Budget 2020 – March 2020

Posted on March 12, 2020 by Henry Cooper

Budget 2020

The Chancellor Rishi Sunak presented his first Budget on Wednesday 11 March 2020. In his speech he stated ‘we are at the beginning of a new era in this country. We have the freedom and the resources to decide our own future’.

‘It is a Budget of a government that gets things done’.

Our summary focuses on the tax measures which may affect you, your family and your business. To help you decipher what was said we have included our own comments. If you have any questions please contact us for advice.

Main Budget tax proposals

Our summary concentrates on the tax measures which include:

a reduction in the Entrepreneurs’ Relief lifetime limit
an increase in the Employment Allowance
an increase in the rate of Structures and Buildings Allowance
an increase in the Research and Development Expenditure Credit.

Other measures include:

an increase and extension of business rates discounts
extended access to Statutory Sick Pay due to coronavirus.

Previously announced measures include:

the increase to the National Insurance thresholds
the introduction of off-payroll working for the private sector
changes to Principal Residence Relief.

Some Budget proposals may be subject to amendment in the 2020 Autumn Budget and subsequent Finance Act. You should contact us before taking any action as a result of the contents of this summary.

Business Tax

Corporation tax rates

Corporation tax rates have already been enacted for periods up to 31 March 2021.

The main rate of corporation tax is 19%. The rate for the Financial Year beginning on 1 April 2020 was due to fall to 17% but the Chancellor has announced the rate will remain at 19%.

Capital Allowances: Structures and Buildings Allowance

The annual rate of capital allowances available for qualifying investments to construct new, or renovate old, non-residential structures and buildings will increase from 2% to 3%. The change will take effect from 1 April 2020 for corporation tax and 6 April 2020 for income tax.

Enhanced Capital Allowances in Enterprise Zones

The government has announced the 100% first year allowance for investment in new plant and machinery within designated assisted areas within Enterprise Zones will remain available for expenditure incurred in relation to all areas, whenever designated, until at least 31 March 2021.

First year allowances for business cars from April 2021

The government has announced an extension to 100% first year allowances for zero-emission cars, zero-emission goods vehicles and equipment for gas refuelling stations by four years from April 2021. CO₂ emission thresholds will also be amended from April 2021. These determine the rate of capital allowances available through which the capital expenditure for business cars can be written down. The thresholds will be reduced from 50g/km to 0g/km for the purpose of the first year allowances for low CO₂ emission cars and from 110g/km to 50g/km for the purpose of WDAs for business cars.

Comment

The reduction in thresholds will mean that only business cars acquired with CO₂ emissions of 0g/km will be eligible for first year allowances. Ultra-low emission vehicles which currently qualify for first year allowances if 50g/km or less will no longer qualify. They will be eligible for WDAs at the main rate (18%). Cars with CO₂ emissions exceeding 50g/km will be eligible for WDAs at the special rate (6%).

Research and Development (R&D) tax relief

The rate of tax credit for companies falling within the Research and Development Expenditure Credit (RDEC) scheme will rise by 1% to 13% from 1 April 2020. This relief is given as an above the line credit for companies undertaking qualifying R&D.

Budget 2018 announced that, from 1 April 2020, the amount of payable R&D tax credit that a qualifying loss-making company can receive in any tax year will be restricted to three times the company’s total PAYE and NICs liability for that year. The government has now announced the implementation of the restriction will be delayed to 1 April 2021.

Corporation tax loss relief

Draft legislation has been issued to extend the rules that potentially limit the use of brought forward losses to include brought forward capital losses. Companies (and corporate groups) will continue to have a £5 million ‘deductions allowance’ before restrictions apply.

The changes will have effect where carried forward capital losses are used to offset chargeable gains accruing from 1 April 2020.

Comment

The inclusion of capital losses will mean that it will be more likely that the deductions allowance will be exceeded.

Intangible fixed assets

The government has announced an extension to corporation tax relief for intangible fixed assets. All pre-Finance Act 2002 intangible assets acquired from 1 July 2020 will come within the intangible fixed asset regime, subject to certain transitional provisions.

Comment

This measure removes a restriction that exists in relation to pre-Finance Act 2002 intangible assets that prevents some companies from claiming relief for older, well-established intellectual property rights. The change will mean that corporate intangible assets will now be relieved and taxed under a single regime for acquisitions from 1 July 2020.

Digital Services Tax

The government has confirmed a new 2% tax on the revenues of search engines, social media platforms and online marketplaces which derive value from UK users. The tax only applies when the group’s worldwide revenues from these digital activities are more than £500 million and more than £25 million of these revenues are derived from UK users.

The tax will apply from 1 April 2020.

Freeports

The government is consulting on proposals to create up to ten freeports across the UK which would have different customs rules to 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. The government 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 import 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.

Comment

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.

Business rates

Business rates have been devolved to Scotland, Northern Ireland and Wales. The government has already announced that, for one year from 1 April 2020, the business rates retail discount for properties with a rateable value below £51,000 in England will increase from one third to 50% and will be expanded to include cinemas and music venues. To support small businesses in response to COVID-19, the retail discount will be increased to 100% and expanded to include hospitality and leisure businesses for 2021.

The government previously committed to introducing a £1,000 business rates discount for pubs with a rateable value below £100,000 in England for one year from 1 April 2020. To further support pubs, in response to COVID-19 the discount for pubs will be increased to £5,000.

The government is launching a fundamental review of business rates to report in the autumn. A call for evidence will be published in the spring.

Time to Pay

The government will ensure that businesses and self-employed individuals in financial distress and with outstanding tax liabilities receive support with their tax affairs.

HMRC has set up a dedicated COVID-19 helpline to help those in need, and they may be able to agree a bespoke Time to Pay arrangement. Time to Pay gives businesses a time-limited deferral period on HMRC liabilities owed and a pre-agreed time period to pay these back.

Statutory Sick Pay

The government will support small and medium-sized businesses and employers to cope with the extra costs of paying COVID-19 related SSP by refunding eligible SSP costs. The eligibility criteria for the scheme include:

the refund will be limited to two weeks per employee
employers with fewer than 250 employees will be eligible. The size of an employer will be determined by the number of people they employed as of 28 February 2020
employers will be able to reclaim expenditure for any employee who has claimed SSP (according to the new eligibility criteria) as a result of COVID-19
employers should maintain records of staff absences, but should not require employees to provide a GP fit note
the eligible period for the scheme will commence from the day on which the regulations extending SSP to self-isolators come into force.

Capital Taxes

Capital gains tax (CGT) rates

The current rates of CGT are 10%, to the extent that any income tax basic rate band is available, and 20% thereafter. Higher rates of 18% and 28% apply for certain gains; mainly chargeable gains on residential properties with the exception of any element that qualifies for Private Residence Relief.

There are two specific types of disposal which potentially qualify for a 10% rate up to a lifetime limit for each individual:

Entrepreneurs’ Relief (ER). This is targeted at directors and employees of companies who own at least 5% of the ordinary share capital in the company, provided other minimum criteria are also met, and the owners of unincorporated businesses.
Investors’ Relief. The main beneficiaries of this relief are external investors in unquoted trading companies who have newly-subscribed shares.

Investors’ Relief has a lifetime limit of £10 million, however the lifetime limit position for ER has been changed in the Budget and is considered further below.

CGT annual exemption

The CGT annual exemption is £12,000 for 2019/20 and £12,300 for 2020/21.

Entrepreneurs’ Relief (ER)

The lifetime limit is reduced from £10 million to £1 million for ER qualifying disposals made on or after 11 March 2020.

There are special provisions for disposals entered into before 11 March 2020 that have not been completed.

Comment

The government’s manifesto stated clearly that there would be a reform and review of this relief, so a reduction in the limit was not unexpected, though the magnitude of the reduction and the immediate implementation will be a surprise. No other consultations to reform the relief were announced.

Private Residence Relief (PRR)

Draft legislation has been issued to make changes to the PRR regime from 6 April 2020. For properties that have not been occupied throughout the period of ownership, available deductions for capital gains tax purposes will be amended as follows:

the final period exemption will be reduced from 18 months to nine months (there are no changes to the 36 months that are available to disabled persons or those in a care home)
lettings relief will be reformed so that it only applies in those circumstances where the owner of the property is in shared occupancy with a tenant.

Comment

At present, lettings relief gives up to £40,000 relief (£80,000 for a couple who jointly own the property) for someone letting part, or all, of a property which is their main residence, or was the former main residence at some point in their period of ownership. Despite concerns raised during the consultation about periods of letting prior to April 2020 and whether the current rules should be allowed to apply, the government is proceeding as planned and lettings reliefs will be abolished except in very limited circumstances of co-occupation with a tenant. The changes apply for disposals on or after 6 April 2020, regardless of when the period of letting took place.

Payments on account and 30 day returns

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

a tax return is required if there is a disposal of UK land on which a residential property gain accrues
CGT is required to be computed on the reported gain in the tax return.

The return needs to be filed and the CGT paid within 30 days of the completion date of the property disposal.

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

Inheritance tax (IHT) nil rate bands

The nil rate band has remained at £325,000 since April 2009 and is set to remain frozen at this amount until April 2021. An additional nil rate band, called the ‘residence nil rate band’ (RNRB), continues to be phased in. For deaths in 2019/20 it is £150,000 rising to £175,000 for deaths in 2020/21. Thereafter it will rise in line with CPI.

Comment

The RNRB was introduced in April 2017 to allow the family home to be passed more easily to direct descendants on death without incurring a charge to IHT. There are, however, a number of conditions that must be met in order to obtain the RNRB, which may involve redrafting an existing will.

Stamp Duty Land Tax (SDLT) surcharge

A SDLT surcharge on non-UK residents purchasing residential property in England and Northern Ireland is to go ahead. The 2% surcharge is to take effect from 1 April 2021. Where contracts are exchanged before 11 March 2020 but complete or are substantially performed after 1 April 2021, transitional rules may apply.

Employment Taxes

National Insurance thresholds

The government has recently announced National Insurance thresholds for 2020/21. Most thresholds will rise with inflation. Two thresholds, however, will rise by 10% from £8,632 to £9,500:

the primary threshold – which sets the level at which employees start to pay Class 1 National Insurance contributions (NICs)
the lower profits limit – which sets the level at which the self-employed start to pay Class 4 NICs.

The upper thresholds which apply to these two classes of NICs remain at £50,000.

Comment

The secondary threshold, which sets the level at which employers pay the main rate of NICs, only rises in line with inflation.

Off-payroll working in the private sector

The changes to the off-payroll working rules (commonly known as IR35), which came into effect in April 2017 for the public sector, will be extended to the private sector from April 2020. Draft legislation has been issued. The new rules apply to payments made for services provided on or after 6 April 2020.

The off-payroll working rules apply where an individual (the worker) provides their services through an intermediary (typically a personal service company) to another person or entity (the client). The client will be required to make a determination of a worker’s status and communicate that determination. In addition, the fee-payer (usually the organisation paying the worker’s personal service company) will need to make deductions for income tax and NICs and pay any employer NICs.

Only medium and large businesses will be subject to the 2020 rules, so small businesses will not need to determine the status of the off-payroll workers they engage. A small company is one which meets two of these criteria: its annual turnover is not more than £10.2 million: it has not more than £5.1 million on its balance sheet: it has 50 or fewer employees. For unincorporated organisations it is only the annual turnover test that applies.

Review

In January 2020, the government announced a review of the implementation of the April 2020 reform, to address concerns from affected businesses and individuals. The government has confirmed the changes will go ahead but:

businesses will not have to pay penalties for errors relating to off-payroll working in the first year, except in cases of deliberate non-compliance
there will be a legal obligation on clients to respond to a request for information about their size from the worker or the fee-payer.

Employer provided cars

The scale of charges for calculating the taxable benefit for an employee who has use of an employer provided car is computed by reference to bands of CO₂ emissions multiplied by the original list price of the vehicle. The maximum charge is capped at 37% of the list price of the car.

For 2019/20 the rates increased by 3% from the rates applying for 2018/19.

The government announced in Budget 2017 that CO₂ emissions for cars registered from April 2020 will be based on the Worldwide Harmonised Light Vehicles Test Procedure (WLTP). Draft legislation has been issued to amend the previously planned benefit percentages for 2020/21 through to 2022/23:

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

Comment

WLTP aims to be more representative of real world driving conditions, compared to the current test known as the New European Driving Cycle. The government estimates that reported CO₂ values may be on average about 20 – 25% higher under WLTP compared to the current test.

Employment Allowance

The Employment Allowance provides businesses and charities with relief from their employer NICs bill. Regulations have been issued to restrict the Employment Allowance, from 6 April 2020, to those employers whose employer NICs bill was below £100,000 in the previous tax year. Employers who are connected to other employers (such as companies within a group) will need to add together all of their employer Class 1 NICs liabilities incurred in the tax year prior to the year of claim to determine eligibility.

The maximum Employment Allowance will be increased from £3,000 to £4,000 with effect from 6 April 2020.

From 6 April 2020 the Employment Allowance will operate as de minimis State aid. This means it will contributeto the total aid a business is entitled to under the relevant de minimis State aid cap.

Comment

De minimis State aid rules apply if a business engages in economic activity, providing goods or services to the market. Most businesses will not have received de minimis State aid before so will not need to do further checks to determine if they are eligible for the Employment Allowance.

Class 1A liabilities on Termination Awards

A new liability to Class 1A NICs comes into effect on 6 April 2020 on termination awards over £30,000 and payments from sporting testimonials above £100,000. The new Class 1A NICs liability applies to non-contractual taxable termination awards over a £30,000 threshold, that have not already incurred a payroll Class 1 NICs liability as earnings.

Unlike the Class 1A NICs liability payable on benefits in kind this new liability will not be payable and reported via the annual P11D(b) payment/reporting process. Instead, from 6 April 2020 onwards, Class 1A liabilities arising on taxable termination awards which comprise of cash and/or cash equivalent payments, will be paid and reported through the PAYE/Real Time Information (RTI) process.

This new Class 1A liability will not apply to any termination awards paid after 5 April 2020 in respect of employment which was terminated before 6 April 2020.

Comment

Before 6 April 2020, employers should ensure that their payroll software has been updated to enable them to pay and report the new Class 1A NICs liabilities, arising on termination awards, through RTI.

Loan Charge review

The Loan Charge tackles disguised remuneration tax avoidance schemes. These are tax arrangements that seek to avoid income tax and NICs by paying income to individuals in the form of loans, usually via an offshore trust, with no expectation that the loans will ever be repaid. The charge applies to any loans made through disguised remuneration schemes after 6 April 1999, which had not been repaid by 5 April 2019.

Draft legislation has been issued to amend the scope of the Loan Charge:

It will now only apply to outstanding balances of disguised remuneration loans made between 9 December 2010 and 5 April 2019 inclusive.
It will not apply to loans made in tax years before 2016/17 where a reasonable disclosure of the use of a disguised remuneration tax avoidance scheme was made within the relevant tax return or associated documents where appropriate, and HMRC failed to take any action (for example by opening an enquiry).
Those affected by the Loan Charge will be able to elect to split their loan balance over three consecutive years 2018/19 to 2020/21 (rather than the full charge arising in 2018/19).
The date by which the additional information form must be returned to HMRC will move from 1 October 2019 to 1 October 2020. The form requires taxpayers to provide full information to HMRC relating to any outstanding disguised remuneration loans for which they will need to make tax payments.

Comment

The amendments have been made due to concerns raised about the impact of some aspects of the charge, particularly the large tax bills arising in 2018/19 for individuals who had used the schemes. An estimated 11,000 individuals will be removed from the charge due to the date the loan charge applies being changed to 2010 and the provisions for those who have made reasonable disclosures. There are many individuals who will still have tax bills to pay and HMRC is introducing special ‘time to pay’ arrangements to allow some individuals to pay over a number of years.

National Living Wage (NLW) and National Minimum Wage (NMW)

Significant increases in minimum wage rates take effect from 1 April 2020. The NLW, which is the rate for workers aged over 25 years, increases by 6.2%. The government states this equates to an annual pay rise of up to £930 for a full time worker. From 1 April 2020, the new hourly rates of NLW and NMW are:

£8.72 for those over 25 years old
£8.20 for 21-24 year olds
£6.45 for 18-20 year olds
£4.55 for under 18s
£4.15 apprentice rate for apprentices under 19, and those 19 and over in their first year of apprenticeship.

Tax treatment of welfare counselling provided by employers

The government will extend the scope of non-taxable counselling services to include related medical treatment, such as cognitive behavioural therapy, when provided to an employee as part of an employer’s welfare counselling services. The changes will take effect from April 2020.

National Insurance holiday for employers of veterans in the first year of civilian employment

To support the employment of veterans, the government is meeting the commitment to introduce a National Insurance holiday for employers of veterans in their first year of civilian employment.

A full digital service will be available to employers from April 2022. However, transitional arrangements will be in place in 2021/22 which will effectively enable employers of veterans to claim this holiday from April 2021.

The holiday will exempt employers from any NICs liability on the veteran’s salary up to the Upper Earnings Limit. The government will consult on the design of this relief.

Increasing the flat rate deduction for homeworking

The government will increase the maximum flat rate income tax deduction available to employees to cover additional household expenses from £4 per week to £6 per week where they work at home under homeworking arrangements. This will take effect from April 2020.

Review of Enterprise Management Incentives (EMI) scheme

The government will review the EMI scheme to ensure it provides support for high-growth companies to recruit and retain the best talent so they can scale up effectively, and examine whether more companies should be able to access the scheme.

Van benefit charge nil-rating for zero emission vans

From April 2021, the government will apply a nil rate of tax to zero-emission vans within the van benefit charge.

Other Matters

VAT

E-publications

The government will introduce legislation to apply a zero rate of VAT to e-publications from 1 December 2020, to make it clear that e-books, e-newspapers, e-magazines and academic e-journals are entitled to the same VAT treatment as their physical counterparts.

Tampon tax

From 1 January 2021 the government will apply a zero rate of VAT to women’s sanitary products.

Postponed accounting

From 1 January 2021 postponed accounting for VAT will apply to all imports of goods, including those from the EU.

Comment

The postponed accounting for VAT aims to provide a boost to those VAT registered UK businesses which are integrated in international supply chains as they adapt to the UK’s new trading arrangements under Brexit.

Insolvency

Draft legislation has been issued to amend insolvency legislation from 1 December 2020. Broadly, HMRC will move up the creditor hierarchy for the distribution of assets in the event of an insolvency. HMRC will become a secondary preferential creditor in respect of certain tax debts held by a business which represent amounts paid by customers or employees. The taxes include VAT, PAYE, employee NICs and Construction Industry Scheme deductions.

The rules will remain unchanged for taxes owed by businesses themselves, such as Corporation Tax and employer NICs.

Draft legislation has also been issued to make directors, and other persons connected to companies subject to an insolvency procedure, jointly and severally liable for amounts payable to HMRC by the company in certain circumstances. This is mainly for cases where the company has engaged in avoidance, evasion or ‘phoenixism’. This measure applies to all tax periods ending, and to facilitation penalties determined and issued, after the date of Royal Assent of the next Finance Act.

Comment

The rationale for HMRC to become a preferential creditor for certain taxes is that the taxes represent payments by customers (such as VAT) or deductions from employees (such as PAYE) and these amounts should ‘go to fund public services rather than being distributed to other creditors’.

Plastic Packaging Tax

This will be a new tax that applies to plastic packaging produced in or imported into the UK that does not contain at least 30% recycled plastic. The tax rate will be £200 per tonne of non-compliant plastic packaging. A consultation on the design and implementation of the tax has been issued and the tax is to take effect from April 2022.

Personal Tax

The personal allowance

The personal allowance is currently £12,500. Budget 2018 announced that the allowance will remain at the same level in 2020/21 and then increase by CPI. There is a reduction in the personal allowance for those with ‘adjusted net income’ over £100,000. The reduction is £1 for every £2 of income above £100,000. So for the current and next tax year there is no personal allowance where adjusted net income exceeds £125,000.

The marriage allowance

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

Comment

The marriage allowance reduces the recipient’s tax bill by up to £250 a year in 2019/20 and 2020/21. The marriage allowance was first introduced for 2015/16 and there continue to be couples who are entitled to claim but have not yet done so. It is possible to claim for all years back to 2015/16 where the entitlement conditions are met. The total tax saving for all years up until 2019/20 could amount to £1,150. A claim for 2015/16 will need to be made by 5 April 2020.

Tax bands and rates

The basic rate of tax is 20%. In 2019/20 and 2020/21 the band of income taxable at this rate is £37,500 so that the threshold at which the 40% band applies is £50,000 for those who are entitled to the full personal allowance.

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

Scottish residents

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

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

The Scottish Government has confirmed that the Scottish income tax rates will be frozen for 2020/21. The thresholds from which the 20% and 21% bands apply will be increased to £14,585 and £25,158 respectively for those who are entitled to the full personal allowance.

Welsh residents

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

The Welsh Government has confirmed that the income tax rate will remain at 10 pence for 2020/21.

Tax on savings income

Savings income is income such as bank and building society interest.

The Savings Allowance applies to savings income and the available allowance in a tax year depends on the individual’s marginal rate of income tax. Broadly, individuals taxed at up to the basic rate of tax have an allowance of £1,000. For higher rate taxpayers the allowance is £500. No allowance is due to additional rate taxpayers.

Some individuals qualify for a 0% starting rate of tax on savings income up to £5,000. However, the rate is not available if taxable non-savings income (broadly earnings, pensions, trading profits and property income less allocated allowances and reliefs) exceeds £5,000.

Tax on dividends

The first £2,000 of dividends is chargeable to tax at 0% (the Dividend Allowance). Dividends received above the allowance are taxed at the following rates:

7.5% for basic rate taxpayers
32.5% for higher rate taxpayers
38.1% for additional rate taxpayers.

Dividends within the allowance still count towards an individual’s basic or higher rate band and so may affect the rate of tax paid on dividends above the Dividend Allowance.

To determine which tax band dividends fall into, dividends are treated as the last type of income to be taxed.

Child Trust Funds (CTFs)

Junior ISAs and its precursor CTFs allow tax free savings to be made for children under 18. There is no access to the investments until the child is 18. CTF accounts will start to mature in September 2020 when the first children reach 18. Without regulatory change the investments would lose their tax advantaged status. CTF and ISA regulations have therefore recently been made which:

make sure that investments in CTF accounts retain their tax advantaged status post maturity, pending instructions from the account holder
allow savings transferred from a matured CTF to be disregarded for the annual ISA subscription limit.

Comment

Around six million children hold a CTF and approximately 800,000 will mature each year from September 2020. A significant proportion of these accounts are thought to be ‘dormant’ – holding just the contributions made by the government. Government contributions are not made to Junior ISAs. This government webpage: bit.ly/2s8ceyz allows a check to be made as to where a CTF is held but a Government Gateway user ID is required first.

Junior ISA and CTF annual subscription limits

The annual subscription limit for Junior ISAs and CTFs will be increased from £4,368 to £9,000 for 2020/21.

Pensions changes

The pensions annual allowance (currently £40,000) is the maximum amount of tax-relieved pension savings that can be accrued in a year. However, for those on higher incomes, the annual allowance is reduced by £1 for every £2 that an individual’s ‘adjusted income’ exceeds £150,000, to a minimum annual allowance of £10,000. Adjusted income is broadly net income before tax with the addition of any pension accrual. The taper potentially applies to an individual with income before tax, without the addition of the pension accrual, above £110,000. This is known as the ‘threshold income’.

Adjusted income and threshold income will each be raised by £90,000 for 2020/21. The threshold income will be £200,000, so individuals with income below this level will not be affected by the tapered annual allowance. The annual allowance will begin to taper down for individuals who also have an adjusted income above £240,000.

There is also a change to the minimum annual allowance. The minimum level to which the annual allowance can taper down will reduce from £10,000 to £4,000 from 6 April 2020. This reduction will only affect individuals with adjusted income over £300,000.

Support during the coronavirus

The Prime Minister previously announced that the forthcoming COVID-19 Bill will temporarily allow Statutory Sick Pay (SSP) to be paid from the first day of sickness absence, rather than the fourth day, for people who have COVID-19 or have to self-isolate in accordance with government guidelines. The Budget sets out a further package to widen the scope of SSP and make it more accessible. The government will temporarily extend SSP to cover:

individuals who are unable to work because they have been advised to self-isolate
people caring for those within the same household who display COVID-19 symptoms and have been told to self-isolate.

Support for those ineligible for SSP

The government recognises that self-employed people and employees earning below the National Insurance Lower Earnings Limit are not entitled to SSP and will offer financial support to these individuals through a ‘new style’ Employment and Support Allowance and Universal Credit.

Budget 2017

Posted on March 9, 2017 by Henry Cooper

Budget 2017

The Chancellor Philip Hammond presented the last Spring Budget on Wednesday 8 March 2017

In his speech the Chancellor was keen to point out that he wanted the tax system to be fair, particularly in relation to the distinction between employed and self-employed individuals.

‘But a fair system will also ensure fairness between individuals, so that people doing similar work for similar wages and enjoying similar state benefits pay similar levels of tax.’

In the Budget speech the Chancellor announced that he has requested a report to be delivered in the summer on the wider implications of different employment practices. Also the Budget included changes to NICs and the Dividend Allowance.

In December and January the government issued a number of the clauses, in draft, of Finance Bill 2017 together with updates on consultations.

The Budget updates some of these previous announcements and also proposes further measures. Some of these changes apply from April 2017 and some take effect at a later date.

Our summary focuses on the issues likely to affect you, your family and your business. To help you decipher what was said we have included our own comments. If you have any questions please do not hesitate to contact us for advice.

Main Budget tax proposals

Our summary concentrates on the tax measures which include:

increases to the Class 4 National Insurance rates
a reduction in the Dividend Allowance
changes to the timing of Making Tax Digital for smaller businesses.

Previously announced measures include:

increases to the personal allowance and basic rate band (a decreased band for Scottish residents)
the introduction of the Apprenticeship Levy
changes to corporation tax loss relief
the introduction of an additional inheritance tax residence nil rate band
changes for non-UK domiciled individuals.

The Budget proposals may be subject to amendment in a Finance Act. You should contact us before taking any action as a result of the contents of this summary.

Personal Tax

The personal allowance

The personal allowance is currently £11,000. Legislation has already been enacted to increase the allowance to £11,500 for 2017/18.

Comment

A reminder that not everyone has the benefit of the full personal allowance. There is a reduction in the personal allowance for those with ‘adjusted net income’ over £100,000, which is £1 for every £2 of income above £100,000. So for 2016/17 there is no personal allowance where adjusted net income exceeds £122,000. For 2017/18 there will be no personal allowance available where adjusted net income exceeds £123,000.

Tax bands and rates

The basic rate of tax is currently 20%. The band of income taxable at this rate is £32,000 so that the threshold at which the 40% band applies is £43,000 for those who are entitled to the full personal allowance.

In 2017/18 the band of income taxable at the basic rate will be different for taxpayers who are resident in Scotland to residents elsewhere in the UK. The Scottish government has decided to reduce the band of income taxable at the basic rate to £31,500 so that the threshold at which the 40% band applies remains at £43,000.

In the rest of the UK, legislation has already been enacted to increase the basic rate band to £33,500 for 2017/18. The higher rate threshold will therefore rise to £45,000 in 2017/18.

The additional rate of tax of 45% remains payable on taxable income above £150,000 for all UK residents.

Tax bands and rates – dividends

Dividends received by an individual are subject to special tax rates. The first £5,000 of dividends are charged to tax at 0% (the Dividend Allowance). Dividends received above the allowance are taxed at the following rates:

5% for basic rate taxpayers
5% for higher rate taxpayers
1% for additional rate taxpayers.

Dividends within the allowance still count towards an individual’s basic or higher rate band and so may affect the rate of tax paid on dividends above the £5,000 allowance.

To determine which tax band dividends fall into, dividends are treated as the last type of income to be taxed.

Reduction in the Dividend Allowance

The Dividend Allowance will be reduced from £5,000 to £2,000 from April 2018.

Comment

The government expect that even with the reduction in the Dividend Allowance to £2,000, 80% of ‘general investors’ will pay no tax on their dividend income. However, the reduction in the allowance will affect family company shareholders who take dividends in excess of the £2,000 limit. The cost of the restriction in the allowance for basic rate taxpayers will be £225 increasing to £975 for higher rate taxpayers and £1,143 for additional rate taxpayers.

Tax on savings income

Savings income is income such as bank and building society interest.

The Savings Allowance (SA) was first introduced for the 2016/17 tax year and applies to savings income. The available SA in a tax year depends on the individual’s marginal rate of income tax. Broadly, individuals taxed at up to the basic rate of tax have an SA of £1,000. For higher rate taxpayers, the SA is £500 whilst no SA is due to additional rate taxpayers.

Individual Savings Accounts (ISAs)

The overall ISA savings limit is £15,240 for 2016/17 but will jump to £20,000 in 2017/18.

Lifetime ISA

A new Lifetime ISA will be available from April 2017 for adults under the age of 40. Individuals will be able to contribute up to £4,000 per year, between ages 18 and 50, 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.

Comment

The increase in the overall ISA limit to £20,000 for 2017/18 is partly due to the introduction of the Lifetime ISA. There will therefore be four types of ISAs for many adults from April 2017 – cash ISAs, stocks and shares ISAs, Innovative Finance ISAs (allowing investment into peer to peer loans) and the Lifetime ISA. Money can be placed into one of each kind of ISA each tax year.

There is a fifth type of ISA – a Help to Buy ISA. Help to Buy ISAs are a type of cash ISA and potentially provide a bonus to savers if the funds are used to help to buy a first home.

Money Purchase Annual Allowance

The Money Purchase Annual Allowance (MPAA) will be reduced from £10,000 to £4,000 from 6 April 2017.

The MPAA counters an individual using the flexibilities around accessing a money purchase pension arrangement as a means to avoid tax on their current earnings, by diverting their salary into their pension scheme, gaining tax relief, and then effectively withdrawing 25% tax free. It also restricts the extent to which individuals can gain a second round of tax relief by withdrawing savings and reinvesting them into their pension. The MPAA is currently £10,000 and applies to individuals who have flexibly accessed their money purchase pension savings.

Comment

The ‘annual allowance’ sets the maximum amount of tax efficient pension contributions. The normal annual allowance is £40,000. The Money Purchase Annual Allowance was introduced in 2015, to restrict the annual allowance to £10,000 when an individual has taken income from a pension scheme.

Phased roll out of Tax-Free Childcare

The Chancellor has confirmed that Tax-Free Childcare will be rolled out from April 2017. Tax-Free Childcare will be gradually rolled out for children under 12.

Under the scheme the relief will be 20% of the costs of childcare up to a total 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). It is expected that all parents in the household will have to meet the following conditions:

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

The existing scheme, Employer-Supported Childcare, will remain open to new entrants until April 2018 to support the transition between the schemes.

Comment

The government has also confirmed that from September 2017, the free childcare offer will double from 15 to 30 hours a week for working families with three and four year olds in England. In total this is worth up to £5,000 for each child.

Universal Credit

Universal Credit is a state benefit designed to support those on low income or out of work.

An individual’s entitlement to the benefit is made up of a number of elements to reflect their personal circumstances. Their entitlement is tapered at a rate of 65% where claimants earn above the work allowances. The current taper rate for those who claim Universal Credit means their credit will be withdrawn at a rate of 65 pence for every extra £1 earned.

From April 2017, the taper rate that applies to Universal Credit will be reduced from 65% to 63%.

Property and trading income allowances

From April 2017, the government will introduce new £1,000 allowances for property and trading income. Individuals with property or trading income below £1,000 will no longer need to declare or pay tax on that income. Those with income above the allowance will be able to calculate their taxable profit either by deducting their expenses in the normal way or by simply deducting the relevant allowance. The trading allowance will also apply to certain miscellaneous income from providing assets or services. Any income which attracts rent-a-room relief will not be eligible for either of the allowances.

Business Tax

Making Tax Digital for Business (MTDfB)

Extensive changes to how taxpayers record and report income to HMRC are being introduced under a project entitled Making Tax Digital for Business.

The government has decided how the general principles of MTDfB will operate. Draft legislation has been issued on some aspects and more will be published in Finance Bill 2017.

Under MTDfB, businesses, self-employed people and landlords will be required to:

maintain their records digitally, through software or apps
report summary information to HMRC quarterly through their ‘digital tax accounts’ (DTAs)
make an ‘End of Year’ declaration through their DTAs.

DTAs are like online bank accounts – secure areas where a business can see all of its tax details in one place and interact with HMRC digitally.

Comment

The End of Year declaration will be similar to the online submission of a self assessment tax return but may be required to be submitted earlier than a tax return. Businesses will have 10 months from the end of their period of account (or 31 January following the tax year – the due date for a self assessment tax return – if sooner).

Exemptions

Businesses, self-employed people and landlords with turnovers under £10,000 are exempt from these requirements.

Changes announced in the Budget

The government has now announced a one year deferral from the mandating of MTDfB for unincorporated businesses and unincorporated landlords with turnovers below the VAT threshold. For those that have turnovers in excess of the VAT threshold the commencement date will be from the start of accounting periods which begin after 5 April 2018.

Cash basis for unincorporated landlords

As part of the wider proposals for Making Tax Digital, the government has decided that, from April 2017, many unincorporated property businesses will compute taxable profits for the purposes of income tax on a cash basis rather than the usual accruals basis.

The cash basis means a business will account for income and expenses when the income is received and expenses are paid. The accruals basis means accounting for income over the period to which it relates and accounting for expenses in the period for which the liability is incurred.

For affected property businesses, the cash basis will first apply for the 2017/18 tax year which means that a tax return for 2017/18, which has to be submitted by 31 January 2019, will be the first one submitted on the new basis.

Not all property businesses will move to the cash basis:

property businesses will remain on the accruals basis if their cash basis receipts are more than £150,000
there is an option to elect out of cash basis accounting and to use accruals basis instead
the cash basis does not apply to property businesses carried out by a company, an LLP, a corporate firm (ie a partner in the firm is not an individual), the trustees of a trust or the personal representatives of a person.

Cash basis for unincorporated businesses

The government is also extending the cash basis option for the self-employed and trading partnerships. The cash receipts threshold for being able to move to the cash basis will increase from the current £83,000 to £150,000 and the threshold for having to move back to the accruals basis will increase to £300,000 from April 2017.

Currently, the rules for the calculation of profits under cash basis accounting do not allow a deduction for expenditure of a capital nature, unless that expenditure qualifies for plant and machinery capital allowances under ordinary tax rules. This results in taxpayers needing to consider whether items are capital in nature, and whether they qualify for capital allowances. New rules will be introduced that list types of expenditure which will or will not be allowed as a tax deduction.

It is proposed these changes will come into effect from the 2017/18 tax year.

Comment

There is no requirement for traders to switch to the cash basis. There are potential problems in adopting the cash basis including restrictions on interest relief on business finance and special calculations which need to be performed on moving to the cash basis. We can, of course, advise you of the issues involved.

Corporation tax rates

Corporation tax rates have already been enacted for periods up to 31 March 2021.

The main rate of corporation tax is currently 20%. The rate will then be reduced as follows:

19% for the Financial Years beginning on 1 April 2017, 1 April 2018 and 1 April 2019
17% for the Financial Year beginning on 1 April 2020.

Corporate tax loss relief

Currently, a company is restricted in the type of profit which can be relieved by a loss if the loss is brought forward from an earlier accounting period. For example, a trading loss carried forward can only relieve future profits from the same trade. Changes are proposed which will mean that losses arising on or after 1 April 2017, when carried forward, will be useable against profits from other income streams or other companies within a group. This will apply to most types of losses but not to capital losses.

However, from 1 April 2017, large companies will only be able to use losses carried forward against up to 50% of their profits above £5 million. For groups, the £5 million allowance will apply to the group.

Class 4 National Insurance contributions (NICs)

It had already been announced in the 2016 Budget that Class 2 NICs will be abolished from April 2018. The government will now also legislate to increase the main rate of Class 4 NICs from 9% to 10% with effect from 6 April 2018 and from 10% to 11% with effect from 6 April 2019.

Comment

Both employed and self-employed earners who reached state pension age from 6 April 2016 have access to the same flat rate state pension. This means that the self-employed have gained £1,800 a year more than under the previous system. The government therefore think it is fair that the NIC differential between them is reduced as employees are paying 12%.

Research and development (R&D)

There are two types of tax reliefs for eligible R&D expenditure. Under one of these, qualifying companies can claim a taxable credit of 11% in relation to eligible R&D expenditure. This is known as the Research and Development Expenditure Credit (RDEC). To further support investment, the government will make administrative changes to the RDEC to increase the certainty and simplicity around claims and will take action to improve awareness of R&D tax credits among small and medium-sized enterprises.

Appropriations to trading stock

From 8 March 2017, the government will remove the ability for businesses to convert capital losses into trading losses when appropriating a capital asset to trading stock.

Disposals of land in the UK

The government will amend legislation to ensure that all profits realised by offshore property developers developing land in the UK, including those on pre-existing contracts, are subject to tax, with effect from 8 March 2017. This extends legislation introduced in Finance Act 2016.

Substantial shareholding exemption (SSE) reform

Changes are proposed to some of the qualifying conditions for the SSE. The good news is that the changes remove some of the obstacles of qualifying for SSE.

The condition that the investing company is required to be a trading company or part of a trading group is being removed.
The condition that the investment must have been held for a continuous period, at a minimum of 12 months in the two years preceding the sale is being extended to a continuous period of 12 months in the six years preceding the sale.
The condition that the company in which the shares are sold continues to be a qualifying company immediately after the sale, is withdrawn, unless the sale is to a connected party.
For a class of investors defined as Qualifying Institutional Investors, the condition that the company in which the shares were sold is a trading company has also been removed. The draft legislation contains a list of Qualifying Institutional Investors.

The changes have effect for disposals on or after 1 April 2017.

Restrictions on residential property interest

Legislation has already been enacted to restrict interest relief for landlords.

From 6 April 2017, landlords will no longer be able to deduct all of their finance costs from their property income. They will instead receive a basic rate reduction from their income tax liability for these finance costs. Finance costs include mortgage interest, interest on loans to buy furnishings and fees incurred when taking out or repaying loans or mortgages.

The restriction will be phased in with 75% of finance costs being allowed in 2017/18, 50% in 2018/19, 25% in 2019/20 and be fully in place for 2020/21. The remaining finance costs for each year will be given as a basic rate tax reduction but cannot create a tax refund.

These restrictions apply to:

UK resident individuals that let residential properties in the UK or overseas
non-UK resident individuals that let residential properties in the UK
individuals who let such properties in partnership
trustees or beneficiaries of trusts liable for income tax on the property profits.

UK and non-UK resident companies are not affected nor landlords of ‘Furnished Holiday Lettings’.

Enlarging Social Investment Tax Relief

Significant amendments to the Social Investment Tax Relief (SITR) will be legislated for in Finance Bill 2017 to:

increase the amount of investment a social enterprise may receive over its lifetime to £1.5 million, for social enterprises that receive their initial risk finance investment no later than seven years after their first commercial sale. The current limit will continue to apply to older social enterprises
reduce the limit on full-time equivalent employees to below 250 employees
exclude certain activities, including asset leasing and on-lending. Investment in nursing homes and residential care homes will be excluded initially. However the government intends to introduce an accreditation system to allow such investment to qualify for SITR in future
exclude the use of money raised under the SITR to pay off existing loans
clarify that individuals will be eligible to claim relief under the SITR only if they are independent from the social enterprise
introduce a provision to exclude investments where arrangements are put in place with the main purpose of delivering a benefit to an individual or party connected to the social enterprise.

The changes will take effect for investments made on or after 6 April 2017.

Employment Taxes

Off-payroll working in the public sector

As previously announced, from 6 April 2017, new tax rules potentially affect individuals who provide their personal services via their own companies (PSCs) to an organisation which has been classified as a ‘public authority’.

The effect of these rules, if they apply, will mean:

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

Public sector organisations include government departments and their executive agencies, many companies owned or controlled by the public sector, universities, local authorities, parish councils and the National Health Service.

The new rules operate in respect of payments made on or after 6 April 2017. This means that they are relevant to contracts entered into before 6 April 2017 but where the payment for the work is made after 6 April 2017.

Comment

Where individuals are working through their PSC for private sector clients, the new rules will not apply to income from such work.

It is for the public authority to decide if the deemed payment rules apply. To help all parties determine whether these rules apply, HMRC have provided an online employment status tool. There is no formal right of appeal to HMRC or the Tax Tribunals by the individual or the PSC. If a new contract is entered into after 6 April 2017, the expectation would be that the PSC would agree the treatment within the initial contract. If it is an existing contract a discussion will need to take place with the public authority as to the reasons for its decision.

Apprenticeship levy and apprenticeship funding

Larger employers (or connected employers treated as large) will be liable to pay the apprenticeship levy from April 2017. The levy is set at a rate of 0.5% of an employer’s pay bill, which is broadly total employee earnings excluding benefits in kind, and will be paid along with other PAYE deductions. Each employer receives an annual allowance of £15,000 to offset against their levy payment. This means that the levy will only be paid on any pay bill in excess of £3 million in a year.

Employers only need to report on the levy where they have a pay bill of £3 million in the current tax year or consider that the pay bill will be over £3 million during the 2017/18 tax year.

The levy will be used to provide funding for apprenticeships and there will be changes to the funding for apprenticeship training for all employers as a consequence. Each country in the UK has its own apprenticeship authority and each is making changes to its scheme.

Different forms of remuneration

The government is consulting on the following:

Taxation of benefits in kind

The government will publish a call for evidence on exemptions and valuation methodology for the income tax and employer NICs treatment of benefits in kind, in order to better understand whether their use in the tax system can be made fairer and more consistent.

Accommodation benefits

The government will publish a consultation with proposals to bring the tax treatment of employer-provided accommodation and board and lodgings up to date. This will include proposals for when accommodation should be exempt from tax and to support taxpayers during any transition.

Employee expenses

The government will publish a call for evidence to better understand the use of the income tax relief for employees’ expenses, including those that are not reimbursed by their employer.

Comment

Employers can choose to remunerate their employees in a range of different ways but, in the view of the government, the tax system may treat these forms of remuneration inconsistently. The government is therefore considering how the tax system ‘could be made fairer and more coherent’.

Salary sacrifice

Legislation will limit the income tax and employer NICs advantages where:

benefits in kind are offered through salary sacrifice or
the employee can choose between cash allowances and benefits in kind.

The taxable value of benefits in kind where cash has been forgone will be fixed at the higher of the current taxable value or the value of the cash forgone.

The new rules will not affect employer-provided pension saving, employer-provided pensions advice, childcare vouchers, workplace nurseries, or Cycle to Work. Following consultation, the government has also decided to exempt Ultra-Low Emission Vehicles, with emissions under 75 grams of CO₂ per kilometre.

This change will take effect from 6 April 2017. Those already in salary sacrifice contracts at that date will become subject to the new rules in respect of those contracts at the earlier of:

an end, change, modification or renewal of the contract
6 April 2018, except for cars, accommodation and school fees, when the last date is 6 April 2021.

Comment

Employers and employees may wish to review their flexible remuneration packages prior to 6 April 2017.

Changes to termination payments

Changes from 6 April 2018 will align the rules for tax and employer NICs by making an employer liable to pay NICs on any part of a termination payment that exceeds the £30,000 threshold. It is anticipated that this will be collected in ‘real-time’.

In addition, all payments in lieu of notice (PILONs) will be both taxable and subject to Class 1 NICs. This will be done by requiring the employer to identify the amount of basic pay that the employee would have received if they had worked their notice period, even if the employee leaves the employment part way through their notice period. This amount will be treated as earnings and will not be subject to the £30,000 exemption.

Finally, the exemption known as foreign service relief will be removed and a clarification made to ensure that the exemption for injury does not apply in cases of injured feelings.

National Minimum Wage and National Living Wage increases

The Chancellor confirmed that the National Living Wage (NLW) rate will be increased from 1 April 2017. Increases are also being made to the National Minimum Wage (NMW) rates. The NLW applies to workers aged 25 and over. The NMW applies to other workers provided they are at least school leaving age.

Rate from:	1 October 2016	1 April 2017
NLW for workers aged 25 and over	£7.20*	£7.50
NMW main rate for workers aged 21-24	£6.95	£7.05
NMW 18-20 rate	£5.55	£5.60
NMW 16-17 rate	£4.00	£4.05
NMW apprentice rate**	£3.40	£3.50

* introduced and applies from 1 April 2016
**the apprentice rate applies to apprentices under 19 or 19 and over and in the first year of their apprenticeship.

Capital Taxes

Capital gains tax (CGT) rates

The rate for disposals qualifying for Entrepreneurs’ Relief is 10% with a lifetime limit of £10 million for each individual. Entrepreneurs’ Relief is targeted at working directors and employees of companies who own at least 5% of the ordinary share capital in the company and the owners of unincorporated businesses. In 2016/17 a new relief, Investors’ Relief, was introduced which also provides a 10% rate with a lifetime limit of £10 million for each individual. The main beneficiaries of this relief are external investors in unquoted trading companies.

CGT annual exemption

The CGT annual exemption is £11,100 for 2016/17 and will be increased to £11,300 for 2017/18.

Inheritance tax (IHT) nil rate band

The nil rate band has remained at £325,000 since April 2009 and is set to remain frozen at this amount until April 2021.

IHT residence nil rate band

Legislation has already been enacted to introduce an additional nil rate band for deaths on or after 6 April 2017, where an interest in a main residence passes to direct descendants. The amount of relief is being phased in over four years; starting at £100,000 in the first year and rising to £175,000 for 2020/21. For many married couples and civil partners the relief is effectively doubled as each individual has a main nil rate band and each will potentially benefit from the residence nil rate band.

The additional band can only be used in respect of one residential property, which does not have to be the main family home, but must at some point have been a residence of the deceased. Restrictions apply where estates are in excess of £2 million.

Where a person dies before 6 April 2017, their estate will not qualify for the relief. A surviving spouse may be entitled to an increase in the residence nil rate band if the spouse who died earlier has not used, or was not entitled to use, their full residence nil rate band. The calculations involved are potentially complex but the increase will often result in a doubling of the residence nil rate band for the surviving spouse.

Downsizing

The residence nil rate band may also be available when a person downsizes or ceases to own a home on or after 8 July 2015 where assets of an equivalent value, up to the value of the residence nil rate band, are passed on death to direct descendants.

Comment

From April 2017 we have three nil rate bands to consider. The standard nil rate band has been a part of the legislation from the start of IHT in 1986. In 2007 the ability to utilise the unused nil rate band of a deceased spouse was introduced enabling many surviving spouses to have a nil rate band of up to £650,000. By 6 April 2020 some surviving spouses will be able to add £350,000 in respect of the residence nil rate band to arrive at a total nil rate band of £1 million.

Individuals will need to revisit their wills to ensure that the relief will be available and efficiently utilised.

Non-UK domiciles

A number of changes are to be made from 6 April 2017:

for individuals who are non-UK domiciled but who have been resident for 15 of the previous 20 tax years or
where an individual was born in the UK with a UK domicile of origin and resumes UK residence having obtained a domicile of choice elsewhere.

Such individuals will be classed as ‘deemed’ UK domiciles for income tax, CGT and IHT purposes. For income tax and CGT, a deemed UK domicile will be assessable on worldwide arising income and gains. They will not be able to access the remittance basis. For IHT, a deemed UK domicile is chargeable on worldwide assets rather than only on UK assets.

Legislation will allow a non-UK domiciled individual who has been taxed on the remittance basis to transfer amounts between overseas mixed fund bank accounts without being subject to the offshore transfer rules. This will allow the different elements within the accounts to be separated, thereby allowing clean capital to be remitted to the UK in priority to income and gains.

The draft legislation also provides that the market value of an asset at 5 April 2017 will be able to be used as the acquisition cost for CGT purposes when computing the gain or loss on its disposal where the asset was situated outside the UK between 16 March 2016 and 5 April 2017. This will apply to any individual who becomes a deemed UK domicile in April 2017, other than one who is born in the UK with a UK domicile of origin.

Non-UK domiciles who set up an overseas resident trust before becoming a deemed UK domicile will generally not be taxed on any income and gains retained in that trust and the trust remains non chargeable property for IHT purposes. However, there are a number of changes which modify the tax treatment on the occurrence of certain events for settlor interested overseas asset trusts.

UK residential property

Changes are also proposed for UK residential property. Currently all residential property in the UK is within the charge to IHT if owned by a UK or non-UK domiciled individual. It is proposed that all residential properties in the UK will be within the charge to IHT where they are held within an overseas structure. This charge will apply whether the overseas structure is held by an individual or trust.

Business Investment Relief

The government will change the rules for the Business Investment Relief scheme from April 2017 to make it easier for non-UK domiciled individuals, who are taxed on the remittance basis, to bring offshore money into the UK for the purpose of investing in UK businesses. The government will continue to consider further improvements to the rules for the scheme to attract more capital investment in UK businesses by non-UK domiciled individuals.

Other Matters

Business rates

Business rates have been devolved to Scotland, Northern Ireland and Wales. The business rates revaluation takes effect in England from April 2017 and will result in significant changes to the amount of rates that businesses will pay. The government announced £3.6 billion of transitional relief in November 2016. The Chancellor has now announced £435 million of further support for businesses. This includes:

support for small businesses losing Small Business Rate Relief to limit increases in their bills to the greater of £600 or the real terms transitional relief cap for small businesses each year
providing English local authorities with funding to support £300 million of discretionary relief, to allow them to provide support to individual cases in their local area.

The government will also introduce a £1,000 business rate discount for public houses with a rateable value of up to £100,000, for one year from 1 April 2017. This is subject to state aid limits for businesses with multiple properties.

Tax avoidance and evasion measures

In addition to measures specifically referred to earlier in this summary, other measures announced include:

Qualifying recognised overseas pension schemes (QROPS)

The government will introduce a 25% charge on transfers to QROPS. This charge is targeted at those seeking to reduce the tax payable by moving their pension wealth to another jurisdiction. Exceptions will apply to the charge allowing transfers to be made tax free where people have a genuine need to transfer their pension, including when the individual and the pension are both located within the European Economic Area.

VAT: fraud in the provision of labour in the construction sector

The government will consult on options to combat missing trader VAT fraud in the provision of labour in the construction sector, in particular, applying the reverse charge mechanism so the recipient accounts for VAT.

Employment Allowance

HMRC are actively monitoring National Insurance Employment Allowance compliance following reports of some businesses using avoidance schemes to avoid paying the correct amount of NICs. The government will consider taking further action in the event that this avoidance continues.

Budget 2016 – An Overview

Posted on March 17, 2016 by Henry Cooper

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The Budget 2016

George Osborne presented the first Spring Budget of this Parliament on Wednesday 16 March 2016.

In his speech the Chancellor reported on ‘an economy set to grow faster than any other major advanced economy in the world’.

Towards the end of last year the government issued the majority of the clauses, in draft, of Finance Bill 2016 together with updates on consultations. Publication of draft Finance Bill clauses is now an established way in which tax policy is developed, communicated and legislated.

The Budget updates some of these previous announcements and also proposes further measures. Some of these changes apply immediately, others in April 2016 and some take effect at a later date.

Main Budget tax proposals

Our summary concentrates on the tax measures which include:

reductions in the rates of capital gains tax
introduction of a Lifetime ISA for under 40s
changes to Entrepreneurs’ Relief
abolition of Class 2 NIC
reduction in the corporation tax rate
reforms to corporate tax losses.

The Budget proposals may be subject to amendment in a Finance Act. You should contact us before taking any action as a result of the contents of this summary.

This summary is published for the information of clients. It provides only an overview of the main proposals announced by the Chancellor of the Exchequer in his Budget Statement, and no action should be taken without consulting the detailed legislation or seeking professional advice. Therefore no responsibility for loss occasioned by any person acting or refraining from action as a result of the material contained in this summary can be accepted by the authors or the firm.

Personal Tax

The personal allowance

For those born after 5 April 1938 the personal allowance is currently £10,600. Those born before 6 April 1938 have a slightly higher allowance. Legislation has already been enacted to increase the personal allowance to £11,000 in 2016/17. From 2016/17 onwards one personal allowance will apply regardless of age.

Comment

Not everyone has the benefit of the full personal allowance. There is a reduction in the personal allowance for those with ‘adjusted net income’ over £100,000 which is £1 for every £2 of income above £100,000. So for 2015/16 there is no personal allowance where adjusted net income exceeds £121,200 (£122,000 for 2016/17).

Tax bands and rates

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

Legislation has already been enacted to increase the basic rate limit to £32,000 for 2016/17. The higher rate threshold will therefore rise to £43,000 in 2016/17 for those entitled to the full personal allowance.

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

Tax bands and personal allowance for 2017/18

The Chancellor has announced that the personal allowance will be increased to £11,500 and the basic rate limit increased to £33,500 for 2017/18. The higher rate threshold will therefore rise to £45,000 for those entitled to the full personal allowance.

Tax bands and rates – dividends

Currently, when a dividend is paid to an individual, it is subject to different tax rates compared to other income due to a 10% notional tax credit being added to the dividend. So for an individual who has dividend income which falls into the basic rate band the effective tax rate is nil as the 10% tax credit covers the 10% tax liability. For higher rate and additional rate taxpayers, the effective tax rates on a dividend receipt are 25% and 30.6% respectively.

To determine which tax band dividends fall into, dividends are treated as the last type of income to be taxed.

From 6 April 2016:

the 10% dividend tax credit is abolished with the result that the cash dividend received will be the gross amount potentially subject to tax
a new Dividend Tax Allowance charges the first £5,000 of dividends received in a tax year at 0%
for dividends above £5,000, new rates of tax on dividend income will be 7.5% for basic rate taxpayers, 32.5% for higher rate taxpayers and 38.1% for additional rate taxpayers.

Comment

Many individuals do not have £5,000 of dividend income so are potential winners in the new regime. The removal of any tax on dividends up to £5,000 increases the attractiveness of holding some investments which provide dividend returns rather than interest receipts. Use can then also be made of the CGT annual exemption by selective selling of investments.

Basic rate taxpayers in particular need to appreciate that all dividends received still form part of the total income of an individual. If dividends above £5,000 are received, the first £5,000 will use up some or all of any basic rate band available. The element of dividends above £5,000 which are taxable may well therefore be taxed at 32.5%.

Tax on savings income

Savings income is income such as bank and building society interest. In 2015/16 some individuals qualify for a 0% starting rate of tax on savings income up to £5,000. However, the rate is not available if taxable non-savings income (broadly earnings, pensions, trading profits and property income) exceeds the starting rate limit.

The starting rate limit remains at £5,000 for 2016/17.

In addition, from 2016/17 the Savings Allowance (SA) will apply to savings income. Income within the SA will be taxed at a new 0% rate (the ‘savings nil rate’). However, the available SA in a tax year will depend on the individual’s marginal rate of income tax. Individuals taxed at up to the basic rate of tax will have an SA of £1,000.

For higher rate taxpayers, the SA will be £500 whilst no SA is due to additional rate taxpayers.

Alongside the introduction of the SA, banks and building societies will cease to deduct tax from account interest they pay to customers.

Comment

The new SA will exempt from tax interest receipts for many taxpayers. The government anticipates that around 95% of taxpayers will not have any tax to pay on their savings income. However, the allowance works in a complex way. For example, a taxpayer whose total non-savings income is near to £43,000 in 2016/17 (the point from which higher rate taxes are payable) needs to be aware that savings income is still added to other income to determine whether the SA is £1,000 or £500.

Individual Savings Accounts (ISAs)

The overall ISA savings limit is £15,240 for 2015/16 and will remain at this figure for 2016/17.

Two changes are proposed with effect from 6 April 2016. The following changes will be made to the existing ISA Regulations:

Savers will be allowed to replace cash they have withdrawn from their account earlier in a tax year, without this replacement counting towards the annual ISA limit for that year. This flexibility will be available in relation to both current year and earlier years’ ISA savings where provided for in the terms and conditions of a ‘flexible ISA’.
A third ISA, the Innovative Finance ISA, is being introduced for loans arranged via a peer to peer (P2P) platform.

The total an individual can save each year into all ISAs will be increased from £15,240 to £20,000 from April 2017.

Lifetime ISA

A new Lifetime ISA will be available from April 2017 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 will 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.

Comment

The new Lifetime ISA is designed to allow flexible saving for first time buyers and those wishing to save for their retirement. The Chancellor said in his speech:

‘My pension reforms have always been about giving people more freedom and more choice.

So faced with the truth that young people aren’t saving enough, I am today providing a different answer to the same problem.’

Help to Save

The government has announced the introduction of a new type of savings account aimed at low income working households.

Individuals in low income working households will be able to save up to £50 a month into a Help to Save account and receive a 50% government bonus after two years. Account holders can then choose to continue saving under the scheme for a further two years. The scheme will be open to all adults in receipt of Universal Credit with minimum weekly household earnings equivalent to 16 hours at the National Living Wage or those in receipt of Working Tax Credits.

Accounts will be available no later than April 2018.

Pensions consultation and reform

The government consultation ‘Strengthening the incentive to save’ looked at the way pensions are taxed. The consultation found that while the current system gives everyone an incentive to save into a pension, and people like the 25% tax free lump sum, it is also inflexible and poorly understood. Young people in particular are not saving enough, often because they feel they have to choose between saving for their first home and saving for retirement.

Comment

The Chancellor said in his speech:

‘Over the past year we’ve consulted widely on whether we should make compulsory changes to the pension tax system. But it was clear there is no consensus.’

The Chancellor is introducing the Lifetime ISA as a vehicle for younger people to save.

Pensions advice

The Financial Advice Market Review (FAMR) aims to support the provision of affordable and accessible advice. FAMR was a joint review between the Financial Conduct Authority and Her Majesty’s Treasury, and its recommendations were published on 14 March 2016.

The government commits to implement all of the recommendations for which it is responsible, and will:

Consult on introducing a single clear definition of financial advice to remove regulatory uncertainty and ensure that firms can offer consumers the help they need.
Increase the existing £150 Income Tax and National Insurance relief for employer arranged pension advice to £500. The new exemption will ensure that the first £500 of any advice received is eligible for the relief. It will be available from April 2017.
Consult on introducing a Pensions Advice Allowance. This will allow people before the age of 55 to withdraw up to £500 tax free from their defined contribution pension to redeem against the cost of financial advice. The exact age at which people can do this will be determined through consultation. This means that a basic rate taxpayer could save £100 on the cost of financial advice.

The government will also restructure the delivery of public financial guidance to make it more effective.

Phased rollout of Tax-Free Childcare

The government has announced it will introduce Tax-Free Childcare in early 2017. Tax-Free Childcare will be gradually rolled out to children under 12 with the parents of the youngest children being able to enter the scheme first. The scheme will be open to all eligible parents by the end of 2017.

The existing scheme, Employer-Supported Childcare, will remain open to new entrants until April 2018 to support the transition between the schemes.

Business Tax

Corporation tax rates

The main rate of corporation tax is currently 20% and this rate will continue for the Financial Year beginning on 1 April 2016. The main rate of corporation tax will then be reduced as follows:

19% for the Financial Years beginning on 1 April 2017, 1 April 2018 and 1 April 2019
17% for the Financial Year beginning on 1 April 2020.

Corporate tax loss relief

The government will introduce two reforms to corporate tax losses from April 2017. First, losses arising on or after 1 April 2017 will be useable, when carried forward, against profits from other income streams or other companies within a group. Second, from 1 April 2017, companies will only be able to use losses carried forward against up to 50% of their profits above £5 million. For groups, the £5 million allowance will apply to the group.

Capital allowances on business cars

The current 100% first year allowance (FYA) on businesses purchasing low emission cars will be extended to April 2021. A low emission car is one where the CO₂ emissions do not exceed 75 gm/km and this threshold will fall to 50 gm/km from April 2018. In addition, the CO₂ emission threshold for the main rate of capital allowances for business cars will reduce from 130 gm/km to 110 gm/km from April 2018.

Corporation tax payment dates

At the Summer Budget 2015, the government announced it would bring forward corporation tax payment dates for companies with taxable profits over £20 million. This measure has been deferred by two years and will now apply to accounting periods starting on or after 1 April 2019.

Loans to participators

The 25% rate of tax charged on loans to participators and other arrangements by close companies will increase to 32.5%. This applies to loans made and benefits conferred on or after 6 April 2016. This increased rate mirrors the dividend upper rate. The government has noted that this will prevent individuals gaining a tax advantage by taking loans or making other arrangements to extract value from their company rather than remuneration or dividends.

Enterprise Zones – enhanced capital allowances

This measure extends the period in which businesses investing in new plant and machinery in ECA sites in Enterprise Zones can qualify for 100% capital allowances to eight years.

Removal of statutory renewals allowance

The government will withdraw the statutory renewals allowance, which provides businesses with tax relief for the cost of replacing tools. The changes ensure that tax relief for expenditure incurred on the replacement of tools will be obtained under the same rules as those which apply to other capital equipment. Businesses will be able to claim tax relief under the normal capital allowance regime or, in the case of residential landlords, for the cost of replacing domestic items such as furnishings and appliances. The withdrawal will come into effect for expenditure on or after 6 April 2016 for income tax purposes and from 1 April 2016 for corporation tax.

Company distributions

Legislation will be introduced with effect from 6 April 2016 to:

amend the Transactions in Securities legislation, which is designed to prevent tax advantages in certain circumstances. The amendments, for example, include liquidations as potentially coming within the scope of the legislation
introduce a new Targeted Anti-Avoidance Rule, which would prevent some distributions in a liquidation being taxed as capital, where certain conditions are met and there is an intention to gain a tax advantage.

Comment

In some situations shareholders of close companies can receive a payment from the company which is taxed as a capital gain instead of as dividend income. If Entrepreneurs’ Relief is available the gain will be subject to only 10% tax. The government is concerned that the new dividend tax rates introduced from 6 April 2016 will encourage shareholders to convert to capital what might otherwise be taxed as income.

Abolition of Class 2 National Insurance Contributions (NIC)

The government will abolish Class 2 NIC from April 2018. The government will publish its response to the recent consultation on state benefit entitlement for the self-employed in due course. This will set out details of how the self-employed will access contributory benefits after Class 2 is abolished.

Property and trading income allowances

From April 2017, the government will introduce a new £1,000 allowance for property and trading income. Individuals with property or trading income below £1,000 will no longer need to declare or pay tax on that income. Those with income above the allowance will be able to calculate their taxable profit either by deducting their expenses in the normal way or by simply deducting the relevant allowance.

Making tax digital

From 2018 businesses, self-employed people and landlords who are keeping records digitally and providing regular digital updates to HMRC will be able to adopt pay-as-you-go tax payments. This will enable them to choose payment patterns that suit them and better manage their cash flow.

Reform of Substantial Shareholding Exemption (SSE)

SSE means that capital gains on corporate share disposals are not subject to UK corporation tax where certain conditions are satisfied. It was introduced in 2002 and was designed to ensure that tax does not act as a disincentive to commercially desirable business sales or group restructuring. There have been significant developments in the UK and international corporate tax landscape since the SSE was first introduced. The government will therefore consult on the extent to which the SSE is still delivering on its original policy objective and whether there could be changes to its detailed design in order to increase its simplicity, coherence and international competitiveness.

Petroleum Revenue Tax (PRT)

The rate of PRT will be permanently reduced to zero for all chargeable periods ending after 31 December 2015.

Anti-avoidance

The government will change the deduction of tax at source regime to bring all international royalty payments arising in the UK within the charge to income tax, unless those taxing rights have been given up under a double taxation agreement or the EU Interest and Royalties Directive.

Employment Taxes

NIC for apprentices under 25

From 6 April 2016 employer NICs are 0% for apprentices under 25 who earn less than the upper secondary threshold (UST) which is £827 per week (£43,000 per annum). Employers are liable to 13.8% NIC on pay above the UST. Employee NICs are payable as normal.

An apprentice needs to:

be working towards a government recognised apprenticeship in the UK which follows a government approved framework/standard
have a written agreement, giving the government recognised apprentice framework or standard, with a start and expected completion date.

Employers need to identify relevant apprentices and generally assign them NIC category letter H to ensure the correct NICs are collected.

Comment

The proposals exclude apprenticeships which do not follow government approved frameworks, also known as common law apprenticeships. A similar 0% rate of employer NIC already applies for employees under the age of 21.

Employee benefits and expenses changes from 6 April 2016

From 6 April 2016 a number of changes are introduced relating to the tax treatment of employee benefits in kind and expenses:

There will be a statutory exemption for certain expenses, such as travelling and subsistence expenses, reimbursed to an employee. This will replace the current system where employers have to apply for a dispensation to avoid having to report non-taxable expenses (on forms P11D).
Employers will be able to include taxable benefits in pay and thus account for PAYE on the benefits. However, in order to payroll benefits for 2016/17, employers will have to register with HMRC for the service before the start of the new tax year. Employers will then not have to include these payrolled benefits on forms P11D.
The £8,500 threshold below which employees do not pay income tax on certain benefits in kind will be removed. There will be new exemptions for carers and ministers of religion.

Comment

The statutory exemption for reimbursed expenses will mean that all employees will automatically get the tax relief they are due on qualifying expenses payments.

Another option is introduced which allows amounts based on scale rates to be paid or reimbursed, instead of the employee’s actual costs. The rates that can be used are either HMRC approved figures or figures specifically agreed with HMRC in writing.

The approved figures only cover meals purchased by an employee in the course of business travel.

Simplification of the administration of tax on employee benefits and expenses

The government will introduce a package of measures to further simplify the tax administration of employee benefits and expenses by:

extending the voluntary payrolling framework to allow employers to account for tax on non-cash vouchers and credit tokens in real time from April 2017
consulting on proposals to simplify the process for applying for and agreeing PAYE Settlement Agreements
consulting on proposals to align the dates by which an employee has to make a payment to their employer in return for a benefit-in-kind they receive to ‘make good’
legislating to ensure that if there is a specific statutory provision for calculating the tax charge on a benefit in kind, this must be used.

Employer provided cars

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. Most cars are taxed by reference to bands of CO₂ emissions. There is a 3% diesel supplement. The maximum charge is capped at 37% of the list price of the car.

From 6 April 2016 there will be a 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%.

From 6 April 2017 the appropriate percentage for cars which have neither a CO₂ emissions figure nor an engine cylinder capacity, and which cannot produce CO₂ emissions in any circumstances by being driven, will be set at 9%. From 6 April 2018 this will be increased to 13%, and from 6 April 2019 to 16%.

Van benefit charge for zero emissions vans

The van benefit charge for 2015/16 is £3,150 increasing to £3,170 in 2016/17.

The government will extend van benefit charge support for zero-emission vans so that from 6 April 2016 the charge will be 20% of the main rate in 2016/17 and 2017/18, and will then increase on a tapered basis to 5 April 2022. The government will review the impact of this incentive at Budget 2018 together with enhanced capital allowances for zero-emission vans.

Taxation of termination payments

From April 2018 the government will tighten the scope of the income tax exemption for termination payments to prevent manipulation.

Termination payments over £30,000 which are subject to income tax will also be subject to employer NIC. The government will undertake a technical consultation on tightening

the scope of the exemption.

Travel and subsistence expenses rules

In September 2015 the government published a discussion document aimed at modernising the tax rules for travel and subsistence (T&S). The government has analysed responses and concluded that, although complex in parts, the current T&S rules are generally well understood and work effectively for the majority of employees and has decided not to make further changes to the T&S rules at this time.

Employment intermediaries and relief for travel and subsistence

As announced at March Budget 2015, the government will introduce legislation in Finance Bill 2016 to restrict tax relief for home to work travel and subsistence expenses for workers engaged through an employment intermediary. This will bring the rules into line with those that apply to employees.

Simplifying the NIC rules

The government will commission the Office of Tax Simplification to review the impact of moving employee NIC to an annual, cumulative and aggregated basis and moving employer NIC to a payroll basis.

Disguised remuneration schemes

The government will introduce a package of measures to tackle the current and historic use of disguised remuneration schemes, which are used to avoid income tax and NIC. Legislation will be included in Finance Bill 2016 which will prevent a relief in the existing legislation from applying where it is used as part of a tax avoidance scheme from Budget Day.

The government will hold a technical consultation on further changes to the legislation which will be included in a future Finance Bill. This will include a new charge on loans paid through disguised remuneration schemes which have not been taxed and are still outstanding on 5 April 2019.

Employee share schemes: simplification of the rules

The government will make a number of technical changes to simplify the tax-advantaged and non-tax-advantaged employee share scheme rules.

Employment Allowance

The NIC Employment Allowance was introduced from 6 April 2014. It is an annual allowance which is available to many employers and can be offset against their employer NIC liability.

From April 2016, the government will increase the NIC Employment Allowance from £2,000 to £3,000 a year. The increase will mean that businesses will be able to employ four workers full time on the new National Living Wage without paying any NIC.

To ensure that the NIC Employment Allowance is focussed on businesses and charities that support employment, from April 2016 companies where the director is the sole employee will no longer be able to claim the Employment Allowance.

Employers who hire an illegal worker face civil penalties from the Home Office. The government will build on this deterrent by removing a year’s Employment Allowance from those receiving civil penalties, starting in 2018.

Salary sacrifice

The government is considering limiting the range of benefits that attract income tax and NIC advantages when provided as part of salary sacrifice schemes. However, the government’s intention is that pension saving, childcare, and health-related benefits such as Cycle to Work should continue to benefit from income tax and NIC relief when provided through salary sacrifice arrangements.

Off-payroll working in the public sector

From April 2017 the government will make public sector bodies and agencies responsible for operating the tax rules that apply to off-payroll working through limited companies in the public sector. The rules will remain unchanged for those working in the private sector. Liability to pay the correct employment taxes will move from the worker’s own company to the public sector body or agency/third party paying the company.

The government will consult on a clearer and simpler set of tests and online tools.

Capital Taxes

Capital gains tax (CGT) rates

The current rates of CGT are 18% to the extent that any income tax basic rate band is available and 28% thereafter. The government is to reduce the higher rate of CGT from 28% to 20% and the basic rate from 18% to 10%. The trust CGT rate will also reduce from 28% to 20%. The 28% and 18% rates will continue to apply for carried interest and for chargeable gains on residential property that do not qualify for private residence relief. In addition, the 28% rate still applies for ATED related chargeable gains accruing to any person (principally companies). These changes will take effect for disposals made on or after 6 April 2016.

The rate for disposals qualifying for Entrepreneurs’ Relief (ER) remains at 10% with a lifetime limit of £10 million for each individual.

Example 2016/17

Annie, a higher rate taxpayer, has the following chargeable gains after the annual exemption:

• Gains eligible for ER £100,000

• A residential property gain £30,000

• Other gains £10,000

The ER gain is taxable at 10%. The residential property gain will be taxed at 28% and other gains at 20%.

Goodwill on Incorporation and ER

New rules were introduced from 3 December 2014 which prevent individuals from claiming ER on disposals of goodwill when they transfer their business to a related company in which they, or a member of their family, held any shares whatsoever. This means that CGT became payable on the gain at the normal rates of 18% or 28% rather than 10%.

Revised legislation will be introduced in Finance Bill 2016 to allow ER to be claimed in respect of gains on goodwill where the individual holds less than 5% of the shares, and less than 5% of the voting power, in the acquiring company.

Relief will also be due where an individual holds 5% or more of the shares or voting power if the transfer of the business to the company is part of arrangements for the company to be sold to a new, independent owner.

This measure will have backdated effect and will therefore apply to disposals on or after 3 December 2014.

Associated disposals and ER

New rules were introduced in 2015 which were aimed at combatting abuse of ER. Whilst preventing the abuse, those rules also resulted in relief not being due on ‘associated disposals’ when a business was sold to members of the claimant’s family under normal succession arrangements.

Certain revisions are to be made so that ER will be allowed on a disposal of a privately-held asset when the accompanying disposal of business assets is to a family member.

In addition, under the 2015 rules an associated disposal can only qualify for ER if there is also a material disposal of 5% or more of the claimant’s share in a partnership or holding in a company. Under the proposals this is not to apply where the claimant disposes of the whole of his interest and has previously held a larger stake.

These changes will have a backdated effect for associated disposals made on or after 18 March 2015.

Joint ventures, partnerships and ER

Changes introduced in 2015 to combat abuse of ER also resulted in relief not being due to investors in some types of genuine commercial structures where tax avoidance was not a main motive. Those affected were companies with shares in joint venture companies and corporate partners with shares in trading companies because their investments were reclassified as non-trading activities. ER is only available to companies or partnerships which are predominantly trading so ER status was lost in a number of cases.

To enable genuine commercial structures to qualify for ER, this measure changes the definitions of a ‘trading company’ and a ‘trading group’ which apply for ER. Where the new definitions apply, a company which holds shares in a joint venture company will be treated as carrying on a proportion of the activities of that company corresponding to the investing company’s fractional shareholding in it. Also, the activities of a corporate partner in a firm will be treated as having their true nature (trading or non-trading) when determining whether the company is a trading company.

It will also be a requirement that the person making the disposal on which relief is claimed has at least a 5% interest in the shares of the joint venture company, and effectively controls at least 5% of the voting rights in that company. Where a partnership with a corporate partner is concerned, the person making the disposal must be entitled to at least 5% of the partnership’s assets and profits, and control at least 5% of the voting rights in the corporate partner.

The new definitions mean that, in some cases, whether a company is a trading company or the holding company of a trading group will depend on the size of the claimant’s shareholding in the company.

External investors and ER

ER will be extended to external investors (other than employees or officers of the company) in unlisted trading companies. To qualify for the 10% CGT rate under ‘investors’ relief’ the following conditions will apply:

shares must be newly issued and subscribed for by the individual for new consideration
be in an unlisted trading company, or an unlisted holding company of a trading group
have been issued by the company on or after 17 March 2016 and have been held for a period of three years from 6 April 2016
have been held continuously for a period of three years before disposal.

An individual’s qualifying gains for investors’ relief will be subject to a lifetime cap of £10 million.

Capital gains and employee shareholder agreements

The ‘employee shareholder’ was a new employment status made available from 1 September 2013. Employee shareholders who agreed to give up certain statutory employment rights received in exchange at least £2,000 of shares in their employer or parent company free of income tax and national insurance. Qualifying conditions do apply.

Any eventual gains on shares received with an original value of up to £50,000 are CGT free. However, a lifetime limit of £100,000 on the CGT exempt gains is introduced on disposals under Employee Shareholder Agreements entered into after 16 March 2016.

Other Matters

Stamp Duty Land Tax (SDLT) and Land and Buildings Transaction Tax (LBTT)

The Chancellor announced in the Autumn Statement that new rates of SDLT on purchases of additional residential properties would apply from 1 April 2016. Similar legislation was introduced in the Scottish Parliament for LBTT which applies to property transactions in Scotland. The LBTT legislation has now been enacted.

The new rates will be three percentage points above the current SDLT and LBTT rates. The higher rates will potentially apply if, at the end of the day of the purchase transaction, the individual owns two or more residential properties.

The SDLT proposals were subject to a consultation. The government has now announced:

purchasers will have 36 months rather than 18 months to claim a refund of the higher rates if they buy a new main residence before disposing of their previous main residence
purchasers will also have 36 months between selling a main residence and replacing it with another main residence without having to pay the higher rates
a small share in a property which has been inherited within the 36 months prior to a transaction will not be considered as an additional property when applying the higher rates
there will be no exemption from the higher rates for significant investors.

Comment

The main target of the higher rates is purchases of buy to let properties or second homes. However, there will be some purchasers who will have to pay the additional charge even though the property purchased will not be a buy to let or a second home. The proposed 36 month rules above will help to remove some transactions from the additional rates (or allow a refund). Care will be needed if an individual already owns, or partly owns, a property and transacts to purchase another property without having disposed of the first property.

LBTT has been enacted with the 18 month periods rather than 36 months.

SDLT on non-residential property

The government will change the calculation of SDLT on freehold and leasehold premium non-residential transactions, on and after 17 March 2016, so the rates apply to the portion of the purchase price within each band. The SDLT rates and thresholds for non-residential freehold and leasehold premiums will also change from the same date.

For new leasehold transactions, SDLT is already charged at each rate on the portion of the net present value (NPV) of the rent which falls within each band. On and after 17 March 2016 a new 2% rate for rent paid under a non-residential lease will be introduced where the NPV of the rent is above £5 million.

Comment

The LBTT on non-residential properties in Scotland is already based on a similar system to that proposed for SDLT.

VAT: overseas businesses and online marketplaces

Changes will be made to the existing rules which allow HMRC to direct an overseas business to appoint a VAT representative with joint and several liability. A new provision will then enable HMRC to hold an online marketplace jointly and severally liable for the unpaid VAT of an overseas business that sells goods in the UK via that online marketplace.

The measure will have effect from Royal Assent to Finance Bill 2016.

Comment

The objective of this measure is to give HMRC strengthened operational powers to tackle the non-compliance from some overseas businesses that avoid paying UK VAT on sales of goods made to UK consumers via online marketplaces. It is directed at getting overseas businesses, that are or should be VAT registered in the UK, paying VAT due either directly or through a VAT representative.

Business rates

Business rates have been devolved to Scotland, Northern Ireland and Wales. The Chancellor has announced cuts on business rates for half of all properties in England from 1 April 2017. In particular the government proposes to:

Permanently double Small Business Rate Relief (SBRR) from 50% to 100% and increase the thresholds to benefit a greater number of businesses. Businesses with a property with a rateable value of £12,000 and below will receive 100% relief.
Increase the threshold for the standard business rates multiplier to a rateable value of £51,000, taking 250,000 smaller properties out of the higher rate.

Insurance Premium Tax

The standard rate of IPT will be increased from 9.5% to 10% with effect from 1 October 2016.

General Anti-Abuse Rule (GAAR)

The government will legislate to introduce a new penalty of 60% of tax due to be charged in all cases successfully tackled by the GAAR. Small changes to the GAAR procedure will be made to improve its ability to tackle marketed avoidance schemes.

New soft drinks industry levy

The government will introduce a new soft drinks industry levy to be paid by producers and importers of soft drinks that contain added sugar. The levy will be charged on volumes according to total sugar content, with a main rate charge for drink above 5 grams of sugar per 100 millilitres and a higher rate for drinks with more than 8 grams of sugar per 100 millilitres. There will be an exclusion for small operators.

It is proposed to introduce the measure from April 2018.

The Second Budget 2015 – An Overview

Posted on July 9, 2015 by Henry Cooper

The Second Budget 2015

George Osborne presented the first Budget of this Parliament on Wednesday 8 July 2015. The speech set out his plans for the next five years ‘to keep moving us from a low wage, high tax, high welfare economy; to the higher wage, lower welfare country we intend to create’.

Main Budget tax proposals

New taxation system for dividend receipts for individuals.
Proposals to restrict interest relief for ‘buy to let’ landlords.
Extension to the inheritance tax nil rate band available.

Other tax changes

An announcement of the amount of the Annual Investment Allowance available to businesses from January 2016.
Removal of the tax relief available on the acquisition of goodwill and customer related intangibles.
An increase in the amount of the NIC Employment Allowance.

The government also announced a number of changes to tax credits and Universal Credit as part of the welfare reforms aimed at reducing the growing expenditure in this area.

Our summary focuses on the tax issues likely to affect you, your family and your business. To help you decipher what was announced we have included our own comments.

If you have any questions please do not hesitate to contact us for advice.

The Budget proposals may be subject to amendment in a Finance Act. You should contact us before taking any action as a result of the contents of this summary.

Personal Tax

The personal allowance for 2015/16

For those born after 5 April 1938 the personal allowance is £10,600. For those born before 6 April 1938 the personal allowance remains at £10,660. The reduction in the personal allowance for those with ‘adjusted net income’ over £100,000 is £1 for every £2 of income above £100,000. So for 2015/16 there is no personal allowance where adjusted net income exceeds £121,200.

Commitments to increase the personal allowance

The Chancellor announced that the personal allowance will be increased to £11,000 for 2016/17 and to £11,200 in 2017/18. These allowances are higher than those previously announced in the March Budget.

Legislation to ensure a tax-free minimum wage

The government has an objective to raise the personal allowance to £12,500 and the higher rate threshold to £50,000 by the end of this Parliament.

The government has announced that the personal allowance will automatically increase in line with the equivalent of 30 hours a week at the adult rate of the national minimum wage once the personal allowance reaches £12,500.

Tax bands and rates for 2015/16

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

Currently dividend income is taxed at 10% where it falls within the basic rate band and 32.5% where liable at the higher rate of tax. Where income exceeds £150,000, dividends are taxed at 37.5%. Dividend income is deemed to be paid net of a notional 10% tax credit.

Some individuals qualify for the 0% starting rate of tax on savings income up to £5,000. The rate is not available if taxable non-savings income (broadly earnings, pensions, trading profits and property income) exceeds the starting rate limit.

Commitment to increase the 40% income tax threshold

The Chancellor announced that the basic rate limit will be increased to £32,000 for 2016/17 and to £32,400 for 2017/18.

The higher rate threshold will rise to £43,000 in 2016/17 and £43,600 in 2017/18 for those entitled to the full personal allowance.

Personal Savings Allowance

The Chancellor announced in the March Budget that legislation will be introduced in a future Finance Bill to apply a Personal Savings Allowance to income such as bank and building society interest from 6 April 2016.

The Personal Savings Allowance will apply for up to £1,000 of a basic rate taxpayer’s savings income, and up to £500 of a higher rate taxpayer’s savings income each year. The Personal Savings Allowance will not be available for additional rate taxpayers.

Dividend Tax Allowance and rates of tax

The government will abolish the dividend tax credit from 6 April 2016 and introduce a new Dividend Tax Allowance of £5,000 a year.

The new rates of tax on dividend income above the allowance will be 7.5% for basic rate taxpayers, 32.5% for higher rate taxpayers and 38.1% for additional rate taxpayers. While these rates remain below the main rates of income tax, those who receive significant dividend income, for example as a result of receiving dividends through a close company, will pay more.

Comment

The government expects these changes to reduce the incentive to incorporate and remunerate through dividends rather than through wages to reduce tax liabilities.

The government also gives an example of a person who receives significant dividend income ‘due to very large shareholdings (typically more than £140,000)’ having to pay a higher rate of tax. It is unclear what this means.

Individual Savings Accounts (ISAs)

In 2015/16 the overall ISA savings limit is £15,240.

From 6 April 2016 the government will introduce the Innovative Finance ISA, for loans arranged via a peer to peer (P2P) platform. A public consultation has been launched on whether to extend the list of ISA eligible investments to include debt securities and equity offered via a crowd funding platform.

It was announced in the March Budget that regulations would be introduced in autumn 2015, following consultation on technical detail, to enable ISA savers to withdraw and replace money from their cash ISA without it counting towards their annual ISA subscription limit for that year. This change will have effect from 6 April 2016.

Help to Buy ISA

The government announced the introduction of a new type of ISA in the March Budget, the Help to Buy ISA, which will provide a tax free savings account for first time buyers wishing to save for a home.

The scheme will provide a government bonus to each person who has saved into a Help to Buy ISA at the point they use their savings to purchase their first home. For every £200 a first time buyer saves, the government will provide a £50 bonus up to a maximum bonus of £3,000 on £12,000 of savings.

The government has now announced that Help to Buy ISAs will be available for first time buyers to start saving into from 1 December 2015. First time buyers will be able to open their Help to Buy ISA accounts with an additional one off deposit of £1,000.

Tax-Free Childcare scheme

The Tax-Free Childcare scheme will provide relief for 20% of the costs of childcare. The maximum relief will be £2,000 per child per year or £4,000 for disabled children. The scheme was scheduled to be launched in autumn 2015 but the launch date has been deferred to early 2017.

The current system of employer supported childcare will continue to be available for current members if they wish to remain in it or they can switch to the new scheme. Employer supported childcare will continue to be open to new joiners until the new scheme is available.

Employers’ workplace nurseries won’t be affected by the introduction of Tax-Free Childcare.

Comment

The scheme has been delayed due to a court case taken by some childcare voucher providers. The legal issues have now been resolved in favour of the government. So those people who are unable to use the current employer supported childcare scheme, such as the self-employed, will have to wait a bit longer to get support with childcare costs.

Free childcare

From September 2017 the free childcare entitlement will be doubled from 15 hours to 30 hours a week for working parents of 3 and 4 year olds. The government will implement this extension of free hours early in some local areas from September 2016. This free childcare is worth around £5,000 a year per child.

Restricting loan interest relief for ‘buy to let’ landlords

The government will restrict the amount of income tax relief landlords can get on residential property finance costs to the basic rate of income tax. Finance costs include mortgage interest, interest on loans to buy furnishings and fees incurred when taking out or repaying mortgages or loans. No relief is available for capital repayments of a mortgage or loan.

Landlords will no longer be able to deduct all of their finance costs from their property income. They will instead receive a basic rate reduction from their income tax liability for their finance costs. To give landlords time to adjust, the government will introduce this change gradually from April 2017, over four years.

The restriction in the relief will be phased in as follows:

in 2017/18, the deduction from property income will be restricted to 75% of finance costs, with the remaining 25% being available as a basic rate tax reduction
in 2018/19, 50% finance costs deduction and 50% given as a basic rate tax reduction
in 2019/20, 25% finance costs deduction and 75% given as a basic rate tax reduction
from 2020/21, all financing costs incurred by a landlord will be given as a basic rate tax reduction.

This restriction will not apply to landlords of furnished holiday lettings.

Comment

The restrictions on loan interest will be an unwelcome development for landlords paying higher or additional rate of tax. For many investors, the restriction on loan interest relief will materially alter their attitude to the amount of debt taken on.

Other changes to property taxation

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. Capital allowances will continue to apply for landlords of furnished holiday lets.
increase the level of Rent-a-Room relief from £4,250 to £7,500 per annum.

Pensions – restriction on tax relief

The Annual Allowance provides an annual limit on tax relieved pension savings. It is currently £40,000. From April 2016 the government will introduce a taper to the Annual Allowance for those with adjusted annual incomes, including their own and employer’s pension contributions, over £150,000. For every £2 of adjusted income over £150,000, an individual’s Annual Allowance will be reduced by £1, down to a minimum of £10,000.

The government also wants to make sure that the right incentives are in place to encourage saving into pensions in the longer term. The government is therefore consulting on whether there is a case for reforming pensions tax relief.

Business Tax

Corporation tax rates

From 1 April 2015 the main rate of corporation tax is 20% and it is proposed that this rate will continue for the Financial Year beginning on 1 April 2016. The main rate of corporation tax will then be reduced as follows:

19% for the Financial Years beginning on 1 April 2017, 1 April 2018 and 1 April 2019
18% for the Financial Year beginning on 1 April 2020.

Annual Investment Allowance (AIA)

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 maximum amount of 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 return 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. The maximum amount for the transitional period is the total of the time apportioned maximum AIA of £500,000 from the start of the chargeable period to 31 December 2015 plus the time apportioned maximum AIA of £200,000 from 1 January 2016 to the end of the chargeable period. However any AIA available on expenditure in the second period would be limited to the time apportioned maximum in that period.

Corporation tax relief for business goodwill

Where a company acquires goodwill or intangible assets, which are recognised in the accounts, a corporation tax deduction is available for the charge to profit and loss when the assets are written off. This deduction is only available on the acquisition of a business and not on the acquisition of shares in a company.

For acquisitions of goodwill and customer related intangibles made on or after 8 July 2015 this relief will no longer be available. In addition, there will be restrictions on the treatment of any allowable losses realised on subsequent disposals of goodwill or customer related intangibles which were acquired on or after 8 July 2015. There are no restrictions where a profit is made on a subsequent disposal.

Corporation tax payment dates

The government will introduce earlier dates for the payment of corporation tax for larger companies and groups, for accounting periods starting on or after 1 April 2017. For companies with annual taxable profits of £20 million or more, tax will be payable in quarterly instalments in the third, sixth, ninth and twelfth months of their accounting period. For groups the threshold is divided by the number of companies in the group.

Tax-advantaged venture capital schemes

This Budget also announces that the government will make amendments to the tax-advantaged venture capital schemes to ensure that the UK continues to offer significant and well-targeted support for investment into small and growing companies, with a particular focus on innovative companies.

Capital Taxes

Capital gains tax (CGT) rates and annual exemption

No changes have been announced in respect of CGT rates or the annual exemption.

Inheritance tax (IHT) nil rate band

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

IHT and the main residence nil rate band

An additional nil rate band is to be introduced 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. It will then increase in line with CPI from 2021/22 onwards. The additional band can only be used in respect of one residential property which has, at some point, been a residence of the deceased.

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 current tax position of the non UK domicile

A UK resident and domiciled individual is taxed on worldwide income and gains. Non UK domiciles who are UK resident are currently able to claim the remittance basis of taxation in respect of foreign income and gains. This means that they are only taxed if foreign income and gains are brought into the UK. The non UK domicile is also favourably treated for IHT as they only pay IHT in respect of UK assets as opposed to their worldwide assets.

New proposals for non UK domiciles

The government intends to abolish non UK domicile status for certain long term residents from April 2017. This will only apply where an individual has been resident for at least 15 out of the last 20 tax years. Such individuals will be treated as deemed UK domicile for all tax purposes.

In addition, those who had a domicile in the UK at the date of their birth will revert to having a UK domicile for tax purposes whenever they are resident in the UK, even if under general law they have acquired a domicile in another country.

UK residential property held indirectly by non UK domicile persons

The government will legislate to ensure that, from April 2017, IHT is payable on all UK residential property owned by non UK domiciles, regardless of their residence status for tax purposes, including property held indirectly through an offshore structure such as a trust or partnership.

Other Matters

Tax lock

The government will legislate to set a ceiling for the main rates of income tax, the standard and reduced rates of VAT, and employer and employee Class 1 NIC rates, ensuring that they cannot rise above their current levels. The tax lock will also ensure that the NIC Upper Earnings Limit cannot rise above the income tax higher rate threshold and will prevent the relevant statutory provisions being used to remove any items from the zero rate of VAT and reduced rate of VAT for the duration of this Parliament.

National Living Wage

The government will introduce a new National Living Wage (NLW) for workers aged 25 and above, by introducing a premium on top of the National Minimum Wage (NMW). From April 2016, the NLW will be set at £7.20 an hour. This rate is 70p higher than the current NMW rate, and 50p above the NMW increase coming into effect in October 2015.

Employment allowance

To ensure that the NIC Employment Allowance is focussed on businesses and charities that support employment, from April 2016, companies where the director is the sole employee will no longer be able to claim the Employment Allowance.

Tax avoidance

A raft of HMRC compliance initiatives are to be launched over the next few years. To quote the Chancellor:

‘We’re boosting HMRC’s capacity with three quarters of a billion pounds of investment to go after tax fraud, offshore trusts and the businesses of the hidden economy, tripling the number of wealthy evaders they pursue for prosecution – raising £7.2 billion in extra tax.’

Tax credits

A number of changes to tax credits and Universal Credit are announced as part of the welfare reforms aimed at reducing the growing expenditure in this area.

Key changes include:

From April 2016 the government will reduce the level of earnings at which a household’s tax credits and Universal Credit award starts to be withdrawn for every extra pound earned. There will also be an increase in the taper rate which applies to any excess income further reducing the tax credit award.
Limiting the Child Element of both tax credits and Universal Credit to two children so that any subsequent children born after April 2017 will not be eligible for further support. Some claimants will be protected from these changes.
Those starting a family after April 2017 will not be eligible for the Family Element in tax credits and equivalent in Universal Credit.

In addition tax credit allowances (with the exception of disability elements) will be frozen

Newsletter – May 2014

Posted on May 26, 2014 by Henry Cooper

In this month’s enews we update you on pertinent announcements from HMRC for employers. We also look at issues relevant to businesses.

Please contact us if you would like any further information.

eNEWS quicklinks
More HMRC guidance on the Employment Allowance	P11D forms don’t get them wrong
Shared Parental Leave	Icebreaker tax avoidance scheme rejected by HMRC
Pay your PAYE on time or face in-year interest on late payments	VAT update and fuel scale charges
Proposed new rules for easier prosecution of offshore tax evaders	Late payments to smaller businesses on the increase

More HMRC guidance on the Employment Allowance

The Employment Allowance of up to £2,000 is available to most employers from 6 April 2014. Employers can reduce the amount of National Insurance contributions (NICs) they pay for their employees by up to £2,000. This is called the ‘Employment Allowance’.

Employers generally won’t have to pay any employer National Insurance contributions at all if they usually pay less than £2,000 a year.

HMRC has updated the guidance on eligibility for the Employment Allowance.

For help with payroll matters please do contact us.

Internet link: Employment allowance eligibility Employment allowance key facts

P11D forms don’t get them wrong

HMRC have published a list of common errors in the completion of forms P11D and guidance that medical benefits for lower paid employees are not reportable. The information is part of the lengthy Employer Bulletin so we have reproduced the guidance below.

Common Mistakes

The following is a list of common errors which are easily avoidable but can delay processing and cause problems with employees’ tax codes each year:

Submitting duplicate P11D information on paper where P11D information has already been filed online to ensure ‘HMRC have received it’. These duplicates can cause processing problems
Using a paper form that relates to the wrong tax year – check the top right hand corner of the first page
Not ticking the ‘director’ box if the employee is a director
Not including a description or abbreviation, where amounts are included in sections A, B, L, M or N of the form
Leaving the ‘cash equivalent’ box empty where you’ve entered a figure in the corresponding ‘cost to you’ box of a section
Not correctly completing the declaration on the final FPS/EPS submission (for those employers operating PAYE in ‘real time’) or the box in Part 5 of form P35 (Employers Annual Return) to indicate whether or not P11Ds are due
Where a benefit has been provided for mixed business and private use, entering only the value of the private-use portion – you must report the full gross value of the benefit
Not completing the fuel benefit box/field where this applies. This means an amended P11D has to be sent in
Incorrectly completing the ‘from’ and ‘to’ dates in the ‘Dates car was available’ boxes. For example entering 06/04/2013 to 05/04/2014 to indicate the car was available throughout that year. If the car was available in the previous tax year, the ‘from’ box should not be completed and if the car is to be available in the next tax year, the ‘to’ box should not be completed i.e. left blank.’

The Employer Bulletin also includes guidance on a common error relating to the incorrect completion of a form P9D in relation to private medical insurance provided to lower paid employees. The HMRC guidance states:

Are You Completing P9D’s Needlessly for Employees in Receipt of Medical Benefit?

Do you know that if your employees earn less than the rate of £8,500 AND you arrange and pay the provider directly for the treatment or insurance a P9D does NOT need to be completed.

For more information go to www.hmrc.gov.uk/payerti/exb/a-z/m/medical-treatment.htm

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

Internet link: www.hmrc.gov.uk/payerti/exb/forms.htm

Shared Parental Leave

The current system of statutory pay and leave entitlements for employed parents is to be reformed for babies due (or adopted children placed) on or after 5 April 2015. The following guidance in contained in the lengthy Employer Bulletin so we have reproduced it in full.

The Government is reforming the statutory pay and leave entitlements available to employed parents. For babies due on or after 5 April 2015 a new entitlement of Shared Parental Leave (SPL) will replace Additional Paternity Leave and Pay. The parents of babies due on or before 4 April 2015 will continue to be eligible for Additional Paternity Leave and Pay.

SPL gives families greater choice over how they arrange childcare in the first year, by allowing working mothers the option to end their maternity pay and leave early and to share untaken leave and pay with their partner. An adopter will similarly be able to bring their adoption leave and pay to an early end to opt into Shared Parental Pay (ShPP) and Leave.

It is intended to enable fathers to take a greater role in caring for a child, and to help both parents to better balance childcare responsibilities with staying in work. For businesses, this helps them keep their best talent and allows employers to recruit with confidence that their women employees will be less likely to drop out of the workforce when they have children.

How does it work?

Current entitlement to 52 weeks statutory maternity/adoption leave, 39 of which is paid, and 2 weeks of statutory paternity leave and pay is all unchanged. The first six weeks of Statutory Adoption Pay will increase to 90% of average weekly earnings.

Working parents of a baby due or an adoptive child placed on or after 5 April 2015 may be eligible for SPL and ShPP. Under SPL, mothers/adopters will be able to choose to end their maternity/adoption leave and pay early (at any point from 2 weeks after the birth/placement), and share their untaken pay and leave with their partner. Shared parental leave and pay can be stopped and started and parents can be off at the same time, if they wish.

Parents will be able to take their leave in phases, for example 20 weeks for the mother/adopter, followed by 20 weeks for the father/partner, followed by 10 weeks for the mother/adopter. So it may be the case that statutory parental pay is paid over one or two discontinuous periods. Parents must notify their employers of their plans under SPL 8 weeks before they become eligible for it, and all shared leave and pay must be taken between the birth/placement and the child’s first birthday.

What do employers need to do?

We expect the first notifications of intention to take SPL to arrive with employers from February 2015. The Government will provide an online form for parents to use. Some employers may wish to create their own requirements for how their employees notify them.

We anticipate that employers will need to update payroll systems where relevant to accommodate providing statutory parental pay to employees taking SPL, and to enable these payments to be paid discontinuously where necessary.

The Government will provide online tools to check eligibility, and publish detailed guidance on the rules around SPL. A key part of SPL is the discussion between employer and employee to agree the phasing of SPL and the return to work, and ACAS will also publish guidance to support this process.’

We will update you when further information is released. Please do get in touch if you would like further guidance on this area.

Internet links: Employer Bulletin

Icebreaker tax avoidance scheme rejected by HMRC

In a high profile decision HMRC has won a case in which the Icebreaker partnership schemes were shut down, after the tribunal ruled it was set up to shelter more than £120m in tax.

The wealthy members of the scheme, which included Gary Barlow and two of his former Take That band mates, claimed to be active partners trading in the creative industries, selling, for example, the rights to a song or an idea for a book. They claimed tax relief on greater losses than they invested in the partnerships. The return on the partners’ ‘investment’ was the tax relief, which was considerably larger than their cash contribution.

A HMRC spokesperson said:

‘HMRC has put in place generous reliefs to support genuine business investment and our tax reliefs for the creative industries work well, enabling the UK’s world-class film, television and video production companies to compete on the global stage.

But we will not tolerate abuse of the system by people trying to dodge their tax obligations. HMRC will continue to challenge in the courts and anyone who engages in tax avoidance schemes risk not only the high cost of these schemes but also lay themselves open to penalties and, potentially, prosecution.’

The scheme was rejected by a First-tier Tribunal.

Internet link: News Tribunal

Pay your PAYE on time or face in-year interest on late payments

HMRC have issued further guidance on late payment interest on PAYE and CIS payments for 2014/15 onwards and how to avoid it.

HMRC now charges interest on any late PAYE and Construction Industry Scheme (CIS) payments.

To avoid an interest charge employers should pay by the due date, the difference between the following:

what they report on their Full Payment Submission(s) (FPS) received by the 19th of the month following the end of the tax month it relates to, together with any CIS charges for that tax month
any deductions reported on an Employer Payment Submission (EPS), again received by the 19th of the month following the end of the tax month it relates to.

Any corrections made to wages reported on an FPS that HMRC receives after the 19th of the month following the end of the tax month it relates to will be included in the following month’s charge. In these circumstances, the amount payable for the tax month is the amount actually reported by the 19th (rather than the corrected amount).

Interest charges

HMRC will charge interest daily, from the date a payment is due and payable to the date it is paid in full.

Accruing Interest and the Business Tax Dashboard

Employers will be able to see an estimate of the interest building up on the Business Tax Dashboard.

Please be aware that HMRC have stated:

‘Accrued interest is only a guide to what may be due. HMRC will only seek payment of interest when the amount due is settled.

The Business Tax Dashboard will only show interest as accruing in the current month, regardless of when the payment was due.

It will show interest as accruing from the 19th of each month, regardless of how the employer pays. Employers who pay electronically should not worry if they see an accrued interest entry between 19th and 22nd of a month. Once the electronic payment is received, the calculation will correctly use the 22nd as the due date, and any interest charge generated between the 19th and 22nd will be cancelled.

Currently, there is an HMRC systems error which results in the Business Tax Dashboard showing interest accruing despite the employer having submitted an EPS that clears the original charges. This error will be corrected shortly. In the meantime, HMRC will not pursue this charge and employers do not need to contact HMRC about this.’

Please do get in touch if you would like help with payroll issues.

Internet links: News

VAT update and fuel scale charges

HMRC have issued guidance on a number of VAT changes including confirmation 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 2014.

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

Internet link: VAT update VAT fuel scale charges

Proposed new rules for easier prosecution of offshore tax evaders

The government will consult on plans to introduce a new strict liability criminal offence for individuals who hide their money offshore.

HMRC would no longer need to prove that individuals who have undeclared income offshore intended to evade tax, in order for the offence to be a criminal conviction.

Currently HMRC have to demonstrate that even when someone failed to declare offshore income that the individual intended to evade tax. This change will mean HMRC only has to demonstrate the income was taxable and undeclared meaning it will be easier to secure successful prosecutions of offshore tax evaders.

As well as introducing the new criminal offence, the government will consult on a range of options building on the existing penalties to make sure they act as a clear and effective deterrent.

Chancellor of the Exchequer, George Osborne, said:

‘The government has taken significant steps to clamp down on those hiding their money offshore. HMRC has brought in over £1.5billion over the last two years and, through our leadership at the G8, we have taken significant steps towards greater transparency and tax information sharing.

But there can be no let up and we will continue to pursue offshore tax evaders. Those who continue to believe they can hide wealth offshore should know that there is no safe haven and that serious consequences await them.’

Internet links: News

Late payments to smaller businesses on the increase

According to a recent survey by the Forum of Private Business (FPB) almost one in four smaller businesses experienced an increase in the number of late payments during 2013.

Approximately a third of businesses surveyed reported an increase in the average number of days beyond the payment deadline that payments were made. FPB Chief Executive Phil Orford commented that more than £30 billion still remains ‘tied up in late payments’.

Internet link: Press release

Newsletter – April 2014

Posted on April 25, 2014 by Henry Cooper

In this month’s enews we report on pensions announcements and other issues pertinent to employers with many deadlines approaching.

Please contact us if you would like any further information.

eNEWS quicklinks
HMRC guidance on new pension flexibility	Employers no longer able to reclaim SSP
Disclosure facility for those with undisclosed second incomes	More guidance on Class 3A NIC
More HMRC guidance on the Employment Allowance	Tax-Free Childcare
Increase in NMW rates	Advisory fuel rates for company cars and fuel benefit charge
P11D deadline approaching

HMRC guidance on new pension flexibility

Following the Budget announcements regarding pension flexibility HMRC have now issued some guidance for those individuals who may wish to review their pension options.

New rules are being introduced to ensure that people do not lose their right to a tax-free lump sum if they would rather use the new flexibility this year or next, instead of buying a lifetime annuity.

Internet link: Pensions flexibility

Employers no longer able to reclaim SSP

The Percentage Threshold Scheme (PTS), which allows employers to reclaim Statutory Sick Pay (SSP) in certain circumstances, is abolished from 6 April 2014.

Under PTS employers have been able to reclaim SSP where the SSP paid is more than 13% of the Class 1 NIC due for the month. Employers are not entitled to recover any of the SSP paid to their employees unless they qualify for the reimbursement scheme.

The following example explains how the scheme worked for a tax month:

SSP paid	=	£630.00
Gross NI £3,704.29 x 13%	=	£481.56
SSP recoverable: (£630 – £481.56)	=	£148.44

From 6 April 2014 employers are unable to recover SSP however they will continue to be able to recover unclaimed SSP for previous years until 5 April 2016. Do contact us if you think this may apply to your business.

The government has announced that the current PTS funding will be moved into a new scheme to help employees who have been incapacitated for four weeks or more get back to work as part of the government’s Health Work and Wellbeing Initiative.

Internet link: Employer bulletin

Disclosure facility for those with undisclosed second incomes

The Second Incomes Campaign is an opportunity open to individuals in employment who have an additional untaxed source of income.

The new facility allows those with untaxed income to get up to date with their tax affairs in a simple, straightforward way and take advantage of the best possible terms.

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

Internet links: Second incomes campaign Guide to disclosure

More guidance on Class 3A NIC

Further guidance has been issued on Class 3A National insurance contributions (NIC).

In the autumn of 2013 the Government announced plans to introduce a scheme to allow pensioners to top up their Additional State Pension by paying a new class of voluntary National Insurance contribution, to be known as Class 3A.

‘The scheme will open in October 2015 and will be available to all pensioners who reach State Pension age before the introduction of the new State Pension in April 2016. The scheme is expected to run for 18 months.’

‘Class 3A will give pensioners an option to top up their pension by up to £25 a week in a way that will protect them from inflation and offer protection to surviving spouses. In particular, it could help women, and those who have been self-employed, who tend to have low additional State Pension entitlement.’

Internet link: Publication

More HMRC guidance on the Employment Allowance

Employers generally won’t have to pay any employer National Insurance contributions at all if they usually pay less than £2,000 a year.

HMRC has issued more guidance on the practicalities of claiming the allowance which can be found by visiting the link below.

For help with payroll matters please do contact us.

Internet links: Employment allowance detail Employment allowance key facts

Tax-free childcare

Details of the new Tax-Free Childcare scheme which is to be launched in autumn 2015 have been announced.

The scheme will be worth a maximum of £2,000 per child per year. The maximum amount due is calculated on 20% of the costs of childcare (up to a total of childcare costs of £10,000 per child per year).

The scheme will be launched in autumn 2015. All children under 12 within the first year of the scheme will be eligible. To qualify for Tax-Free Childcare all parents in the household must:

meet a minimum income level based on working eight hours per week at the National Minimum Wage (around £50 a week at current rates)
each earn less than £150,000 a year, and
not already be receiving support through Tax Credits or Universal Credit.

Self-employed parents will be able to get support with childcare costs in the Tax-Free Childcare scheme, unlike the current employer supported childcare scheme. To support newly self-employed parents, the Government is introducing a ‘start-up’ period. During this period a newly self-employed parent will not have to earn the minimum income level.

It is proposed that parents register with the Government and open an online account. The scheme will be delivered by HMRC in partnership with National Savings and Investments, the scheme’s account provider. The Government will then ‘top up’ payments into this account at a rate of 20p for every 80p that families pay in.

Internet link: News

Increase in NMW rates

The Government has approved a rise in the National Minimum Wage rates which will come into effect on 1 October 2014:

a 19p (3%) increase in the adult rate (from £6.31 to £6.50 per hour)
a 10p (2%) increase in the rate for 18 to 20 year olds (from £5.03 to £5.13 per hour)
a 7p (2%) increase in the rate for 16 to 17 year olds (from £3.72 to £3.79 per hour)
a 5p (2%) increase in the rate for apprentices (from £2.68 to £2.73 per hour.

The rise will take effect in October 2014, as Business Secretary Vince Cable has accepted in full the independent Low Pay Commission’s recommendations for 2014, including plans for bigger increases in future than in recent years.

The Low Pay Commission (LPC) has said the rise, the first real terms cash increase since 2008, is manageable for employers and will support full employment.

Business Secretary Vince Cable said:

‘The recommendations I have accepted today (12 March 2014) mean that low paid workers will enjoy the biggest cash increase in their take home pay since 2008. This will benefit over 1 million workers on National Minimum Wage and marks the start of a welcome new phase in minimum wage policy.’

Meanwhile HMRC have revealed some of the excuses given for not paying the NMW.

Internet links: Press release HMRC NMW excuses

Advisory fuel rates for company cars and fuel benefit charge

Where private fuel is provided by the employer for a company car then a separate benefit is assessable on the employee. This benefit charge is calculated by applying the same percentage figure used to calculate the company car benefit to a fixed figure which for 2014/15 is set at £21,700. The percentage is linked to the car’s CO2 emission figures.

Now is a good time to consider whether this benefit is value for money for both the employee and employer.

The alternative is to reimburse the employee for business miles using the company car advisory fuel rates. The current rates are:

Engine size	Petrol
1400cc or less	14p
1401cc – 2000cc	16p
Over 2000cc	24p

Engine size	LPG
1400cc or less	9p
1401cc – 2000cc	11p
Over 2000cc	17p

Engine size	Diesel
1600cc or less	12p
1601cc – 2000cc	14p
Over 2000cc	17p

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: HMRC advisory fuel rates

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 2014, are due for submission to HMRC by 6 July 2014. 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.

HMRC have updated their expenses and benefits toolkit for 2013/14 and record keeping for 2014/15. The toolkit consists of a checklist which may be used by advisers or employers to check they are completing the forms P11D correctly.

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

Internet links: http://www.hmrc.gov.uk/payerti/exb/forms.htm Toolkit

Newsletter – February 2014

Posted on February 28, 2014 by Henry Cooper

In this month’s enews we advise on several issues relevant to employers. We also report on the help available for those affected by floods.

Please contact us if you would like any further information.

eNEWS quicklinks
Employment Allowance	Increases to NMW penalties and latest targets
Help for those affected by floods	No penalties for some late Self Assessment returns
HMRC warning about phishing scams	PAYE end of year approaching
Electronic messages to employers	Employee travel disruption

Employment Allowance

The Government has announced further details of the Employment Allowance which is available from 6 April 2014. Eligible employers can reduce their employer Class 1 NICs by up to £2,000 each tax year.

The Employment Allowance can be claimed by a business or charity (including Community Amateur Sports Clubs) that pays employer Class 1 NICs on their employees’ or directors’ earnings.

However there are some circumstances which may limit the availability of the allowance:

if a company belongs to a group of companies or a charity is part of a charities structure, only one company or charity can claim the allowance
the £2,000 Employment Allowance can only be claimed against one PAYE scheme, even if the business has more than one PAYE scheme.

Not all businesses can claim the Employment Allowance and the government guidance gives the following details of excluded employers.

You cannot claim the Employment Allowance, for example if you:

employ someone for personal, household or domestic work, such as a nanny, au pair, chauffeur, gardener or care support worker
already claim the allowance through a connected company or charity
are a public authority, this includes; local, district, town and parish councils
carry out functions either wholly or mainly of a public nature (unless you have charitable status), for example:

NHS services
General Practitioner services
the managing of housing stock owned by or for a local council
providing a meals on wheels service for a local council
refuse collection for a local council
prison services
collecting debt for a government department

If you would like any guidance on claiming the allowance please do get in touch. If we deal with your payroll we will ensure this matter is dealt with on your behalf.

Internet link: Gov.uk

Increases to NMW penalties and latest targets

The Government has announced that rogue employers who do not pay their workers the National Minimum Wage (NMW) will face an increased penalty of up to £20,000 as part of a Government crackdown.

Currently employers that break NMW law must pay the unpaid wages plus a financial penalty calculated as 50% of the total underpayment for all workers found to be underpaid. The maximum penalty an employer can face is £5,000.

The Government plans to increase the financial penalty percentage from 50% to 100% of the unpaid wages owed to workers. The maximum penalty will increase from £5,000 to £20,000. Regulations introducing these new limits are subject to Parliamentary approval and are expected to be enacted this month.

Latest target

Major record labels involved in this year’s Brit Awards are among the latest targets of HMRC’s continued crackdown on unpaid internships.

HMRC have written to record labels and event companies warning them about the consequences for non-payment of the NMW for any unpaid interns they take on. HMRC intend to follow up these letters with compliance visits later in the year to ensure the rules are being followed.

Michelle Wyer, HMRC’s Assistant Director NMW, said:

‘Non-payment of the National Minimum Wage is not an option, it’s the law, and we’re letting the music industry know that we’ve got them in our sights. If they are not playing by the rules, now is the time to put things in order.

Last year we fined over around 800 employers, so our message is clear: if you are not paying your interns, but should be, come forward now and put things right to avoid a penalty.’

Internet link: Press release

Help for those affected by floods

The Prime Minister has announced a package of measures to help flood affected businesses get back on their feet. The package of measures includes:

A Government Business Support Helpline providing comprehensive advice and support to businesses affected by floods. The helpline number is 0300 456 3565.
A new Business Support Scheme to provide hardship funding for SME businesses in areas affected by the floods. Both businesses that have been flooded, and businesses that are in affected areas and have suffered significant loss of trade, will be able to apply for support. Eligible businesses will be able to claim for funding for things like immediate clean-up costs, materials, and exceptional costs to help them continue trading.
Extra time for businesses to file accounts without any penalties.
All affected businesses will be able to apply to their local authority to get business rate relief for 3 months.
HMRC will also set up a new hotline for those who have been affected by flooding and may have difficulties in meeting their tax liabilities. HMRC will look to offer up to 3 months additional time to pay. This will cover all taxes owed to HMRC, including VAT, PAYE and corporation tax. The helpline number is 0800 904 79000800 904 7900.

Help is also available for communities affected. To read more about the help on offer visit the links below.

Internet links: HMRC website News Communities News business support

No penalties for some late Self Assessment returns

HMRC have announced that more than 10 million tax returns were filed on time meeting the 31 January deadline.

Approximately 8.5 million returns were filed online with the rest being paper filed. Perhaps not surprisingly the busiest day for tax return submission was 31 January when HMRC received over half a million returns.

For those failing to meet the deadline there is an automatic £100 late filing penalty regardless of whether the tax has been paid on time or indeed there is a refund due. Further penalties may also be imposed for continued failure to submit the return.

It has been widely reported that HMRC would not be charging penalties where returns were submitted before midnight on 15 February 2014. However this ‘reprieve’ only applies in limited circumstances as set out in the following HMRC statement:

‘We haven’t extended the Self Assessment deadline. Tax returns and any tax due must be received by HMRC by midnight tonight 31 January.

If someone has registered for our Online Service or existing customers have lost their User ID or password and realise they have left it too late we will allow a bit of extra time for this information to be received. This only applies to taxpayers who did the following between midnight on 21 January and midnight on 31 January 2014:

enrolled for the Self Assessment online service, or
requested a replacement user ID or password’

If you are one of the half a million people who have not yet submitted your self assessment return and you would like some help please do get in touch.

Internet links: Gov news SA leniency

HMRC warning about phishing scams

HMRC are warning taxpayers to be wary of the latest in a long line of email phishing scams that claim to offer tax rebates in return for bank account details.

HMRC have received over 23,000 reports of phishing scam emails in the three months to the 31 January 2014 self assessment deadline which is a 47% increase on the same period in 2013.

HMRC have confirmed that it never contacts taxpayers via e-mail regarding a refund and advised anyone who receives an email claiming to be from HMRC:

not to click on any links or attachments
forward it to phishing@hmrc.gsi.gov.uk and then
delete it permanently.

HMRC have published advice and examples of typical fake emails at www.hmrc.gov.uk/security/index.htm.

Internet link: News

PAYE end of year approaching

HMRC are reminding employers that with the end of the 2013/14 tax year approaching they will soon need to make their final 2013/14 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 2013/14 and this needs to be made on or before 5 April 2014. Details of how to make the final submission can be found on the HMRC website using the link below.

If we deal with the payroll on your behalf we will ensure this matter is dealt with on a timely basis.

Internet link: HMRC news

Electronic messages to employers

HMRC have issued an electronic warning message to employers who have not submitted their Full Payment Submission (FPS) return(s) during the January tax month. The message is intended to be a reminder to employers and is not a penalty notice.

HMRC are advising employers who receive this message that they should check that they have sent all the submissions that are due for their PAYE scheme.

If employers have notified HMRC recently that their business has ceased, then they can ignore the electronic message and do not need to contact HMRC.

HMRC started issuing these messages in December 2013 and this following link sets out instances where an employer may receive a non-filing message, although they have filed on time and where not action is required.

Internet links: HMRC news

Employee travel disruption

From time to time and particularly with the current weather conditions, travel disruption can affect an employee’s ability to get to work on time, or in some cases at all. For situations ranging from public transport cancellations to severe weather, employers and employees should consider how this could impact on the workforce.

Acas provide some useful guidance on these issues.

Internet link: Acas

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