Newsletter – May 2021

Posted on May 4, 2021 by Henry Cooper

Enews – May 2021

In this month’s Enews we consider the opening of the latest SEISS grant to applicants, the launch of the government’s latest loan scheme aimed at supporting COVID-hit businesses and the introduction of state-backed 95% mortgages for first-time buyers.

With guidance on tax relief for home workers, a call for the extension of the Kickstart scheme and pension fraud increases there is a lot to update you on.

Article Index

Fourth self-employed grant now open for online applications
Recovery Loan Scheme opens to businesses
Recent changes to IR35 ‘undermine the self-employed’, says IPSE
CBI calls for extension of Kickstart Scheme as jobs market remains subdued
New 95% mortgage scheme launched
New claims required for home working tax relief
HMRC sets out penalty regime for SEISS abuse
Pension fraud increased to £1.8 million in first quarter of 2021

Fourth self-employed grant now open for online applications

On 21 April, the online service for applications for the fourth Self-employment Income Support Scheme (SEISS) grant was opened for claims, HMRC confirmed.

All applications must be submitted by the individual self-employed worker and cannot be handled by accountants or tax advisers.

The fourth grant will be 80% of three months’ average trading profits, to be claimed from late April 2021.

Payment will be in a single instalment capped at £7,500 in total and will cover the period 1 February to 30 April 2021. The scheme has been extended to those who filed a 2019/20 self-assessment tax return prior to 3 March 2021.

Claimants must have been impacted by reduced activity, capacity and demand, or have been trading previously and are temporarily unable to do so. All claims must be made on or before 1 June 2021.

There is no requirement for an earlier SEISS grant to have been claimed to be able to claim the fourth grant.

The fifth SEISS grant will cover the period from 1 May to 30 September 2021 and will be available from July.

It will be set at 80% of three months’ average trading profits, paid out in a single instalment, capped at £7,500, for those with a turnover reduction of 30% or more.

Alternately, it will be worth 30% of three months’ average trading profits, capped at £2,850 for those with a turnover reduction of less than 30%.

Further details of the fifth grant will be provided in due course.

Internet link: GOV.UK

Recovery Loan Scheme opens to businesses

On 6 April, the Recovery Loan Scheme (RLS) was introduced to replace the government’s coronavirus lending schemes.

The RLS provides financial support to businesses affected by the COVID-19 pandemic. The scheme gives lenders a guarantee of 80% on eligible loans between £25,000 and £10 million to give them confidence in continuing to provide finance to UK businesses.

The RLS is open to all businesses, including those who have already received support under the previous COVID-19 guaranteed loan schemes, the Bounce Back Loan Scheme, the Coronavirus Business Interruption Scheme and the Coronavirus Large Business Interruption Scheme although the amount they have borrowed under an existing scheme may in certain circumstances limit the amount they may borrow under RLS.

The RLS is initially available through a number of lenders accredited by the British Business Bank.

Internet link: British Business Bank website

Recent changes to IR35 ‘undermine the self-employed’, says IPSE

The Association of Independent Professionals and the Self-Employed (IPSE) has stated that the recent changes to the rules relating to off-payroll workers, commonly known as IR35, ‘undermine the self-employed at the worst possible time’.

The changes to IR35 took effect on 6 April 2021 and shifted responsibility for making the decision on employment status on each contract away from contractors and personal service companies (PSCs) and on to the client receiving their services. This has already been done in the public sector.

Research carried out by IPSE found that 50% of contractors planned to stop contracting in the UK once the changes took effect unless they could secure contracts unaffected by them. 24% are planning to seek contracts abroad; 12% plan to stop working altogether; 17% will seek an employed role; and 11% are looking to retire within the next year.

Additionally, 24% of contractors said their clients are planning to blanket-assess all their contractors as ‘inside IR35’.

Andy Chamberlain, Director of Policy at IPSE, said:

‘The changes to IR35 would do serious harm to the self-employed sector at the best of times, but now they are adding drastic, unnecessary damage to the financial carnage of the pandemic – undermining the UK’s contractors at the worst possible time.

‘The crucial problem with IR35 is still its complexity: in fact, it is so complex that HMRC has lost the majority of tribunals on its own legislation. And there remains serious doubts about the CEST tool HMRC designed to supposedly cut through this complexity.’

Internet link: IPSE website

CBI calls for extension of Kickstart Scheme as jobs market remains subdued

The Confederation of British Industry (CBI) has urged the government to extend the Kickstart Scheme to help young people who are bearing the brunt of the subdued job market.

The Kickstart Scheme was launched in September and promised to pay the wages and associated employment costs for businesses taking on 16 to 24-year-olds in receipt of Universal Credit up to six-month contract periods.

The UK unemployment rate fell to 4.9% in the three months to February, according to the latest figures from the Office for National Statistics (ONS). However, 56,000 workers were cut from company payrolls in March, which represents the first monthly drop since last November.

Around 813,000 workers have been cut from company payrolls in the last 12 months as the pandemic adversely affected the jobs market. The ONS said young people continued to bear the brunt of the crisis amid job losses in sectors such as hospitality and retail.

People under 25 accounted for more than half of the jobs lost in the year to March, it added.

Matthew Percival, Director of People and Skills at the CBI, said:

‘Evidence continues to mount that it is young people’s jobs that have been hardest hit by lockdowns. Support for jobs and training will be vital to making the UK’s economic recovery inclusive.

‘Government should confirm that the extra lockdown at the beginning of the year means that the Kickstart Scheme will remain open for longer to allow businesses the time to deliver opportunities for young people.’

Internet link: CBI website

New 95% mortgage scheme launched

On 19 April, a government-backed mortgage scheme to help people with 5% deposits get on to the housing ladder was made available to lenders.

First announced at the 2021 Budget, the scheme will help first-time buyers or current homeowners secure a mortgage with just a 5% deposit to buy a house worth up to £600,000. The government says this will provide ‘an affordable route to homeownership for aspiring homeowners’.

The government will offer lenders the guarantee they need to provide mortgages that cover the other 95%, subject to the usual affordability checks.

The scheme is now available from lenders on high streets across the country, with Lloyds, Santander, Barclays, HSBC and NatWest having launched mortgages under the scheme and Virgin Money following shortly.

Miguel Sard, Managing Director of Home Buying and Ownership at NatWest, said:

‘We welcome the government’s new mortgage guarantee scheme to give further support to those with smaller deposits. For those customers, particularly younger or first-time buyers, saving up for a big deposit can often be difficult, and we know people in these groups are some of the hardest hit by the effects of the pandemic.

‘A government-backed scheme will help segments of the market for whom homeownership has felt far out of reach in recent months.’

Internet link: GOV.UK

New claims required for home working tax relief

Employees who are working from home will need to make new claims for tax relief for the 2021/22 tax year, HMRC has stated.

From 6 April 2020, employers have been able to pay employees up to £6 a week tax-free to cover additional costs if they have had to work from home.

Employees who have not received the working from home expenses payment direct from their employer can apply to receive the tax relief from HMRC.

HMRC has also confirmed that the £6 per week payment is available in full, even if an employee splits their time between home and the office.

The allowance is to cover tax-deductible additional costs that employees who are required to work from home have incurred, such as heating and lighting the workroom, and business telephone calls.

Last year an online portal was launched that allows employees to claim tax relief for working at home. The portal was set up to process tax relief on additional expenses for employed workers who have been told to work from home by their employer during the coronavirus (COVID-19) pandemic.

Internet link: GOV.UK

HMRC sets out penalty regime for SEISS abuse

The fourth Self-Employed Income Support Scheme (SEISS) grant is now live and HMRC has set out the penalties for abuse of the scheme.

An overclaimed SEISS grant includes any amount of grant which the self-employed individual was not entitled to receive or was more than the amount HMRC said the applicant was entitled to when the claim was made.

Overpayments must be notified to HMRC within 90 days of receipt of an SEISS grant.

When deciding the amount of any penalty, HMRC will take account whether the taxpayer knew they were entitled to the SEISS grant when they received it and when it became repayable or chargeable to tax because the individual’s circumstances changed.

The HMRC guidance states: ‘If you knew you were not entitled to your grant and did not tell us in the notification period, the law treats your failure as deliberate and concealed. This means we can charge a penalty of up to 100% on the amount of the SEISS grant that you were not entitled to receive or keep.

‘If you did not know you were not entitled to your grant when you received it, we will only charge you a penalty if you have not repaid the grant by 31 January 2022.’

If you would like further advice or require a compliance review on your eligibility, please contact us.

Internet link: GOV.UK publications

Pension fraud increased to £1.8 million in first quarter of 2021

Losses from pension fraud rose to £1.8 million in the first three months of this year, according to figures from Action Fraud.

107 reports of pension fraud were made in the first quarter of 2021, an increase of almost 45% when compared to the same period in 2020.

Pension scams often include free pension reviews, ‘too good to be true’ investment opportunities and offers to help release money from your pension, even for under 55s, which is not permitted under the pension freedom rules.

Pauline Smith, Head of Action Fraud, said:

‘Criminals are malicious and unapologetic when it comes to committing pension fraud. They are motivated by their own financial gain and lack any kind of empathy for their victims, who can often lose their whole life savings to these scams.

‘We know pension fraud can have a devastating impact, both financially and emotionally, but any one of us can fall victim to a fraud and it’s nothing to feel ashamed or embarrassed about. It’s incredibly important that instances of pension fraud and attempted scams are reported to Action Fraud.

‘Every report helps police get that bit closer to the people committing these awful crimes. Reporting to Action Fraud also allows our specialist victim support advocates to provide people with important protection advice and signpost them to local support services.’

Internet link: Action Fraud website

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.

Newsletter – January 2020

Posted on January 16, 2020 by Henry Cooper

Enews – January 2020

In this month’s Enews we consider a number of issues including increases in the minimum wage rates, the independent review of the Disguised Remuneration Loan Charge and the Chancellor’s commitment to review IR35. We also update you on retiring clinicians pensions, Structures and Buildings Allowance, a call for a review of the High Income Child Benefit Charge and a reminder that the self assessment deadline is approaching.

With the latest on deliberate tax defaulters and publication of the Welsh Draft Budget there are lots of issues to update you on.

Minimum wage rates announced

Review of the Disguised Remuneration Loan Charge

Chancellor commits to review of IR35

Retiring clinicians payments

Guidance on Structures and Buildings Allowance

Call for review of High Income Child Benefit Charge

Self assessment deadline approaching

Current list of deliberate tax defaulters

Welsh government publishes Draft Budget

Minimum wage rates announced

The government has announced a 6.2% increase in the National Living Wage (NLW), which applies to workers aged 25 and over. From 1 April 2020 the NLW will rise from the current rate of £8.21 to £8.72 an hour, in the largest raise since it was introduced two decades ago.

The government has confirmed that the new rate will start on 1 April 2020 and will result in an increase of £930 annually for 2.8 million full-time workers earning the NLW.

Workers aged under 25 earning the National Minimum Wage (NMW) will also see increases of between 4.6% and 6.5%, depending on their age.

Bryan Sanderson, Chair of the Low Pay Commission (LPC), said:

‘The NLW has been an ambitious long-term intervention in the labour market. The rate has increased faster than inflation, faster than average earnings and faster than most international comparators.

‘This has raised pay for millions without costing jobs, although employers have had to make a variety of other adjustments to deal with the increases.’

Internet link: GOV.UK news

Review of the Disguised Remuneration Loan Charge

The government has announced it will make a number of changes to the loan charge rules, in response to Sir Amyas Morse’s independent review of the loan charge policy and its implementation.

The government has announced the following key changes to the loan charge:

the loan charge will apply only to outstanding loans made on, or after, 9 December 2010
the loan charge will not apply to outstanding loans made in any tax years before 6 April 2016 where the avoidance scheme use was fully disclosed to HMRC and HMRC did not take action
affected taxpayers can elect to spread the amount of their outstanding loan balance evenly across three tax years: 2018/19, 2019/20 and 2020/21.

Please contact us for advice with this issue.

Internet link: GOV.UK independent loan charge review

Chancellor commits to review of IR35

The Chancellor of the Exchequer, Sajid Javid has announced that the major review of all aspects of self-employment, promised in the Conservatives’ manifesto, will include the proposed extension of the Off-Payroll working rules to the private sector from April 2020.

Speaking on Radio 4’s Money Box Election Special, Sajid Javid said that, as part of the review, he wanted in particular to look again at the proposed changes to the IR35 rules. He said:

‘I value the work of consultants and I want to make sure that the proposed changes are right to take forward.’

Internet link: economia news

Retiring clinicians payments

The Secretary of State has confirmed that the commitments being entered into, to make payments to clinicians affected by annual allowance pension tax, will be honoured when clinicians retire.

In a written statement Matt Hancock, Secretary of State for Health and Social Care stated:

‘I have agreed to support this proposal from NHS England and NHS Improvement for reasons of urgent operational necessity….

‘The scheme involves employers making binding contractual commitments to be given to every affected NHS clinician so as to ensure that this commitment is honoured. Full details of the terms of the payment arrangements are set out in letters that are being sent to each affected clinician by their employer including the terms and conditions of the offer.

‘Clinicians are therefore now immediately able to take on additional shifts or sessions without worrying about an annual allowance charge on their pensions.’

Internet link: GOV.UK statement

Guidance on Structures and Buildings Allowance

The latest HMRC Agent Update includes guidance on the Structures and Buildings Allowance (SBA). This capital allowance is designed to provide tax relief for businesses and to support investment in constructing new structures and buildings and improving existing ones.

The SBA relieves the construction costs for new structures and buildings used for qualifying purposes and the improvement of existing structures and buildings, including the cost of converting existing premises for use in a qualifying activity.

The SBA is available at a flat rate of 2% a year, for up to 50 years, on the eligible costs of building, converting or renovating non-residential structures or buildings that have been brought into qualifying use. Certain costs are specifically excluded such as those costs that qualify for plant and machinery allowances, planning permission, landscaping, cost of land and integral features and fixtures.

For a claim to be valid the date of the earliest contract for construction of the structure or building must be on or after 29 October 2018. The first use of the structure or building must be non-residential.

The Agent Update confirms claims for the allowance must be made on a tax return. However for tax returns up to April 2020 there is no specific box for SBA claims. HMRC advise affected taxpayers to follow the guidance contained in the notes to the returns.

Internet link: GOV.UK Agent Update 75

Call for review of High Income Child Benefit Charge

The Low Incomes Tax Reform Group (LITRG) is calling on the government to address issues with the High Income Child Benefit Charge (HICBC).

The HICBC is designed to claw back child benefit where the claimant or their partner earns in excess of £50,000. According to LITRG some households think making a child benefit claim is not worthwhile if it will be clawed back in full via the tax charge, with the added administrative burden of needing to complete a tax return. LITRG warns that this trend will have unforeseen consequences for the lower-earning partner and for the child.

LITRG is calling for the Government to reconsider the £50,000 threshold at which the HICBC starts to apply, if it is retained in its current form.

Victoria Todd, Head of LITRG Team, said:

‘Despite its name, the high income child benefit charge can have consequences for the lower earner in a couple even though the liability to the tax charge falls to the higher earner. This is because where the tax charge applies a household may decide, quite understandably, not to claim child benefit at all. But this means that the lower earning individual may miss out on National Insurance credits, due for the first 12 years, which help to build entitlement towards a state pension.

‘The Government’s solution is to allow couples to claim child benefit regardless and, if they wish to avoid the charge, they can choose not to receive payments – but this is not widely known and to many, claiming and receiving a benefit are the same thing.

‘This is a problem which is affecting an increasing number of families because the £50,000 threshold has remained static since the charge was introduced in 2013. At that time, the HICBC was intended to affect only the top 10 percent of earners, but each year the proportion of those affected increases as wages rise. LITRG recommends that the next Government considers uprating the £50,000 threshold, just like some other tax thresholds and allowances, to minimise the adverse consequences for those families it affects and ensure the policy works in the way originally intended.’

Please contact us for help and advice on HICBC.

Internet link: LITRG press release

Self assessment deadline approaching

The deadline for submitting your 2018/19 self assessment return is 31 January 2020. The deadline applies to taxpayers who need to complete a tax return and make direct payments to HMRC in respect of their income tax, Classes 2 and 4 National Insurance Contributions (NIC), capital gains tax and High Income Child Benefit Charge liabilities.

There is a penalty of £100 if a taxpayer’s return is not submitted on time, even if there is no tax due or the return shows that they are due a tax refund.

The balance of any outstanding income tax, Classes 2 and 4 NIC, capital gains tax and High Income Child Benefit Charge for the year ended 5th April 2019 is also due for payment by 31 January 2020. Where the payment is made late interest will be charged.

The first payment on account for 2019/20 in respect of income tax and any Class 4 NIC or High Income Child Benefit Charge is also due for payment by 31st January 2020.

HMRC revealed that more than 3000 taxpayers filed their return on Christmas Day. If you would like help with your return or agreeing your tax liability, please contact us.

Internet links: GOV.UK self assessment GOV.UK news

Current list of deliberate tax defaulters

HMRC publishes details of deliberate tax defaulters, those people who have received penalties either for:

deliberate errors in their tax returns or
deliberately failing to comply with their tax obligations.

Internet link: GOV.UK deliberate defaulters

Welsh government publishes Draft Budget

The Welsh government has published its Draft Budget, setting out revenue raising and capital spending plans for 2020/21.

The Draft Budget confirms no changes are proposed to Welsh income tax rates, or Land Transaction Tax rates and bands. The Draft Welsh spending plans for the longer term will depend on the next UK Budget and comprehensive spending review scheduled for 2020.

Internet link: GOV.WALES Budget

Newsletter – November 2019

Posted on November 4, 2019 by Henry Cooper

Enews November 2019

In this month’s Enews we report on an IR35 appeal, HMRC’s clampdown on enablers of tax avoidance schemes and an update on probate fees. With a Charity Commission report on fraud protection, the latest guidance for employers and a reminder to complete your self assessment tax return there is a lot to consider.

Budget will not now take place on 6 November

Christa Ackroyd loses IR35 appeal

Clamp down on enablers of tax avoidance schemes

Increase in probate fees abandoned

Charities fraud protection failures

Guidance for employers

HMRC countdown: file your tax return

Genuine HMRC contact and recognising phishing emails and texts

Budget will not now take place on 6 November

On 25 October 2019 the Chancellor of the Exchequer Sajid Javid wrote to the Treasury Select Committee to confirm that the Budget will not now take place on 6 November 2019 as originally planned. You can read that letter here.

We will keep you informed of developments.

Internet link: GOV.UK Budget

Christa Ackroyd loses IR35 appeal

Former BBC presenter Christa Ackroyd has lost her appeal against a ruling that she was an employee, not a freelance contractor, when she worked for the BBC via a personal service company.

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.

Judges in the Upper Tier Tribunal upheld last year’s First Tier Tribunal ruling that she was a BBC employee when she presented Look North in Yorkshire and was therefore liable to pay income tax and national insurance contributions.

The case related to the tax years 2006/07 to 2012/13, while she worked for the public broadcaster through her personal service company, Christa Ackroyd Media (CAM).

HMRC argued that she owed almost £420,000 in income tax and national insurance contributions, before corporation tax deductions. An HMRC spokesperson said they welcomed the judgment that the presenter was within the intermediary rules.

‘Employment status is never a matter of choice; it is always dictated by the facts and when the wrong tax is being paid, we put things right.

It is right that an individual who works through a company, but would have been an employee if they were taken on directly, pays broadly the same amount of tax and national insurance contributions as employees.’

The IR35 rules were amended for Public Bodies (including the BBC) from April 2017 and the government will make similar changes for the private sector from April 2020.

Internet links: ICAEW news BAILII cases

Clamp down on enablers of tax avoidance schemes

HMRC says it is clamping down on the promoters and enablers of tax avoidance schemes in the wake of the loan charge controversy.

Penny Ciniewicz, Director General of Customer Compliance at HMRC, told the Treasury Select Committee that HMRC is ‘doubling the resources’ to tackle those in the ‘avoidance supply chain’.

In response to questions about the loan charge, Ms Ciniewicz said:

‘We have more than 100 current investigations into promoters [and enablers], and we’re keeping a very close eye on the market for avoidance. We are spotting schemes as they emerge and we’re tackling them.’

The loan charge policy is currently subject to an independent review. It came into effect on 6 April this year, and applies to anyone who used ‘disguised remuneration’ schemes. The legislation added a 45% non-refundable charge on all loans advanced through the schemes, unless the individual had agreed with HMRC to settle their tax affairs.

Internet link: ICAEW news

Increase in probate fees abandoned

The government has abandoned its planned increase in probate fees. The increase in fees was originally expected to take effect from 1 April 2019. However, in March 2019 HMRC postponed the introduction of the increase, attributing the delay to pressure on Parliamentary time.

As part of the government’s plans, estates that are valued between £50,000 and £300,000 would have been subject to a probate fee of £250. Fees were to rise thereafter to reach £6,000 for estates with a value above £2 million.

Currently, for estates valued at over £5,000, a grant application made by a solicitor is subject to a flat fee of £155. A grant application made by an individual is subject to a fee of £215.

The increase was included in a statutory instrument (SI) however the SI fell away on the prorogation of Parliament in September, but was reinstated when the prorogation was declared illegal.

The government has now announced that the planned increase will not take place. Instead there will be a review of court costs and how they can be covered by the actual service required.

Probate fees apply in in England and Wales.

Internet link: ICAEW post

Charities fraud protection failures

According to a report published by the Charity Commision, the majority of UK charities admit fraud is a major risk, but are still failing to carry out basic tasks in order to protect themselves.

More than 3,300 charities took part in the Charity Commission’s survey into fraud awareness, resilience and cyber security in the sector. Over two thirds of charities agree that fraud is a significant risk. Insider fraud is recognised as one of the biggest threats, the report stated.

The survey found that 85% of charities think they are doing everything they can to prevent fraud, but almost half do not have robust protections in place.

The Commission recommended some simple steps that charities could take to protect their funds, including introducing and enforcing basic financial controls. They should also make sure no single individual has oversight or control of financial arrangements, as effective segregation of duties is a crucial method of preventing and detecting fraud.

The Commission also recommends that employees, volunteers and trustees should be encouraged to speak out when they see something they feel uncomfortable about.

Internet link: GOV.UK news

Guidance for employers

HMRC has published the October 2019 issue of the Employer Bulletin which contains guidance on a number of issues relevant for employers. Topics in this edition include:

Changes for UK employers sending workers to the EU, the EEA or Switzerland
PAYE Settlement Agreements and Welsh rate of Income Tax

Guidance for employers on reporting PAYE information in real time when payments are made early at Christmas
Disguised Remuneration
Termination payments: Post Employment Notice Pay for employees paid by equal monthly instalments
Do your employees have the right tax code?

Employment Allowance reform – eligibility rules for the Employment Allowance are changing from April 2020
Do you claim the Apprenticeship Levy Allowance or Employment Allowance?
Changes to company car tax regime
Student and Postgraduate Loans
Childcare vouchers
Trivial Benefits in kind
Paying for fitness equipment

If you would like help with payroll matters please contact us.

Internet link: GOV.UK employer-bulletin-october-2019

HMRC countdown: file your tax return

With less than 100 days until the self assessment tax return deadline of 31 January 2020, HMRC is urging taxpayers to complete their tax returns early, in order to avoid the last minute rush.

HMRC report that last year more than 2,000 people submitted their tax returns on Christmas Day. Taxpayers should consider submitting their returns early to avoid the stress of a last minute rush.

Angela MacDonald, HMRC’s Director General for Customer Services, said:

‘The deadline for completing Self Assessment tax returns is only 100 days away, yet, so many of us wait until January to start the process. Avoid the last minute rush by completing your tax returns on time and then enjoy the upcoming festive period.

We want to help people get their tax returns right – starting the process early and giving yourself time to gather all the information you need will help avoid that stressful, late rush to file.’

Not all taxpayers need to complete a tax return as tax is automatically deducted from the majority of UK taxpayers’ wages, pensions or savings. For people or businesses where tax is not automatically deducted, or when they may have earned additional untaxed income, they are required to complete a Self Assessment tax return each year.

HMRC is also reminding people who are liable for the High Income Child Benefit Charge that they may need to file a tax return before the deadline. Those with income over £50,000 who receive child benefit, or those whose partner gets it, are liable for the charge. Taxpayers can check their annual income via their P60 or Personal Tax Account, and use HMRC’s child benefit tax calculator.

The deadline for filing paper tax returns was 31 October 2019 and the deadline for online tax returns and paying any tax owed is 31 January 2020. If taxpayers miss the deadline, they face a minimum £100 penalty for late submission.

Internet link: GOV.UK news

Genuine HMRC contact and recognising phishing emails and texts

HMRC has updated their guidance on how to recognise when contact from HMRC is genuine and how to recognise phishing or bogus emails and text messages.

Internet link: GOV.UK recognising phishing emails

Newsletter – May 2019

Posted on May 7, 2019 by Henry Cooper

Enews – May 2019

In this month’s Enews we report on the latest guidance for employers, revised VAT fuel scale charges and the consultation to extend IR35. We also update you on the latest springtime tax scam and the government’s commitment to implement a pensions dashboard. With an update on Money Laundering failings, reaction to the flexible extension to Article 50 and a further delay to Scottish Air Departure Tax, there is a lot to update you on.

Latest guidance for employers

VAT fuel scale charges

Consultation on extension of IR35 rules

Government confirms implementation of pensions dashboards

‘Springtime’ tax scams target young people

Money Laundering

‘Flexible extension’ to Article 50

Scottish Air Departure Tax plans further delayed

Latest guidance for employers

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

Cash Allowances, Flexible Benefits Packages and Salary Sacrifice
Unpaid work trials and the National Minimum Wage
Diesel Supplement Company Car Tax Changes to meet Euro standard 6d
Student Loans
Construction Industry Scheme – helpful reminders for contractors and subcontractors
Welsh rate of income tax and Scottish Income Tax.

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

Internet link: Employer Bulletin April 2019

VAT fuel scale charges

HMRC has issued details of the updated VAT fuel scale charges which apply from the beginning of the next prescribed VAT accounting period starting on or after 1 May 2019.

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

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

Internet link: GOV.UK fuel scale charges

Consultation on extension of IR35 rules

HMRC has published guidance on the extension of the off-payroll working rules (also known as IR35) to the private sector, a year ahead of its implementation on 6 April 2020.

In the guidance, HMRC state that the responsibility to determine whether the off-payroll working rules apply will fall on the organisation receiving the individual’s service. It outlines a four-step process which can be used to prepare for the changes, starting with identifying any individuals who are supplying their services through PSCs.

The consultation closes on 28 May and asks for responses on several matters, including the scope of the reform and its impact on non-corporate engagers; information requirements for engagers, fee payers and personal service companies (PSCs); and how to address disagreements on an individual’s employment status.

The consultation also sets out HMRC’s plans to provide education and support for those businesses that are affected.

Internet links: HMRC guidance and HMRC consultation

Government confirms implementation of pensions dashboards

The government has confirmed that the initiative to introduce a pensions dashboard will go ahead.

Pensions dashboards will allow those saving for retirement to view information from multiple pensions in one place stating that the dashboard will ‘open up pensions to millions’, and ‘provide an easy-to-access online view of a saver’s pensions’.

The Department for Work and Pensions (DWP) will bring forward legislation that will require pension scheme providers to make consumers’ data available to them through their chosen dashboard. The plan is to include State pension information as well.

Mike Cherry, National Chairman of the Federation of Small Businesses (FSB), said:

‘The government’s commitment to compel pension schemes to share data with platforms through primary legislation is particularly welcome. Some urgency is now required, and we question the three to four-year timeframe for schemes to prepare data for dashboards.’

Internet links: GOV.UK Pensions dashboard fsb press release

‘Springtime’ tax scams target young people

HMRC has warned young people in the UK to ‘stay vigilant’ in order to avoid falling victim to ‘Springtime’ tax refund scams.

Criminals often target young individuals or the elderly as these groups of people are likely to be less familiar with the UK tax system. During the months of April and May, criminals often bombard taxpayers with tax refund scams at the same time as genuine rebates are processed by HMRC.

In the Spring of 2018, approximately 250,000 reports of tax scams were received by HMRC.

Individuals have been warned to be wary of text messages, calls and voicemails purporting to be from HMRC. These are often designed to extract personal or financial information from the taxpayer.

Angela MacDonald, Head of Customer Services at HMRC, said:

‘We are determined to protect honest people from these fraudsters who will stop at nothing to make their phishing scams appear legitimate.

‘HMRC is currently shutting down hundreds of phishing sites a month. If you receive one of these emails or texts, don’t respond and report it to HMRC so that more online criminals are stopped in their tracks.‘

Internet links: Action Fraud

Money Laundering

HMRC has published a list of businesses that have not met their obligations under the Money Laundering Regulations.

As a supervisor of the Money Laundering Regulations HMRC has a duty to publish details of businesses that have been penalised for not complying with the regulations.

HMRC advises that it considers cases individually to decide whether to publish details in full, anonymously, or not at all. Where a decision is made to publish in full, the following information may be published:

the name and address of the business owner or business
the nature of the breach or breaches
the penalty issued by HMRC
the status of any appeal against the penalty

HMRC publishes anonymously if it considers that the effect of publishing details about an individual or business would be disproportionate.

Internet link: GOV.UK money laundering

‘Flexible extension’ to Article 50

Business groups, including the British Chambers of Commerce (BCC) and the Confederation of British Industry (CBI), have commented on the six-month ‘flexible’ extension of Article 50, granted to the UK by EU leaders.

The extension potentially pushes ‘Brexit Day’, the day when the UK officially leaves the EU, to 31 October 2019.

Reacting to the news, the BCC stated that the flexible extension is ‘preferable’ for most businesses. It said:

‘Politicians must urgently agree on a way forward. It would be a disaster for business confidence and investment if a similar late-night drama is played out yet again in October.’

The CBI said that UK businesses will now ‘adjust their no-deal plans’ instead of cancelling them. Carolyn Fairbairn, Director General of the CBI, said:

‘For the good of jobs and communities across the country, all political leaders must use the time well. Sincere cross-party collaboration must happen now to end this crisis.’

Internet links: BCC news CBI article

Scottish Air Departure Tax plans further delayed

The Scottish government has further delayed its plans to replace Air Passenger Duty (APD) with Air Departure Tax (ADT). The plans to introduce ADT have been delayed beyond 2020.

In 2016, as part of the Scotland Act, the Scottish Parliament was given devolved powers to charge tax on travellers leaving Scottish airports. Proposals were put forward to replace the UK-wide APD with an ADT.

The ADT was set to take effect in April 2018, but was delayed due to issues surrounding the current exemption which applies to airports in the Highlands and Islands.

Commenting on the delay, Kate Forbes MSP, Minister for Public Finance and Digital Economy, stated:

‘The Scottish government has been clear that it cannot take on ADT until a solution to these issues has been found, because to do so would compromise the devolved powers and risk damage to the Highlands and Islands economy.

‘While we work towards a resolution to the Highlands and Islands exemption, we continue to call on the UK government to reduce APD rates to support connectivity and economic growth in Scotland and across the UK.’

Internet link: GOV.SCOT news parliamentary business

Autumn Budget 2018

Posted on October 30, 2018 by Henry Cooper

Budget 2018

The Chancellor Philip Hammond presented his second Autumn Budget on Monday 29 October 2018. In his speech he stated that ‘austerity is coming to an end – but discipline will remain’. He also promised a ‘double deal dividend’ if the Brexit negotiations are successful but stated that there may be a full-scale Spring Budget in 2019 if not.

Main Budget tax proposals

Our summary concentrates on the tax measures which include:

increases to the personal allowance and basic rate band
extending off-payroll working to medium/large organisations in the private sector
a temporary increase to the Annual Investment Allowance
freezing the VAT registration threshold for a further two years
changes to Entrepreneurs’ Relief and private residence relief
measures to tackle the plastic problem.

Previously announced measures include:

increases in car benefits
plans for Making Tax Digital for Business
extending the charge to gains on non-UK residents of non-residential UK property.

Some Budget proposals may be subject to amendment in the 2019 Spring Statement and subsequent 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 £11,850. The personal allowance for 2019/20 will be £12,500.

Comment

There is a reduction in the personal allowance for those with ‘adjusted net income’ over £100,000 and the threshold has remained at this figure since its introduction for the 2010/11 tax year. The reduction is £1 for every £2 of income above £100,000. So for 2018/19 there is no personal allowance where adjusted net income exceeds £123,700. For 2019/20 there will be no personal allowance available 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 £238 a year in 2018/19. The marriage allowance was first introduced for 2015/16 and there are many 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. A recent change to the law allows backdated claims to be made by personal representatives of a deceased transferor spouse or civil partner.

Tax bands and rates

The basic rate of tax is currently 20%. The band of income taxable at this rate is £34,500 so that the threshold at which the 40% band applies is £46,350 for those who are entitled to the full personal allowance. Additional rate taxpayers pay tax at 45% on their income in excess of £150,000.

The tax on income (other than savings and dividend income) is different for taxpayers who are resident in Scotland to 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 the 2018/19 Scottish Budget, the Finance Secretary for Scotland introduced five income tax rates as shown in the table of rates at the end of this summary. The income tax rates range between 19% and 46%. Scottish taxpayers are entitled to the same personal allowance as individuals in the rest of the UK.

Tax bands and rates 2019/20

The government has announced that for 2019/20 the basic rate band will be increased to £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. The additional rate of tax of 45% remains payable on taxable income above £150,000.

From April 2019, the Welsh Government has the right to vary the rates of income tax payable by Welsh taxpayers. The UK government will reduce each of the three rates of income tax paid by Welsh taxpayers by 10 pence. The Welsh Government has provisionally set the Welsh rate of income tax at 10 pence which will be added to the reduced UK rates. This means the rates of income tax paid by Welsh taxpayers will continue to be the same as those paid by English and Northern Irish taxpayers. The Welsh Government will need to confirm this proposal prior to their final Budget.

The Scottish Government will announce the Scottish income tax rates and bands for 2019/20 in the Draft Budget on 12 December 2018.

Tax on dividends

In 2018/19 the first £2,000 of dividends are chargeable to tax at 0% (the Dividend Allowance). The Dividend Allowance will remain at £2,000 for 2019/20. 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 Dividend Allowance.

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

Comment

In 2017/18 the Dividend Allowance was £5,000. The reduction in the allowance particularly affects family company director-shareholders who extract monies from the company by means of a small salary and the balance in dividends. The cost of the restriction in the allowance for basic rate taxpayers is £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, which was first introduced for the 2016/17 tax year, 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.

Rent-a-room relief

Rent-a-room relief gives relief from income tax for up to £7,500 of income to individuals who let furnished accommodation in their only or main residence. Following consultation on the draft legislation and to maintain the simplicity of the system, the government will not include legislation for the shared occupancy test. The government will retain the existing qualifying test of letting in a main or only residence.

Comment

Rent-a-room relief was introduced 26 years ago to encourage individuals to make spare capacity in their homes available for rent rather than letting out their entire property. The emergence and growth of online platforms have made it easier than ever for those with accommodation to access a global network of potential occupants. The government wants rent-a-room relief to be better targeted to achieve its objective of incentivising individuals to share their homes.

Gift Aid – donor benefits

Draft legislation has been issued which simplifies the donor benefits rules that apply to charities who claim Gift Aid tax relief on donations. From 6 April 2019 the benefit threshold for the first £100 of the donation will remain at 25% of that amount. For gifts exceeding £100, charities can offer benefits up to the sum of £25 and 5% of the amount of the donation that exceeds £100. The total value of the benefit that a donor can receive remains at £2,500.

Comment

The new limits replace the current mix of monetary and percentage thresholds that charities have to consider when determining the value of benefit they can give to their donors without losing the entitlement to claim Gift Aid tax relief on the donations given to them.

Gift Aid Small Donations Scheme

The Gift Aid Small Donations Scheme (GASDS) applies to small charitable donations where it is impractical to obtain a Gift Aid declaration. GASDS currently applies to donations of £20 or less made by individuals in cash or contactless payment. The limit will be raised to £30 from 6 April 2019.

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

Following the recommendations of the independent Low Pay Commission (LPC), the government will increase the NLW by 4.9% from £7.83 to £8.21 from April 2019.

The government will also accept all of the LPC’s recommendations for the other NMW rates to apply from April 2019, including increasing the rates for:

21 to 24 year olds by 4.3% from £7.38 to £7.70 per hour
18 to 20 year olds by 4.2% from £5.90 to £6.15 per hour
16 to 17 year olds by 3.6% from £4.20 to £4.35 per hour
apprentices by 5.4% from £3.70 to £3.90 per hour.

Universal Credit

The government has announced that the amount that households with children and people with disabilities can earn before their Universal Credit award begins to be withdrawn – the Work Allowance – will be increased by £1,000 from April 2019.

In addition the government has listened to representations made by stakeholders on Universal Credit, and has announced a package of extra support for claimants as they make the transition to Universal Credit.

Comment

The government remains committed to the introduction of Universal Credit. The set of measures announced in the Budget are worth £1.7 billion per year.

Business Tax

Making Tax Digital for Business: VAT

HMRC is phasing in its landmark Making Tax Digital (MTD) regime, which will ultimately require taxpayers to move to a fully digital tax system. Regulations have now been issued which set out the requirements for MTD for VAT. Under the new rules, businesses with a turnover above the VAT threshold (currently £85,000) must keep digital records for VAT purposes and provide their VAT return information to HMRC using MTD functional compatible software.

The new rules have effect from 1 April 2019 where a taxpayer has a ‘prescribed accounting period’ which begins on that date, or otherwise from the first day of a taxpayer’s first prescribed accounting period beginning after 1 April 2019. HMRC has recently announced that the rules will have effect for some VAT-registered businesses with more complex requirements from 1 October 2019. Included in the deferred start date category are VAT divisions, VAT groups and businesses using the annual accounting scheme.

HMRC has recently opened a pilot service for businesses with straightforward affairs and the pilot scheme will be gradually extended for other businesses in the next few months.

Keeping digital records and making quarterly updates will not be mandatory for taxes other than VAT before April 2020.

Comment

Keeping digital records will not mean businesses are mandated to use digital invoices and receipts but the actual recording of supplies made and received must be digital. It is likely that third party commercial software will be required. Software will not be available from HMRC. The use of spreadsheets will be allowed, but they will have to be combined with add-on software to meet HMRC’s requirements.

In the long run, HMRC is still looking to a scenario where income tax updates are made quarterly and digitally, and this is really what the VAT provisions anticipate.

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 19% and will remain at this rate for next year. The rate will fall to 17% for the Financial Year beginning on 1 April 2020.

Class 2 and 4 National Insurance contributions (NICs)

The government has recently announced that Class 2 NICs will not be abolished for the duration of this Parliament. The Chancellor confirmed in March 2017 that there will be no increases to Class 4 NICs rates in this Parliament.

Comment

The government’s proposed reform of Class 2 and 4 NICs has had a chequered history. The original proposal was to abolish Class 2 contributions and reform Class 4 contributions. The Chancellor had to backtrack on the Class 4 reform due to the reaction to a proposed increase in rates and the Class 2 abolition was deferred to April 2019.

However a significant number of self-employed individuals with the lowest profits would have seen the voluntary payment they make to maintain access to the state pension rise substantially and so the government decided it would not be right to proceed with the abolition of Class 2.

UK property income of non-UK resident companies

Changes are made for non-UK resident companies that carry on a UK property business either directly or indirectly, for example through a partnership or a transparent collective investment vehicle.

Following consultation, from 6 April 2020, non-UK resident companies that carry on a UK property business, or have other UK property income, will be charged to corporation tax, rather than being charged to income tax as at present.

Capital allowances

Annual Investment Allowance

The government has announced an increase in the Annual Investment Allowance for two years to £1 million in relation to qualifying expenditure incurred from 1 January 2019. Complex calculations may apply to accounting periods which straddle this date.

Other changes

A number of changes are made to other rules relating to capital allowances:

a reduction in the rate of writing down allowance on the special rate pool of plant and machinery, including long-life assets, thermal insulation, integral features and expenditure on cars with CO₂ emissions of more than 110g/km, from 8% to 6% from April 2019. Complex calculations may apply to accounting periods which straddle this date
clarification as to precisely which costs of altering land for the purposes of installing qualifying plant or machinery qualify for capital allowances, for claims on or after 29 October 2018
the end of the 100% first year allowance and first year tax credits for products on the Energy Technology List and Water Technology List from April 2020
an extension of the current 100% first year allowance for expenditure incurred on electric charge-point equipment until 2023.

In addition, a new capital allowances regime will be introduced for structures and buildings. It will be known as the Structures and Buildings Allowance and will apply to new non-residential structures and buildings. Relief will be provided on eligible construction costs incurred on or after 29 October 2018, at an annual rate of 2% on a straight-line basis.

Change to the definition of permanent establishment

A non-resident company is liable to corporation tax only if it has a permanent establishment in the UK. Certain preparatory or auxiliary activities, such as storing the company’s own products, purchasing goods or collecting information for the non-resident company, are classed as not creating a permanent establishment.

From 1 January 2019, the exemption will be denied to these activities if they are part of a ‘fragmented business operation’.

Preventing abuse of the R&D tax relief for SMEs

To help prevent abuse of the Research and Development (R&D) SME tax relief by artificial corporate structures, the amount that a loss-making company can receive in R&D tax credits will be capped at three times its total PAYE and NICs liability from April 2020.

Comment

HMRC has identified and prevented £300 million of fraud linked to this relief and this change will help to address similar abuses in future. Almost 95% of companies currently claiming the payable credit will be unaffected.

Protecting taxes in insolvency

From April 2020, HMRC will have greater priority to recover taxes paid by employees and customers.

The changes appear to be mainly targeted at the distribution of funds to financial institutions as creditors. The rules will remain unchanged for taxes owed by the business and HMRC will remain below other preferential creditors such as the Redundancy Payment Service.

Comment

This will ensure that an extra £185 million in taxes already paid each year reaches the government.

A veiled comment also suggests that, at some stage in the future, directors and other persons involved in tax avoidance, evasion or phoenixism will be jointly and severally liable for company tax liabilities, where there is a risk that the company may deliberately enter insolvency.

Other measures

Changes to the tax treatment of corporate capital losses from 1 April 2020 to restrict the proportion of annual capital gains that can be relieved by brought-forward capital losses to 50%.
Changes to the Diverted Profits Tax from 29 October 2018.
An increase in the small trading tax exemption limits for charities from April 2019 from £5,000 per annum or, if the turnover is greater than £5,000, 25% of the charity’s total incoming resources, subject to an overall upper limit of £50,000, to £8,000 and £80,000 respectively.
The introduction of an income tax charge to amounts received in a low tax jurisdiction in respect of intangible property, to the extent that those amounts are referable to the sale of goods or services in the UK, from 6 April 2019, with targeted anti-avoidance rules for arrangements entered into on or after 29 October 2018.

Digital Services Tax

The government remains committed to reform of the international corporate tax framework for digital businesses. However, pending global reform, interim action is needed to ensure the corporate tax system is sustainable and fair across different types of businesses.

Therefore, the government has announced that it will introduce a Digital Services Tax (DST) which will raise £1.5 billion over four years from April 2020. The DST will apply a 2% tax on the revenues of search engines, social media platforms and online marketplaces where their revenues are linked to the participation of UK users.

Businesses will need to generate revenues of at least £500 million globally to become taxable under the DST. The first £25 million of relevant UK revenues are also not taxable.

Intangible fixed assets

The Intangible Fixed Assets regime, which was introduced from 1 April 2002, fundamentally changed the way the UK corporation tax system treats intangible fixed assets (such as copyrights, patents and goodwill). As the regime is now more than 15 years old, the government would like to examine whether there is scope for reforms that would simplify it and make it more effective in supporting economic growth.

Following a short consultation, the government will seek to introduce targeted relief for the cost of goodwill in the acquisition of businesses with eligible intellectual property from April 2019.

With effect from 7 November 2018, the government will also reform the de-grouping charge rules, which apply when a group sells a company that owns intangibles, so that they more
closely align with the equivalent rules elsewhere in the tax code.

VAT registration limits

The government had previously announced that the VAT registration and deregistration thresholds would be frozen at £85,000 and £83,000 respectively until April 2020.

The government has now announced that this freeze will continue for a further two years from 1 April 2020.

VAT fraud in labour provision in the construction sector

The government will pursue legislation to shift responsibility for paying VAT along the supply chain with the introduction of a domestic VAT reverse charge for supplies of construction services with effect from 1 October 2019. The long lead-in time reflects the government’s commitment to give businesses adequate time to prepare for the changes.

VAT treatment of vouchers

Draft legislation has been issued to insert a new tax code for the VAT treatment of vouchers, such as gift cards, for which a payment has been made and which will be used to buy something. The legislation separates vouchers with a single purpose (eg a traditional book token) from the more complex gift vouchers and sets out how and when VAT should be accounted for in each case. The new legislation is not concerned with the scope of VAT and whether VAT is due, but with the question of when VAT is due and, in the case of multi-purpose vouchers, the consideration upon which any VAT is payable.

VAT collection – split payment

The government wants to combat online VAT fraud by harnessing new technology and is consulting on VAT split payment. This will utilise payments industry technology to collect VAT on online sales and transfer it directly to HMRC. In the government’s view this would significantly reduce the challenge of enforcing online seller compliance and offer a simplification for business.

Employment Taxes

Off-payroll working in the private sector

The changes to IR35 that came into effect in April 2017 for the public sector will be extended to the private sector from April 2020. Responsibility for operating the off-payroll rules will be transferred from the individual to the organisation, agency or third party engaging the worker. Only medium and large organisations will be subject to this change.

Employment Allowance

The Employment Allowance provides businesses and charities with up to £3,000 off their employer NICs bill. From April 2020, the Employment Allowance will be restricted to those employers whose employers’ NICs bill was below £100,000 in the previous tax year.

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 normally announced well in advance. Most cars are taxed 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 this tax year there was generally a 2% increase in the percentage applied by each band. For 2019/20 the rates will increase by a further 3%.

A new development for the current tax year is an increase in the diesel supplement from 3% to 4%. This applies to all diesel cars (unless the car is registered on or after 1 September 2017 and meets the Euro 6d emissions standard) but the maximum is still 37%. There is no change to the current position that the diesel supplement does not apply to hybrid cars.

Charging facilities for electric and hybrid cars

Legislation is proposed to provide a new exemption from a taxable employment benefit where an employer provides charging facilities for employees’ all-electric and plug-in hybrid vehicles at or near the workplace. The exemption is backdated to have effect from 6 April 2018.

Employer provided cars and vans are already exempt from this benefit.

Exemption for travel expenses

Draft legislation has been issued which removes the requirement for employers to check receipts when making payments to employees for subsistence using benchmark scale rates. This will apply to standard meal allowances paid in respect of qualifying travel and overseas scale rates. Employers will only be asked to ensure that employees are undertaking qualifying travel. This will have effect from April 2019.

The proposed legislation will also allow HMRC to put the existing concessionary accommodation and subsistence overseas scale rates on a statutory basis from 6 April 2019. Like benchmark rates, employers will only be asked to ensure that employees are undertaking qualifying travel.

Self-funded work-related training

The government had previously announced that it would consult on extending the scope of tax relief currently available to employees and the self-employed for work-related training costs. The government has now decided to make no changes to the existing rules. However the National Retraining Scheme is being launched to help those in work, including the self-employed, to develop further skills.

Capital Taxes

Capital gains tax (CGT) rates

There are two specific types of disposal which potentially qualify for a 10% rate, both of which have a lifetime limit of £10 million for each individual:

Entrepreneurs’ Relief (ER). This 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
Investors’ Relief. The main beneficiaries of this relief are external investors in unquoted trading companies who have newly-subscribed shares.

CGT annual exemption

The CGT annual exemption is £11,700 for 2018/19 and will be increased to £12,000 for 2019/20.

Entrepreneurs’ Relief (ER)

Tackling misuse

With immediate effect for disposals on or after 29 October 2018, two new tests are to be added to the definition of a ‘personal company’, requiring the claimant to have a 5% interest in both the distributable profits and the net assets of the company. The new tests must be met, in addition to the existing tests, throughout the specified period in order for relief to be due. The existing tests already require a 5% interest in the ordinary share capital and 5% of voting rights.

Minimum qualifying period

The government will legislate in Finance Bill 2018-19 to increase the minimum period throughout which certain conditions must be met to qualify for ER, from one year to two years. The measure will have effect for disposals on or after 6 April 2019 except where a business ceased before 29 October 2018. Where the claimant’s business ceased, or their personal company ceased to be a trading company (or the holding company of a trading group) before 29 October 2018, the existing one year qualifying period will continue to apply.

Dilution of holdings below 5%

Draft legislation has been issued to provide a potential entitlement to ER where an individual’s holding in a company is reduced below the normal 5% qualifying level (meaning 5% of both ordinary share capital and voting power). The relief will only apply where the reduction below 5% occurs as a result of the company raising funds for commercial purposes by means of an issue of new shares, wholly for cash consideration.

Where a disposal of the shareholding prior to the issue would have resulted in a gain which would have qualified for ER, shareholders will be able to make an election treating them as if they had disposed of their shares and immediately reacquired them at market value just before dilution. To avoid an immediate CGT bill on this deemed disposal, a further election can be made to defer the gain until the shares are sold. ER can then be claimed on the deferred gain in the year the shares are sold under the rules in force at that time.

The new rules will apply for share issues which occur on or after 6 April 2019.

Gains for non-residents on UK property

Draft legislation has been issued to charge all non-UK resident persons, whether liable to CGT or corporation tax, on gains on disposals of interests in any type of UK land, whether residential or non-residential. Certain revisions are to be made following a further technical consultation when the full legislation is introduced but the key points are covered here.

All non-UK resident persons will also be taxable on indirect disposals of UK land. The indirect disposal rules will apply where a person makes a disposal of an entity that derives 75% or more of its gross asset value from UK land. There will be an exemption for investors in such entities who hold a less than 25% interest.

All non-UK resident companies will be charged to corporation tax rather than CGT on their gains.

There will be options to calculate the gain or loss on a disposal using the original acquisition cost of the asset or using the value of the asset at commencement of the rules in April 2019.

The CGT charge relating to the Annual Tax on Enveloped Dwellings will be abolished. The legislation will broadly have effect for disposals from 6 April 2019.

Comment

The main effect of the new legislation will be to extend the scope of UK taxation of gains to include gains on disposals of interests in non-residential UK property.

Previous legislation has focussed on bringing gains made by non-residents on residential properties within the UK tax regime.

Payment on account and 30 day returns

Draft legislation has been issued to change the reporting of gains and the associated CGT liability on disposal of property. The main change is a requirement for UK residents to make a return and a payment on account of CGT within 30 days following the completion of a residential property disposal on a worldwide basis. The new requirements will not apply where the gain on the disposal is not chargeable to CGT, for example where the gains are covered by private residence relief.

For UK residents, the measure will have effect for disposals made on or after 6 April 2020.

CGT private residence relief

It is proposed that from April 2020 the government will make two changes to private residence relief:

the final period exemption will be reduced from 18 months to 9 months. There will be 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 circumstances where the owner of the property is in ‘shared-occupancy’ with a tenant.

The government will consult on the detail of both of these changes and other technical aspects.

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.

IHT residence nil rate band

From 6 April 2017 a new nil rate band, called the ‘residence nil rate band’ (RNRB), has been introduced, meaning that the family home can be passed more easily to direct descendants on death.

The RNRB is being phased in. For deaths in 2018/19 it is £125,000, rising to £150,000 in 2019/20 and £175,000 in 2020/21. Thereafter it will rise in line with the Consumer Price Index.

There are a number of conditions that must be met in order to obtain the RNRB, which may involve redrafting an existing will.

Downsizing

The RNRB 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 RNRB, are passed on death to direct descendants.

Changes to IHT RNRB

Amendments are to be introduced to the RNRB relating to downsizing provisions and the definition of ‘inherited’ for RNRB purposes. These amendments clarify the downsizing rules, and provide certainty over when a person is treated as ‘inheriting’ property. This will ensure the policy is working as originally intended. The changes will have effect for deaths on or after 29 October 2018.

Stamp Duty Land Tax (SDLT)

First time buyers relief

The relief for first time buyers will be extended to purchasers of qualifying shared ownership properties who do not elect to pay SDLT on the market value of the whole property when they purchase their first share. Relief will be applied to the first share purchased, where the market value of the shared ownership property is £500,000 or less.

Comment

The relief will apply retrospectively from 22 November 2017, meaning that a refund of tax will be payable for those who have paid SDLT after 22 November 2017 in circumstances which now qualify for first time buyers relief.

Higher rates for additional dwellings (HRAD)

A minor amendment will extend the time allowed to claim back HRAD where an individual sells their old home within three years of buying their new one.The measure also clarifies the meaning of `major interest` in land for the general purpose of HRAD.

Consultation on SDLT charge for non-residents

The government will publish a consultation in January 2019 on a SDLT surcharge of 1% for non-residents buying residential property in England and Northern Ireland.

Other Matters

Extension of offshore time limits

Draft legislation has been issued to increase the assessment time limits for offshore income and gains to 12 years. Similarly the time limits for proceedings for the recovery of inheritance tax are increased to 12 years. Where an assessment involves a loss of tax brought about deliberately the assessment time limit is 20 years after the end of the year of assessment and this time limit will not change.

The legislation does not apply to corporation tax or where HMRC has received information from another tax authority under automatic exchange of information.

The potential extension of time limits will apply from the 2013/14 tax year where the loss of tax is brought about by careless behaviour and from the 2015/16 tax year in other cases. The amendments will have effect when Finance Bill 2018-19 receives Royal Assent.

Comment

The current assessment time limits are ordinarily four years (six years in the case of carelessness by the taxpayer). The justification for the extension of time limits is the longer time it can take HMRC to establish the facts about offshore transactions, particularly if they involve complex offshore structures.

The legislation cannot be used to go back earlier than 2013/14. If there has been careless behaviour HMRC can make an assessment for up to 12 years from 2013/14 in respect of offshore matters but HMRC could not raise an assessment for 2012/13 or earlier (unless there is deliberate error by the taxpayer).

Penalties for late submission of tax returns

Taxpayers are required to submit tax returns by specified dates. When taxpayers submit their returns late they generally incur a penalty. Draft legislation has been issued which sets out a new points-based penalty regime for regular submission obligations. Returns have to be submitted more frequently in some circumstances. Depending on the frequency of the return submission obligation, a defined number of penalty points will accrue to a threshold. Once this threshold has been reached, a fixed penalty will be charged to the taxpayer.

After this each late submission will attract a fixed penalty, until the taxpayer meets all submission obligations by the relevant deadline for a set period of time. Once this happens, and a taxpayer has provided any outstanding submissions for the preceding 24 months, the points total will reset to zero. Points will generally have a lifetime of 24 months after which they expire, so if a taxpayer accrues points but does not reach the threshold, the points will expire after 24 months. Taxpayers will have a separate points total per submission obligation.

Penalties for late payment of tax

Draft legislation has been issued to harmonise the late payment penalty regimes for income tax, corporation tax and VAT. Late payment penalties are charged when customers do not pay, or make an agreement to pay, by the date they should, and do not have a reasonable excuse for the failure to do so.

The penalties will consist of two penalty charges, one charge based upon payments and agreements to pay in the first 30 days after the payment due date and another charge based upon how long the debt remains outstanding after the 30 days.

Interest harmonisation

Draft legislation has been issued to change the VAT interest rules so that they will be similar to those that currently exist for income tax and corporation tax.

This will mean:

late payment interest will be charged from the date the payment was due to the date the payment is received
HMRC will pay repayment interest when it has held taxpayer repayments for longer than it should.

The provisions are expected to take effect for VAT returns from 1 April 2020.

Tackling the plastic problem

As part of the government’s response to tackling plastic waste, the following announcements were made:

Single-use plastics will be addressed in the Resources and Waste Strategy later in the year for situations where recycling rates are too low and producers use too little recycled plastic.
The issue of excess and harmful packaging will be addressed with a tax on the production and importation of plastic packaging which does not contain at least 30% recycled plastic. This tax will be implemented in April 2022.
The Resources and Waste Strategy will also consider ways of reducing the environmental impact of disposable cups. The government does not believe that a levy would be effective at this time but will return to the issue if insufficient progress has been made by those businesses already taking steps to address the matter.

Newsletter – March 2018

Posted on March 6, 2018 by Henry Cooper

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

Advisory fuel rates for company cars

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

Minimum Wage increases

Pensions Auto Enrolment reaches a million employers

Year end tax planning

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 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%

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 2015

Posted on December 10, 2015 by Henry Cooper

eNews – December 2015

In this month’s eNews we report on pertinent announcements from the Autumn Statement focussing on issues for parents, employers and company car drivers, buy to let landlords and those with second homes. We also report on the forthcoming Scottish Budget and other pertinent announcements for employers.

Please do contact us if you would like any further information on any of the issues.

Scottish income tax rates and Scottish Budget

Autumn Statement 2015 – key announcements for parents

Autumn Statement 2015 – key announcements for employers and company car drivers

Autumn Statement 2015 – key announcements for buy to let landlords and those with second homes

Advisory fuel rates for company cars

‘Payrolling’ benefits in kind

Guidance on use of zero hours contracts

Deadline for final IR35 payments and returns

Planning a party for employees

Scottish income tax rates and Scottish Budget

From April 2016, the Scottish Parliament will have the power to set its own rate of income tax to fund spending by the Scottish government. The rate will be set in the Scottish Budget on 16 December and we will update you on pertinent announcements.

Those who are resident in Scotland will pay two types of income tax on their non-savings income. The main UK rates of income tax will be reduced by 10p for Scottish taxpayers and in its place the Scottish Parliament will be able to levy a Scottish Rate of Income Tax (SRIT) applied equally to all Scottish taxpayers. If the SRIT is set at 10p then income tax rates will be the same as in the rest of the UK. SRIT can however be reduced to zero and there is no upper limit.

The Scottish Rate of Income Tax doesn’t apply to income from savings such as building society interest or income from dividends. Tax on this income will stay the same for all taxpayers across the UK. It also doesn’t affect income tax thresholds and allowances, which will continue to be set by the UK government.

The definition of a Scottish taxpayer is based on where an individual lives in the course of a tax year. Scottish taxpayer status applies for a whole tax year. It is not possible to be a Scottish taxpayer for part of a tax year. HMRC will identify those individuals who will be Scottish taxpayers based on their records of where individuals live. In early December HMRC started to write to potential Scottish taxpayers to confirm that the address held in their records is correct. If it is, taxpayers will need to take no further action. Those paying the new rate will see their tax code prefixed by an ‘S’ and their income tax will continue to be collected from pay and pensions in the same way as it is now.

Further details and the effect on employers can be found by visiting the following link.

Internet link: GOV.UK briefing

Autumn Statement 2015 – key announcements for parents

Reversal of most of the tax credit proposals

A number of changes to tax credits and Universal Credit were announced in the July Budget but the Chancellor has scrapped some of the changes following a defeat of the proposals by the House of Lords. The government has confirmed that:

The rate at which a tax credit claimant’s award is reduced as each pound of their income exceeds the income threshold (known as the taper rate) will remain at 41% of gross income from April 2016.
The level of income at which a claimant’s tax credit award begins to be tapered away (known as the income threshold), will remain at £6,420 per year from April 2016. Claimants earning below this amount will retain their maximum award.
The income rise disregard in tax credits will reduce from £5,000 to £2,500. This is the amount by which a claimant’s income can increase in-year compared to their previous year’s income before their award is adjusted.

Changes to the prospective Tax-Free Childcare scheme

Under the scheme, which is expected to launch in 2017, the relief will be 20% of the costs of childcare up to a total of childcare costs 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).

The government has announced changes to the conditions to qualify for Tax-Free Childcare. All parents in the household must:

meet a minimum income level based on the equivalent of working 16 hours a week at the National Living Wage (increased from eight hours at the National Minimum Wage)
each earn less than £100,000 a year (reduced from £150,000), and
not already be receiving support through tax credits or Universal Credit.

The Chancellor of the Exchequer, George Osborne, has announced that the government will publish its next Budget on Wednesday 16 March 2016.

Internet links: GOV.UK main tax announcements GOV.UK news

Autumn Statement 2015 – key announcements for employers and company car drivers

Retaining the 3% diesel supplement for company cars which was to be abolished

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. Cars are taxed by reference to bands of CO₂ emissions. From 6 April 2015 the percentage applied by each band went up by 2% and the maximum charge is capped at 37% of the list price of the car.

From 6 April 2016 there will be a further 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%. It had been expected that the 3% diesel supplement would be removed from 6 April 2016, however this 3% differential will now be retained until April 2021. This is a blow to diesel car drivers who were expecting to see their car benefit reduce from April 2016.

The introduction of an apprenticeship levy

The government will introduce the apprenticeship levy in April 2017. It will be set at a rate of 0.5% of an employer’s paybill, which is broadly total employee earnings excluding benefits in kind, and will be paid through PAYE. Each employer will receive an allowance of £15,000 to offset against their levy payment. This means that the levy will only be paid on any paybill in excess of £3 million.

Internet link: GOV.UK Blue Book

Autumn Statement 2015 – key announcements for buy to let landlords and those with second homes

Higher SDLT on purchases of additional residential properties

Higher rates of SDLT will be charged on purchases of additional residential properties (above £40,000), such as buy to let properties and second homes, from 1 April 2016. The higher rates will be three percentage points above the current SDLT rates.

The higher rates will not apply to purchases of caravans, mobile homes or houseboats, or to corporates or funds making significant investments in residential property. The government will consult on the policy detail, including whether an exemption for corporates and funds owning more than 15 residential properties is appropriate. The Chancellor stated that ‘more and more homes are being bought as buy to lets or second homes’ and ‘frankly, people buying a home to let should not be squeezing out families who can’t afford a home to buy’.

No mention was made by the Chancellor on the position in Scotland. It is the Scottish Government which sets the rates for the equivalent tax on property – the Land and Buildings Transaction Tax.

The introduction of a payment on account of any CGT due on the disposal of residential property

From April 2019, a payment on account of any CGT due on the disposal of residential property will be required to be made within 30 days of the completion of the disposal. This will not affect gains on properties which are not liable for CGT due to Private Residence Relief.

Currently, CGT is not payable on a disposal of an asset until 31 January following the tax year in which a disposal is made. So a disposal made on the 6 April 2016 will not result in a tax bill until 31 January 2018.

This measure is another blow for buy to let landlords.

Internet link: GOV.UK main tax announcements

Advisory fuel rates for company cars

New company car advisory fuel rates have been published which took effect from 1 December 2015. 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 2015 are:

Engine size	Petrol
1400cc or less	11p
1401cc – 2000cc	13p
Over 2000cc	20p

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

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

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: GOV.UK AFR

‘Payrolling’ benefits in kind

From April 2016 the government is introducing a voluntary framework to allow employers to payroll most employee benefits in kind (benefits) rather than report them at the end of the tax year on a form P11D.

In order to payroll benefits an employer will need to include a notional value for employee benefits as taxable pay in the regular payroll cycle. By doing this the income tax due on the benefits can be collected in real time.

Currently the tax due on employee benefits is collected through an adjustment to the employee’s tax code. The way that tax codes work means that HMRC try to collect the right amount of tax at the right time. However, when benefits start/stop or are changed there can be a delay in changing the tax code which may result in an employee under or over paying tax.

One of the advantages to employers is that if employees’ benefits are payrolled then forms P11D will not need to be completed. Payrolling is not possible for some benefits such as living accommodation, beneficial loans and credit vouchers and tokens.

HMRC have confirmed that there will be no change to the process for reporting and collecting Class 1A NICs. Employers will still need to complete a form P11D(b) after the end of the tax year and calculate and pay the 13.8% employer only liability.

Employers need to register for the new service by 5 April 2016 as HMRC cannot process changes in year. HMRC are advising that employers should ideally register before 21 December to avoid being sent multiple tax codes for employees.

Please contact us if this is of interest to you.

Internet links: GOV.UK payrolling benefits Employer Bulletin

Guidance on use of zero hours contracts

The government has published guidance for employers on the use of zero hours contracts. The guidance sets out where zero hours contracts may be appropriate and also sets out alternatives and best practice.

The guidance gives examples of where zero hours contracts might be appropriate:

new businesses, where demand might be fluctuating and unpredictable
seasonal work, for example around Christmas
employers needing cover for unexpected sickness in critical roles
catering businesses using additional experienced staff when a special event is booked and
a business testing a new service that they are thinking about providing, needing employees on an ad hoc basis.

Internet link: GOV.UK zero-hours-contracts-guidance

Deadline for final IR35 payments and returns

The ‘IR35’ rules are designed to prevent the avoidance of tax and national insurance contributions (NIC) through the use of personal service companies and partnerships.

The rules do not stop individuals selling their services through either their own personal companies or a partnership. However, they do seek to remove any possible tax advantages from doing so.

Intermediaries who have operated the IR35 concession to delay making a final return and payment for the tax year ending 5 April 2015, have until 31 January 2016 to submit accurate figures and pay any outstanding amounts of PAYE and NIC due.

The concession operates where a provisional return and payment have been submitted but cannot be confirmed because final figures of income, including the calculation of the ‘deemed payment’, were not known at the end 2015 tax year.

HMRC advise that adjustments to the provisional RTI return should be reported using ‘an Earlier Year Update (EYU)’ and must be submitted electronically to HMRC by 31 January 2016. Interest will be charged on any balancing payment.

Please advise us if you would like help with this issue.

Internet links: GOV.UK IR35 guidance Employer Bulletin

Planning a party for employees

With the season for workplace parties fast approaching we thought it would be a good idea to remind you of the tax implications of these types of events. The good news is that, unlike entertaining customers, the costs of entertaining employees are generally allowable against the profits of the business.

But what about the tax consequences for the employees themselves? Is it a perk of their jobs and will they have to pay tax on a benefit?

Generally, as long as the total costs of all employee annual functions in a tax year are less than £150 per attendee (VAT inclusive) there will be no tax implications for the employees themselves. In considering this limit make sure you have included all the costs, which may include not only the meal itself but also any drinks, entertainment, transport and accommodation that you provide.

If the costs are above the £150 limit then the full cost will be taxable on the employee. In that case do get in touch so we can advise you how best to deal with them.

Internet link: HMRC guidance

Newsletter – November 2014

Posted on November 4, 2014 by Henry Cooper

eNews – November 2014

In this month’s enews we report on the Government’s announcement on the availability of free advice on pensions flexibility, the latest HMRC disclosure opportunity and the end of the Business Entity Tests for IR35.

Acas have issued guidance on the administration of Shared Parental Leave and HMRC will be collecting larger debts via ‘coding out’.

Please do contact us if you would like any further information on any of the issues

Pension flexibility

HMRC Credit Card Sales Campaign disclosure opportunity

IR35 Business Entity Tests

HMRC to collect more debt through tax codes

VAT on ‘snowballs’

Acas guidance on new shared parental leave rules

Parties for employees

2012/13 tax gap

Pension flexibility

The Government has announced that people who wish to access their defined contribution pension flexibly will be able to go to a local Citizens Advice Bureau across the UK for expert free and impartial face to face guidance or receive telephone guidance from the Pensions Advisory Service.

In Budget 2014 radical changes to the way individuals can access their pensions were announced. The Government promised that those able to take advantage of these flexibilities would be entitled to free and impartial guidance on their available choices as they approach retirement.

Pension expert Dr Ros Altmann CBE said:

‘This is a big step forwards in ensuring the pension revolution announced in the Budget will have a meaningful impact on pension savers. It is clear that, currently, most people saving for a pension don’t understand all the vital issues, and it’s really important that they receive impartial help to make the best decisions for themselves.’

‘Both the Pensions Advisory Service and Citizens Advice have longstanding experience in helping the public with financial issues; and it is really important that people do trust the scheme, otherwise they remain at risk of stumbling into poor decisions.’

Internet link: News

HMRC Credit Card Sales Campaign disclosure opportunity

HMRC have launched yet another disclosure opportunity this time aimed at undisclosed credit card sales. The Credit Card Sales Campaign is an opportunity for those affected to bring their tax affairs up to date if they are an individual or business that accepts credit or debit card payments for goods or services.

The disclosure opportunity allows those who have not registered with HMRC or who have failed to declare all their income to make a ‘voluntary disclosure’ of the omitted information in order to get the best terms under the campaign.

If you have any concerns in this area please do get in touch.

Internet link: Credit card sales campaign

IR35 Business Entity Tests

The ‘IR35’ rules are designed to prevent the avoidance of tax and national insurance contributions through the use of personal service companies and partnerships.

The rules do not stop individuals selling their services through either their own personal companies or a partnership. However, they do seek to remove any possible tax advantages from doing so.

One of the ways in which businesses, advisers and HMRC determine whether or not the IR35 rules apply is by the use of Business Entity Tests (BETs) which were introduced in 2012. The points based system is used to risk assess whether a particular arrangement is caught by the rules.

The IR35 Forum has recently reviewed the approach to administering IR35 and found that the BETs were not helpful to businesses as they were:

used very little
not fulfilling their intended purpose.

As a result the review recommended withdrawing the BETs.

HMRC have accepted this recommendation and will withdraw the BETs from 6 April 2015. They have also confirmed how this change will affect previous, ongoing or future enquiries which are detailed in the link.

If you are concerned how this change will affect you or your business please do get in touch.

Internet link: News

HMRC to collect more debt through tax codes

HMRC can currently collect debts of up to £3,000 by adjusting an individual’s Pay As You Earn (PAYE) tax code which applies to their employment or pensions income. This collection method is known as ‘coding out’. The effect of this is to recover the debt from an individual’s income, by increasing the amount of tax that is deducted from their income during the tax year.

Currently the limit set on the amount which can be recovered this way is £3,000, however for those with PAYE earnings of £30,000 or more the amount which can be recovered via coding out will be increased from April 2015 to a possible maximum of £17,000. The amount which can be collected increases using a sliding scale of band earnings, for example those with annual PAYE earnings of between £40,000 but less than £50,000 could have debts of £7,000 collected this way. If an individual’s earnings are less than £30,000, there is no change to the £3,000 coding out limit.

These changes will only apply to underpaid Self Assessment and Class 2 National Insurance debts and Tax Credit overpayments. Changes will be reflected in 2015/16 tax codes. If an individual does not want the debt coded they should arrange to pay off the debt or agree a suitable payment plan with HMRC.

The current £3,000 coding out limit will still apply to the collection of Self Assessment balancing payments and PAYE underpayments.

If you don’t want the debts to be included in your tax code, then you will need to pay the full amount you owe or speak to us to agree a suitable payment arrangement.

If you receive a tax code and would like us to review it please do get in touch.

Internet link: News

VAT on ‘snowballs’

HMRC have published a Brief which advises that ‘snowballs’ are zero rated for VAT purposes.

Following the decision of the First Tier Tribunal HMRC have issued guidance on the VAT treatment of ‘snowballs’. The case concerned the VAT liability of this food item and whether or not it was confectionary (standard rated) or a cake (zero-rated). The ‘snowballs’ considered were those manufactured by Lees of Scotland and Thomas Tunnock Ltd which are a dome of marshmallow covered with sugar strands and a chocolate, carob, cocoa or coconut coating with or without a jam filling.

Both manufacturers had challenged a previous ruling that ‘snowballs’ were standard rated confectionery by claiming they were also cakes and submitted voluntary disclosures for VAT they claimed was overcharged. HMRC disagreed with this view and so the matter was decided by the First Tier Tribunal.

The Tribunal considered what factors should be considered when identifying whether a product is a cake and weighed the relevant factors in the balance. The Tribunal did not dispute that snowballs are confectionery however they accepted they do have sufficient characteristics of a cake for them to be characterised as a cake, which means they are zero rated for VAT purposes.

HMRC have accepted that decision and will be updating their guidance in respect of this type of snowball in due course.

In limited circumstances suppliers of these products may be entitled to a refund however this claim would be subject to the ‘unjust enrichment’ rules and the 4 year cap in line with normal HMRC procedures.

This case helps to illustrate how important it is to get the VAT treatment right. Please do get in touch for advice on VAT issues.

Internet link: Brief

Acas guidance on new shared parental leave rules

Acas have issued a new guide to help employers and employees to understand the practicalities of the Shared Parental Leave (SPL) Regulations.

The operation of the new rules, which apply to parents of babies due on or after 5 April 2015, and to parents of children placed for adoption from that date, have raised concerns among employers about administrative difficulties, such as managing employee requests to alternate leave multiple times between parents.

The Acas guidance which can be found using the following link includes step by step instructions on how eligible employees can make SPL requests, as well as advice for employers about how to handle requests fairly together with useful template documents.

Internet link: Acas guidance

Parties for employees

With the season for workplace parties fast approaching we thought it would be a good idea to remind you of the tax implications of these type of events. The good news is that, unlike entertaining customers, the costs of entertaining employees are generally allowable against the profits of the business.

But what about the tax consequences for the employees themselves? Is it a perk of their jobs and will they have to pay tax on a benefit?

If the costs are above the £150 limit then the full cost will be taxable on the employee. In that case do get in touch so we can advise you how best to deal with them.

Internet link: HMRC guidance

2012/13 tax gap

HMRC have announced the latest tax gap figures. The tax gap, which is the difference between the amount of tax due and the amount collected, was 6.8% of tax liabilities, or £34 billion, in 2012 to 2013.

Financial Secretary to the Treasury David Gauke said:

‘Since 2010 to 2011 the percentage tax gap has stayed lower than at any point under the previous government, saving the country £4 billion. Today’s figures show that there’s still more work to do but our continued drive to tackle avoidance means that avoidance is down.’

Internet link: News