Newsletter – March 2018

Enews – March 2018

In this month’s Enews we report on National Minimum Wage and National Living Wage increases together with increases in auto enrolment pension contributions.

We also report on tax relief for Scottish taxpayers on pension contributions following the introduction of five income tax bands. With new advisory fuel rates and a tribunal ruling on the tax status of a BBC journalist, there is lots to update you on.

Tribunal rules BBC journalist is caught by ‘IR35’ legislation

A First Tier Tribunal has ruled that Christa Ackroyd who presented BBC news programme Look North and was paid via a personal service company was caught by the IR35 rules resulting in additional tax and national insurance contributions being payable.

The IR35 rules in broad terms mean that those working via a personal service company have to consider whether, if the services were provided by the individual contractor directly to the client, there would be a contract of employment.

The tribunal looked at lots of factors pertinent to Ms Ackroyd’s engagement and considered it significant that the BBC could control what work she did. She was engaged for seven years on effectively a full time basis.

Subject to any appeal and determination of final figures, the tax and NIC that Ms Ackroyd will be liable for amounts to around £420,000 before offset of corporation tax.

The IR35 rules were amended for Public Bodies (including the BBC) from April 2017 and the government has announced that it may make changes to the rules for the private sector as well in the future.

Internet link: ICAEW News

Advisory fuel rates for company cars

New company car advisory fuel rates have been published which take effect from 1 March 2018. The guidance states: ‘You can use the previous rates for up to one month from the date the new rates apply’. The rates only apply to employees using a company car.

The advisory fuel rates for journeys undertaken on or after 1 March 2018 are:

Engine size Petrol
1400cc or less 11p
1401cc – 2000cc 14p
Over 2000cc 22p
Engine size LPG
1400cc or less 7p
1401cc – 2000cc 8p
Over 2000cc 13p
Engine size Diesel
1600cc or less 9p
1601cc – 2000cc 11p
Over 2000cc 13p

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

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

You must not use these rates in any other circumstances.

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

Internet link: GOV.UK AFR

Scotland’s five income tax bands and tax relief for pensions

Following the announcement of new income tax rates for Scottish taxpayers for 2018/19, the government is looking at ways of addressing the issue of the tax relief due on Scottish taxpayers’ pension contributions.

Tax relief on pension contributions is a complex matter and depends on the marginal tax rate of the individual concerned and whether or not the contributions are being paid with relief at source or under net pay arrangements. The following link details how relief will be given for 2018/19. If you would like help in this complex area please contact us.

The income tax rates for Scottish taxpayers on income other than savings and dividend income are now expected to be as follows:

Scottish Bands £ Band name Scottish Rate
0 – 2,000 Starter 19%
2,001 – 12,150 Basic 20%
12,151 – 31,580 Intermediate 21%
31,581 – 150,000 Higher 41%
Over 150,000 Top 46%

Scottish taxpayers are entitled to the same personal allowance as individuals in the rest of the UK which for 2018/19 is £11,850. The allowance is reduced by £1 for every £2 of adjusted net income in excess of £100,000. The bands and allowances are detailed in the P9X.

Internet links: GOV.UK pensions newsletter P9X 2018

Minimum Wage increases

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

There are different levels of NMW and NLW, depending on age and whether the employee is an apprentice. The rates are due to increase from 1 April 2018 as shown in the following table:

Rate from 1 April 2017 Rate from 1 April 2018
NLW for workers aged 25 and over £7.50 £7.83
NMW main rate for workers aged 21-24 £7.05 £7.38
NMW 18-20 rate £5.60 £5.90
NMW 16-17 rate for workers above school leaving age but under 18 £4.05 £4.20
NMW apprentice rate * £3.50 £3.70

*for apprentices under 19 or 19 or over and in the first year of their apprenticeship

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

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

Internet link: ACAS article

Pensions Auto Enrolment reaches a million employers

The Pensions Regulator has announced that the number of employers meeting their workplace pension duties has reached one million and that statistics show that approximately 9.3 million people are saving into a pension.

TPR’s Director of Automatic Enrolment, Darren Ryder, said:

‘I am delighted we have reached this important landmark, which shows how far we have come since the start of automatic enrolment.

By successfully meeting their responsibilities, employers have helped reverse the downward trend in workplace saving so that putting earnings into a pension has now become the norm.

The continued support of the pensions industry, including pension and payroll providers and business advisers has been crucial to the success of automatic enrolment. The industry has helped us ensure employers have the tools, information and services they need to comply with the law.

We are now focused on the challenges ahead so that employers continue to understand what they need to do so that staff receive the pensions they are entitled to.’

Minimum pension contributions are set to increase from 6 April 2018 and again in 2019.

Period Duration Employer minimum Total minimum contribution
1 Employer’s staging date to 5 April 2018 1% 2%
2 6 April 2018 to 5 April 2019 2% 5%
6 April 2019 onwards 3% 8%

Contact us if you would like help with auto enrolment.

Internet links: TPR press release TPR report TPR contributions increase

Year end tax planning

With the end of the tax year looming there is still time to save tax for 2017/18. We have set out some points you may want to consider.

  • Make full use of your ISA allowance – ISAs can offer a useful tax free way to save, whether this is for your children’s future, a first home or another purpose. Individuals may invest up to a limit of £20,000 for the 2017/18 tax year. A saver may only pay into a maximum of one Cash ISA, one Stocks and Shares ISA and one Innovative Finance ISA per year. Savers have until 5 April 2018 to make their 2017/18 ISA investment.
  • Take advantage of capital allowances – By making the most of capital allowances, businesses may be able to write off the costs of capital assets against taxable profits. The Annual Investment Allowance allows businesses to claim a deduction of up to £200,000 of the year’s investment in plant and machinery (excluding cars). Businesses of any size and most business structures can make use of the AIA. However, there are provisions to prevent multiple claims.
  • Build a tax efficient retirement plan – Pension contributions must be paid on or before 5 April 2018 for them to be relieved against 2017/18 income. Annual contributions are limited to the greater of £3,600 (gross) or the amount of your UK relevant earnings may be eligible for tax relief. However, these will be subject to the annual allowance, which is generally £40,000. This is reduced for those whose income is above certain technical thresholds and has to be considered when both adjusted annual income is (their income plus both their own and their employer’s pension contributions) over £150,000 and ‘net’ income is at least £110,000. Net income broadly means an individual’s income less own gross pension contributions made. For every £2 of adjusted income over £150,000, a person’s annual allowance is reduced by £1 (down to a minimum of £10,000).

 

Newsletter – December 2016

Enews – December 2016

Autumn Statement update

On Wednesday 23 November the Chancellor Philip Hammond presented his first, and last, Autumn Statement along with the Spending Review.

His speech and the supporting documentation set out both tax and economic measures. Some of the pertinent tax and employee welfare measures announced were:

  • the government reaffirming the objectives to raise the personal allowance to £12,500 and the higher rate threshold to £50,000 by the end of this Parliament
  • a reduction of the Money Purchase Annual Allowance for pensions to £4,000
  • a review of ways to build on Research and Development tax relief
  • tax and National Insurance advantages of salary sacrifice schemes to be removed
  • anti-avoidance measures for the VAT Flat Rate Scheme including the introduction of a higher 16.5% rate for some businesses
  • autumn Budgets commencing in autumn 2017
  • National Living Wage to rise from £7.20 an hour to £7.50 from April 2017
  • Universal Credit taper rate to be cut from 65% to 63% from April 2017.

Internet link: GOV.UK autumn statement documents

Seasonal gifts to employees – make sure they are tax free

At this time of year some employers may wish to make small gifts to their employees.

For many years HMRC have been prepared to accept that trivial benefits were not taxable under certain circumstances. However a statutory exemption has been introduced from the start of the current tax year which should give employers certainty that the benefits provided are exempt and do not result in a reportable employee benefit in kind. In order for the benefit to be exempt it must satisfy the following conditions:

  • the cost of providing the benefit does not exceed £50
  • the benefit is not cash or a cash voucher
  • the employee is not entitled to the voucher as part of a contractual arrangement (including salary sacrifice)
  • the benefit is not provided in recognition of particular services performed by the employee as part of their employment duties
  • where the employer is a ‘close’ company and the benefit is provided to an individual who is a director, an office holder or a member of their household or their family, then the exemption is capped at a total cost of £300 in a tax year.

If any of these conditions are not met then the benefit will be taxed in the normal way subject to any other exemptions or allowable deductions.

One of the main conditions is that the cost of the benefit does not exceed £50. If the cost is above £50 the full amount is taxable, not just the excess over £50.The cost of providing the benefit to each employee and not the overall cost to the employer determines whether the benefit can be treated as a trivial benefit. So, a benefit costing up to £50 per employee whether provided to one or more employees can be treated as trivial. Where the individual cost for each employee cannot be established, an average could be used. Some HMRC examples consider gifts of turkeys, a bottle of wine or alternative gift voucher.

Further details on how the exemption will work, including family member situations, are contained in HMRC manual.

However if you are unsure please do get in touch before assuming the trivial benefit you are about to provide is covered by the exemption.

Internet link: HMRC manual

Advisory fuel rates for company cars

New company car advisory fuel rates have been published which took effect from 1 December 2016. The guidance states: ‘You can use the previous rates for up to one month from the date the new rates apply’. The rates only apply to employees using a company car.

The advisory fuel rates for journeys undertaken on or after 1 December 2016 are:

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

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

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

You must not use these rates in any other circumstances.

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

Internet link: GOV.UK AFR

‘No excuses’ for auto enrolment mistakes say TPR

The Pensions Regulator is reminding employers and their advisers, that they need to comply with their auto enrolment duties or face penalties:

‘Being ill or short-staffed isn’t a good enough excuse for your clients failing to comply with their legal duties. Our latest compliance and enforcement report shows that the number of small and micro employers receiving fines has risen after tribunal judges rejected what the employers claimed were ‘reasonable excuses’.

As with any other business activity, if an employer is too unwell to complete their AE duties, they’ll need to find someone else who can. Automatic enrolment is ultimately the employer’s legal responsibility, so whether it’s due to pension provider failings or illness, a judge won’t consider an excuse to be ‘reasonable’, if there’s something they or someone else could have done to remedy the situation in time.’

TPR’s latest ‘Compliance and enforcement Quarterly bulletin’ reports that instances of penalties have risen but so have the amount of employers who are ‘staging’ for auto enrolment.

They have also sent over 6,000 letters to employers reminding them that their deadline for compliance is 31 December 2016.

Please contact us if you would like any help with your duties.

Internet link: TPR bulletin

Making Tax Digital update

Over the summer HMRC published six consultation documents on Making Tax Digital. The six consultations set out detailed plans on how HMRC propose to fundamentally change the method by which taxpayers, particularly the self-employed and landlords, send information to HMRC. Two key changes proposed are:

  • From April 2018, self-employed taxpayers and landlords will be required to keep their business records digitally and submit information to HMRC on a quarterly basis and submit an End of Year declaration within nine months of the end of an accounting period (accounting periods are typically 12 months long).
  • HMRC will make better use of the information which they currently receive from third parties and will also require more up to date information from some third parties, such as details of bank interest. Employees and employers will see the updating of PAYE codes more regularly as HMRC use the data received from the third parties.

HMRC received over 3,000 responses to their consultations which are now closed.

The government has announced it will publish its response to the consultations in January 2017 together with provisions to implement the changes.

Meanwhile HMRC’s Tax Assurance Commissioner Jim Harra has written to the Financial Times stating HMRC’s point of view that ‘Digital tax should not be a burden to businesses’ in a move to allay the concerns that changes will place an additional burden on businesses and their agents.

We will keep you informed of developments.

Internet links: GOV.UK MTD GOV.UK Speech

Recognising genuine contact from HMRC – spotting phishing

HMRC have updated their guidance on how to spot genuine contact from HMRC, and how to tell when an email or text message is phishing or bogus.

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

Internet link: Genuine HMRC contact

Newsletter – September 2014

eNews – September 2014

In this month’s enews we report on a variety of issues including an update for employers on payroll penalties and NMW increases. We are also including guidance on the introduction of the VAT Mini One Stop Shop for digital services.

We are amending the timing of enews following a review of the product. Enews will be published during the first week of the month, rather than at the end of the month. So please watch out for the next issue early in October.

Please do get in touch if you would like more detail on any of the articles.

RTI penalties for small employers delayed

HMRC have confirmed that employers with fewer than 50 employees will face automated in-year penalties for late real-time PAYE returns from 6 March 2015 which is later than had originally been anticipated. Those who employ 50 or more people will face penalties from 6 October 2014. HMRC will send electronic messages to all employers shortly to let them know when the penalties will apply to them, based on the number of employees shown in the department’s records.

Level of penalties

For the purposes above, an employer who, during a tax month, fails to make a return on or before the filing date will be liable to a penalty as follows:

  • 1-9 employees – £100
  • 10-49 employees – £200
  • 50-249 employees – £300 and
  • 250 or more employees – £400.

Ruth Owen, HMRC Director-General for Personal Tax, said:

‘Real Time Information is working well. Our most recent figures show that over 95% of PAYE schemes making payments to individuals are successfully reporting in real time, and 70% say that it is easy to do.’

‘We know from our experience of rolling out of RTI that to ensure a smooth transition for our customers it’s best to introduce changes in stages. This will allow us to update our systems and enhance our guidance and customer support as needed. We know that those who have had most difficulty adjusting to real-time reporting have been small businesses, so this staged approach means they have a little more time to comply with the new arrangements before facing a penalty. ‘

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

Internet link: Press release

VAT for digital businesses and the Mini One Stop Shop

The one-stop VAT service starts from 1 January 2015 for businesses supplying what are collectively known as ‘digital services’ in the EU. The effect of the measures are that a business will not have to account and pay VAT separately in each country where they do business which would otherwise be the case following a change in the place of supply rule.

Digital services essentially means broadcasting, telecoms and e-services including those selling apps, e-books, streaming services (e.g. sports/film/tv/music), dating services and journals, newspapers and magazines that are subscribed to electronically and smartphone games.

Change of place of supply

From 1 January 2015 the place of supply for VAT purposes for a EU business selling digital services will change. Currently, intra-EU supplies of digital services to non-business customers are subject to VAT in the member state where the supplier belongs.

From 1 January 2015 this changes, so that the VAT is due where the customer who receives the service lives or is located. This will ensure that UK consumers of these services will pay UK VAT no matter where the supplier of those services belongs.

In order that UK businesses supplying digital services do not have to register for VAT in every EU member state where they have customers, an optional VAT ‘Mini One Stop Shop’ (MOSS) online service has been set up by HMRC. Other EU member states will be building their own systems.

Sally Beggs, Deputy Director Indirect Tax, HMRC, said:

‘The VAT MOSS will save digital services suppliers from having to register for VAT in every Member State where they do business, removing a significant administrative burden. Businesses with their main operation or headquarters in the UK will register with HMRC to use the service.’

Businesses will be able to register for VAT MOSS from 20 October 2014. The service will be available to use from 1 January 2015.

If this affects your business and you would like more detailed information or guidance on the matter please do not hesitate to contact us.

Internet links: HMRC MOSS  News story

National Minimum Wage rises

The National Minimum Wage (NMW) is a minimum amount per hour that most workers in the UK are entitled to be paid. NMW rates increases come into effect on 1 October 2014:

  • the main rate for workers aged 21 and over will increase to £6.50 (currently £6.31)
  • the 18-20 rate will increase to £5.13 from £5.03
  • the 16-17 rate for workers above school leaving age but under 18 will increase to £3.79 from £3.72
  • the apprentice rate will increase from £2.68 to £2.73 per hour.

It is important to note that these rates, which are in force from 1 October 2014, apply to pay reference periods beginning on or after that date.

Penalties

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

Most workers in the UK over school leaving age are entitled to be paid at least the NMW for details of exceptions see the Acas website.

If you have any queries on the NMW please do get in touch.

Internet link: Acas

Fuel Advisory rates

New company car advisory fuel rates have been published which took effect from 1 September 2014. HMRC’s website states:

‘These rates apply to all journeys on or after 1 September 2014 until further notice. For one month from the date of change, employers may use either the previous or new current rates, as they choose. Employers may therefore make or require supplementary payments if they so wish, but are under no obligation to do either.’

The advisory fuel rates for journeys undertaken on or after 1 September 2014 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 16p

 

Engine size Diesel
1600cc or less 11p
1601cc – 2000cc 13p
Over 2000cc 17p

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

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

  • 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

Autumn Statement date announced and have your say

The government has announced that the Autumn Statement 2014 will take place on 3 December.

The government is seeking views of businesses, charities and members of the public, as to what they would like to see included in the Autumn Statement 2014. To have your say email autumnstatementrepresentations@hmtreasury.gsi.gov.uk

We will keep you informed of announcements.

Internet link: News