Newsletter – February 2018

Enews – February 2018

In this month’s Enews we report on the roll out of Tax-free Childcare and the reduction in HMRC scam texts. We also consider the latest list of deductible subscriptions and rejected Self assessment expenses claims and excuses. With revised income tax bands for Scottish taxpayers there is lots to update you on.

HMRC rejected Self Assessment expenses and excuses

HMRC have released the latest list of imaginative excuses made by individuals who failed to submit their self assessment return by 31 January deadline in 2017. Excuses include alien sightings and being too busy touring with a one-man play.

HMRC’s annual list of outlandish excuses is used to publicise the self assessment deadline of 31 January following the end of the tax year. An automatic £100 penalty applies to those who have the obligation to complete a return and miss the filing deadline, regardless of whether the individual has a tax liability to pay or not.

Angela MacDonald, HMRC’s director general of customer services, said:

‘Each year we’re making it easier and more intuitive for our customers to complete their tax return, but each year we still come across some questionable excuses, whether that’s blaming a busy touring schedule or seeing aliens.’

Here are some of the recent excuses:

  1. I couldn’t file my return on time as my wife has been seeing aliens and won’t let me enter the house.
  2. I’ve been far too busy touring the country with my one-man play.
  3. My ex-wife left my tax return upstairs, but I suffer from vertigo and can’t go upstairs to retrieve it.
  4. My business doesn’t really do anything.
  5. I spilt coffee on it.

HMRC have also released details of some of the weirdest expense claims which include:

  1. A three-piece suite for my partner to sit on when I’m doing my accounts.
  2. Birthday drinks at a Glasgow nightclub.
  3. Vet fees for a rabbit.
  4. Hotel room service – for candles and prosecco.
  5. £4.50 for sausage and chips meal expenses for 250 days.

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

Internet link: GOV.UK news

Tax-free childcare roll out

The implementation of Tax-Free Childcare, the new government scheme to help working parents with the cost of childcare, is being rolled out to eligible parents in stages.

The scheme first made its debut in April 2017 and although there have been initial systems problems, HMRC’s aim is to have the scheme open to all eligible parents by 14 February 2018. Application is made online through the Childcare Choices site www.childcarechoices.gov.uk and applications can be made for all eligible children at the same time.

Under Tax-Free Childcare, for every £8 the parent pays, the government provides a £2 top-up, to a maximum of £2,000 per child each year – with a higher limit of £4,000 for disabled children. This gives a total childcare pot of £10,000, or £20,000 for disabled children. To be eligible, parents must generally have minimum weekly earnings of at least £120 each. There is also an upper earnings limit of £100,000.

Compensation may be available in certain circumstances where a parent:

  • is unable to complete an application for Tax-Free Childcare
  • is unable to access their childcare account
  • or doesn’t get a decision about whether they are eligible, without explanation, for more than 20 days.

Those employing a nanny should be able to use the childcare account to pay their PAYE tax and National Insurance. Delays in getting this system working may also give grounds for compensation. Application is made online GOV.UK childcare-service-compensation

Internet link: GOV.UK childcare under 9s

HMRC halts thousands of scam text messages

HMRC have announced that they have stopped thousands of taxpayers from receiving scam text messages ‘with 90 percent of the most convincing texts now halted before they reach their phones’.

HMRC’s press release states:

‘Fraudsters alleging to be from HMRC send text messages to unsuspecting members of the public. In these messages they will make false claims, such as suggesting they are due a tax rebate. Messages will usually include links to websites that harvest personal information or spread malware. This can in turn lead to identity fraud and the theft of people’s personal savings.’

HMRC have confirmed that they will never contact taxpayers who are due a tax refund by text message or by email.

HMRC’s Director of Customer Services, Angela MacDonald, said:

‘HMRC is focused on becoming the most digitally advanced tax authority in the world, and a big part of that relates to keeping our customers safe from online scammers.’

‘As email and website scams become less effective, fraudsters are increasingly turning to text messages to con taxpayers. But as these numbers show, we won’t rest until these criminals are out of avenues to exploit.’

‘We have made significant progress is cutting down these types of crime, but one of the most effective ways to tackle it is still to help the public spot the tell-tale signs of fraud.’

To read details of the measures taken by HMRC and other advice on spotting fraud visit the link below.

Internet link: GOV.UK scam-text-messages

Updated list of professional subscriptions

Employees are allowed to claim tax relief on their annual professional fees or subscriptions to some HMRC approved professional organisations. The costs are tax deductible generally where the individual must have membership to do their job or it is helpful for their work. Where the fees are paid by the individual’s employer this will not generally result in a benefit in kind charge.

HMRC have updated the list of approved bodies which also includes not only details of the professional bodies that are approved but details of qualifying annual subscriptions for journals.

Internet link: GOV.UK/professional-bodies

What will the Spring Statement bring?

We had two Budgets in 2017 and the Spring Statement is planned for Tuesday 13 March. The Chancellor Philip Hammond has previously stated that at the Spring Statement he will respond to the Office for Budget Responsibility forecast, consider longer-term tax challenges and start consultations on how they can be addressed. The government has the option to make immediate changes to tax policy at the Spring Statement if the economic circumstances require it.

The revised timetable of an Autumn Budget followed by a Spring Statement means changes to the legislative timetable which are set out in the link below.

We will keep you informed of pertinent Spring Statement announcements.

Internet link: GOV.UK new budget timetable

Scotland revise income tax bands

Derek Mackay, Scottish Finance Secretary, has made a change to the proposed Scottish income tax bands for 2018/19 which he announced in December 2017 in the Scottish Draft Budget.

The change is being made to ‘remove an anomaly that meant some higher rate taxpayers saw their bills fall while others on slightly lower incomes saw a rise, due in part to changes in the personal allowance’.

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

Scottish Bands Band name Scottish Rate
Over £11,850 – £13,850 Starter 19%
Over £13,850 – £24,000 Basic 20%
Over £24,000 – £43,430 Intermediate 21%
Over £43,430 – £150,000 Higher 41%
Over £150,000 Top 46%

Confirming the changes during the Stage 1 of the Budget debate, Mr Mackay said:

‘As a parliament of minorities, we must work across the chamber to find compromise and consensus in order to give support, sustainability and stimulus to our economy and to our public services …. Our changes to tax ensure Scotland has a progressive tax system – with 70% of taxpayers paying less next year than they do currently and 55% paying less than they would across the rest of the UK – while businesses benefit from support for investment.’

Internet link: GOV.SCOT/news

Newsletter – April 2013

In this month’s enews we report on changes to the tax rules for loans to participators and other issues pertinent to employers with many deadlines approaching.

Please contact us if you would like any further information.

Loans from a company to shareholders

Draft legislation has been published which confirms an announcement made in Budget 2013 and which has effect from 20 March 2013.

A close company (which generally includes an owner managed company) may be charged to tax in certain circumstances where it has made a loan or advance to individuals who have an interest or shares in the company (known as participators). Loans and advances are also caught where they are made to an associate of the individual such as a family member.

The corporation tax charge is 25% where the loan is outstanding nine months after the end of the accounting period.

The new law will prevent the practise of avoiding the payment of the tax charge by repaying the loan before the tax is due (nine months after the end of the accounting period) and then effectively withdrawing the same money shortly after. This change may also prevent refunds of the 25% tax already paid where loans are redrawn shortly after.

This change may affect a number of owner managed companies and we will be happy to discuss this with you.

Internet links: Press release HMRC TIIN

Increase in NMW rates

The Government has announced increases in the NMW rates which will come into effect on 1 October 2013:

  • the adult rate will increase by 12p to £6.31 an hour
  • the rate for 18-20 year olds will increase by 5p to £5.03 an hour
  • the rate for 16-17 year olds will increase by 4p to £3.72 an hour
  • the apprentice rate will increase by 3p to £2.68 an hour and
  • the accommodation offset increases from the current £4.82 to £4.91.

Katja Hall, CBI Chief Policy Director, said:

‘Pay restraint has been crucial in creating jobs in this tough economic climate.’

‘The LPC has struck a careful balance in setting the rates given sluggish growth, particularly in recommending a cautious approach to youth pay.’

‘The LPC will need to monitor the impact of raising the adult rate very carefully. Given average earnings this year are already lower than expected, we must make sure the minimum wage doesn’t limit jobs in key sectors, by outstripping pay across the rest of the workforce.’

‘The law is clear that employers must pay apprentices the legal minimum wage. It is right that ministers tighten up compliance and enforcement.’

Internet links: Press release CBI press release

HMRC launch Managing Serious Defaulters (MSD)

Following on from Managing Deliberate Defaulters (MDD) programme, under MSD HMRC will closely monitor the tax affairs of more individuals and businesses who have deliberately evaded tax for up to five years.

From 1 April 2013, HMRC is also extending the close monitoring of the tax affairs of those who deliberately choose not to pay what they owe. MSD replaces and expands the MDD scheme.

David Gauke, Exchequer Secretary to the Treasury, said:

‘Increasingly, evaders are using contrived insolvency to evade tax, either through liquidation of a business or bankruptcy of an individual. It is only fair that someone who has deliberately tried to evade tax should face extra scrutiny from HMRC.’

‘This measure, along with those announced in the Budget, demonstrates that we will crack down on people who don’t pay what they owe.’

Internet link: Government news

Employer end of year forms

HMRC are reminding employers that in order to avoid penalties they must file the Employer Annual Return (P35 and P14s) online and on time. The vast majority of employers must file electronically and the deadline for submission of the forms is 19 May 2013, which this year falls on a Sunday.

Where employers do not file their annual return by 19 May they incur a penalty of £100 per 50 (or fewer) employees for every month (or part month) that their return is late.

With the introduction of RTI for the majority of employers from 6 April 2013 this will be the final P35 submission for many.

If you are unsure whether you need to complete a return this year please do get in touch.

Internet links: HMRC end of year guidance Employer Bulletin

Employment Particulars

The government has updated the template of written employment particulars.

The template is an example of a written statement of employment particulars which meets the requirements of employment law.

Where an employee is employed for more than a month the employer must give them a written statement of employment particulars.

Internet link: Government Publications

P11d deadline approaching

The forms P11D, and where appropriate P9D, which report employees and directors benefits and expenses for the year ended 5 April 2013, are due for submission to HMRC by 6 July 2013. 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 issued some guidance as to common errors on the forms in the latest Employer Bulletin. These include the following which can delay processing and cause problems with employees’ tax codes:

  • 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 box in Part 5 of form P35 (Employers Annual Return) or the declaration on the final FPS/EPS submission (for those employers operating PAYE in ‘real time’) 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 06/04/2012 to 05/04/2013 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.

Correct P11D completion is complex. If you would like any help with the forms P11D or the calculation of the associated Class 1A National Insurance liability please get in touch.

Internet links: http://www.hmrc.gov.uk/paye/exb/index.htm Employer Bulletin

Scottish rate of income tax

On 14 February 2013 Scottish and UK ministers agreed the final text of the Memorandum of Understanding between HMRC and the Scottish Government covering the Scottish rate of income tax.

The Scottish rate will commence from a date to be set by the UK Government, expected to be April 2016.

Internet links: HMRC What’s New FAQs

HMRC Business Records Checks

HMRC extends Business Records Checks

HM Revenue & Customs (HMRC) has announced an extension of its Business Records Checks programme.

Business Records Checks were piloted earlier this year in eight key areas, and involve checks on the adequacy of small and medium-sized enterprises’ business records.
The pilots found that around 44 per cent of businesses visited had issues with their record-keeping, while around 12 per cent of those visited had seriously inadequate records.

HMRC will be now be extending this activity from mid-September to cover a number of key areas across the UK. As part of this, the number of full-time staff employed on the programme will rise from 30 to 120.

HMRC plans to complete up to 12,000 Business Records Checks by the end of the current financial year, with 20,000 provisionally planned for 2012/13. HMRC is increasing the number of visits, so it can refine the process, before final decisions on a national roll-out are taken in the New Year.

Initially, HMRC will only levy a record-keeping penalty in the most extreme cases of poor record-keeping. In the longer-term, HMRC intends to issue penalties of up to £3,000 for serious inadequacies in record-keeping. HMRC will issue guidance on this, and make a further announcement on when it will happen, in due course.

HMRC’s Director of Local Compliance, Richard Summersgill, said:

“Good record-keeping helps businesses pay the right amount of tax at the right time, thereby potentially avoiding interest and penalties.

“Adequate records give businesses a clear idea of their trading position and profitability, allowing them to make business decisions and adjustments to ensure survival and success. And where a check has shown a business keeps adequate records, it gives HMRC a greater degree of assurance as to the likely accuracy of its tax returns.

“Ultimately, this is about supporting businesses and reducing the tax gap.”
For further information on record-keeping, visit www.hmrc.gov.uk/record-keeping

 

Notes for editors
1. The Business Records Checks pilots involved around 800 visits, focusing on eight different sites (Edinburgh, Irvine, Sunderland, Liverpool, Manchester, Stockport, Sheffield and Portsmouth). The extended programme of visits will cover key areas in England, Scotland, Wales and Northern Ireland.

2. Research by the Organisation for Economic Cooperation and Development (OECD) indicates that poor business record-keeping generally leads to an underassessment of tax, even where there is an audit-type check into a return for the period covered by such records. On this basis, poor business record-keeping is responsible for a loss of tax in up to two million SME cases annually.

3. A guide to setting up a basic record-keeping system is available from the Business Link website at www.businesslink.gov.uk/startrecordkeeping.
Issued by HM Revenue & Customs Press Office