Newsletter – June 2017

Enews – June 2017

In this month’s eNews we report on the roll out of tax free childcare and the guidance available for parents on the choices and support available, the latest advisory fuel rates and labour market statistics. With guidance on cyber security, the latest report from the Pensions Regulator and what the Small Business Taskforce wants following the election there is lots to consider.

Tax-Free Childcare and childcare options

Tax-Free Childcare, the new government scheme to help working parents with the cost of childcare launched at the end of April and is being rolled out to parents, starting with those parents with the youngest children first.

For every £8 a parent pays in, the government will pay in an extra £2. Parents can receive up to £2,000 per child, per year, towards their childcare costs making a total amount of £10,000. Higher limits of £4,000 and £20,000 apply for disabled children.

To qualify for Tax-Free Childcare parents and partners in the household must generally meet a minimum income level of on average £120 a week and each earn less than £100,000 a year.

The scheme will be available for children up to the age of 12, or 17 for children with disabilities. All eligible parents will be able to join the scheme by the end of 2017. Those eligible will be able to apply for all their children at the same time although the government rollout will start with the youngest children first. Parents will need to open an online account, which they can use to pay for childcare from a registered provider.

For those employers who currently offer Employer Supported Childcare, usually in the form of childcare vouchers, these schemes can remain open to new entrants until April 2018. Existing members have the option to remain in their existing scheme or change over to Tax-Free childcare as their child becomes eligible. It is not possible to benefit from tax-free childcare and employer supported childcare at the same time.

A calculator for parents comparing the options and guidance on the other government provided free childcare available are available on GOV.UK.

Internet links: Childcare calculator Childcare choices

Small Business Taskforce outlines priorities ahead of the General Election

The Small Business Taskforce has outlined its priorities ahead of the General Election.

The Taskforce which is made up of 14 organisations, including the Institute of Chartered Accountants in England and Wales (ICAEW), Enterprise Nation and the Entrepreneurs Network, has set out six key recommendations in its election manifesto to help ‘build a positive and progressive business case for Britain’.

The Taskforce is recommending the next government should provide an environment which ‘champions the role of small businesses’ and creates a tax system that supports businesses of all sizes.

They also call for the next government to provide an advantageous pensions and benefits system, supply procurement opportunities that are beneficial to all and create a workforce that is equipped for enterprise.

Clive Lewis, Head of Enterprise at the ICAEW, commented:

‘Whatever the outcome on 8 June, the incoming government must provide a solid platform for small businesses to flourish and grow.’

‘Currently businesses are cautious about the future and are holding back on investment, therefore it’s vital that, in the run-up to the General Election, all political parties spell out how they plan to encourage businesses to invest in long-term growth.’

To read more of the Small Business Taskforce’s manifesto visit the following link.

Internet links: economia news Manifesto

Advisory fuel rates for company cars

New company car advisory fuel rates have been published which took effect from 1 June 2017. 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 2017 are:

Engine size Petrol
1400cc or less 11p
1401cc – 2000cc 14p
Over 2000cc 21p
Engine size LPG
1400cc or less 7p
1401cc – 2000cc 9p
Over 2000cc 14p
Engine size Diesel
1600cc or less 9p
1601cc – 2000cc 11p
Over 2000cc 13p

The 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.

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

Internet link: GOV.UK AFR

Guidance protects against ‘ransomware’ attacks

The National Cyber Security Council (NCSC) has published guidance for small businesses about how they can prevent, detect and respond to ransomware attacks following the widespread ‘WannaCry’ ransomware attack in early May.

Further guidance has been produced by the Charity Commission for England and Wales for charity trustees on this issue.

Internet links: https://www.ncsc.gov.uk/guidance/ransomware-latest-ncsc-guidance

https://www.gov.uk/government/news/ransomware-threat-keep-your-charity-safe

TPR name and shame those who fail to comply

The latest Compliance and Enforcement Bulletin from the Pensions Regulator (TPR) makes interesting reading as it sets out cases and the powers TPR have used relating to automatic enrolment and associated employer duties.

TPR are warning employers that ignoring TPR penalties could seriously damage a business’ reputation.

TPR are maintaining a tough approach towards those employers who try to get away with not giving their staff the pension that they are due. The latest development is to publish details of those who have paid their Escalating Penalty Notice (EPN) but remain non-compliant. We will also publish the details of those who failed to pay their EPN, and as a result have been made subject to a court order.

The details published will include the employer’s name, the penalty amount, and the first part of their postcode.

Internet links: TPR Bulletin EPN employer details

Rising employment statistics

The Office for National Statistics has published the latest employment statistics which reveal:

  • Estimates from the Labour Force Survey show that, between October to December 2016 and January to March 2017, the number of people in work increased, the number of unemployed people fell, and the number of people aged from 16 to 64 not working and not seeking or available to work (economically inactive) also fell.
  • There were 31.95 million people in work, 122,000 more than for October to December 2016 and 381,000 more than for a year earlier.
  • The employment rate (the proportion of people aged from 16 to 64 who were in work) was 74.8%, the highest since comparable records began in 1971.
  • There were 1.54 million unemployed people (people not in work but seeking and available to work), 53,000 fewer than for October to December 2016 and 152,000 fewer than for a year earlier.
  • The unemployment rate (the proportion of those in work plus those unemployed, that were unemployed) was 4.6%, down from 5.1% for a year earlier and the lowest since 1975.
  • There were 8.83 million people aged from 16 to 64 who were economically inactive (not working and not seeking or available to work), 40,000 fewer than for October to December 2016 and 82,000 fewer than for a year earlier.
  • The inactivity rate (the proportion of people aged from 16 to 64 who were economically inactive) was 21.5%, down from 21.8% for a year earlier and the joint lowest since comparable records began in 1971.
  • Latest estimates show that average weekly earnings for employees in Great Britain in nominal terms (that is, not adjusted for price inflation) increased by 2.4% including bonuses, and by 2.1% excluding bonuses, compared with a year earlier.
  • Latest estimates show that average weekly earnings for employees in Great Britain in real terms (that is, adjusted for price inflation) increased by 0.1% including bonuses, but fell by 0.2% excluding bonuses, compared with a year earlier.’

Responding to the latest data, Alpesh Paleja, CBI Principal Economist, said:

‘Rising employment continues to reinforce the importance of the UK’s flexible labour market.’

‘However, weakening productivity and slower pay growth, coupled with rising inflation, will continue to squeeze real household earnings.’

‘Therefore maintaining the UK’s reputation as a great place to do business, for example by increasing R&D spend to 3% of GDP by 2025, will help boost the UK’s productivity. This is the only sustainable route to higher wages, and better living standards.’

Internet links: ONS statistics CBI news

Newsletter – March 2017

Enews – March 2017

In this month’s eNews we report on the new advisory fuel rates for company cars, year end tax planning, business hopes for the Spring Budget and the new off payroll working rules for those providing services to the public sector. We also include an update on pensions freedom, the new Lifetime ISA and ludicrous expense claims.

Please do get in touch if you would like any further guidance on any of the areas covered.

Advisory fuel rates for company cars

New company car advisory fuel rates have been published which took effect from 1 March 2017. 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 2017 are:

Engine size Petrol
1400cc or less 11p
1401cc – 2000cc 14p
Over 2000cc 22p
Engine size LPG
1400cc or less 7p
1401cc – 2000cc 9p
Over 2000cc 14p
Engine size Diesel
1600cc or less 9p
1601cc – 2000cc 11p
Over 2000cc 13p

Other points to be aware of about the advisory fuel rates:

  • Employees driving employer provided cars are not entitled to use these rates to claim tax relief if employers reimburse them at lower rates. Such claims should be based on the actual costs incurred.
  • The advisory rates are not binding where an employer can demonstrate that the cost of business travel in employer provided cars is higher than the guideline mileage rates. The higher cost would need to be agreed with HMRC.

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

Internet link: GOV.UK AFR

Year end tax planning

With the end of the tax year looming there is still time to save tax for 2016/17. We have set out some points you may want to consider.

  • 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 £15,240 for the 2016/17 tax year. A saver may only pay into a maximum of one Cash ISA, one Stocks and Shares ISA and one Innovative Finance ISA per year. Savers have until 5 April 2017 to make their 2016/17 ISA investment.
  • Take advantage of capital allowances – By making the most of capital allowances, businesses may be able to write off the costs of capital assets against taxable profits. The Annual Investment Allowance allows businesses to claim a deduction of up to £200,000 of the year’s investment in plant and machinery (excluding cars). Businesses of any size and most business structures can make use of the AIA. However, there are provisions to prevent multiple claims.
  • Build a tax efficient retirement plan – Pension contributions must be paid on or before 5 April 2017 for them to be relieved against 2016/17 income. Annual contributions are limited to the greater of £3,600 (gross) or the amount of your UK relevant earnings may be eligible for tax relief. However, these will be subject to the annual allowance, which is generally £40,000. This is further reduced for those with net income over £110,000 and adjusted annual income (their income, plus both their own and their employer’s pension contributions) over £150,000. For every £2 of adjusted income over this figure, a person’s annual allowance is reduced by £1 (down to a minimum of £10,000).

This is only a selection of options that you may wish to consider as part of your tax planning strategy. For more information, and for advice on how we can help you to minimise your tax bill, please contact us.

Please contact us to discuss your personal situation.

What will the Spring Budget bring for business?

With two Budgets in 2017, and the Spring Budget scheduled for Wednesday 8 March 2017, the Confederation of British Industry (CBI) have written to the Chancellor Philip Hammond outlining what they would like to see in the Budget proposals.

The CBI’s letter calls for the government to ‘back businesses’ growth ambitions’ to help build prosperity across the UK, and to work alongside firms to ‘prioritise stability’ during periods of economic uncertainty.

The CBI has also urged the government to tackle the UK’s ‘outdated’ business rates regime and limit its ‘growing burden’ on businesses.

Elsewhere, the Federation of Small Businesses (FSB) has advocated for a ‘pro-business Budget’ that supports self-employed individuals, urging the government to help more people start up in business.

We will keep you informed of pertinent Budget announcements.

Internet links: CBI news FSB news

Self assessment expense claims

HMRC have released a list of the most outlandish items which have been claimed as expenses. These include:

  • Holiday flights to the Caribbean
  • Luxury watches as Christmas gifts for staff – from a company with no employees
  • International flights for dental treatment ahead of business meetings
  • Pet food for a Shih Tzu ‘guard dog’
  • Armani jeans as protective clothing for painter and decorator
  • Cost of regular Friday night ‘bonding sessions’ – running into thousands of pounds.
  • Underwear – for personal use
  • A garden shed for private use – plus the costs of the space it takes up in the garden
  • Betting slips
  • Caravan rental for the Easter weekend.

Ruth Owen, HMRC Director General of Customer Services, said:

‘Year after year we receive a number of ludicrous expense claims, ranging from international holiday flights to expensive designer clothing, which we would never uphold. Why should the honest taxpayer pick up the bill for others? HMRC will only accept those claims which are genuine, such as legitimate travel expenses or the cost of tools for the job.

For help with your tax affairs please do get in touch.

Internet link: GOV.UK news

Over £9.2 billion released by pension freedoms

Hundreds of thousands of savers have cashed in £9.2 billion from their pension pots since pension freedoms were introduced in April 2015.

In April 2015, the government introduced significant pension reforms giving people the ability to access their pensions savings how and when they want. Over 1.5 million payments have been made using pension freedoms, with 162,000 people accessing £1.56 billion flexibly from their pension pots over the last three months, according to HMRC figures.

The Economic Secretary to the Treasury, Simon Kirby, said:

‘Giving people freedom over what they do with their hard-earned savings, whether it’s buying an annuity or taking a cash lump sum, is the right thing to do. These figures show that people continue to take advantage of the choices on offer: choices ‎only made available since the government’s landmark pension freedoms were introduced in April 2015.

We are working with our partners, including Pension Wise, the regulators and pension firms, so that savers have the support they need to understand the options available to them.

The statistics show that in the first year of these new rules being available, more than 232,000 people have accessed £4.3 billion flexibly from their pension pots.’

Internet links: GOV.UK news Statistics

New Lifetime ISA

The Lifetime Individual Savings Account (ISA) is a longer term tax-free account that receives a government bonus. The accounts will be available from 6 April 2017. HMRC have produced a helpful guide on the account. Some of which is reproduced below:

Opening a Lifetime ISA

You can open a Lifetime ISA if you’re aged 18 or over but under 40.

As with other ISAs, you won’t pay tax on any interest, income or capital gains from cash or investments held within your Lifetime ISA.

Saving in a Lifetime ISA

You can save up to £4,000 each year in a Lifetime ISA. There’s no maximum monthly savings contribution, and you can continue to save in it until you reach 50. The account can stay open after then but you can’t make any more payments into it.

The £4,000 limit, if used, will form part of your overall annual ISA limit. From the tax year 2017 to 2018, the overall annual ISA limit will be £20,000.

Example

You could save:

  • £11,000 in a cash ISA
  • £2,000 in a stocks and shares ISA
  • £3,000 in an innovative finance ISA
  • £4,000 in a Lifetime ISA in one tax year.

Your Lifetime ISA won’t close when the tax year finishes. You’ll keep your savings on a tax-free basis for as long as you keep the money in your Lifetime ISA.

Lifetime ISAs can hold cash, stocks and shares qualifying investments, or a combination of both.

Government bonus

When you save into your Lifetime ISA, you’ll receive a government bonus of 25% of the money you put in, up to a maximum of £1,000 a year.

Withdrawals

You can withdraw the funds held in your Lifetime ISA before you’re 60, but you’ll have to pay a withdrawal charge of 25% of the amount you withdraw.

A withdrawal charge will not apply if you’re:

  • using it towards a first home
  • aged 60
  • terminally ill with less than 12 months to live.

If you die, your Lifetime ISA will end on the date of your death and there won’t be a withdrawal charge for withdrawing funds or assets from your account.

Transferring a Lifetime ISA

You can transfer your Lifetime ISA to another Lifetime ISA with a different provider without incurring a withdrawal charge.

If you transfer it to a different type of ISA, you’ll have to pay a withdrawal charge.

Saving for your first home

Your Lifetime ISA savings and the bonus can be used towards buying your first home, worth up to £450,000, without incurring a withdrawal charge. You must be buying your home with a mortgage.

You must use a conveyancer or solicitor to act for you in the purchase, and the funds must be paid direct to them by your Lifetime ISA provider.

If you’re buying with another first time buyer, and you each have a Lifetime ISA, you can both use your government bonus. You can also buy a house with someone who isn’t a first time buyer but they will not be able to use their Lifetime ISA without incurring a withdrawal charge.

Your Lifetime ISA must have been opened for at least 12 months before you can withdraw funds from it to buy your first home.

If you have a Help to Buy ISA, you can transfer those savings into your Lifetime ISA or you can continue to save into both – but you’ll only be able to use the government bonus from one to buy your first home.

You can transfer the balance in your Help to Buy ISA into your Lifetime ISA at any time if the amount is not more than £4,000.

In 2017/18 only, you can transfer the total balance of your Help to Buy ISA, as it stands on 5 April 2017, into your Lifetime ISA without affecting the £4,000 limit.

Internet link: GOV.UK news

Construction Industry – Subcontractor verifications

HMRC have confirmed in the latest Employer Bulletin that changes will be made to the verification of subcontractors in the construction Industry Scheme (CIS) from 6 April 2017.

From 6 April 2017, contractors must use an approved method of electronic communication to verify their subcontractors. So from 6 April 2017 HMRC will no longer accept any telephone calls to verify subcontractors and from then contractors must verify subcontractors using:

  • the free HMRC CIS online service, or
  • commercial CIS software.

This change is one of a series made to CIS to increase HMRC efficiency and accuracy, and to reduce administration. HMRC are also reminding contractors that they have also introduced additional features of the online system including the ability to amend returns online, and the addition of an online message/alert service.

Contact us for help with CIS issues.

Internet link: Employer Bulletin

Providing services to a public sector – off payroll working

In the latest Employer Bulletin HMRC advise those providing services to a public sector client through their own limited company to ensure they are ready for the new rules which take effect from 6 April 2017.

The new rules for off payroll working, commonly referred to as IR35 or the Intermediaries legislation, take effect from 6 April 2017.

These changes mean individuals working through their intermediary in the public sector will no longer be responsible for deciding whether the intermediaries’ legislation applies and then paying the appropriate tax and National Insurance contributions (NICs). This responsibility will instead move to the public authority client, agency, or third party that pays the worker’s intermediary, and they will also now become responsible for making sure that, where the rules apply, the relevant income tax and NICs are deducted and reported through PAYE in real time.

The public authority client is required to tell any agency or third party its view as to whether the rules apply. HMRC have been consulting on these new rules and the legislation has yet to be finalised.

HMRC confirm that ‘work is continuing on the development of the new Employment Status Service, and the online tool should be available for use in March. We have launched an off-payroll working in the public sector page on GOV.UK where you can find guidance for fee-payers, PSCs and public authorities to use, and links to material such as the technical note’.

If you have concerns in this area please contact us.

Internet links: Employer Bulletin Technical note

Newsletter – September 2016

Henry Cooper is walking 2016 km in the year 2016!

Henry is walking 2016 km in the year 2016, to raise some funds for the Thames Valley Air Ambulance.

Please click below, to sponsor him – thank youJustGiving - Sponsor me now!

Enews – September 2016

In this month’s eNews we report on recent developments including HMRC consultations on Making Tax Digital and new sanctions for tax avoidance as well as guidance on the implications of new UK GAAP.

We also report on HMRC’s advice on spotting scams, how to complain online and industry concerns about the introduction of the new Lifetime ISA.

We also include guidance for employers and employees including the new advisory fuel rates and the latest Employer Bulletin.

Please do get in touch if you would like any further guidance on any of the areas covered.

HMRC outline Making Tax Digital plans

HMRC have issued a series of consultation documents outlining further plans for the government’s Making Tax Digital (MTD) initiative.

HMRC have published six consultation documents on MTD. The six consultations set out detailed plans on how HMRC propose to make tax digital and to simplify the tax system. The consultations look at the following areas:

  • How digital record keeping and regular updates will operate – this considers compulsory digital record-keeping and quarterly ‘updates’ to HMRC and an End of Year declaration within nine months of the end of the period of account.
  • Options to simplify tax for unincorporated businesses, including changes to basis periods, extending cash basis accounting and reducing reporting requirements for unincorporated businesses.
  • Extending cash basis accounting to unincorporated property businesses.
  • Voluntary pay as you go arrangements, where taxpayers can pay what they want when they want, subject to the normal payment on account rules. Regular direct debit arrangements and quarterly payments on account are also being considered.
  • Changes to tax administration, including changes to the enquiry regime, penalties for late submission of quarterly updates and End of Year declarations and also the late payment of tax.
  • How HMRC will make better use of the information which they currently receive from third parties, including updating of PAYE codes more regularly and coding out of bank interest via PAYE.

Commenting on the plans, Jane Ellison Financial Secretary to the Treasury said:

‘This new system will make the UK’s tax administration more efficient and straightforward and will offer businesses greater clarity when it comes to paying their tax bills.’

However professional bodies have expressed their concerns about HMRC’s proposals. Frank Haskew, Head of the Tax Faculty at the Institute of Chartered Accountants in England and Wales, said:

‘This is not the time to be rushing through fundamental changes to business processes that are likely to result in major upheaval and extra costs, especially when the business benefit to the UK has not been clearly demonstrated.’

Under the Government’s plans, the changes to the tax system will be introduced gradually between 2018 and 2020. We will keep you informed of developments.

Internet link: GOV.UK MTD

Government propose new sanctions for tax avoidance

The government has announced new proposals for sanctions for ‘enablers and users of tax avoidance which is defeated by HMRC’.

The consultation proposes a new penalty for those who enable tax avoidance and changes to the existing penalty legislation which applies to those who use avoidance.

The proposals are to introduce ‘sanctions for those who design, market or facilitate the use of tax avoidance arrangements which are defeated by HMRC and to change the way the existing penalty regime works for those whose tax returns are found to be inaccurate as a result of using such arrangements.’

The government is seeking views on proposals for sanctions against those who enable or use tax avoidance arrangements which are later defeated.

Internet link: GOV.UK consultation

Accounting standards and the tax implications of new UK GAAP

HMRC have updated their guidance on the tax implications of changes to the ‘generally accepted accounting practice’ used to prepare financial statements as many UK companies will be required to apply one of the EU-endorsed IFRS, FRS 101 or FRS 102 over the next few years.

HMRC have stated that the purpose of these two papers is to assist companies who are thinking of choosing or have already chosen to apply either FRS 101 or FRS 102. The guidance includes an overview of the key accounting changes and key tax considerations that arise.

Please contact us if you would like information on how these changes will affect you and your business.

Internet link: GOV.UK accounting standards

HMRC genuine and phishing/bogus emails and calls

HMRC have issued an update of their guidance on how to recognise genuine HMRC contact be it via email or text.

They have also issued a warning regarding two telephone scams that they are aware of.

The details of the two phone scams are as follows:

  • Taxpayers receive telephone calls claiming to be from HMRC requesting personal information in order to receive a tax refund, or to demand money for an unpaid tax bill.
  • A recorded message is left, allegedly from HMRC, advising ‘that HMRC are bringing a lawsuit against the individual and is going to sue them. The recipient is asked to phone 0161 8508494 and press “1” to speak to the officer dealing with the case.

HMRC are advising that taxpayers should not reply to the message and should report this to Action Fraud, or you can call Action Fraud on 0300 123 2050.

Internet links: HMRC guidance Employer Bulletin

Complain to HMRC – online

HMRC have always had complaints procedures and have extended these to now include an online form which can be used to make complaints about your self-assessment and PAYE. The guidance also includes other ways to complain.

If you would like help with PAYE or self assessment issues please contact us.

Internet link: GOV.UK guidance

Government urged to delay the launch of Lifetime ISA

The government is being urged by both pension providers and banks to delay the April 2017 launch of the new Lifetime ISA as they are warning that they will not be ready to offer the savings product by this time.

A new Lifetime ISA introduces a new type of savings account for adults under the age of 40. Individuals will be able to contribute up to £4,000 per year and receive a 25% bonus from the government. Funds, including the government bonus, can be used to buy a first home at any time from 12 months after opening the account, and can be withdrawn from age 60 completely tax-free.

Further details of the new account, which is expected to be available from 2017, are as follows:

  • Any savings an individual puts into the account before their 50th birthday will receive an added 25% bonus from the government.
  • There is no maximum monthly contribution and up to £4,000 a year can be saved into a Lifetime ISA.
  • The savings and bonus can be used towards a deposit on a first home worth up to £450,000 across the country.
  • Accounts are limited to one per person rather than one per home, so two first time buyers can both receive a bonus when buying together.
  • Where an individual already has a Help to Buy ISA they will be able to transfer those savings into the Lifetime ISA in 2017, or continue saving into both. However only the bonus from one account can be used to buy a house.
  • Where the funds are withdrawn at any time before the account holder is aged 60 they will lose the government bonus (and any interest or growth on this) and will also have to pay a 5% charge.
  • After the account holder’s 60th birthday they will be able to take all the savings tax-free.

In the article published by This is Money pension providers Aegon and Standard Life have stated that they have delayed their plans until final details regarding the Lifetime ISA are released.

The Financial Conduct Authority (FCA) is yet to consult on the initiative. Steven Cameron, Pensions Director at Aegon, stated that a consultation is ‘likely to take three months’ to carry out.

Meanwhile, a spokesperson for Standard Life said: ‘As we want the Lifetime ISA to be a success, we would prefer that its launch is delayed until providers receive more detail on the product and how it is to be implemented.’

The Treasury is expected to confirm full details in the autumn.

Internet link: Article

Advisory fuel rates for company cars

New company car advisory fuel rates have been published which take effect from 1 September 2016. 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 2016 are:

Engine size Petrol
1400cc or less 11p
1401cc – 2000cc 13p
Over 2000cc 20p
Engine size LPG
1400cc or less 7p
1401cc – 2000cc 9p
Over 2000cc 13p
Engine size Diesel
1600cc or less 9p
1601cc – 2000cc 11p
Over 2000cc 13p

The 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.

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

Internet link: GOV.UK AFR

Guidance for employers

HMRC have issued their latest guidance to employers in the August edition of the Employer Bulletin. This publication, which is issued every two months, includes articles on:

  • expenses and benefits in kind consultations
  • HMRC Toolkits – helping to reduce errors
  • Automatic penalties for late intermediary returns
  • the Apprenticeship Levy and apprentices
  • guidance on paying HMRC
  • student loan deductions
  • Automatic enrolment update
  • National insurance contributions for employees over State Pension age
  • Basic PAYE tools usage
  • the impact on tax codes of the Personal Savings Allowance.

For help with your payroll contact us.

Internet link: Employer Bulletin

Newsletter – June 2016

Henry Cooper is walking 2016 km in the year 2016!

Henry is walking 2016 km in the year 2016, to raise some funds for the Thames Valley Air Ambulance.

Please click below, to sponsor him – thank youJustGiving - Sponsor me now!

Advisory fuel rates for company cars

New company car advisory fuel rates have been published which took effect from 1 June 2016. 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 2016 are:

Engine size Petrol
1400cc or less 10p
1401cc – 2000cc 13p
Over 2000cc 20p
Engine size LPG
1400cc or less 7p
1401cc – 2000cc 9p
Over 2000cc 13p
Engine size Diesel
1600cc or less 9p
1601cc – 2000cc 10p
Over 2000cc 12p

The 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.

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

Internet link: GOV.UK AFR

PAYE 3 days grace and risk based penalties to continue

HMRC have confirmed, in their updated guidance, that the three day easement and risk assessed approach to issuing penalties will continue to apply for 2016/17. As a result employers will not incur penalties for delays of up to three days in filing PAYE information during the 2016/17 tax year.

Late filing penalties will continue to be reviewed on a risk-assessed basis rather than be issued automatically.

Employers are required to file a Full Payment Submission (FPS) on or before each payment of wages is made to employees. Limited exceptions apply to this deadline which are set out at https://www.gov.uk/running-payroll/fps-after-payday’.

HMRC will not charge a late filing penalty for delays of up to three days after the statutory filing date, however employers who persistently file late, will be monitored and may be contacted or considered for a penalty.

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

Internet link: GOV.UK Penalties

VAT Flat Rate Scheme guidance updated

HMRC have issued updated guidance on the operation of the VAT Flat Rate Scheme which allows taxpayers to calculate the VAT payable by applying a flat rate percentage to their VAT inclusive turnover, rather than netting off output and input VAT due on sales and purchases.

The revision in the guidance follows a number of unsuccessful visits to the First Tier Tribunal (FTT). HMRC has issued a revised version of VAT notice 733 Flat Rate Scheme to update their guidance in accordance with the FTT decisions.

The previous version of the notice listed a number of trades and professions (at paragraph 4.4 of the guidance) and indicated the relevant sectors and percentages that these types of business should choose. These had a higher percentage than the 12% rate which applies to ‘business services not listed elsewhere’.

The FTT was critical of HMRC in their rigid interpretation of their own guidance. Although this section of the guidance has not been removed, taxpayers are now advised to ‘use ordinary English’ and choose the sector which ‘most closely describes what your business will be doing in the coming year’. The new guidance confirms that HMRC will not change a business’s choice of sector retrospectively as long as the choice was reasonable.

Please contact us if you would like any advice on VAT matters.

Internet link: VAT Notice 733

NAO report says HMRC’s customer service quality ‘collapsed’

According to a report by the National Audit Office (NAO) the quality of service at HMRC ‘collapsed’ over an 18 month period between 2014 and 2015.

The report found that average call waiting times tripled in 2014/15 and in the first seven months of 2015/16. Call waiting times for self assessment tax returns peaked at 47 minutes last autumn, which resulted in HMRC having to bring in 2,400 extra staff for their tax helpline.

Using HMRC’s own criteria, the NAO valued people’s time at an average of £17 an hour, and, as a result, calculated that callers would have wasted a total of £66 million while waiting on the phone, £21 million while actually talking to HMRC and £10 million on the cost of the call itself.

The NAO report blames the poor performance on HMRC’s decision to cut 11,000 staff between 2010 and 2014 in the move to persuade more people to complete their tax returns online. The report claims that HMRC ‘misjudged the cumulative impact of its complex transition and released too many customer service staff before completing service changes’.

In other words, it greatly underestimated how many call centre staff would still be required to help taxpayers with self assessment queries.

Amyas Morse, head of the NAO, said:

‘HMRC’s overall strategy of using digitally enabled information to improve efficiency and deliver service in new ways make sense to the NAO. This does not change the fact that they got their timing badly wrong in 2014, letting significant numbers of call handling staff go before their new approach was working reliably.

This led to a collapse in service quality and forced a rapid expansion of headcount. HMRC needs to move forward carefully and get their strategy back on track while maintaining, and hopefully improving, service standards.’

HMRC said its service levels had improved since the period analysed in the NAO report, and that, over the last six months, call waiting times had averaged six minutes.

Ruth Owen, HMRC’s director general for customer services, said:

‘We recognise that early in 2015 we didn’t provide the standard of service that people are entitled to expect and we apologised at the time. We have since fully recovered and are now offering our best service levels in years.’

Internet links: NAO press release HMRC news

HMRC update phishing scam advice

HMRC have updated their guidance to taxpayers on how to spot phishing scam emails.

Phishing is the fraudulent act of emailing a person in order to obtain their personal/financial information such as passwords and credit card or bank account details. These emails often include a link to a bogus website designed to encourage the unwary to enter their personal details.

The HMRC guidance is designed to help taxpayers to recognise genuine contact from HMRC, and how to tell when an email/text message is phishing/bogus.

Internet link: HMRC guidance

HMRC urges claimants to renew tax credits online

HMRC are urging people to renew their tax credits claim well before the 31 July deadline.

HMRC have made improvements to the online renewal service and recommend claimants renew their claim online once they receive their renewal pack which is issued between April and June. The online service can now accommodate all changes in circumstances (working hours, childcare costs or income) which affect the amount of someone’s entitlement.

Nick Lodge, HMRC’s Director General, Benefits and Credits, said:

‘Our online service means that you can renew at any time of the day or night, and on any device, without having to call us. Online help can also answer most queries you may have and a web chat facility will be available to support people renewing online. We urge everyone who can to go online.

Our customers should check their details and renew early to ensure they get the right money. The sooner people renew their claim, the sooner we can check payments are correct, meaning we avoid paying too little money, or too much, which claimants then have to pay back.

This year, claimants renewing online will be able to access further information, including viewing their next payment, through their own online Personal Tax Account.

Internet link: Press release

P11D deadline approaching

The forms P11D, and where appropriate P9D, which report details of expenses and benefits provided to employees and directors for the year ended 5 April 2016, are due for submission to HMRC by 6 July 2016. 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, either via a PAYE coding notice adjustment or through the self assessment system. In addition, 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 (22nd for cleared electronic payment).

HMRC produce 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

Newsletter – March 2016

Henry Cooper is walking 2016 km in the year 2016!

Henry is walking 2016 km in the year 2016, to raise some funds for the Thames Valley Air Ambulance.

Please click below, to sponsor him – thank youJustGiving - Sponsor me now!

Enews – March 2016

In this month’s eNews we report on several changes for employers including the changes to the advisory fuel rates and changes to expenses and benefits reporting. We also consider the changes to the taxation of savings income which are introduced from 6 April 2016 and year end tax planning considerations.

Please do get in touch if you would like any further guidance on any of the areas covered.

Advisory fuel rates for company cars

Benefits and expenses – bespoke scale rates

Trivial benefits exemption

Year end tax planning

Changes to the taxation of saving income

What will the Budget bring for businesses?

Auto enrolment success for small businesses

Advisory fuel rates for company cars

New company car advisory fuel rates have been published which took effect from 1 March 2016. 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 2016 are:

Engine size Petrol
1400cc or less 10p
1401cc – 2000cc 12p
Over 2000cc 19p
Engine size LPG
1400cc or less 7p
1401cc – 2000cc 8p
Over 2000cc 13p
Engine size Diesel
1600cc or less 8p
1601cc – 2000cc 10p
Over 2000cc 11p

Other points to be aware of about the advisory fuel rates:

  • Employees driving employer provided cars are not entitled to use these rates to claim tax relief if employers reimburse them at lower rates. Such claims should be based on the actual costs incurred.
  • The advisory rates are not binding where an employer can demonstrate that the cost of business travel in employer provided cars is higher than the guideline mileage rates. The higher cost would need to be agreed with HMRC.

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

Internet link: GOV.UK AFR

Benefits and expenses – bespoke scale rates

From 6 April 2016 there are a lot of changes to the way in which benefits and expenses are reported to HMRC.

HMRC have set out the maximum tax and NICs free allowances that can be paid by employers to employees for subsistence. Subject to qualifying conditions, the amounts are set out below:

Minimum journey time Maximum amount of meal allowance
5 hours £5
10 hours £10
15 hours £25

Where a meal allowance of £5 or £10 is paid and the qualifying journey in respect of which it is paid lasts beyond 8pm a supplementary rate of £10 can be paid.

Employers may choose to reimburse employees for the actual costs incurred. However where employers wish to use bespoke rates other than those set out above, they will need to apply for approval from HMRC for bespoke rates.

HMRC have issued an online application form to allow employers to request approval for these bespoke amounts. This should state the rate that the employer wishes to pay and also needs to demonstrate that the amount is a reasonable estimate of the amount of expenses actually incurred by the employees.

To establish these amounts, HMRC have confirmed that the employer should carry out a sampling exercise to verify the actual expenses incurred by employees. We would be happy to advise you on the sampling which would need to be carried out for your business.

In addition, employers will need to have a checking system in place which ensures that the payments or reimbursements are only make on occasions where the employee would be entitled to a deduction from their earnings and that the employees have actually incurred and paid the amounts.

Once approval has been given by HMRC, they will issue an approval notice which sets out the date from which the approval is given and what expenses are covered. It will also state the date when the approval notice ends which will be no later than five years from the start date.

Please do get in touch if you would like help with benefits and expense reporting or agreeing Bespoke rates.

Internet links: GOV.UK HMRC

Trivial benefits exemption

From April 2016, where trivial benefits are provided to employees they may be exempt from tax if certain conditions are met. The conditions are:

  • the cost of providing the benefit does not exceed £50
  • the benefit is not cash or a cash voucher
  • the employee is not entitled to the voucher 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, 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 exemptions or allowable deductions.

One of the main conditions is that the cost of the benefit is less than £50, if the cost is above £50 the full amount is taxable, not just the excess over £50. The cost is the cost of providing the benefit to each employee not the overall cost to the employer. Where the individual cost for each employee cannot be established, an average could be used.

Further details on how the exemption will work, including family member situations, are contained in the Government guidance. However if you are unsure please do get in touch before assuming the trivial benefit you are about to provide is covered by the exemption.

Internet link: GOV.UK

Year end tax planning

With two months to the end of the tax year there is still time to save tax for 2015/16. We have set out some points you may want to consider.

  • Review dividend payment timing – with new dividend tax rates and a £5,000 dividend allowance from 6 April 2016, the timing of dividends could make a difference to the tax charge.
  • Consider  company car options – going forward for each tax year the taxable percentage increases 2% for each CO2 emission band and the diesel 3% supplement which was expected to be abolished from April 2016 is now to be retained.
  • Review personal pension contributions to ensure annual allowances are being used effectively as from 6 April 2016 the annual allowance may be tapered for those with incomes over £150,000.
  • Defer capital gains by reinvesting in Enterprise Investment Scheme shares.

Please contact us to discuss your personal situation.

Changes to the taxation of saving income

There are significant changes to the income tax rules from 6 April 2016 which affect the taxation of savings income.

From 6 April 2016, if you are a basic taxpayer you may be able to receive up to £1,000 in savings income tax free. Higher rate taxpayers will be able to receive up to £500.

Savings income includes the following:

  • interest from bank and building societies accounts
  • interest from credit union or National Savings and Investment accounts
  • income from government or company bonds
  • interest distributions from authorised unit trusts
  • most types of purchased life annuity payments.

As a result of this from 6 April 2016 interest will be paid gross rather than net which is the current position for most interest paid to individuals. Net payments are received after deduction of the basic rate of tax of 20%. Interest from ISAs is not included in your Savings Allowance (SA) because it is already tax free.

No action is required to claim the allowance. If the amount of savings income you receive is higher than the allowance, banks and building societies will provide details to HMRC and they will amend your tax code to collect any tax due. If you complete a Self Assessment tax return you should carry on doing this as normal.

If you have any queries on the changes to income tax please do get in touch.

Internet link: GOV.UK

What will the Budget bring for businesses?

With two Budgets in 2015 it does not feel like that long ago since we last had a Budget but the next one is not that far away and will take place on  Wednesday 16 March 2016. Ahead of the Budget the CBI have written to the Chancellor outlining what they would like to see in the Budget proposals.

The CBI emphasise that businesses have suffered sizeable policy costs which impact on their ability to remain competitive. These include the Apprenticeship Levy, the National Living Wage and also pension auto enrolment. They therefore want the government to provide additional tax incentives to promote productivity and the delivery of jobs. Examples would include:

  • new capital allowances for investments in structures and buildings
  • allowing smaller companies claiming research and development tax credits to be able to claim repayments in part payments throughout the year  rather than yearly
  • introducing a payroll incentive to help small firms with the costs of hiring high-skilled staff along the lines of the Employment Allowance.

We will keep you informed of pertinent Budget announcements.

Internet link: CBI

Auto enrolment success for small businesses

More than 90% of the first small employers required to put their staff into a workplace pension have now complied with the law.

Around 12,000 small and micro employers became subject to the new legal requirements last summer and the vast majority have put their eligible staff into a pension. For the small numbers that did not comply, the Pensions Regulator (TPR) used their powers of enforcement action.

Although compliance with the rules remains the norm, TPR has noted that smaller employers are more likely to leave things to the last minute and they are therefore more likely to receive a compliance notice which could lead to a fine.

Since the start of auto enrolment:

  • 4,818 compliance notices have been issued
  • around half of these (2,596) were issued between October and December last year
  • a total of 1,594 £400 Fixed Penalty Notice fines have now been issued to employers
  • just over a thousand (1,021) Fixed Penalty Notices were issued in the last quarter of 2015.

Compliance notices act as a warning and give employers a deadline to meet their duties and avoid a fine.

If you would like details on what you are required to do as an employer to meet your auto enrolment obligations then please get in touch.

Internet link: TPR press release

Newsletter – December 2015

eNews – December 2015

In this month’s eNews we report on pertinent announcements from the Autumn Statement focussing on issues for parents, employers and company car drivers, buy to let landlords and those with second homes. We also report on the forthcoming Scottish Budget and other pertinent announcements for employers.

Please do contact us if you would like any further information on any of the issues.

Scottish income tax rates and Scottish Budget

From April 2016, the Scottish Parliament will have the power to set its own rate of income tax to fund spending by the Scottish government. The rate will be set in the Scottish Budget on 16 December and we will update you on pertinent announcements.

Those who are resident in Scotland will pay two types of income tax on their non-savings income. The main UK rates of income tax will be reduced by 10p for Scottish taxpayers and in its place the Scottish Parliament will be able to levy a Scottish Rate of Income Tax (SRIT) applied equally to all Scottish taxpayers. If the SRIT is set at 10p then income tax rates will be the same as in the rest of the UK. SRIT can however be reduced to zero and there is no upper limit.

The Scottish Rate of Income Tax doesn’t apply to income from savings such as building society interest or income from dividends. Tax on this income will stay the same for all taxpayers across the UK. It also doesn’t affect income tax thresholds and allowances, which will continue to be set by the UK government.

The definition of a Scottish taxpayer is based on where an individual lives in the course of a tax year. Scottish taxpayer status applies for a whole tax year. It is not possible to be a Scottish taxpayer for part of a tax year. HMRC will identify those individuals who will be Scottish taxpayers based on their records of where individuals live. In early December HMRC started to write to potential Scottish taxpayers to confirm that the address held in their records is correct. If it is, taxpayers will need to take no further action. Those paying the new rate will see their tax code prefixed by an ‘S’ and their income tax will continue to be collected from pay and pensions in the same way as it is now.

Further details and the effect on employers can be found by visiting the following link.

Internet link: GOV.UK briefing

Autumn Statement 2015 – key announcements for parents

Reversal of most of the tax credit proposals

A number of changes to tax credits and Universal Credit were announced in the July Budget but the Chancellor has scrapped some of the changes following a defeat of the proposals by the House of Lords. The government has confirmed that:

  • The rate at which a tax credit claimant’s award is reduced as each pound of their income exceeds the income threshold (known as the taper rate) will remain at 41% of gross income from April 2016.
  • The level of income at which a claimant’s tax credit award begins to be tapered away (known as the income threshold), will remain at £6,420 per year from April 2016. Claimants earning below this amount will retain their maximum award.
  • The income rise disregard in tax credits will reduce from £5,000 to £2,500. This is the amount by which a claimant’s income can increase in-year compared to their previous year’s income before their award is adjusted.

Changes to the prospective Tax-Free Childcare scheme

Under the scheme, which is expected to launch in 2017, the relief will be 20% of the costs of childcare up to a total of childcare costs of £10,000 per child per year. The scheme will therefore be worth a maximum of £2,000 per child (£4,000 for a disabled child).

The government has announced changes to the conditions to qualify for Tax-Free Childcare. All parents in the household must:

  • meet a minimum income level based on the equivalent of working 16 hours a week at the National Living Wage (increased from eight hours at the National Minimum Wage)
  • each earn less than £100,000 a year (reduced from £150,000), and
  • not already be receiving support through tax credits or Universal Credit.

The Chancellor of the Exchequer, George Osborne, has announced that the government will publish its next Budget on Wednesday 16 March 2016.

Internet links: GOV.UK main tax announcements GOV.UK news

Autumn Statement 2015 – key announcements for employers and company car drivers

Retaining the 3% diesel supplement for company cars which was to be abolished

The scale of charges for working out the taxable benefit for an employee who has use of an employer provided car are now announced well in advance. Cars are taxed by reference to bands of CO2 emissions. From 6 April 2015 the percentage applied by each band went up by 2% and the maximum charge is capped at 37% of the list price of the car.

From 6 April 2016 there will be a further 2% increase in the percentage applied by each band with similar increases in 2017/18 and 2018/19. For 2019/20 the rate will increase by a further 3%. It had been expected that the 3% diesel supplement would be removed from 6 April 2016, however this 3% differential will now be retained until April 2021. This is a blow to diesel car drivers who were expecting to see their car benefit reduce from April 2016.

The introduction of an apprenticeship levy

The government will introduce the apprenticeship levy in April 2017. It will be set at a rate of 0.5% of an employer’s paybill, which is broadly total employee earnings excluding benefits in kind, and will be paid through PAYE. Each employer will receive an allowance of £15,000 to offset against their levy payment. This means that the levy will only be paid on any paybill in excess of £3 million.

Internet link: GOV.UK Blue Book

Autumn Statement 2015 – key announcements for buy to let landlords and those with second homes

Higher SDLT on purchases of additional residential properties

Higher rates of SDLT will be charged on purchases of additional residential properties (above £40,000), such as buy to let properties and second homes, from 1 April 2016. The higher rates will be three percentage points above the current SDLT rates.

The higher rates will not apply to purchases of caravans, mobile homes or houseboats, or to corporates or funds making significant investments in residential property. The government will consult on the policy detail, including whether an exemption for corporates and funds owning more than 15 residential properties is appropriate. The Chancellor stated that ‘more and more homes are being bought as buy to lets or second homes’ and ‘frankly, people buying a home to let should not be squeezing out families who can’t afford a home to buy’.

No mention was made by the Chancellor on the position in Scotland. It is the Scottish Government which sets the rates for the equivalent tax on property – the Land and Buildings Transaction Tax.

The introduction of a payment on account of any CGT due on the disposal of residential property

From April 2019, a payment on account of any CGT due on the disposal of residential property will be required to be made within 30 days of the completion of the disposal. This will not affect gains on properties which are not liable for CGT due to Private Residence Relief.

Currently, CGT is not payable on a disposal of an asset until 31 January following the tax year in which a disposal is made. So a disposal made on the 6 April 2016 will not result in a tax bill until 31 January 2018.

This measure is another blow for buy to let landlords.

Internet link: GOV.UK main tax announcements

Advisory fuel rates for company cars

New company car advisory fuel rates have been published which took effect from 1 December 2015. 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 2015 are:

Engine size Petrol
1400cc or less 11p
1401cc – 2000cc 13p
Over 2000cc 20p

 

Engine size LPG
1400cc or less 7p
1401cc – 2000cc 9p
Over 2000cc 13p

 

Engine size Diesel
1600cc or less 9p
1601cc – 2000cc 11p
Over 2000cc 13p

Please note that not all of the rates have been amended so care must be taken to apply the correct rate.

Other points to be aware of about the advisory fuel rates:

  • Employers do not need a dispensation to use these rates. Employees driving employer provided cars are not entitled to use these rates to claim tax relief if employers reimburse them at lower rates. Such claims should be based on the actual costs incurred.
  • The advisory rates are not binding where an employer can demonstrate that the cost of business travel in employer provided cars is higher than the guideline mileage rates. The higher cost would need to be agreed with HMRC under a dispensation.

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

Internet link: GOV.UK AFR

‘Payrolling’ benefits in kind

From April 2016 the government is introducing a voluntary framework to allow employers to payroll most employee benefits in kind (benefits) rather than report them at the end of the tax year on a form P11D.

In order to payroll benefits an employer will need to include a notional value for employee benefits as taxable pay in the regular payroll cycle. By doing this the income tax due on the benefits can be collected in real time.

Currently the tax due on employee benefits is collected through an adjustment to the employee’s tax code. The way that tax codes work means that HMRC try to collect the right amount of tax at the right time. However, when benefits start/stop or are changed there can be a delay in changing the tax code which may result in an employee under or over paying tax.

One of the advantages to employers is that if employees’ benefits are payrolled then forms P11D will not need to be completed. Payrolling is not possible for some benefits such as living accommodation, beneficial loans and credit vouchers and tokens.

HMRC have confirmed that there will be no change to the process for reporting and collecting Class 1A NICs. Employers will still need to complete a form P11D(b) after the end of the tax year and calculate and pay the 13.8% employer only liability.

Employers need to register for the new service by 5 April 2016 as HMRC cannot process changes in year. HMRC are advising that employers should ideally register before 21 December to avoid being sent multiple tax codes for employees.

Please contact us if this is of interest to you.

Internet links: GOV.UK payrolling benefits Employer Bulletin

Guidance on use of zero hours contracts

The government has published guidance for employers on the use of zero hours contracts. The guidance sets out where zero hours contracts may be appropriate and also sets out alternatives and best practice.

The guidance gives examples of where zero hours contracts might be appropriate:

  • new businesses, where demand might be fluctuating and unpredictable
  • seasonal work, for example around Christmas
  • employers needing cover for unexpected sickness in critical roles
  • catering businesses using additional experienced staff when a special event is booked and
  • a business testing a new service that they are thinking about providing, needing employees on an ad hoc basis.

Internet link: GOV.UK zero-hours-contracts-guidance

Deadline for final IR35 payments and returns

The ‘IR35’ rules are designed to prevent the avoidance of tax and national insurance contributions (NIC) through the use of personal service companies and partnerships.

The rules do not stop individuals selling their services through either their own personal companies or a partnership. However, they do seek to remove any possible tax advantages from doing so.

Intermediaries who have operated the IR35 concession to delay making a final return and payment for the tax year ending 5 April 2015, have until 31 January 2016 to submit accurate figures and pay any outstanding amounts of PAYE and NIC due.

The concession operates where a provisional return and payment have been submitted but cannot be confirmed because final figures of income, including the calculation of the ‘deemed payment’, were not known at the end 2015 tax year.

HMRC advise that adjustments to the provisional RTI return should be reported using ‘an Earlier Year Update (EYU)’ and must be submitted electronically to HMRC by 31 January 2016. Interest will be charged on any balancing payment.

Please advise us if you would like help with this issue.

Internet links: GOV.UK IR35 guidance Employer Bulletin

Planning a party for employees

With the season for workplace parties fast approaching we thought it would be a good idea to remind you of the tax implications of these types of events. The good news is that, unlike entertaining customers, the costs of entertaining employees are generally allowable against the profits of the business.

But what about the tax consequences for the employees themselves? Is it a perk of their jobs and will they have to pay tax on a benefit?

Generally, as long as the total costs of all employee annual functions in a tax year are less than £150 per attendee (VAT inclusive) there will be no tax implications for the employees themselves. In considering this limit make sure you have included all the costs, which may include not only the meal itself but also any drinks, entertainment, transport and accommodation that you provide.

If the costs are above the £150 limit then the full cost will be taxable on the employee. In that case do get in touch so we can advise you how best to deal with them.

Internet link: HMRC guidance

Newsletter – September 2015

eNews – September 2015

In this month’s eNews we report on how dividends will be taxed from 2016 and changes to ATED reporting requirements and increases in the NMW and the latest target for non compliance. We also update you on HMRC’s latest taskforce target, the new advisory fuel rates and an update on auto enrolment.

Please contact us if you would like further help or advice.

Taxing dividends from April 2016

In the Summer 2015 Budget, George Osborne announced fundamental changes to the way in which dividends are taxed and HMRC have issued a factsheet setting out examples of how the new regime will work.

An extract from the HMRC Factsheet states:

‘From April 2016 you have to apply the new headline rates on the amount of dividends you actually receive, where the income is over £5,000 (excluding any dividend income paid within an ISA).

The Dividend Allowance will not reduce your total income for tax purposes. However, it will mean that you don’t have any tax to pay on the first £5,000 of dividend income you receive.

Dividends within your allowance will still count towards your basic or higher rate bands, and may therefore affect the rate of tax that you pay on dividends you receive in excess of the £5,000 allowance.’

The changes will affect dividend receipts from 6 April 2016 however those who extract profits from their company as dividends may wish to consider whether to increase dividend payments before this date.

The table below shows a comparison between the current and prospective tax rates.

Dividend falls into : Basic rate band Higher rate band Additional rate band
Effective dividend tax rate now (taking into account notional tax credit) 0% 25% 30.6%
Rate from 6 April 2016 7.5% 32.5% 38.1%

Please contact us if you would like advice on this issue.

Internet link: Factsheet

National Minimum Wage rates and National Living Wage

The National Minimum Wage (NMW) is a minimum amount per hour that most workers in the UK are entitled to be paid. NMW rates increases come into effect on 1 October 2015.

From 1 October 2015:

  • the adult rate will increase by 20 pence to £6.70 per hour
  • the rate for 18 to 20 year olds will increase by 17 pence to £5.30 per hour
  • the rate for 16 to 17 year olds will increase by 8 pence to £3.87 per hour
  • the apprentice rate will increase by 57 pence to £3.30 per hour.

Employers also need to be aware that from April 2016, the government will introduce a new mandatory National Living Wage (NLW) for workers aged 25 and above. This will initially be set at £7.20 which is a 50p increase in the adult rate of NMW coming into force in October 2015. This represents an increase of in excess of £1,200 per annum in earnings for a full-time worker on the current NMW.

The NMW will continue to apply for those aged under 25. The government has issued further details of the new NLW policy.

Penalties

Penalties may be levied on employers where HMRC believe underpayments have occurred and HMRC may ‘name and shame’ non-compliant employers.

Please contact us if you would like help with payroll issues.

Internet links: Press release NLW policy

ATED updated procedures

Since 2013 a range of measures have been introduced to discourage the holding of residential property in the UK via companies, partnerships and collective investment schemes. In summary, these measures are:

  • Stamp Duty Land Tax (SDLT) is payable at 15% on the acquisition on or after 20 March 2014 of properties costing more than £500,000
  • an Annual Tax on Dwellings (ATED) applies at a fixed amount depending on value and
  • Capital gains tax (CGT) at 28% is payable on a proportion of gains for the period that the property has been subject to ATED.

There are specific reliefs and exemptions for certain types of properties.

Changes in limits

Prior to 1 April 2015 the lower property value threshold for ATED was a value of more than £2m on 1 April 2012, or at acquisition, if later. With effect from 1 April 2015, residential properties valued at more than £1m and up to £2m on 1 April 2012, or at acquisition if later, were brought into the charge.

From 1 April 2016 another new valuation band comes into effect for properties valued at more than £500,000 but less than £1 million.

The threshold for ATED-related CGT disposal consideration has also reduced from £2m to £1m from 6 April 2015 and will further reduce to £500,000 from 6 April 2016.

ATED Procedures

ATED is reported and the tax paid through an annual return. The return periods run from 1 April to 31 March each year.

Normally an ATED return must be made within 30 days of the date on which the property first comes within the charge to ATED for any chargeable period. Where the property is within the scope of ATED on 1 April each year, the return must be filed by 30 April in the year of charge. Payment of the tax is due with the return.

There is a special rule for properties coming within the scope of ATED from 1 April 2015 under the lower threshold of £1m detailed above. The rule is that returns for the chargeable period beginning 1 April 2015 must be filed by 1 October 2015 if the property was held on 1 April 2015 or within 30 days of acquisition if this is later. Payment of the tax is due 31 October 2015.

The chargeable person must submit an ATED return for any property that is within the scope of ATED for the relevant chargeable period. There are reliefs available which may reduce the liability in part or to zero. However, all claims for reliefs must be made in a new ‘relief declaration return’ and these new returns to claim relief have now been made available.

Returns for properties falling within the lower band of £500,000 are due for the chargeable period 1 April 2016 to 31 March 2017. The normal filing dates apply to properties within this new band. For example, if you hold a property valued at more than £500,000 on 1 April 2016, you must file your return and pay the tax by 30 April 2016.

Returns

In addition, a new ‘relief declaration return’ is introduced. Broadly, for each type of ATED relief being claimed, the company can submit a relief declaration return stating that a relief is being claimed in respect of one or more properties held at that time. No details are required of the individual properties or the number of properties eligible. Where a property is acquired in-year which also qualifies for the same type of relief, the existing return is treated as also having been made in respect of that property.

A normal ATED return will still be required in respect of any property which does not qualify or ceases to qualify for a relief i.e. where tax is due.

ATED and the reliefs available are a complex area. Please contact us if you would like specific advice.

Internet links: ATED relief declaration returns ATED

HMRC targets wealthy ‘tax cheats’ in Scotland

A taskforce which aims to tackle wealthy ‘tax cheats’ who are living beyond their means in Scotland has been launched by HMRC.

HMRC is identifying individuals with ‘badges of wealth’ such as large houses, investments, aeroplanes, boats and undeclared offshore bank accounts which are not in keeping with the information they report to HMRC.

HMRC expects the taskforce to recover nearly £4.5million. It will bring together specialist officers from across HMRC to identify wealth indicators and cross reference them with the data HMRC holds about their owners.

HMRC’s Michael Connolly, HMRC Taskforce Lead in Scotland, said:

‘HMRC’s intelligence shows that people being targeted by this taskforce have no intention of playing by the rules. They are deliberately failing to declare all their income to HMRC in a crude attempt to line their own pockets, and they will be investigated.

As a result of this behaviour, they could end up facing a heavy fine or even a criminal conviction. Those who pay the tax they are supposed to have nothing to worry about.

Using information we hold, we can target people whose lifestyle does not reflect the tax they are paying. It’s not fair that a small minority are living millionaire lifestyles as a result of not paying the tax they owe.’

Internet link: Press release

Auto enrolment ‘engagement’ and calculation tool

The Pensions Regulator (‘TPR’) has announced that following consultation they will develop a basic automatic enrolment tool. The basic tool should be available to download from TPR’s website by the end of 2015.

TPR consulted earlier this year on proposals to develop a basic tool to support those employers who use HMRC’s Basic PAYE Tools (BPT) to carry out their payroll function. HMRC’s BPT are used by many small employers to calculate PAYE, national insurance contributions and statutory payments such as Statutory Maternity Pay but has no pension function.

According to the TPR approximately 200,000 small and micro employers who use BPT are due to stage over the next two and half years and TPR’s experience indicates that using appropriate software either through payroll or pension provider systems helps employers to comply with their duties.

The majority of consultation responses were supportive of the TPR’s proposal, although some payroll firms and pension schemes were against the regulator developing a new tool.

Executive Director for Automatic Enrolment Charles Counsell said:

‘We will continue to recommend that BPT users consider using software with integrated automatic enrolment functionality, but by developing this basic contribution calculation tool we aim to ensure that BPT users have access to the help they need to support compliance.

The decision to develop a basic tool is recognition that significant numbers of BPT users will not seek a more integrated solution and will attempt manual calculations. This is another example of how The Pensions Regulator seeks to develop new ways to ensure we are meeting the needs of the diverse group of employers due to stage in the coming years.’

TPR has also issued the third edition of ‘Automatic enrolment: Commentary and analysis’, which reports on the impact of automatic enrolment and the increasing participation in workplace pension schemes. The commentary states:

  • By March 2015, over 5.2 million workers had been successfully automatically enrolled since the reforms began in 2012, an increase of more than 2.2 million workers from 2014, and 4.2 million from 2013.
  • Automatic enrolment is helping to turn around the decade-long decline in pension provision, with 59% of all employees now active members of a pension scheme, compared with just 47% in 2012. This increase suggests that pension saving is now becoming the norm.
  • The pensions landscape has been transformed as the majority of people are enrolled into defined contribution schemes. We have witnessed the growth in master trusts – 94% of employers who chose a trust-based scheme opted for a master trust.
  • We now expect that significantly more employers will be subject to automatic enrolment duties than originally anticipated, mainly due to an increase in the number of new companies that have started up, and fewer going out of business than was forecast. We have revised the staging profile accordingly, so that it reflects the 1.8 million employers we expect to help through the automatic enrolment process from now until 2018.

If you would like help with your payroll or advice on Pensions Auto Enrolment please contact us.

Internet links: Press release Commentary

Advisory fuel rates for company cars

New company car advisory fuel rates have been published which took effect from 1 September 2015. Due to the reduction in fuel prices many rates have reduced this quarter so please take care to update your expenses payments. However, 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 2015 are:

Engine size Petrol
1400cc or less 11p
1401cc – 2000cc 14p
Over 2000cc 21p

 

Engine size LPG
1400cc or less 7p
1401cc – 2000cc 9p
Over 2000cc 14p

 

Engine size Diesel
1600cc or less 9p
1601cc – 2000cc 11p
Over 2000cc 13p

Other points to be aware of about the advisory fuel rates:

  • Employers do not need a dispensation to use these rates. Employees driving employer provided cars are not entitled to use these rates to claim tax relief if employers reimburse them at lower rates. Such claims should be based on the actual costs incurred.
  • The advisory rates are not binding where an employer can demonstrate that the cost of business travel in employer provided cars is higher than the guideline mileage rates. The higher cost would need to be agreed with HMRC under a dispensation.

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

Internet link: Advisory fuel rates

Newsletter – June 2015

eNews – June 2015

In this month’s eNews we report on a number of issues including the announcement of the date of the Summer Budget and the latest advisory fuel rates for company car drivers.

We also report on guidance issued to charities on VAT reclaims and payroll processing together with the end of the paper counterpart to the photo driving licence.

Please contact us if you would like further information.

Government announces date of Summer Budget

The Chancellor of the Exchequer George Osborne has announced that there will be a Summer Budget on Wednesday 8 July 2015.

Mr Osborne admitted that it was unusual to deliver two budgets in one year, but said he didn’t want to wait to ‘deliver on the commitments we have made to working people’.

‘It will continue with the balanced plan we have to deal with our debts, invest in our health service and reform welfare to make work pay.’

‘But there will also be a laser-like focus on making our economy more productive so we raise living standards across our country’ he added.

We will keep you informed of the pertinent Budget announcements.

Internet links: GOV.UK news BBC news

65+ Guaranteed Growth Bonds a success

HM Treasury has announced that the National Savings and Investments 65+ Guaranteed Growth Bonds have been bought by more than a million older savers, who made total investments of over £13 billion. These investment figures make the product the best-selling retail financial product in Britain’s modern history.

The ‘65+ Guaranteed Growth Bonds’ from National Savings and Investments went on sale in January 2015 and offered savers aged 65 and over an opportunity to boost the return on their savings by investing up to £10,000 per bond at fixed annual interest rates of 2.8% for one year bonds and 4% for three year bonds.

The Bonds are no longer available to purchase with the investment window closing on 15 May 2015.

Internet link: GOV.UK news

HMRC issue guidance on VAT reclaims by qualifying charities

HMRC have issued guidance on VAT reclaims by ‘qualifying charities’ under recent changes to the rules. ‘Qualifying charities’ for this purpose are those concerned with palliative care, air ambulance, search and rescue and medical courier charities.

The guidance details which charities are eligible to use the refund scheme to claim a refund of VAT incurred on goods and services used for their non-business activities. It also covers issues such as what to do when circumstances change, what falls within the scope of the refund scheme and how charities can make a claim.

If you would like any guidance on this or any other VAT or charity issue please do get in touch.

Internet link: GOV.UK news

HMRC payroll guidance – harvest casuals and casual beaters

HMRC have issued useful guidance for those employers who pay casual employees working outdoors harvesting perishable crops, or as casual beaters for a shoot.

The guidance outlines the specific circumstances which must apply in order for these employees to be paid without the deduction of tax. The guidance also stresses that their pay is still taxable income and these employees must ensure that any tax due is paid.

Monthly penalties (of between £100 and £400 depending on the size of the employer) now apply to broadly all employers who fail to submit necessary information to HMRC via the Full Payment Submission (FPS) on or before the time wages are paid to employees. It is therefore important that the rules are complied with and returns are submitted on a timely basis.

Please contact us if you would like help with payroll issues.

Internet links: GOV.UK news GOV.UK late return penalties

Driving licence paper counterpart no longer valid

The Driving and Vehicle Licensing Agency has announced that with effect from 8 June 2015 the paper counterpart to the photocard driving licence will not be valid and will no longer be issued. The paper counterpart was introduced to display driving licence details that could not be included on the photocard. These additional details include whether the licence holder is entitled to drive some additional vehicle categories and any endorsement/penalty points. The DVLA is advising that the paper counterpart should be destroyed after 8 June 2015. Licence holders still need to keep their current photocard driving licence.

Those with apaper driving licence (issued before the photocard was introduced in 1998) need to be aware that these licences will remain valid and should not be destroyed. However where a licence holder needs to update their licence photocard licences will be issued.

From 8 June 2015 new endorsements will be recorded electronically, and will not be printed or written on either photocard licences or paper driving licences.

This means that from 8 June 2015 neither the photocard driving licence nor the paper licence will provide an accurate account of any driving endorsements a licence holder may have. This information will instead be held on DVLA’s driver record, and can be checkedonline, by phone or post.

This change does not affect photocard licences issued by DVA in Northern Ireland.

Internet link: GOV.UK news

Advisory fuel rates for company cars

New company car advisory fuel rates have been published which took effect from 1 June 2015. Please take care to update your expenses payments and note that only some rates have been amended. However, 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 2015 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 10p
1601cc – 2000cc 12p
Over 2000cc 14p

Other points to be aware of about the advisory fuel rates:

  • Employers do not need a dispensation to use these rates. Employees driving employer provided cars are not entitled to use these rates to claim tax relief if employers reimburse them at lower rates. Such claims should be based on the actual costs incurred.
  • The advisory rates are not binding where an employer can demonstrate that the cost of business travel in employer provided cars is higher than the guideline mileage rates. The higher cost would need to be agreed with HMRC under a dispensation.

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

Internet link: Advisory fuel rates

Newsletter – March 2015

eNews – March 2015

This month we report on the latest round of penalties issued by the Pensions Regulator and end of year filing and payment reminders for employers. We also include details of how to claim the new ‘Marriage Allowance’. Please contact us if you would like any further information on these or any other issues.

Fines for those who fail to comply with Pensions Auto Enrolment

The Pensions Regulator (TPR) has issued 166 Fixed Penalty Notices of £400 to employers who failed to meet their obligations in the last quarter of 2014.

The number of employers approaching the date when they must confirm that they have complied with new workplace pensions duties (known as a declaration of compliance) is now beginning to rise significantly as Auto enrolment is rolled out across all employers. In future months, TPR expects to see more employers who, despite the message to prepare early, leave it too late or do not comply at all.

The Pensions Regulator’s Director of automatic enrolment, Charles Counsell, said,

‘My message to all employers is that failing to declare within five months of your staging date means you risk being fined, which is why we recommend you start your automatic enrolment planning and preparation 12 months before staging.

It appears some medium employers waited for a prompt from the regulator before completing their automatic enrolment duties. Employers must complete all their duties including making their declaration of compliance to The Pensions Regulator.’

Experience to date also shows that employers should begin gathering the information they need to complete their declaration of compliance well in advance of their deadline.

If you would like help or advice with auto enrolment please get in touch.

Internet link: Press release

Registration opens for new married couples tax break

HMRC have announced that registration for the new ‘Marriage Allowance’ for married couples and those in civil partnerships is now open.

From 6 April 2015 certain married couples and civil partners may be eligible for a new Transferable Tax Allowance referred to by the Government as the ‘Marriage Allowance’. The allowance will enable eligible spouses and civil partners to transfer a fixed amount of their personal allowance to their spouse. The option to transfer is not available to unmarried couples.

The option to transfer will be available to couples where neither pays tax at the higher or additional rate. If eligible, one partner will be able to transfer 10% of their personal allowance to the other partner which means £1,060 for the 2015/16 tax year which could save them tax of up to £212 a year.

Couples can register their interest to receive the Allowance.

The government estimates that more than four million married couples and 15,000 civil partnerships will be eligible for the tax break.

Chancellor of the Exchequer George Osborne said:

‘We made a promise to introduce a recognition of marriage into our tax system – and now we’re delivering on that promise.

This includes updating the tax system so that it recognises marriage and civil partnerships.

Our new Marriage Allowance means saving £212 on your tax bill couldn’t be simpler or more straightforward.’

From April, HMRC will contact those who have already registered for the ‘Marriage Allowance’ to apply. People can register at any point in the tax year and still receive the full benefit of the allowance. It is also possible to claim the allowance after the end of the tax year where claimants are unsure if they will qualify.

Applying online is simple. One person in a couple will apply online to transfer the allowance to their spouse or civil partner, and HMRC will tell the recipient about the change to their Pay As You Earn (PAYE) tax code.

Internet link: GOV.UK

Charities Digital Service launched

HMRC have launched an online registration service for charities.

Until now charities have been required to complete a paper form (ChA1). Approximately 15,500 new charities are registered each year.

Chief digital and information officer at HMRC, Mike Dearnley, said:

‘We are completely changing the way we work with our customers – including charities. Our new digital services are straightforward, easy to use and convenient. The charities service minimises the risk of making mistakes, so applications are less likely to be returned to the organisation’.

All registration must now be completed online. Please contact us if you would like help with a charity.

Internet link: Charities Digital

PAYE end of year – pay on time reminder

HMRC are reminding employers that with the end of the 2014/15 tax year approaching they will soon need to make their final 2014/15 PAYE (RTI) submission.

For most employers, the final submission will be their final Full Payment Submission (FPS) which advises HMRC about the very last employee payments for 2014/15 and this needs to be made on or before 5 April 2015. Details of how to make the final submission can be found on the GOV.UK website using the link below. Alternatively if you would like help with your payroll please do get in touch.

HMRC are also advising employers to take extra care as the deadline for electronic payment of 22nd March falls on a Sunday.

HMRC are advising that employers should ensure their payment reaches HMRC on time, which means that cleared funds should be in HMRC’s account by the 20th unless employers are able to arrange a Faster Payment. For more details about paying HMRC electronically visit Pay PAYE tax.

Internet link: GOV payroll annual reporting Employer Bulletin

HMRC concession for late RTI returns and payments

HMRC have announced that employers will not incur penalties for delays of up to three days in filing RTI returns. There is no change to the filing deadlines and employers should generally file their full payment submissions (FPS) ‘on or before’ each payment date unless a concession applies.

HMRC are also advising any employer that has received an in-year late filing penalty for the period 6 October 2014 to 5 January 2015 and was 3 days late or less, to appeal online by completing the ‘Other’ box and add ‘Return filed within 3 days’.

In addition, to prevent unnecessary penalties being issued, HMRC will be closing around 15,000 PAYE schemes next month that have not made a PAYE report since April 2013 and which appear to have ceased.

HMRC will write to the affected schemes to tell them about the planned closure and what to do if they are, or should be, operating PAYE.

Employers with fewer than 50 employees are reminded that PAYE late filing penalties will apply to them from 6 March.

Internet link: News

Advisory fuel rates for company cars

New company car advisory fuel rates have been published which took effect from 1 March 2015. Due to the reduction in fuel prices many rates have reduced this quarter between two and three pence so please take care to update your expenses payments. However, 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 2015 are:

Engine size Petrol
1400cc or less 11p
1401 cc – 2000cc 13p
Over 2000cc 20p

 

Engine size LPG
1400cc or less 8p
1401 cc – 2000cc 10p
Over 2000cc 14p

 

Engine size Diesel
1600cc or less 9p
1601cc – 2000cc 11p
Over 2000cc 14p

Other points to be aware of about the advisory fuel rates:

  • Employers do not need a dispensation to use these rates. Employees driving employer provided cars are not entitled to use these rates to claim tax relief if employers reimburse them at lower rates. Such claims should be based on the actual costs incurred.
  • The advisory rates are not binding where an employer can demonstrate that the cost of business travel in employer provided cars is higher than the guideline mileage rates. The higher cost would need to be agreed with HMRC under a dispensation.

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

Internet link: GOV.UK

Car benefits online

As part of HMRC’s digitisation campaign, an online trial allows company car drivers to make changes to car and fuel benefits that will affect their tax codes.

It is important to ensure the benefits included in your tax code are as accurate as possible or large under or overpayments of tax may arise. For information on how to amend your tax code visit the link below. Alternatively if you would like help checking your tax code please do get in touch.

Internet link: GOV.UK

Newsletter – December 2014

eNews – December 2014

In this month’s eNews we report on a number of issues including the Autumn Statement announcement of the changes to Stamp Duty Land Tax. We also include the latest advisory fuel rates and the EAT ruling on holiday pay and overtime.

Please do get in touch if you would like any further guidance on any of the areas covered.

Autumn Statement

The Chancellor George Osborne delivered his Autumn Statement on 3 December and said:

‘…to improve the productivity of our economy, we back business and we build infrastructure and we will support growth across the whole UK.’

‘But in the end, Britain’s future lies in the hands of its people and their aspirations.

The aspiration to save, to work, and to buy a home. Today we support each one.’

We have included details of some of the major announcements.

Internet link: gov.uk

Stamp Duty Land Tax (SDLT)

One of the Autumn Statement announcements is a major reform to SDLT on residential property transactions. Historically SDLT has been charged at a single percentage of the price paid for the property, depending on the rate band within which the purchase price falls. From 4 December 2014 each new SDLT rate will only be payable on the portion of the property value which falls within each band. This will remove the distortion created by the existing system, where the amount of tax due jumps at the thresholds.

Where contracts have been exchanged but not completed on or before 3 December 2014, purchasers will have a choice of whether the old or new structure and rates apply. This measure will apply in Scotland until 1 April 2015 when SDLT is devolved to the Scottish Parliament.

The new rates and thresholds are:

Purchase price of property New rates paid on the part of the property price within each tax band
£0 – £125,000 0%
£125,001 – £250,000 2%
£250,001 – £925,000 5%
£925,001 – £1,500,000 10%
£1,500,001 and above 12%

The government believes that this reform makes SDLT more efficient and fairer, and ensures that SDLT will be cut for 98% of people who pay it.

Internet link: gov.uk

Incorporation – restriction of relief for goodwill and Entrepreneurs’ relief

Corporation tax relief is given to companies when goodwill and intangible assets are recognised in the financial accounts. Relief is normally given on the cost of the asset as the expenditure is written off in accordance with Generally Accepted Accounting Practice or at a fixed 4% rate, following an election.

In the Autumn Statement an anti-avoidance measure has been announced to restrict corporation tax relief where a company acquires internally-generated goodwill and certain other intangible assets from related individuals on the incorporation of a business.

In addition, individuals will be prevented from claiming Entrepreneurs’ Relief on disposals of goodwill when they transfer the business to a related company. Capital gains tax will be payable on the gain at the normal rates of 18% or 28% rather than 10%.

These measures will apply to all transfers on or after 3 December 2014 unless made pursuant to an unconditional obligation entered into before that date.

Prior to this announcement it was possible, for example, on incorporation of a sole trader’s business to a company which is owned by the sole trader, for the company to obtain corporation tax relief on the market value of goodwill at the time of incorporation. The disposal by the sole trader would qualify for a low rate of capital gains tax.

Internet link: gov.uk

Employment benefits changes ahead

In the Autumn Statement the government announced a package of measures which will impact the treatment of employee benefits in kind and expenses.

  • From 6 April 2015 there will be a statutory exemption for trivial benefits in kind costing less than £50.
  • From 6 April 2016, the £8,500 threshold below which employees do not pay income tax on certain benefits in kind will be removed. This threshold adds unnecessary complexity to the tax system. There will be new exemptions for carers and ministers of religion.
  • There will be an exemption for certain reimbursed expenses which will replace the current system where employers apply for a dispensation to avoid having to report non-taxable expenses. The new exemption for reimbursed expenses will not be available if used in conjunction with salary sacrifice.
  • The introduction of a statutory framework for voluntary payrolling benefits in kind. Payrolling benefits instead of submitting forms P11D can offer substantial administrative savings for some employers.

Please contact us if we can help with employee benefits and expenses reporting.

Internet link: gov.uk

Personal allowances and tax bands 2015/16

For those born after 5 April 1948 the personal allowance will be increased from £10,000 to £10,600. The reduction in the personal allowance for those with ‘adjusted net income’ over £100,000 will continue. The reduction is £1 for every £2 of income above £100,000. So for 2014/15 there is no allowance when adjusted net income exceeds £120,000. In 2015/16 the allowance ceases when adjusted net income exceeds £121,200.

The basic rate of tax is currently 20%. The band of income taxable at this rate is being decreased from £31,865 to £31,785 so that the threshold at which the 40% band applies will rise from £41,865 to £42,385 for those who are entitled to the full basic personal allowance.

The additional rate of tax of 45% is payable on taxable income above £150,000.

Dividend income is taxed at 10% where it falls within the basic rate band and 32.5% were liable at the higher rate of tax. Where income exceeds £150,000, dividends are taxed at 37.5%.

Starting rate of tax for savings income

From 6 April 2015, the maximum amount of an eligible individual’s savings income that can qualify for the starting rate of tax for savings will be increased to £5,000 from £2,880, and this starting rate will be reduced from 10% to nil. These rates are not available if taxable non-savings income (broadly earnings, pensions, trading profits and property income) exceeds the starting rate limit.

This will increase the number of savers who are not required to pay tax on savings income, such as bank or building society interest. If a saver’s taxable non-savings income will be below the total of their personal allowance plus the £5,000 starting rate limit then they can register to receive their interest gross using a form R85.

Internet link: gov.uk

Holiday pay and overtime

In the judgment an Employment Appeal Tribunal (EAT) has decided that holiday pay should reflect non-guaranteed overtime.

Under the Working Time Regulations 1998 most workers are entitled to paid statutory annual leave. This is 5.6 weeks (28 days) if the employee works five days a week. A worker is entitled to be paid in respect of any period of annual leave for which they are entitled, at a rate of one week’s pay for each week’s leave.

The EAT considered three cases in which employees were required to work overtime if requested by their employees. The EAT referred to this type of overtime as non-guaranteed overtime. The Tribunal decided in the context of non-guaranteed overtime:

  • overtime payments must be taken into account in the calculation of holiday pay if there is a settled pattern of work
  • if the amount of overtime varies but is regularly paid, overtime payments must also be taken into account on an average basis.

Vince Cable has announced the setting up of a taskforce to assess the possible impact of the Employment Appeal Tribunal ruling on holiday pay.

Business Secretary Vince Cable said:

‘Government will review the judgment in detail as a matter of urgency. To properly understand the financial exposure employers face, we have set up a taskforce of representatives from government and business to discuss how we can limit the impact on business. The group will convene shortly to discuss the judgment.

Employers and employees can also contact the Acas helpline for free and confidential advice.

If you would like any help in this area please do get in touch.

Internet links: Acas guidance Gov News EAT

Advisory Fuel rates for company cars

New company car advisory fuel rates have been published which took effect from 1 December 2014. 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 2014 are:

Engine size Petrol
1400cc or less 13p
1401 cc – 2000cc 16p
Over 2000cc 23p

 

Engine size LPG
1400cc or less 9p
1401 cc – 2000cc 11p
Over 2000cc 16p

 

Engine size Diesel
1600cc or less 11p
1601cc – 2000cc 13p
Over 2000cc 16p

Please note that not all of the rates have been amended so care must be taken to apply the correct rate.

Other points to be aware of about the advisory fuel rates:

  • Employers do not need a dispensation to use these rates. Employees driving employer provided cars are not entitled to use these rates to claim tax relief if employers reimburse them at lower rates. Such claims should be based on the actual costs incurred.
  • The advisory rates are not binding where an employer can demonstrate that the cost of business travel in employer provided cars is higher than the guideline mileage rates. The higher cost would need to be agreed with HMRC under a dispensation.

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

Internet link: gov.uk

Do you employ anyone under the age of 21?

From the 6 April 2015, if any of your employees are under the age of 21 you may no longer need to pay employer Class 1 secondary National Insurance contributions (NICs) on their earnings.

The rate of employer Class 1 NICs for employees under the age of 21 will be 0% up to the new ‘Upper Secondary Threshold’ (UST) which, for the tax year starting 6 April 2015, will be the same as the Upper Earnings Limit (UEL). Class

1 NICs will however continue to be payable on all earnings above this threshold. The basic rules and calculations of National Insurance including how Class 1 NICs are assessed will not be changed by this measure.

For employees who are at, or over, the age of 16 and under the age of 21 there will be a range of new NI category letters to available. From 6 April 2015, when submitting PAYE information for employees under the age of 21 employers will need to use the new category letter appropriate to the individual.

Seven new National Insurance category letters have been introduced. The most commonly used one will be category M:- Not contracted-out standard rate contributions for employees under 21.

Employers (or their agents) are responsible for ensuring they report the correct category letter. To do this, employers will need to make sure they hold the correct date of birth for employees.

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

Internet link: Employer Bulletin

Gift Aid declaration to be improved – potentially saving charities billions of pounds

The Gift Aid model declaration form is to be improved, to stop charities potentially losing out on billions of pounds of Gift Aid.

The National Audit Office estimates there are donations of around £2.3 billion where Gift Aid is not used. Although not all of these donations will be eligible for Gift Aid, the government is working with charities to boost the number of eligible donations.

One way it hopes to do this is by improving the model Gift Aid declaration form, as research has identified that many donors do not understand Gift Aid and the link between the tax they have paid and Gift Aid claimed by the charity. Possible improvements include making the language used about Gift Aid more straightforward to enable donors to decide if their donations qualify for relief.

Exchequer Secretary to the Treasury, Priti Patel said:

‘Gift Aid is an important tax relief for charities which helps to provide essential revenue to charitable causes. This research shows that there is more that government can do to boost eligible donations which is why we are simplifying the declaration forms to make sure donors understand when they’re eligible so that charities can maximise the financial donations they receive.’

Internet link: gov.uk

Helping employers identify a pension scheme for automatic enrolment

The Pensions Regulator (TPR) has opened consultation on a proposal to publish a list of pension schemes that are available to any employer, regardless of the number or workers the employer has or their levels of pay.

According to research carried out by the Department for Work and Pensions 48% of small and 79% of micro employers currently have no pension scheme and will have to choose a new one as they prepare for automatic enrolment.

TPR state they are ‘aware of 30-40 providers who offer a scheme for automatic enrolment. Of these, a much smaller number of schemes have indicated they will not reject employers on the basis of size or low value. Even fewer schemes have indicated they will accept all employers who approach them.’

To read more about this issue and the consultation visit the link below.

Internet link: thepensionsregulator.gov.uk

HMRC warning ‘Ten things you need to know about tax avoidance’

HMRC have published a list of factors to consider before buying into a ‘scheme’. The list sets out the risks of entering into a tax avoidance scheme including the possible monetary costs and reputational damage of tax avoidance, but also a potential criminal conviction.

This list is being published as HMRC writes to the first promoters who will be caught by new High-Risk Promoters rules. If they don’t change their behaviour, HMRC could name them publicly and fines might be imposed of up to £1 million.

The Financial Secretary to the Treasury, David Gauke, said:

‘The government has taken unprecedented steps to clamp down on the selfish minority who practise tax avoidance, because we are firmly on the side of the vast majority of taxpayers who play by the rules. As a result, tax avoidance is now very high risk.

On top of a substantial fee to join a scheme that will almost certainly fail a challenge by HMRC, tax avoiders will also have to pay the tax they dodged, plus interest and penalties.

To help protect taxpayers from unscrupulous promoters we have put in place new High-Risk Promoters rules, but people need to be aware of the dangers. So I would strongly advise anyone thinking of signing up to a scheme which they have been told will legally reduce their tax bill to carefully consider today’s list of things a promoter may not tell you.’

Internet link: Gov News