you on.

Businesses urged to prepare for post-Brexit Customs Declarations

HMRC is urging VAT-registered UK businesses which trade exclusively with the EU to be prepared for a no deal Brexit.

In a letter sent to 145,000 affected businesses, HMRC explains changes to Customs, Excise and VAT procedures in the ‘unlikely event’ that the UK leaves the EU without a Brexit deal.

HMRC’s letter advises businesses to take three actions ahead of ‘Brexit Day’ on 29 March 2019:

  • Register for a UK Economic Operator Registration and Identification (EORI) number.
  • Decide whether a customs agent will be used to make import and/or export declarations, or whether declarations will be made by the business via software.
  • Contact the organisation responsible for moving goods (for example, the haulage firm) in order to ascertain whether the business will need to supply additional information to complete safety and security declarations, or whether it will need to submit these declarations itself.

A report jointly published by HMRC and the National Audit Office (NAO) recently revealed that approximately 55 million customs declarations are currently made by British businesses every year. This figure may rise to 255 million when the UK leaves the EU.

HMRC intends to write to businesses in the future in order to instruct them on any additional actions they will need to take, and when. We will keep you informed of developments.

Internet links: GOV.UK publicationsHMRC letter NAO report

MTD for VAT – pilot extended to all eligible businesses

HMRC has extended its Making Tax Digital for VAT (MTDfV) pilot scheme to all eligible businesses.

For most businesses, compliance with the regulations is mandated for VAT return periods beginning on or after 1 April 2019. However, MTDfV for some ‘more complex’ businesses has been deferred until 1 October 2019. This deferral applies to: trusts; not for profit organisations not set up as companies; VAT divisions; VAT groups; public sector entities such as government departments and NHS Trusts, which have to provide additional information on their VAT return; local authorities; public corporations; traders based overseas; those required to make payments on account; annual accounting scheme users.

Commenting on the pilot scheme, Clare Sheehan, Deputy Director for MTD for Business, said:

‘The MTD pilot is now available to all businesses who will need to use the service from April. This marks a significant milestone towards our delivery of a modern tax administration.’

‘We encourage all eligible businesses to join and try out the service before they are mandated to use it.’

HMRC has also confirmed that Brexit will not affect the introduction of MTDfV. In a recent letter, Jim Harra, Deputy Chief Executive of HMRC, wrote:

‘Our system is already live and by the end of February we’ll have written to every affected business, encouraging them to join the thousands of others who have registered.’

Please contact us for help with MTDfV.

Internet link: GOV.UK publications

HMRC’s Voice ID database

Since 2017, HMRC has captured millions of callers’ voice data on its Voice ID system by encouraging the caller to say a key phrase instead of the conventional password to gain access to their accounts.

However, non-profit organisation Big Brother Watch warns that people have been ‘railroaded into a mass ID scheme by the back door’ and has reported HMRC to the Information Commissioner’s Office (ICO) on the grounds that it has ‘broken data protection laws’.

A Freedom of Information request revealed almost seven million taxpayers are enrolled in HMRC’s Voice ID database of which 162,185 individuals have opted out and had their biometric data deleted by HMRC.

A spokesperson for HMRC said:

‘Our Voice ID system is very popular with millions of customers as it gives a quick route to access accounts by phone.

All our data is stored securely, and customers can opt out of Voice ID or delete their records any time they want.’

Internet links: https://bigbrotherwatch.org.uk/all-media/hmrc-voice-id-delete/

HMRC FOI Response

Spring Statement date announced

The Chancellor of the Exchequer, Philip Hammond, has announced that the government will respond to the forecast from the Office for Budget Responsibility (OBR) in the Spring Statement on Wednesday 13 March 2019.

The Chancellor may take the opportunity to announce tax changes and consultations.

We will update you on pertinent announcements.

Internet link: GOV.UK news

‘Unbelievable excuses’ for late filing of tax returns

HMRC has revealed some of the most ‘bizarre excuses’ taxpayers have given for failing to file their self assessment tax return on time.

Excuses included ‘I’m too short to reach the post box’, and ‘my boiler had broken and my fingers were too cold to type’. One taxpayer claimed that a junior member of staff ‘forgot to wear their glasses’, and accidentally registered a client for self assessment. Another told HMRC that their mother-in-law was a witch, and that she had put a curse on the taxpayer, which prevented them from filing their tax return on time.

In addition to these excuses, HMRC also stated that, every year, they receive some unconvincing expenses claims.

One individual attempted to claim £40 for ‘extra woolly underwear’, whilst another taxpayer tried to claim £756 for pet insurance. Meanwhile, a carpenter attempted to claim £900 for a 55-inch TV and sound bar, which he claimed would ‘help him price his jobs’.

HMRC Director General of Customer Services, Angela MacDonald, said:

‘Help will always be provided for those who have a genuine excuse for not submitting their return on time, but it’s unfair to the majority of honest taxpayers when others make bogus claims.’

HMRC stated all these excuses and claims were unsuccessful.

The deadline for sending 2017/18 Self Assessment tax returns to HMRC, and paying any outstanding liabilities, was 31 January 2019. If you have not yet filed your return please contact us for assistance.

Internet link: GOV.UK news

Protect your pension pots

The Insolvency Service has urged individuals saving for retirement to protect their pension pots from criminals and ‘negligent trustees’.

Research carried out by the Service found that criminals use a range of tactics to convince savers to part with their funds, including persuading individuals to access their pension and invest in unregulated schemes.

Pension scam victims lost an average of £91,000 to criminals in 2018, according to Financial Conduct Authority (FCA) research. Criminals often use cold-calls and offers of free pension reviews to convince their victims to comply.

The Insolvency Service has urged savers to be wary of calls that come out of the blue; seek financial advice before altering their pension arrangements or making investments; and not be pressured into making decisions about their pension.

Consumer Minister Kelly Tolhurst said:

‘If you are approached to make an investment from your pension, always do your homework and seek independent advice, if necessary, to help you make an informed decision.

‘The government continues to work closely with the Insolvency Service who are working to clamp down on rogue companies targeting vulnerable people.’

Internet link: GOV.UK news