eNews – January 2015
In this month’s eNews we report on a number of issues including an update on the calculation of holiday pay, construction industry changes ahead, guidance on VAT and digital services and the latest disclosure opportunity for solicitors.
Please do get in touch if you would like any further guidance on any of the areas covered.
Changes to the Construction Industry Scheme (CIS)
The government has announced that it will implement a package of improvements to the CIS. The stated aim of the changes is to reduce the administrative and related cost burden on construction businesses. The measures should result in more subcontracting businesses being able to achieve and maintain gross payment status so improving their cashflow. These changes are to be implemented in stages.
From 6 April 2015 the following amendments will be made to the system:
- The requirement for a contractor to make a return to HMRC even if the contractor has not made any payments in a tax month will be removed. Contractors may make a voluntary nil return but will no longer be obliged to do so.
- The requirements for joint ventures to gain gross payment status will be relaxed where one member already has this status and that firm or company has a right to at least 50% of the assets or the income or holds at least 50% of the shares or the voting power in the joint venture.
- Earlier repayments can be made to liquidators in insolvency proceedings. Currently where a subcontractor is a company, no repayment of any amount deducted and paid over to HMRC by a contractor can be made to the subcontractor until after the end of the tax year in which the deduction was made. These rules will be amended so that in certain cases where the amount deducted by the contractor is excessive, a repayment can be made during the tax year.
From 6 April 2016 further changes are proposed:
- Mandatory online filing of CIS returns will be introduced with the offer of alternative filing arrangements for those unable to access an online channel by reason of age, disability, remote location or religious objection.
- The directors’ self assessment filing requirements will be removed from the initial and annual compliance tests.
- The threshold for the turnover test will be reduced to £100,000 in multiple directorship situations.
From 6 April 2017 mandatory online verification of subcontractors will be introduced.
Internet link: CIS
VAT and digital services
HMRC have issued some additional guidance for small businesses which supply digital services to consumers in other EU Member States.
The guidance advises:
- how to comply with new VAT rules on the place of supply of digital services that came into force on 1 January 2015
- how to register for HMRC’s VAT Mini-One Stop Shop (MOSS) and still benefit from the UK’s VAT registration threshold for sales to UK consumers.
On 1 January 2015, the VAT rules for cross-border Business to Consumer supplies of ‘digital services’ (for example broadcasting, telecoms and e-services) changed. Broadly from that date, VAT must be accounted for in the Member State where the consumer normally is, rather than where the supplier of the service is established.
HMRC have also issued more general guidance on the change to all businesses which can be found here
If you would like further information on this issue please contact us.
1,773 ‘happy returns’ at Christmas
HMRC have reported that they received 1,773 online tax returns on Christmas Day, with the busiest time for online returns on 25 December between midday and 1pm, when 148 Yuletide returns were delivered electronically.
Christmas Eve, which has traditionally been a much busier day for festive filing than Christmas Day, saw 17,644 online returns successfully submitted.
In total, 24,228 online returns were received over the three-day festive period (including Boxing Day) which was a 5% increase on the 2013 total.
HMRC Director General of Personal Tax, Ruth Owen, said:
‘You can file your online return at any time of day or night – even Christmas Day, if it suits you. But don’t leave it too late. Give yourself plenty of time to resolve any problems and if you need to call us, do it now, as our phone lines get much busier as the 31 January deadline approaches.’
The deadline for sending 2013/14 tax returns to HMRC, and paying any tax owed, is 31 January 2015.
Internet link: Gov news
Holiday pay and overtime update
We have previously reported that in the judgment an Employment Appeal Tribunal (EAT) decided that holiday pay should reflect non-guaranteed overtime.
Under the Working Time Regulations 1998 most workers are entitled to paid statutory annual leave. This is 5.6 weeks (28 days) if the employee works five days a week. A worker is entitled to be paid in respect of any period of annual leave for which they are entitled, at a rate of one week’s pay for each week’s leave.
The EAT considered three cases in which employees were required to work overtime if requested by their employees. The EAT referred to this type of overtime as non-guaranteed overtime. The Tribunal decided in the context of non-guaranteed overtime:
- overtime payments must be taken into account in the calculation of holiday pay if there is a settled pattern of work
- if the amount of overtime varies but is regularly paid, overtime payments must also be taken into account on an average basis.
Following fears that employers may face large backdating claims the Government has taken action to reduce potential costs to employers by limiting claims by introducing regulations which will mean that claims to Employment Tribunals on this issue cannot stretch back further than two years.
Employees can still make claims under the existing arrangements for the next six months which will act as a transition period before the new rules come into force. The changes apply to claims made on or after 1 July 2015.
Employers and employees can also contact the Acas helpline for free and confidential advice.
If you would like any help in this area please do get in touch.
Tax on the diverted profits dubbed the new ‘Google tax’
The government has published draft tax legislation to implement the new tax on diverted profits which has been referred to as the ‘Google tax’. The introduction of a new Diverted Profits Tax which was announced in the 2014 Autumn Statement will target multinational enterprises with business activities in the UK who ‘enter into contrived arrangements to divert profits from the UK by avoiding a UK taxable presence and/or by other contrived arrangements between connected entities’.
The Diverted Profits Tax will be applied using a rate of 25% from 1 April 2015 and is expected to raise £1.4bn over the course of the next five years.
Commenting on the new measure, John Cridland, Director General of the CBI said:
‘International tax rules are in urgent need of updating but there is already an OECD process underway to do this. It is unfortunate that the UK has decided to go it alone with a Diverted Profits Tax outside this process, which will be a real concern for global businesses.’
‘The legislation will be complex to apply, and if other countries follow suit businesses will have a patchwork of uncoordinated unilateral rules to navigate, which risks undermining the whole OECD approach.’
Internet link: CBI News
Solicitors’ Tax Campaign
Solicitors are being given the chance by HMRC to bring their tax affairs up to date or face tougher penalties, as part of a new tax campaign.
The Solicitors Tax Campaign gives solicitors the opportunity to declare any undisclosed income by making a voluntary disclosure. The disclosure opportunity is available to those working within the legal profession either as a solicitor in a partnership or company, or as an individual.
Those affected have until 9 March 2015 to notify HMRC of the undisclosed income and need to complete a disclosure form and pay the outstanding liability by 9 June 2015.
Caroline Addison, Head of Campaigns, HMRC, said:
‘Information gathered by HMRC has allowed us to identify solicitors who thought they could operate without declaring income and paying the taxes that others have to pay. If you have not declared all of your income, you need to put your tax affairs in order. Take this chance to come forward and put things right in a straightforward way and on the best possible terms. It will be easier and cheaper for you to come to us than for us to come to you. Those who make a deliberate decision not to pay the taxes due could face a penalty of 100% or more of the tax due, or even a criminal prosecution.’
RTI: filing penalties and appeals
In the latest Employer Bulletin HMRC are reminding employers that they are about to issue penalty notices to those employers who have failed to meet their RTI filing obligations.
Late filing penalties began on 6 October for employers with schemes of 50 or more employees. Those employers who have incurred these penalties will start to receive the penalty notices, which will be issued on a quarterly basis, from the beginning of February 2015.
The notice will be in the form of a ‘paper letter’, and will set out all filing penalties incurred for the third quarter of 2014/15 ( for tax months 7, 8 and 9 covering the period 6 October to 5 January 2015). The penalty notices may contain more than one penalty.
Agents are not sent a copy of this notice so if you receive one and would like guidance on whether the penalty is due or how to appeal against it please do get in touch as soon as possible. Further guidance on this issue can be found on page four of the latest Employer Bulletin.
Internet link: Employer bulletin