Tag Archives: EMI

Newsletter – July 2018

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Enews – July 2018

In this month’s Enews we report on the Supreme Court’s ruling on workers’ rights and the latest guidance from HMRC for employers. We also consider the latest tax gap figures and HMRC’s efforts to stop fraudsters. With new rules to introduce a VAT reverse charge for construction services and an extension to the easement for RTI payroll penalties there are lots to consider.

Workers’ rights for Pimlico Plumber

A plumber has won a legal battle for working rights in a Supreme Court ruling.

The Supreme court has backed up an earlier ruling by an Employment Tribunal in the case of a contractor engaged by Pimlico Plumbers.

Plumber Gary Smith carried out plumbing jobs for Pimlico Plumbers. He was VAT registered and paid tax on a self employed tax basis.

The Supreme Court has ruled that Gary Smith was entitled to workers’ rights and confirmed that the Employment Tribunal was ‘entitled to conclude’ that Mr Smith was a worker.

As a worker Mr Smith was entitled to rights including holiday and sick pay. Details of workers rights can be found GOV.UK worker

Pimlico Plumbers chief executive Charlie Mullins said that he was ‘disgusted by the approach taken to this case by the highest court in the United Kingdom.

‘This was a poor decision that will potentially leave thousands of companies, employing millions of contractors, wondering if one day soon they will get a nasty surprise from a former contractor demanding more money, despite having been paid in full years ago. It can only lead to a tsunami of claims.’

Internet links: Press summary BBC News

Latest guidance for employers

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

  • P11D and P11D(b) filing and payment deadlines
  • benefits in kind with cash allowances, flexible benefit packages and salary sacrifice
  • important information about childcare voucher and directly-contracted childcare schemes
  • Construction Industry Scheme – helpful reminders for subcontractors

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

Internet link: HMRC Employer Bulletin June 2018

UK ‘tax gap’ falls to 5.7%

HMRC has confirmed that the tax gap for 2016/17 has fallen to 5.7%.

The ‘tax gap’ is the difference between the tax that should theoretically be paid to HMRC and the actual tax that has been paid. HMRC believes that the tax gap is lower as a result of its work to help taxpayers get things right from the start, and the department’s sustained efforts to tackle evasion and avoidance.

Key findings from the Measuring the Tax Gap publication include:

  • small businesses made up the largest proportion of unpaid tax by taxpayer group at £13.7 billion
  • taxpayer errors and failure to take reasonable care made up £9.2 billion of unpaid taxes by behaviour, while criminal attacks made up £5.4 billion
  • income tax, national insurance contributions and capital gains tax made up the largest proportion of the tax gap by tax type at £7.9 billion for 2016/17; equivalent to 16.4% of self assessment liabilities
  • the VAT gap showed a declining trend over time, falling from 12.5% in 2005/06 to 8.9% in 2016/17.

Mel Stride, Financial Secretary to the Treasury, said:

‘These really positive figures show that the tax gap is the lowest in the last 5 years, which reflects the hard work that HMRC and I have been doing to ensure we support businesses to pay the right tax at the right time and clamp down on tax evasion and avoidance.’

‘Collecting taxes is essential for funding our vital public services such as the NHS – indeed, had the tax gap remained at its 2005/06 level the UK would have lost £71 billion in revenue destined for public services, enough to build 200 hospitals.’

Internet link: GOV.UK tax gap

HMRC extends RTI late filing easement until April 2019

HMRC has extended the payroll Real Time Information (RTI) late filing easement until April 2019.

Under RTI payroll obligations employers must submit details of payments made to employees on or before the day that wages are paid via a Full Payment Submission.

The updated guidance extends the easement, introduced in April 2015 to April 2019. The easement applies where an employer’s FPS is late but all reported payments on the FPS are within three days of the employees’ payday. This easement applies from 6 March 2015 to 5 April 2019. However, HMRC go on to clarify that employers who persistently file after the payment date but within three days may be contacted or considered for a penalty. Potential monthly penalties range from £100 to £400 depending on the size of the employer.

Please contact us for help or advice with payroll matters.

Internet link: GOV.UK PAYE guidance

HMRC saves public £2.4M by stopping fraudsters

HMRC has announced that it has saved the public over £2.4m by tackling fraudsters that trick them into using premium rate phone numbers for services that HMRC provide for free.

HMRC has reported that scammers create websites that look similar to HMRC’s official site and then direct the public to call numbers with extortionate costs in comparison to the low cost and no cost services that HMRC provides.

These websites promote premium rate phone numbers as a means of phoning HMRC but these are call forwarding services which connect the unsuspecting to HMRC at a premium rate.

HMRC’s has confirmed that its genuine 0300 numbers are mainly free or charged at the local landline rate. In other cases, websites charge for forwarding information to HMRC which can be provided free of charge via GOV.UK website.

HMRC has successfully challenged the ownership of these websites, masquerading as official websites, and removed them from the hands of cheats. Analysis carried out shows that had HMRC not taken this action then the public would have lost £2.4m to these scams.

Mel Stride, Financial Secretary to the Treasury said:

‘We know that HMRC is the most spoofed government brand as criminals try to take advantage of the fact that everyone has some involvement with the tax authority. In this particular case, scammers try to dupe the public into paying large sums for services that are available for free or low cost.’

‘This is a brazen con, charging premium rates whilst simply redirecting calls to the real HMRC numbers that are available at low or no cost. It is a testament to the hard work of HMRC that they have prevented criminals extracting £2.4m from the public.’

Internet link: GOV.UK news

VAT reverse charge for construction services consultation

HMRC proposes to introduce new VAT rules for construction services which are subject to consultation.

HMRC has published a draft statutory instrument for technical consultation together with a draft explanatory memorandum and a draft tax information and impact note.

Under the draft legislation supplies of standard or reduced-rated construction services between construction or building businesses will be subject to a domestic reverse charge. This means that the customer will be liable to account for VAT due, instead of the supplier.

The legislation will not apply to specified supplies made to customers who are consumers, or to those that use specified supplies to make other supplies, such as those selling new houses.

The legislation is expected to take effect from 1 October 2019. More details of the proposed new rules can be found at the following link.

Internet link: GOV.UK consultation

Enterprise Management Incentive continues

It has previously been reported that the Enterprise Management Incentive scheme State Aid approval lapsed on 6 April 2018. HMRC had previously warned that EMI share options granted in the period from 7 April 2018 until EU State Aid approval was received may not be eligible for the tax advantages afforded to option holders but has now confirmed the scheme will operate as before.

On 15 May EU approval was granted and HMRC has now confirmed that the Enterprise Management Incentives scheme will continue to operate as before and no changes have therefore been made to the scheme.

The Enterprise Management Incentive (EMI) allows selected employees (often key to the employer) to be given the opportunity to acquire a significant number of shares in their employer through the issue of options. An EMI can offer significant tax advantages as the scheme allows options to be granted to employees which then allows shares to be acquired without any tax bill arising until the shares are sold.

Internet link: GOV.UK bulletin

Newsletter – June 2018

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eNews June 2018

In this month’s eNews we report on new advisory fuel rates for company cars, the latest tax refund scam warnings, and National Minimum Wage enforcement from HMRC.

A new consultation has been launched on off-payroll working in the private sector, State Aid approval has been granted for Enterprise Management Incentive schemes and a report has been issued on Universal Credit and the self employed. We also report on the Welsh Assembly’s plans for Welsh income tax rates.

Advisory fuel rates for company cars

New company car advisory fuel rates have been published which take effect from 1 June 2018. 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 2018 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 10p
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

Tax refund scams warning from HMRC

HMRC has issued a warning to taxpayers regarding the latest tax refund scams. These scams are targeting individuals via email and SMS messages.

HMRC is currently processing genuine tax refunds for the 2017/18 tax year and the fraudsters are sending scam messages which claim that taxpayers are entitled to a rebate. These messages go on to request that they provide their personal and account details in order to make their claim.

HMRC is keen to stress that it will only ever inform individuals of a tax refund by post or through their employer, and never via email, text messaging or voicemail.

Commenting on the issue, Treasury Minister Mel Stride said

‘We know that criminals will try and use events like the end of the financial year, the self assessment deadline, and the issuing of tax refunds to target the public and attempt to get them to reveal their personal data’.

HMRC is advising taxpayers not to click on any links, download any attachments or provide any personal information, and to forward any suspect messages to HMRC.

Internet link: GOV.UK news

200,000 receive back pay as HMRC enforce National Minimum Wage

BEIS and HMRC are urging underpaid workers to complain about National Minimum Wage (NMW) and National Living Wage (NLW) underpayments. Recent figures show that the number of workers receiving the money they are owed has doubled.

During 2017/18, HMRC investigators identified £15.6 million in pay owed to more than a record 200,000 of the UK’s lowest paid workers. This is an increase on the previous years figures of £10.9 million for more than 98,000 workers.

HMRC launched its online complaints service in January 2017 and believes this has contributed to the 132% increase in the number of complaints received over the last year and the amount of money HMRC has been able to recoup for those unfairly underpaid.

The figures are published as the government launches its annual advertising campaign which encourages workers to take action if they are not receiving the NMW or NLW. The online campaign urges underpaid workers to proactively complain by completing an HMRC online form.

HMRC state that the types of business receiving most complaints include restaurants, bars, hotels and hairdressing.

Business Minister Andrew Griffiths said:

‘Employers abusing the system and paying under the legal minimum are breaking the law. Short changing workers is a red line for this government and employers who cross the line will be identified by HMRC and forced to pay back every penny, and could be hit with fines of up to 200% of wages owed.

I would urge all workers, if you think you might be being underpaid then you should check your pay and call Acas on 0300 123 1100 for free and confidential advice.’

Please contact us for help with payroll matters.

Internet link: GOV.UK news 200000 receive back pay

Off-payroll working in the private sector consultation

HMRC has launched a consultation on how to tackle non-compliance with the off-payroll working rules in the private sector and are asking for comments on the best way to do this.

HMRC estimates only 10% of PSCs that should apply the legislation actually do so, and the the cost of this is projected to increase from £700m in 2017/18 to £1.2bn in 2022/23.

This consultation provides an early evaluation of the public sector reform and invites responses on how best to deal with non-compliance in the private sector.

This consultation considers a number of potential options for tackling the non-compliance with the off-payroll working rules in the private sector. However, the fundamental principles of the off-payroll working rules, that the employment status test determines who should be taxed as employees, are not being considered as part of this consultation.

In respect of the public sector

‘HMRC has analysed PAYE data covering the first 10 months of the reform, from April 2017 to February 2018. This shows that in any given month since the reform was introduced, there are an estimated 58,000 extra individuals who are paying income tax and NICs undertaking work for a public authority above expected levels.

HMRC estimates that an additional £410 million of income tax and NICs has been remitted from these engagements, since the public sector reform was introduced.

On the basis of this evidence, the government’s assessment is that the public sector reform has been successful both in increasing tax compliance and resolving the compliance challenges faced by HMRC in enforcing the off-payroll working rules in the public sector.’

Private sector

‘The government considers extension of similar reform to the private sector to be the lead option which will effectively tackle non-compliance.’

The consultation closes on 10 August. We will keep you updated on this issue.

Internet link: GOV.UK consultation

Universal Credit and self employment

The government has published a report, Universal Credit: supporting self employment which considers the issues faced by self employed claimants.

The report considers the impact of the Monthly Income Floor (MIF) earnings requirement. To be eligible for Universal Credit (UC) claimants must earn the MIF. However, the MIF assumes self employed claimants earn a regular income at least equal to the National Minimum Wage, and makes no provision for those with income and expenditure that vary from month to month. The report states that the MIF has been designed with monthly paid employed individuals in mind rather than the self employed who may have more volatile earnings.

It also considers the current system which allows self employed individuals to be exempt from meeting the MIF for the first 12 months of self employment and whether this is sufficient. The report urges the Government to extend the exemption period.

Internet link: Universal Credit Self Employed report

State Aid approval granted for the Enterprise Management Incentive

It has previously been reported that the Enterprise Management Incentive State Aid approval lapsed on 6 April 2018. On 15 May EU approval was granted however HMRC have not confirmed expressly that this approval will be backdated to 6 April 2018.

The Enterprise Management Incentive (EMI) allows selected employees (often key to the employer) to be given the opportunity to acquire a significant number of shares in their employer through the issue of options. An EMI can offer significant tax advantages as the scheme allows options to be granted to employees which may allow the shares to be received without any tax bill arising until the shares are sold.

HMRC had previously warned that EMI share options granted in the period from 7 April 2018 until EU State Aid approval is received may not be eligible for the tax advantages afforded to option holders.

We await official confirmation on the position from HMRC.

Please contact us for specific advice on this issue.

Internet link: Europa press release

Wales to set devolved income tax rates

From April 2019, the National Assembly for Wales will be able to vary the rates of income tax payable by Welsh taxpayers.

Responsibility for many aspects of income tax will remain with the UK government, and the tax will continue to be collected by HMRC for Welsh taxpayers.

The process for setting Welsh rates of income tax

From April 2019, the UK government will reduce each of the three income tax rates: basic, higher and additional rate, paid by Welsh taxpayers by 10 pence.

The National Assembly for Wales will then decide the three Welsh rates of income tax, which will be added to the reduced UK rates. The combination of reduced UK rates plus the Welsh rates will determine the overall rate of income tax paid by Welsh taxpayers.

If the National Assembly for Wales approves each of the Welsh rates of income tax at 10p, this will mean the rates of income tax paid by Welsh taxpayers will continue to be the same as that paid by English and Northern Irish taxpayers. However the National Assembly for Wales may decide to set different rates ‘to reflect Wales’ unique social and economic circumstances’.

Internet link: GOV.Wales

Newsletter – May 2018

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eNews May 2018

In this month’s eNews we report on the latest announcement from HMRC regarding Making Tax Digital. We also consider the looming deadline for GDPR, changes to tax reliefs following the Scottish Budget and issues to do with EMI share options. With articles on benefits in kind forms P11D,the VAT fuel scale charges and a new benefits exemption for workplace charging of employee vehicles there is lots to consider.

Changing priorities at HMRC

Over the coming years, the government plans to phase in its landmark Making Tax Digital (MTD) initiative, which will see taxpayers move to a fully digital tax system. However HMRC has shared a statement about how they are prioritising change in the department and as a result some parts of MTD will be delayed. HMRC has acknowledged the challenges in:

  • exiting the EU and
  • the ambition to become the world’s most digitally advanced tax authority.

While some of the finer details are still being decided, HMRC have announced that, to achieve the above, some aspects of MTD are to be delayed. HMRC still plan to go ahead with MTD for VAT from April 2019. Information on some of the delayed projects is set out below:

Plans to introduce further digital services for individuals

There will be ‘halted progress’ on simple assessment and real-time tax code changes. Additional services in this area will only be added where they reduce phone or post contact or otherwise deliver ‘significant savings’.

Other digitalisation of services affecting fewer individuals

This includes Inheritance Tax payments, Tax Advantaged Venture Capital Schemes applications and PAYE Settlement Agreements

Creation of the single digital account for all businesses

HMRC has confirmed this will now happen at a ‘slower pace’. HMRC has confirmed the single digital account remains an aim of the department and they stress it will not impact the delivery of Making Tax Digital.

Voluntary Making Tax Digital for Business service for income tax

HMRC has confirmed this will continue to be available for any sole trader wishing to make quarterly updates to HMRC.

Mandatory Making Tax Digital for VAT – still ‘on track’

HMRC stated that MTD for VAT is still on track. VAT registered businesses with a turnover in excess of the £85,000 VAT registration threshold, will be required to comply with the requirements of MTD for VAT for all VAT periods commencing on or after 1 April 2019.

In addition, the government has confirmed that, it will not mandate any further MTD for Business changes before 2020, at the earliest.

Internet link: ICAEW blog

GDPR compliance deadline looms

With less than one month until the introduction of the new General Data Protection Regulation (GDPR), the Federation of Small Businesses (FSB) is warning small and medium-sized enterprises (SMEs) that time is running out for them to prepare.

The business group stated that small businesses face an ‘uphill challenge’ in ensuring that they are compliant by the date when GDPR takes effect of 25 May 2018.

Under the new rules, organisations which collect, store and process individuals’ personal data will be subject to new obligations, with an increased emphasis on accountability and transparency.

The financial penalties for failing to comply are severe, with fines costing up to €20 million or up to 4% of total annual worldwide revenue, whichever is the greater.

Mike Cherry, National Chairman of the FSB said:

‘As the GDPR deadline swiftly approaches, there is a real danger that many small businesses are yet to have adequately prepared for the changes. Fortunately for these businesses, there is still time on the clock to start, or finish, their preparations.’

‘The GDPR is the largest shake-up of data protection laws for years, and whether you are a personal trainer or a consultant, most businesses will have to implement changes to their current practices to make sure they are complying with the new rules.’

Further information on the GDPR can be found on the ICO website.

Internet links: ICO guidance FSB press release

Tax reliefs following the Scottish Budget

The Government has stated that it will ensure that tax reliefs continue to work as they were intended as the new Scottish Income Tax rates and bands are introduced from 6 April 2018. The Government has confirmed:

  • Marriage Allowance
    Marriage Allowance allows taxpayers to transfer 10% of their tax-free Personal Allowance to their spouse or civil partner, reducing their tax bill by up to £230 in 2017 to 2018, and £238 in 2018/19. The UK government will ensure that all those claiming Marriage Allowance in Scotland can continue to do so at the current rate (20%).
  • Gift Aid
    Gift Aid allows charities to claim back 25p for every £1 donated. The UK government will make changes to ensure that Scottish taxpayers can benefit from the right rate of tax relief on Gift Aid. Gift Aid will continue to be paid to charities at the basic rate, with Scottish taxpayers able to claim the correct amount of additional relief on top of this.
  • Pensions relief at source
    The UK government confirmed that current processes will continue while it works with stakeholders to establish how this will work in the longer term. For 2018/19, Scottish taxpayers who receive relief on their contributions at source will, therefore, continue to receive relief in their pension pot at 20%, with no adjustment for those taxed at a rate of less than 20%, and scope for those taxed at a rate higher than 20% to claim additional relief.
  • Social security pension lump sum
    The UK government will make changes so that Scottish taxpayers who receive a social security pension lump sum will be taxed, where appropriate, at the new Scottish starter rate.
  • Finance cost relief This will continue to apply at 20%, the same rate applicable to landlords across the UK.

Please contact us if you have queries on the workings of any of these tax reliefs for Scottish taxpayers and those resident elsewhere across the United Kingdom.

Internet link GOV.UK changes to tax relief Scotland

EMI options may not qualify for tax relief

The Enterprise Management Incentive (EMI) allows selected employees (often key to the employer) to be given the opportunity to acquire a significant number of shares in their employer through the issue of options. An EMI can offer significant tax advantages as the share option scheme allows options to be granted to employees which may allow the shares to be received without any tax bill arising until the shares are sold.

HMRC have warned that EMI share options granted in the period from 7 April 2018 until EU State Aid approval is received may not be eligible for the tax advantages presently afforded to option holders, and accordingly share options granted in that period as EMI share options may necessarily fall to be treated as non-tax advantaged employment-related securities options meaning that the options may be taxable when exercised.

To read more, please visit the link below or contact us for specific advice.

Internet link: GOV.UK EMI Bulletin

P11D deadline approaching

The forms P11D which report details of benefits and some expenses provided to employees and directors for the year ended 5 April 2018, are due for submission to HMRC by 6 July 2018. The process of gathering the necessary information can take some time, so it is important that this process is not left to the last minute.

Employees pay tax on benefits provided as shown on the P11D, generally via a PAYE coding notice adjustment or through the self assessment system. Significant changes were introduced to the rules for reporting expenses from 6 April 2016.

Some employers ‘payroll’ benefits and in this case the benefits do not need to be reported on forms P11D but employers should advise employees of the amount of benefits payrolled.

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

VAT fuel scale charges

HMRC have issued details of the updated VAT fuel scale charges which apply from the beginning of the next prescribed VAT accounting period starting on or after 1 May 2018.

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

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

Internet link: GOV.UK fuel scale charges

HMRC consultation on benefits exemption for workplace charging facilities

HMRC are consulting on the tax exemption which will apply from 6 April 2018 on workplace electric charging facilities used by employees.

It was announced in the Autumn Budget 2017 that the government intends to implement an exemption for the benefit of electricity provided by an employer, at the workplace, to charge electric or plug-in hybrid vehicles. The necessary legislation will be included in the Finance Bill later this year and its effect will be made retrospective to 6 April 2018.

This means that there is no need for employers to report the value of electricity provided for the workplace charging of employees’ vehicles from that date.

This consultation seeks comments on workplace charging tax exemptions for electric and plug-in hybrid vehicles.

This guidance will be of interest to employers that pay taxable benefits to employees and provide electric charging points for employee use and the provision of workplace charging facilities, which vehicles the exemption covers and the qualifying conditions of the exemption.

Internet link: GOV.UK consultations/draft guidance