Newsletter – October 2016

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Enews – October 2016

In this month’s eNews we report on recent developments including plans for the Autumn Statement, new National Minimum Wage rates, more detail on the Lifetime ISA and Tax Free Childcare. We also consider whether VAT is recoverable on a car following a recent Tribunal decision as well as updated Gift Aid guidance for charities.

Please do get in touch if you would like any further guidance on any of the areas covered.

Autumn Statement plans

The Chancellor of the Exchequer, Philip Hammond, will present his first Autumn Statement to Parliament on Wednesday 23 November 2016.

The Chancellor recently met with representatives from British business and business groups to listen to their views ahead of the Autumn Statement. The events, which took place at the Treasury and Downing Street, also provided the opportunity for discussions regarding leaving the EU.

The Chancellor said:

‘My message to businesses is clear: in our negotiations to leave the EU, we will work hard to get the best deal for Britain and that includes ensuring that British companies can continue to trade with the single market in goods and services.’

Carolyn Fairbairn, Director General of the CBI, commented:

‘Business wants the openness of the UK’s economy to be preserved – specifically access to markets, skills and trade – and to see an ambitious Autumn Statement that drives investment and growth, and delivers jobs and prosperity for all of the UK’s regions.’

We will keep you up to date with pertinent announcements from the Autumn Statement.

Internet links: GOV.UK News Gov.UK News

Tax Free Childcare

HMRC have announced further details of the new Tax Free childcare scheme which is to be introduced in 2017.

To be eligible, families will have to have all parents in work and each expecting to earn at least £115 per week and less than £100,000 a year and not be already receiving support through Tax Credits or Universal Credit.

The government will top up the account with 20% of childcare costs up to a total of £10,000 – the equivalent of up to £2,000 support per child per year (or £4,000 for disabled children).

HMRC are asking childcare providers to register for the scheme as soon as possible.

Tax-Free Childcare will be launched from early 2017. The scheme will be rolled out gradually to families, with parents of the youngest children able to apply first. Parents will be able to apply for all their children at the same time, when their youngest child becomes eligible. All eligible parents will be able to join the scheme by the end of 2017.

The current system of employer supported childcare will continue to be available for current members if they wish to remain in it or they can switch to the new scheme. Employer supported childcare will continue to be open to new joiners until April 2018.

The existing system of employer supported childcare provides an income tax and national insurance contributions (NIC) relief. The maximum relief is an exemption from income tax and NIC on £55 a week. This relief is per employee so if both parents are in employment the maximum exemption is £110 per week. In the new scheme the limit is per child.

Throughout September and October 2016, letters are being sent to regulated and approved childcare providers asking them to sign up online for Tax-Free Childcare. Only childcare providers registered with a regulator (such as Ofsted) can receive Tax-Free Childcare payments.

The government will make more information available, including details of how parents can sign up, later this year.

Internet link: GOV.UK tax free childcare

Deadline for ‘paper’ self assessment tax returns

For those individuals who have previously submitted ‘paper’ self assessment tax returns the deadline for the 2015/16 return is 31 October 2016. Returns submitted after that date must be submitted electronically or they will incur a minimum penalty of £100. The penalty applies even when there is no tax to pay or the tax is paid on time.

If you would like any help with the completion of your return please do get in touch.

Internet link: GOV.UK Self Assessment

Increase in NMW rates

The National Minimum Wage (NMW) is a minimum amount per hour that most workers in the UK are entitled to be paid. NMW rates increases come into effect on 1 October 2016.

  • the rate for 21 to 24 year olds will increase by 25 pence to £6.95 per hour
  • the rate for 18 to 20 year olds will increase by 25 pence to £5.55 per hour
  • the rate for 16 to 17 year olds will increase by 13 pence to £4.00 per hour
  • the apprentice rate will increase by 10 pence to £3.40 per hour.

The mandatory National Living Wage (NLW) applies for workers aged 25 and above. This is £7.20 an hour.

NLW and NMW rates will in the future be uprated every April starting in April 2017.


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

National Living Wage hits small business costs

According to research, 47% of small business owners blame increased wages following the introduction of the NLW as the main contributor to rising costs.

The research, carried out by the Federation of Small Businesses (FSB), revealed that a third of FSB members claim that the NLW has led to a small increase in their wage costs while one in five have said that their staff costs have increased significantly. Although 59% of FSB members absorbed the increased costs through reduced profitability, 35% have increased prices, 24% reduced staff hours and 23% cut investment.

Updated guidance

HMRC have updated their guidance on payroll reporting including what employers should include on the Full Payment Submission (FPS) and Employer Payment Summary (EPS) returns.

Please contact us if you would like help with your payroll.

Internet links: ACAS article FSB press release Payroll guidance

VAT claim on company cars allowed

HMRC recently lost a first tier tribunal case on the recovery of VAT on the purchase of six cars.

Although most VAT registered businesses are able to recover the VAT on the purchase of commercial vehicles the rules for the recovery on a car state two conditions must be met:

  • the vehicle must be used exclusively for business purposes and
  • it is not made available for private use.

In the case of Zone Contractors Ltd the court accepted that six cars were not available for private use which allowed the business to successfully recover the VAT on the six cars.

The business had a strongly worded contract of employment that prevented employees from using company cars for private travel. This was the crucial factor in this case and allowed the business to recover over £27,000 in input VAT on the purchase of six new cars.

The tribunal was satisfied that the cars were wholly used for business purposes and were not available for private use. The tribunal also rejected HMRC’s argument that the company had failed to demonstrate that the cars were not available for private use.

Other factors which were relevant:

  • The Tribunal was satisfied that all employees signed a contract when they first joined the company, which included the following ‘It is hereby strictly forbidden for the Employee to use the Company vehicle for any personal use inside/outside their employment hours’.
  • The six cars were always kept overnight at the company’s offices or were left on site.
  • Zone Contractors carry out groundwork projects and the vehicles were appropriate for for site based work.
  • The taxpayer also successfully counteracted HMRC’s argument that the insurance cover of the vehicles included use for ‘social, domestic and pleasure’ (SDP), and was not just restricted to business use. But the tribunal accepted it was impossible to have a business only policy without the SDP clause.
  • HMRC also put forward an argument that private use of a car would include detours to buy ‘cigarettes or lunch while out on a business journey or even going off site to collect lunch’. The tribunal concluded that such use could be ignored as de minimis.
  • The intended use of the car at the time it is purchased is crucial. The private use issue means that either a legal restriction to prevent such use or a physical restriction must be in place.

HMRC may appeal against the decision.

Internet link: Tribunal decision

Updated guidance on Gift Aid

HMRC have updated their guidance for charities and community amateur sports clubs (CASC) on claiming Gift Aid on donations.

The guidance has been amended to reflect updated guidance on the retail Gift Aid process operated by charity shops on donated goods.

Internet link: GOV.UK guidance

Lifetime ISA

Following consultation the government has issued further details of the new Lifetime ISA account which is expected to be available from April 2017.

In summary the account will be available to adults under the age of 40 and individuals will be able to contribute up to £4,000 per year and receive a 25% bonus from the government. Funds, including the government bonus, can be used to buy a first home at any time from 12 months after opening the account and can be withdrawn from age 60 completely tax free.

The new Lifetime ISA is designed to allow flexible saving for first time buyers and those wishing to save for their retirement.

Further details of the new Lifetime ISA are as follows:

  • Any savings an individual puts into the account before their 50th birthday will receive an added 25% bonus from the government.
  • There is no maximum monthly contribution and up to £4,000 a year can be saved into a Lifetime ISA.
  • The savings and bonus can be used towards a deposit on a first home worth up to £450,000 across the country.
  • Accounts are limited to one per person rather than one per home, so two first time buyers can both receive a bonus when buying together.
  • Where an individual already has a Help to Buy ISA they will be able to transfer those savings into the Lifetime ISA in 2017/18, or continue saving into both. However only the bonus from one account can be used to buy a house.
  • Where funds are withdrawn at any time before the account holder is aged 60 they will incur a 25% government charge applied to the amount of the withdrawal. This returns the government bonus element of the fund (including any interest or growth on that bonus) to the government with a small additional charge applied.
  • After the account holder’s 60th birthday they will be able to take all the savings tax free.

Internet link: GOV.UK technical note

Newsletter – August 2015

Enews – August 2015

In this month’s eNews we report on HMRC’s time to pay arrangements, the launch of Tax-Free Childcare, the latest NMW campaign and changes to the rules for farmers averaging of profits. We also report on the introduction of the Alcohol Wholesaler Registration Scheme and TPR guidance on pension schemes for auto enrolment.

Please do contact us for further advice.

Tax-Free Childcare to launch in 2017 following court ruling

The government has welcomed a judgment from the Supreme Court that found the proposals for delivering Tax-Free Childcare to be lawful. The new Tax-Free Childcare Scheme was being challenged by some of the providers of the childcare vouchers typically used in the current Employer Supported Childcare arrangements.

The scheme is now expected to launch from early 2017. The existing EmployerSupported Childcare scheme will remain open to new entrants until Tax-Free Childcare is launched.

Exchequer Secretary to the Treasury, Damian Hinds said:

‘We are pleased that the government’s proposals for delivering Tax-Free Childcare have been found to be clearly lawful. This government is absolutely clear on the importance of supporting families with their childcare costs.’

‘It is disappointing that some organisations involved in the existing scheme felt the need to take and persist in this costly and wasteful course of action, which has led to a delay in the launch of Tax-Free Childcare.’

If you would like advice on Employer Supported Childcare please contact us.

Internet link: GOV.UK news

Time to Pay Arrangements – Mandatory Direct Debit

Where a taxpayer has difficulty paying their tax liabilities HMRC may agree ‘time to pay arrangements’ whereby the taxpayer agrees to pay off the amount owing by instalments after the due date. These arrangements are only entered into where the taxpayer is genuinely unable to pay by the due date and is able to commit to agreed payments to bring their tax up to date.

HMRC have announced that where time to pay arrangements are agreed the payments will need to be made by Direct Debit. This has always been HMRC’s preferred method of collection but this became mandatory from 3 August 2015.

However, HMRC do state that:

‘We recognise that there will be exceptional circumstances where a customer is unable to set up a direct debit, perhaps because their bank account will not allow it. In such cases payment by other methods may be agreed.’

Internet link: GOV.UK blog

NMW campaign targets hair and beauty sector

HMRC are targeting employers in the hairdressing and beauty sectors who pay their staff below the national minimum wage (NMW).

HMRC and the Department for Business, Innovation and Skills (BIS), supported by the National Hairdressers’ Federation and the Hair and Beauty Industry Authority, will work with hair and beauty businesses to help them understand their pay obligations to their employees.

In a new approach HMRC will provide employers with tools and guidance to check if they are paying the correct amount.

Employers who take this opportunity to ‘self-correct’ will not have to pay penalties, nor will they be ‘named and shamed’. If employers choose not to comply with their NMW obligations, HMRC will take action to ensure that employees are paid what they are owed.

As detailed in the press release ‘BIS analysis shows that 42% of businesses in the sector do not pay level 2 and level 3 apprentices the correct minimum wage – the highest underpayment rate of any sector. Those paying under the minimum wage now have a chance to put things right. If they fail to do so it could result in their business being publicly ‘named and shamed’ and facing a fine of up to £20,000 per employee.’

Jennie Granger, HMRC Director General of Enforcement and Compliance, said:

‘This innovative campaign is about helping employees who have been underpaid get the money they are legally due back into their pockets. It will help them understand where they can report underpaying employers confidentially.

It is also about helping employers check if they are making mistakes, and self-correct if they are. Some employers will need a bit of a reminder to check they are getting it right, and some will need stronger action from us, so we are bringing in more enforcement officers to support this campaign.

I urge all employers and employees in the sector to check that salary is being paid correctly, as we will use these extra resources to find and investigate where it is not. Check you’re paying NMW correctly – it’s worth it.’

Employers in the hair and beauty sector are being asked to come forward as part of the National Minimum Wage Campaign by:

  • advising HMRC they want to take part in the campaign
  • disclosing details of arrears now paid to their workers and confirming that wages worth at least the NMW are now paid to all workers.

If you would like help with NMW issues please contact us.

Internet link: GOV.UK nmw campaign

Latest job market statistics

The Office for National Statistics (ONS) has released figures showing that the UK employment rate has dropped by 67,000 when compared to the three months to February 2015. As detailed in the press release the figures show:

  • There were 30.98 million people in work. This was 67,000 fewer than for the 3 months to February 2015, the first quarterly fall since February to April 2013. Comparing March to May 2015 with a year earlier, there were 265,000 more people in work (272,000 more people working full-time and 7,000 fewer people working part-time).
  • The proportion of people aged from 16 to 64 in work (the employment rate) was 73.3%, little changed compared with the 3 months to February 2015 but higher than for a year earlier (72.9%).
  • There were 1.85 million unemployed people. This was 15,000 more than for the 3 months to February 2015, the first quarterly increase since January to March 2013. Comparing March to May 2015 with a year earlier, there were 273,000 fewer unemployed people.
  • The proportion of the economically active population who were unemployed (the unemployment rate) was 5.6%, little changed compared with the 3 months to February 2015 but lower than for a year earlier (6.5%). Economically active people are those in work plus those seeking and available to work.
  • There were 9.02 million people aged from 16 to 64 who were out of work and not seeking or available to work (known as economically inactive), 30,000 more than for the 3 months to February 2015 and 104,000 more than for a year earlier.
  • The proportion of people aged from 16 to 64 who were economically inactive (the inactivity rate) was 22.2%, little changed compared with the 3 months to February 2015 but higher than for a year earlier (22.0%).
  • Comparing March to May 2015 with a year earlier, pay for employees in Great Britain increased by 3.2% including bonuses and by 2.8% excluding bonuses.

Internet link: ONS


Alcohol Wholesaler Registration Scheme

The Alcohol Wholesaler Registration Scheme (AWRS) is being introduced on 1 October 2015 by HMRC to tackle alcohol fraud. HMRC are advising that if you are an alcohol wholesaler or trade buyer, you need to prepare for the new registration scheme now.

Who the scheme applies to

HMRC are advising that the AWRS will apply to existing, and new, wholesalers of alcohol, trading at or after the point at which excise duty has become payable. In addition all businesses that trade in or retail alcohol will in future need to make sure that any UK wholesalers that they buy from are registered with HMRC. The types of business who will be affected include:

  • alcohol wholesalers
  • brokers
  • auctioneers
  • alcohol retailers.

The scheme will not apply to private individuals purchasing alcohol from retailers.

HMRC are advising that:

  • from 1 October 2015, all alcohol wholesalers must apply online to HMRC to register for AWRS
  • from 1 January 2016 HMRC will start to review all AWRS applications to decide whether businesses are ‘fit and proper’ to be accepted onto the register. Where a business fails the ‘fit and proper’ test, HMRC will remove its right to trade in wholesale alcohol
  • from 1 April 2017, all businesses that trade in, or retail, alcohol will need to make sure that any UK wholesalers that they buy from are registered with HMRC. HMRC will provide an online look up service so that trade buyers can ensure wholesalers they buy from are registered with HMRC.

Internet link: GOV.UK AWRS

Farmers Averaging of Profits

It was announced in the March 2015 Budget that the government plans to extend the period over which self-employed farmers can average their profits for income tax purposes from two years to five years. The government has launched a consultation which considers ways in which the extension could be designed and implemented.

The change to the averaging rules is expected to come into effect from 6 April 2016.

Internet link: GOV.UK farmers averaging

Pension Schemes for Auto Enrolment

The Pensions Regulator (TPR) has published some guidance aimed at the 1.3 million small and micro employers who are preparing for pensions auto enrolment. The guidance aims to help employers find a good quality pension scheme. TPR research suggests one in five (290,000) employers will not seek advice when choosing a pension scheme, while one in ten (130,000) do not know how to select a scheme, or think it will be difficult.

The information includes details of a list of ‘master trust’ pension schemes open to employers of all sizes, and which have been independently reviewed to help to demonstrate that they are administered to a high standard.

TPR have also made available a quick guide for small and micro employers on what to look out for when choosing a scheme suited to their needs. They have also updated their webpage guidance to advisors.

Lesley Titcomb, chief executive of The Pensions Regulator, said:

‘I strongly believe that the vast majority of the 1.3 million small and micro employers approaching automatic enrolment want to do the right thing. However, many will choose not to seek advice and will need additional support to meet their duties.

We are committed to providing them with the information they need to make confident choices when it comes to choosing a quality scheme for their employees.’

If you would like help complying with your auto enrolment duties please do get in touch.

Internet link:Press release