Newsletter – November 2021

Enews – November 2021

In this month’s Enews we consider the Chancellor’s Autumn 2021 Budget announcements, as well as reactions from business groups and other experts.

With guidance on changes to the payment schedules for residential capital gains tax, applications for freeport businesses and heat pumps, there is a lot to update you on.

Chancellor delivers Budget to lay foundation for a strong economy

On 27 October, Chancellor Rishi Sunak delivered a Budget to ensure the UK economy bounces back following the coronavirus (Covid-19) pandemic.

The Chancellor announced that total departmental spending will grow by £150 billion per year in cash terms by 2024/25, marking the largest real term increase in overall departmental spending for any Parliament this century.

Public research and development (R&D) investment will increase to a record level of £20 billion by 2024/25. Combined with R&D tax reliefs, which the government intends to modernise and refocus, total government R&D support as a proportion of GDP is forecasted to increase from 0.7% in 2018 to 1.1% in 2024/25.

The Chancellor unveiled a new temporary business rates relief in England for 2022/23 for eligible retail, hospitality and leisure properties, worth almost £1.7 billion. The government stated that the reform of business rates will make the system fairer, more responsive and more supportive of investment.

Mr Sunak also announced significant changes to fuel duty and alcohol duties: fuel duty will be frozen at 57.95p per litre for 2022/23, and drinks will be taxed in proportion to their alcohol content, making the system ‘fairer and more conducive to product innovation in response to evolving consumer tastes’.

Meanwhile, the government will give £11.5 billion to help build up to 180,000 affordable homes, whilst an additional £4.7 billion will be invested in the core schools budget in England.

The Chancellor also confirmed that the government will increase the National Living Wage to £9.50 per hour from April 2022 and cut the Universal Credit taper rate from 63p to 55p.

Internet link: GOV.UK speeches

Business groups give mixed response to Budget

Business groups gave a mixed response to Chancellor Rishi Sunak’s 2021 Autumn Budget speech.

Responding to the speech, the Confederation of British Industry (CBI) said that the Chancellor had shown a willingness to listen to business with measures that will help firms innovate and the economy grow.

However, Tony Danker, Director General of the CBI, warned:

‘This Budget alone won’t seize the moment and transform the UK economy for a post-Brexit, post-Covid world. Businesses remain in a high-tax, low-productivity economy with concerns about inflation.’

Meanwhile, the Federation of Small Businesses (FSB) also voiced concerns over the Chancellor’s Budget announcements.

Mike Cherry, National Chair of the FSB, said:

‘This Budget has delivered some measures that should help to arrest the current decline in small business confidence.

‘But against a backdrop of spiralling costs, supply chain disruption and labour shortages, is there enough here to deliver the government’s vision for a low-tax, high-productivity economy? Unfortunately not.’

The British Chambers of Commerce (BCC) welcomed the changes to the business rates system in England. Shevaun Haviland, Director General of the BCC, commented:

‘The Chancellor has listened to Chambers’ long-standing calls for changes to the business rates system and this will be good news for many firms. This will provide much needed relief for businesses across the country, giving many firms renewed confidence to invest and grow.’

Internet links: CBI press release BCC press release FSB press release

 

IFS predicts millions to be worse off next year due to tax rises

The Institute for Fiscal Studies (IFS) has predicted that millions of people will be worse off in 2022 as a result of spiralling costs and tax rises.

Responding to the Autumn Budget, the IFS predicted that low-income families will be squeezed by a rise in the cost of living. The Office for Budget Responsibility (OBR) recently warned that the cost of living is set to rise at its fastest rate in 30 years.

The IFS stated changes to income tax and National Insurance, alongside rising household bills, will mean slow growth in living standards.

Paul Johnson, Director of the IFS, said:

‘With, in the words of the OBR, inflation quite possibly hitting its ‘highest rate in the UK for three decades’, millions will be worse off in the short term. Next April benefits will rise by just over 3%, but inflation could easily be at 5%. That will be a real, if temporary, hit of hundreds of pounds a year for many benefit recipients.

‘We are not at 1970s levels of inflation, but we are now experiencing enough inflation that real pain will be felt as low income households – most of whom have next to nothing in the way of financial assets – wait more than a year for their incomes to catch up. For some in work that may never happen.’

Internet link: IFS website

Payment period on residential CGT is doubled

The government has doubled the period for filing and payment of capital gains tax (CGT) on residential property from 30 days to 60 days.

The measure was announced by Chancellor Rishi Sunak in the recent Autumn Budget.

The change applies from 27 October 2021. It sees the deadline for residents to report and pay CGT after selling UK residential property increase from 30 days after the completion date to 60 days.

For non-UK residents disposing of property in the UK, this deadline will also increase from 30 days to 60 days. When mixed-use property is disposed of by UK residents, legislation will also clarify that the 60-day payment window will only apply to the residential element of the property gain.

The Treasury says that these changes will ensure that taxpayers have sufficient time to report and pay CGT, as recommended by the Office of Tax Simplification (OTS). The Association of Accounting Technicians (AAT) has campaigned for this change for the past 18 months.

Phil Hall, Head of Public Affairs and Public Policy at the AAT, said:

‘It’s a common-sense measure that helps taxpayers and their accountants whilst maintaining increased revenue for the Exchequer. Very pleased that HM Treasury and HMRC took on board the views of our members and changed their position accordingly.’

Internet links: GOV.UK publications LinkedIn

FSB warns tax rises ‘threaten recovery from pandemic’

The Federation of Small Businesses (FSB) has warned that tax rises could threaten the UK’s ongoing recovery from the Covid-19 pandemic.

According to the FSB, small businesses are coming up against ‘unprecedented strain’, with the cost of doing business higher than ever. Small businesses are also being affected by disruption to supply chains and increasing costs, the business group said.

Following the end of the Coronavirus Job Retention Scheme, it has called for the government to focus on helping employers create jobs. The FSB also urged the government to generate new schemes to help fill skills shortages.

Mike Cherry, National Chair of the FSB, said:

‘It’s disappointing to see that more is not being done to tackle employment costs which are a huge drain on small businesses.

‘Increasing the Employment Allowance would help protect the smallest employers who are being hit hard by the end of furlough and the NICs rise. The government should also expand Small Business Rates Relief to premises with a rateable value of £25,000, removing an additional 200,000 small firms from the scope of this tax.’

Internet link: FSB press release

Applications now open for freeports

Businesses that are planning to operate in the UK’s new freeports can now apply to HMRC.

The tax authority has published the application forms to operate special customs procedures within the sites, along with further guidance on procedures for declaring goods moving into and out of sites.

Freeports are areas that benefit from a range of tax and other incentives, including a suspension from customs duties for imported goods and less burdensome customs procedures.

HMRC is now accepting applications to use freeport customs special procedures. The application form, which can be downloaded from gov.uk, must be emailed or posted to HMRC once completed.

An application can be made by businesses that have a provisional agreement in place with a freeport customs site operator to store or process goods at a freeport customs site. An application may not be necessary if the business uses existing customs special procedures.

To complete the form, businesses will need, among other things, their Economic Operator Registration and Identification (EORI) number, company registration number (if a company), tax reference numbers and contact details.

Internet link: GOV.UK

Pensions experts say a minimum of £10,900 a year needed to retire

A single person will need post-tax annual income of £10,900 for a minimum standard of living in retirement, according to the Pensions and Lifetime Savings Association (PLSA).

The minimum retirement living standard is based on the Joseph Rowntree Foundation’s Minimum Income Standard and covers a typical retiree’s basic needs plus enough for some social activities, such as a week of holiday in the UK, eating out once a month, but not including running a car.

That spending budget increases to £16,700 for a couple and also includes subscriptions and services such as getting a haircut.

The moderate retirement living standard includes a two-week holiday in Europe and more frequent eating out. This was assessed to require a budget of £20,800 for a single person, £600 higher than two years ago, and £30,600 for a couple, up £1,500.

The annual budget needed for a comfortable retirement living standard has increased since 2019 by £600 to £33,600 for one person and £2,200 to £49,700 for a couple.

This covered items such as regular beauty treatments, theatre trips and annual maintenance and servicing of a burglar alarm.

Nigel Peaple, Director of Policy and Advocacy at the PLSA, said:

‘The pandemic has emphasised the importance of economic security as well as social and cultural participation in retirement.

‘We hope the updated standards will encourage people to think about whether they are saving enough for the retirement lifestyle they want and, in particular, whether they are making the most of the employer contributions on offer in their workplace pension.’

Internet links: PLSA website

Heat pump grants worth £5,000 will help replace gas boilers

Homeowners in England and Wales will be offered subsidies of £5,000 from next April to help them to replace old gas boilers with low carbon heat pumps.

The grants are part of the government’s £3.9 billion plan to reduce carbon emissions caused by heating homes and other buildings.

It is hoped no new gas boilers will be sold after 2035. The funding also aims to make social housing and public buildings more energy efficient.

However, experts have stated that the budget is too low and the strategy not ambitious enough. Ministers say the subsidies will make heat pumps a comparable price to a new gas boiler, but the £450 million being allocated for the subsidies over three years will cover a maximum of just 90,000 pumps.

Matthew Fell, Chief Policy Director at the Confederation of British Industry (CBI), said:

‘£5,000 heat pump grants will help get the ball rolling when it comes to decarbonising homes across the UK. The government’s Heat and Buildings Strategy provides a golden opportunity for both the public and private sector to pick up the pace of progress to net zero.

‘There’s no doubt that the scale of the challenge is considerable. These welcome measures – including the 2035 phase out of new gas boilers – will help consumers and business better prepare to change the way they heat their homes and buildings.’

Internet links: GOV.UK CBI website

 

Newsletter – March 2020

Enews March 2020

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

Coronavirus measure: Statutory Sick Pay from ‘day one’

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

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

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

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

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

The Prime Minister had earlier said:

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

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

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

Internet links: GOV.UK news GOV.UK guidance

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

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

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

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

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

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

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

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

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

Internet links: GOV.UK review GOV.UK news

IFS calls for Chancellor to raise taxes in upcoming Budget

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

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

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

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

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

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

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

We will update you on pertinent Budget announcements.

Internet link: FS publications

Minimum Wage increases

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

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

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

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

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

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

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

Business Minister Kelly Tolhurst said:

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

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

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

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

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

Internet links: GOV.UK NMW GOV.UK news

Advisory fuel rates for company cars

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

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

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

Hybrid cars are treated as either petrol or diesel.

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

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

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

You must not use these rates in any other circumstances.

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

Internet link: GOV.UK AFR

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

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

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

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

Internet links: GOV.UK ISAs Pensions Advisory Service AA

Freeports

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

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

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

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

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

Internet link: GOV.UK consultation

Additional financial support for flooding victims

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

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

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

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

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

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

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

Internet link: GOV.UK news

Newsletter – July 2015

eNews – July 2015

In this month’s eNews we report on highlights of the Summer Budget. We also include an update on PAYE penalties, the latest jobs market statistics and the latest information on claiming the marriage allowance.

Please do contact us for further advice.

Budget announcements

George Osborne delivered his second budget of the year on 8 July 2015. Following the general election in May this was the first full Conservative budget since 1996. The budget focussed on reducing the budget deficit and moving from a ‘low wage, high tax, high welfare economy’ to a ‘higher wage, lower tax, lower welfare country.’ Brief details of some of the more significant proposals are set out below. Please contact us if you would like any further information on any of the issues.

Internet link: GOV Summer Budget

Changes for ‘Buy to Let’ Landlords

It was announced in the Budget that the government will restrict the amount of income tax relief landlords can claim on residential property mortgage interest costs to the basic rate of income tax.

This means that landlords will no longer be able to deduct all of their finance costs from their property income. They will instead be restricted to the basic rate. To give landlords time to adjust, the government will introduce this change gradually from April 2017, over four years.

This restriction will not apply to landlords of furnished holiday lettings and will not impact on basic rate tax paying landlords.

From April 2016 the government will replace the Wear and Tear Allowance with a new relief that allows all residential landlords to deduct the actual costs of replacing furnishings.

Internet link: TIIN landlords

Annual Investment Allowance certainty

The Chancellor announced that Annual Investment Allowance will be set permanently at £200,000 from 1 January 2016 providing certainty for businesses. The AIA provides a 100% deduction for the cost of most plant and machinery (not cars) purchased by a business, up to an annual limit and is available to most businesses.

The AIA was increased to £500,000 from 1 April 2014 for companies or 6 April 2014 for unincorporated businesses until 31 December 2015. However it was due to reduce to £25,000 after this date. The level of the maximum AIA will now be set permanently at £200,000 for all qualifying investment in plant and machinery made on or after 1 January 2016.

Where a business has a chargeable period which spans 1 January 2016 there are transitional rules for calculating the maximum AIA for that period and there will be two important elements to the calculations:

  • a calculation which sets the maximum AIA available to a business in an accounting period which straddles 1 January 2016
  • a further calculation which limits the maximum AIA relief that will be available for expenditure incurred from 1 January 2016 to the end of that accounting period.

It is the second figure that can catch a business out as demonstrated by the following example:

If a company has a 31 March year end then the maximum AIA in the accounting periods to 31 March 2016 will be:

9 months to December 2015 three quarters of £500,000 £375,000
3 months from January 2016 one quarter of £200,000 £50,000
Total annual AIA using first calculation £425,000

This is still a generous figure. However if expenditure is incurred between 1 January and 31 March 2016 the maximum amount of relief for will only be £50,000. This is because of the restrictive nature of the second calculation. Alternatively, the business could defer its expenditure until after 31 March 2016. In the accounting period to 31 March 2017, AIA will be £200,000. However tax relief will have been deferred for a full year.

Please contact us for specific advice for your business.

Internet link: TIIN AIA

The family home and IHT

The government has announced the introduction of a new transferrable nil rate band for the family home. The additional band will apply where a residence is passed on death to direct descendants such as a child or a grandchild. This will initially be £100,000 in 2017/18, rising to £125,000 in 2018/19, £150,000 in 2019/20, and £175,000 in 2020/21. The additional band can only be used in respect of one residential property which has, at some point, been a residence of the deceased.

The allowance is in addition to the inheritance tax nil rate band which is currently set at £325,000. By 2020/21 the total individual nil rate band will therefore total £500,000.

Any unused nil rate band may be transferred to a surviving spouse or civil partner. It will also be available when a person downsizes or ceases to own a home on or after 8 July 2015 and assets of an equivalent value, up to the value of the additional nil rate band, are passed on death to direct descendants. This element will be the subject of a technical consultation and will be legislated for in Finance Bill 2016.

There will also be a tapered withdrawal of the additional nil rate band for estates with a net value (after deducting any liabilities but before reliefs and exemptions) of more than £2 million. This will be at a withdrawal rate of £1 for every £2 over this threshold.

The IHT nil rate band is currently frozen at £325,000 until April 2018. This is to remain frozen until April 2021.

Internet link: TIIN IHT

National Living Wage

The government has announced the introduction of a new National Living Wage (NLW) for working people aged 25 years and above. The NLW will introduce a premium on top of the national minimum wage (NMW). Initially the premium is set at 70p above the current NMW although this will fall to a premium of 50p when the NMW increase comes into effect in October 2015. Further increases are to be recommended by the Low Pay Commission in order to achieve the government’s objective of reaching 60% of median earnings by 2020.

John Cridland, Director-General of the CBI, commented:

‘Small shops, hospitality firms and care providers are the businesses that will face real challenges in affording the National Living Wage.’

‘Delivering higher wages can only be done sustainably by boosting productivity. Bringing politics into the Low Pay Commission is a bad idea.’

Internet link: CBI press release

PAYE late filing penalties

HMRC have now issued the first in-year penalties notices to employers with fewer than 50 employees who missed the deadline for sending PAYE information to HMRC.

Rather than issue late filing penalties automatically when a deadline is missed, HMRC have announced that they will ‘take a more proportionate approach and concentrate on the more serious defaults on a risk-assessed basis.’

This approach is in line with the likely direction of HMRC’s general approach to penalties, outlined in the HMRC penalties: a discussion document which they issued earlier this year. HMRC have confirmed that this ‘risk-based’ approach will apply to submissions that were late from:

  • 6 March 2015 for employers with fewer than 50 employees; and
  • 6 January 2015 for employers with 50 or more employees.

Penalties for 2015/16 will also continue to be risk-based.

HMRC had previously announced that they will not be penalising minor delays of up to three days.

HMRC are reminding employers:

‘Even if employers do not get a penalty, they are required by law to file on time and if they do not may be charged a penalty on a future occasion. The deadlines for sending PAYE information stay the same, including the requirement to send PAYE information on or before the time that employees are actually paid or due to be paid.’

HMRC have confirmed the process employers should use to appeal a penalty using the using the Penalties and Appeals System (PAS) on HMRC Online. Employers who receive a late filing penalty notice for tax year 2014/15 quarter 4 but who filed within three days of the reporting deadline may appeal and should use reason code A as set out in the What happens if you don’t report payroll information on time guidance.

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

Internet link: GOV news

Claiming the marriage allowance

The Low Incomes Tax Reform Group published updated their guidance on how to apply for the new transferable personal allowance, known as the marriage allowance, for married couples and civil partners which came into effect on 6 April 2015.

The transfer of part of the personal allowance between spouses (or civil partners) allows eligible couples to save up to £212 tax in a year.

The marriage allowance enables an individual whose income does not allow them to make use of their full personal allowance, currently £10,600, to transfer 10% (£1,060) of this allowance to their partner. Their spouse or civil partner is then able to set their own personal allowance, plus the transferred part of their partner’s allowance, against their own income. This increase in usable allowances should result in a tax saving of up to £212 in a year for a couple (20% of £1,060).

The transfer can only be made if the spouse or civil partner who receives the transferred allowance is not a higher-rate taxpayer (meaning that in 2015/16 they have an income of more than £42,385.

Currently an individual can only claim to transfer the marriage allowance to their partner by registering online via GOV.UK. The individual will then be prompted to use GOV.UK’s Verify procedure to confirm their identity which requires the individual to have a UK passport or driving licence. A phone option is also available If the individual is unable to confirm their identity using Verify they will be advised to call HMRC’s PAYE helpline on 0300 200 3300.

Internet link: News

Phishing emails HMRC examples

HMRC have updated their list of examples of emails, letters, text messages and bogus calls used by ‘scammers’ and fraudsters to get taxpayers personal information.

This guidance provides examples of the different methods that fraudsters use to obtain personal information.

Internet links: Examples GOV news

HMRC checking employees have paid the correct amount of tax on their pay

HMRC have started to check that people have paid the right amount of tax in 2014/15, a process they refer to as the annual End of Year Reconciliation process.

They will be sending out forms P800 first which show details of the calculation showing the under or over payment. However, where an overpayment of PAYE has been made they should issue the cheque approximately two weeks later. For those who have underpaid tax for the year the P800 will detail how this tax will be collected, generally by adjustment of the PAYE tax code for 2016/17.

HMRC’s press release states:

‘This automated process ensures those who have had a change in circumstances during the last tax year (2014/15) that was not captured in their tax code have paid no more or less than they should. Any discrepancy could be because the taxpayer changed jobs, had more than one job for a time, a change of company car or received investment income that was not reported during the year.’

Where HMRC’s calculations show that the correct amount of tax has been paid for the year HMRC will not contact the individuals concerned. HMRC expect that the vast majority of PAYE taxpayers will have paid the right amount of tax for the year.

If you would like help reconciling your tax position please do get in touch.

Internet links: GOV news Understanding and checking your P800 Tax Calculation

Statistics show employment rise in 2015

The Office for National Statistics (ONS) has released figures showing that UK employment rates were up between February and April compared to the three months to January 2015. As detailed in the press release the figures show:

  • ‘There were 31.05 million people in work, 114,000 more than for the 3 months to January 2015 and 424,000 more than for a year earlier.
  • There were 22.74 million people working full-time, 362,000 more than for a year earlier. There were 8.31 million people working part-time, 63,000 more than for a year earlier.
  • The proportion of people aged from 16 to 64 in work (the employment rate) was 73.4%, up slightly from the 3 months to January 2015 (73.3%) and higher than for a year earlier (72.7%).
  • There were 1.81 million unemployed people. This was 43,000 fewer than for the 3 months to January 2015 and 349,000 fewer than for a year earlier.
  • Comparing February to April 2015 with a year earlier, pay for employees in Great Britain increased by 2.7% both including and excluding bonuses.’

Employment Minister Priti Patel said: ‘Today’s figures confirm that our long-term economic plan is already starting to deliver a better, more prosperous future for the whole of the country, with wages rising, more people finding jobs and more women in work than ever before’.

Neil Carberry, CBI Director for Employment and Skills, said:

‘These figures provide more evidence that the wage squeeze has eased, with private sector pay increasing almost as fast as it was before the crisis. At the same time, firms are creating more jobs.’

‘If we are to deliver sustainable higher wage growth, we need to see a rise in productivity. That means businesses investing in skills, and the Government helping firms innovate by supporting investment in next month’s Budget.’

‘These figures are testament to the strength of our flexible labour market, which has helped British firms create a strong number of permanent full-time jobs.’

Internet links: ONS bulletin Press release

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 2011

In this month’s enews we report on several employment related issues. Please browse through the articles and get in touch if you have any further queries or would like more information.

 

 

Budget Statement

George Osborne presented his second Budget on Wednesday 23 March 2011.

In his statement he said that the ‘Budget is about reforming the nation’s economy, so that we have enduring growth and jobs in the future’.

The Main Budget proposals

The government had previously announced changes which apply from April 2011. However the Statement also included several new announcements, some of the more significant of which are set out below:

An additional 1% cut in the main rate of corporation tax to 26% from April 2011.

  • Enhanced tax incentives for investment in higher risk companies and for SMEs investing in research and development.
  • Reintroduction of Enterprise Zones.
  • Entrepreneurs’ Relief limit doubled to £10 million.
  • An increase in the mileage rate payable to own car drivers.
  • Consultation on integrating income tax and national insurance contributions.
  • Reduced inheritance tax rates for those giving one tenth of their estate to charity.

Some of these items are covered in more detail in the following articles. To access the full Budget information visit the Treasury website using the link below.

Internet link: Treasury Website Budget

Enterprise Investment Scheme (EIS) and Venture Capital Trusts (VCTs)

EIS and VCTs are designed to encourage private individuals to invest in smaller unquoted trading companies which may be perceived as higher risk. While the EIS requires an investment to be made directly into the shares of the company, VCTs operate by indirect investment through a mediated fund.

Currently EIS investors may be given income tax relief at 20% on their investments of up to £500,000 a year. Legislation will be introduced to increase the rate of tax relief to 30% for shares issued on or after 6 April 2011, subject to State aid approval.

Future changes

Subject to State aid approval, legislation will be introduced to make the following changes to the EIS and for shares issued on or after 6 April 2012.

The thresholds for the size of the company which may benefit from both types of investment will be increased to fewer than 250 employees and £15 million gross assets before the investment.

The annual amount which can be invested in an individual company is to rise to £10 million.

The annual amount that an individual can invest through EIS is to increase to £1 million.

Internet link: Budget TIIN

Corporation tax rates

Legislation will be introduced in Finance Bill 2011 to reduce the main rate of corporation tax from 28% to 26% for the Financial Year commencing 1 April 2011 and then to 25% for the Financial Year commencing 1 April 2012. The main rate of corporation tax generally applies to companies with profits of more than £1.5 million. It had previously been announced that the main rate would reduce from 28% to 27% followed by further 1% graduated reductions until it reached 24% by 1 April 2014. Instead the main rate is set to reduce to 23% by 1 April 2014.

The small profits rate of corporation tax, which generally applies to companies with up to £300,000 of profits, is to reduce from 21% to 20% also with effect from 1 April 2011. This had already been announced.

The effective marginal corporation tax rate for profits between £300,000 and £1.5 million will be 27.5% from 1 April 2011.

Internet link: Budget TIIN

Approved mileage allowance payments (AMAP)

The AMAP rates can be used to claim the cost of business mileage in an employee’s own vehicle. The rates cover cars, vans, motorcycles and bicycles. Where an employer pays less than the published rates, employees can make a claim for tax relief for the shortfall.

With effect from 6 April 2011 the rate of the AMAP for cars and vans will be increased from 40p per mile to 45p per mile for the first 10,000 miles of business travel in the tax year. The rate for mileage above 10,000 miles will remain at 25p per mile.

This may mean that drivers receiving mileage allowances in excess of the AMAP will see a reduction in their tax and NICs liability. For those drivers who receive less than the AMAP their claim for tax relief on the shortfall will be increased.

An allowance for passenger payments currently in place for employees at 5p per passenger per mile will be extended to volunteers who carry passengers as part of their volunteering duties. This extension will apply with effect from 6 April 2011.

Internet link: Budget TIIN

Entrepreneurs’ Relief (ER)

ER was introduced in April 2008. Subject to satisfying certain conditions, including the current lifetime limit of £5 million, capital gains on qualifying business disposals by individuals and certain trustees are eligible for ER. Qualifying gains are liable to CGT at 10%.

The lifetime limit is applied to the aggregate of gains that benefit from ER, whatever the year in which the disposal took place. Any gains in excess of the lifetime limit are liable to CGT at the same rates as other chargeable gains.

The lifetime limit will increase to £10 million with effect for qualifying business disposals on or after 6 April 2011.

Where individuals or trustees make qualifying gains above the £5m limit before 6 April 2011, no additional relief will be allowed for the excess.

Internet link: Budget TIIN

Research and Development (R&D) Tax Credits

Subject to State aid approval, legislation will be introduced in Finance Bill 2011 to increase the rate of the additional deduction for expenditure on R&D for companies that are small or medium-sized enterprises (SMEs) from 75% to 100% for expenditure incurred on or after 1 April 2011, giving a total deduction of 200%. The rate of Vaccine Research Relief for SMEs will be reduced to 20% from the same date.

The government also plans to introduce further changes subject to consultation and State aid approval in Finance Bill 2012 in respect of expenditure incurred on or after 1 April 2012 as follows:

  • to abolish the rule limiting a company’s payable R&D tax credit to the amount of PAYE and NICs it pays
  • to abolish the £10,000 minimum expenditure condition
  • to change the rules governing the provision of relief for work done by subcontractors under the large company scheme
  • to increase the rate of the additional deduction for expenditure on R&D for SMEs by a further 25% to give a total deduction of 225%
  • Vaccine Research Relief will not be available for SMEs.

Internet link: Budget TIIN

Enterprise Zones

The government announced the location of ten new urban Enterprise Zones within the following Local Enterprise Partnership areas: Birmingham and Solihull; Leeds City Region; Sheffield City Region; Liverpool City Region; Greater Manchester; West of England; Tees Valley; North Eastern; the Black Country; and Derby, Derbyshire, Nottingham and Nottinghamshire. In addition, London will have an Enterprise Zone and be able to choose its site.

The government will make a range of policy tools available to all zones including:

  • a 100% business rate discount worth up to £275,000 over a five year period for businesses that move into an Enterprise Zone during the course of this Parliament
  • government and local authority help to develop radically simplified planning approaches in the zone.

It will consider, in a limited number of cases, the scope for introducing enhanced capital allowances.

Internet link: Treasury Budget document

£1.3 million tax credits identity thief jailed

Olaide (John) Taiwo, aged 35, has been jailed for his part in stealing the identities of at least 350 people and using the identities to submit over 300 fraudulent tax credit claims.

A woman who also took part in the fraud was also convicted. She will be sentenced in April.

Richard Young, Senior Investigating Officer for HMRC said:

‘This pair blatantly hijacked the identities of over 350 innocent people and stole from British taxpayers by submitting over 300 fraudulent tax credit claims between June 2004 and July 2008. They deliberately attacked and abused a system designed to provide financial help to the most vulnerable people in our society. The sentences given will be a warning to anyone considering committing this type of fraud – it will not be tolerated. HMRC will pursue, prosecute and reclaim the financial gain from those found to commit these types of crime. I urge anyone who has information about Tax Credits fraud, to call the National Benefit Fraud Hotline on 0800 854 440 and help us stamp this fraudulent activity out.’

Upon sentencing Taiwo, His Honour Judge Simon Davis said:

‘This is a fraud on a substantial scale. You lied and sought to manipulate with ease and confidence and with an arrogance that was astonishing. You were intimately connected with every aspect of the fraud, stealing real details of real people to commit identity fraud on the large scale.’

As part of the investigation, a search of his home uncovered evidence of the fraud taking place, including details of numerous bank accounts held in the defendants’ names and aliases, plus documentation which held hundreds of innocent people’s identities. HMRC investigators also seized £70,000, which is believed to be proceeds of the crime.

Internet link: Press release

HMRC launch business records tools

HMRC are making available on their website checklists and toolkits which they believe are suitable for the self employed, sole traders and small businesses. The tools have been released in advance of the launch of HMRC’s programme of Business Record Checks scheduled for later this year, which will impose penalties for significant record keeping failures.

Brian Redford, HMRC’s Acting Director, Business Customer Unit, said:

‘In these tough times, keeping good records makes sound business sense.’

‘It may seem like a challenge, particularly when you’re starting out, but keeping good records will bring real advantages to your business. Get a proper system in place and you’ll not only be confident that you are paying the right tax, but you’ll keep up-to-date with how much you owe suppliers and how much you are owed.’

‘Later this year, HMRC will start a programme of Business Records Checks that will look at the adequacy and accuracy of business records in SMEs to bring about a major improvement in the standard of record-keeping. Now is the time to invest a bit of effort to make sure your business records are perfect.’

The toolkits and checklists can be found on the Business Link website. However if you are unsure what records you should be keeping or would like a reminder please do get in touch.

Internet link: Press release

Plumbers Tax Safe Plan

HMRC have introduced the Plumbers Tax Safe Plan. This is the latest of HMRC’s disclosure opportunities and follows on from the doctors and dentists disclosure facility.

According to the HMRC website:

‘The Plumbers Tax Safe Plan (PTSP) is designed for people working within the plumbing industry who have not told HM Revenue & Customs (HMRC) about all their income in the past and who now want to get back on track. It is intended to cover people who work (or worked) in the plumbing, heating or gas installation trades and this includes anyone who installs and repairs pipes and fixtures for water, drainage or gas systems in a building.’

If you would like any more information on the PTSP please do get in touch.

Internet links: HMRC disclosures Guidance Pack

Fuel Prices

George Osborne presented his second Budget Statement and said:

‘Today’s Budget is about reforming the nation’s economy, so that we have enduring growth and jobs in the future.

And it’s about doing what we can to help families with the cost of living and the high oil price.

We understand how difficult it is for so many people across our country right now.

That we are able now to set off on the route from rescue to reform, and reform to recovery, is because of difficult decisions we’ve already taken.’

One of the measures announced was a cut in fuel duty by 1 pence per litre together with scrapping the escalator for the rest of this Parliament. Duty on fuel was due to rise by inflation plus 1 pence from 1 April 2011, which would have added around 5 pence in cost to each litre of fuel.

Internet link: BBC news

Help for small businesses

Another Budget announcement was that as part of a raft of measures to help small businesses the current business rates holiday will be extended until October 2012.

During his statement George Osborne said:

‘The last government planned that the current rate relief holiday for small businesses should end in October this year. I don’t think that would be right. So I can announce that, at a cost to the Exchequer of £370 million, I will extend the rate holiday for small businesses for another year – to October 2012.’

David Gauke, Exchequer Secretary to the Treasury, has also issued a letter to small businesses setting out the measures designed to support for enterprise and small business. To read more about the measures visit the link below.

Internet link: Business link letter

HMRC online services unavailable

HMRC are advising taxpayers that unfortunately their online services will be unavailable from Saturday 2 April until 06.00 Wednesday 6 April 2011. This is to allow for IT upgrades. All services will be affected including Corporation Tax, Self Assessment, PAYE and VAT.

Internet link: HRMC services unavailable

Standard rate of VAT- updated guidance

HMRC have updated their guidance on how to deal with the change in the standard rate of VAT which happened on 4 January 2011. The guidance covers such issues as deposits, credit notes and services which span the change in rate. If you would like any further information please get in touch.

Internet link: HMRC VAT guidance

Retirement and the removal of the Default Retirement Age

Acas have updated their guidance on the transitional arrangements which are in place to abolish the default retirement age (DRA).

According to the Acas website:

‘The new regulations now make it clear that the transitional arrangements apply to anyone who is 65 or over by 30 September 2011 regardless of when they reached the age of 65.

The new regulations also provide for the notice of retirement to be extended up to a maximum of 6 months if the employee requests this before 5 January 2012 and the retirement takes place on or before 5 October 2012’.

To read the updated employer guidance and the article visit the links below.

Internet links: Acas article Acas guidance