Newsletter – February 2017

Enews – February 2017

In this month’s eNews we report on changes for landlords which take effect from April 2017, increased NMW and NLW rates and progress on Making Tax Digital. We also include several announcements from HMRC on tax return excuses, a new Helpline and details of successful prosecutions.

We also include the latest announcements regarding Pensions Auto Enrolment. Please do get in touch if you would like any further guidance on any of the areas covered.

Making Tax Digital

The government published their responses to the six consultations on making tax digital (MTD).

In response to the consultations the government have decided the following:

  • businesses will be able to continue to use spreadsheets for record keeping, but they must ensure that their spreadsheet meets the necessary requirements of Making Tax Digital for Business (MTDfB). This is likely to involve combining the spreadsheet with software
  • businesses eligible for three line accounts will be able to submit a quarterly update with only three lines of data (income, expenses and profit)
  • free software will be available to businesses with the most straightforward affairs
  • the requirement to keep digital records does not mean that you have to make and store invoices and receipts digitally
  • activity at the end of the year must be concluded and sent either by ten months after the last day of the period of account or 31 January, whichever of these is soonest
  • charities (but not their trading subsidiaries) will not need to keep digital records
  • for partnerships with a turnover above £10 million, MTDfB is deferred until 2020 due to the complexity of their tax affairs.

The MTD consultations also specifically explored the appropriate level of the initial exemption and deferral for the self-employed, landlords and businesses. Given the range of views expressed on this matter from respondents to the consultation, the government has decided to take more time to consider these issues alongside the fiscal impacts. Final decisions will be made before the law is finalised later this year.

In addition, HMRC will begin piloting digital record keeping and quarterly updates for a full year from April 2017, building up to working with hundreds of thousands of businesses and landlords before rolling the services out more widely. The stated aim of this pilot is to ensure the software is user-friendly and give individuals and businesses time to prepare and adapt. Piloting of the system had been recommended by the Treasury Select Committee.

Select Committee’s findings

The Treasury Select Committee has urged HMRC to implement a series of wide-ranging pilots in order to better test the government’s plans for the new digital tax initiative, Making Tax Digital (MTD), before it becomes compulsory for the majority of taxpayers.

The report found that, while the government had already carried out trials of the new initiative, those businesses which took part had done so at HMRC’s invitation.

The Committee stated that comprehensive pilots of MTD are ‘essential’, and that these need to be designed to collect information over the entire reporting cycle.

It also suggested that an evaluation of these pilots should be carried out before the full implementation of the scheme which is expected, for all but the smallest businesses to be implemented from April 2018 onwards.

Andrew Tyrie MP, Chairman of the Committee, said:

‘Without sufficient care, MTD could be a disaster. Implemented carefully, with long transitional arrangements where necessary, and, having drawn on information from fully inclusive pilots, MTD could be designed for the benefit both of the economy and of the tax yield. But with a rushed introduction, it will benefit neither.’

MTDfB will still be phased in from April 2018. We will keep you informed of developments.

Internet links: Parliament MTD GOV.UK MTD responses Consultations

Pay the NMW – no excuses

The government has revealed ten of the most bizarre excuses used by unscrupulous business owners who have been found to have underpaid workers the NMW.

These employers used excuses such as ‘only wanting to pay staff when there are customers to serve and believing it was acceptable to underpay workers until they had ‘proved’ themselves’.

The government has launched an awareness campaign to encourage workers to check their pay to ensure they are receiving at least the statutory minimum ahead of the NMW and NLW increases on 1 April 2017.

Employers need to ensure they are paying their employees at least the NMW and NLW.

Rate from 1 October 2016 Rate from 1 April 2017
NLW for workers aged 25 and over (introduced and applies from 1 April 2016) £7.20 £7.50
the main rate for workers aged 21-24 £6.95 £7.05
the 18-20 rate £5.55 £5.60
the 16-17 rate for workers above school leaving age but under 18 £4.00 £4.05
the apprentice rate, for apprentices under 19 or 19 or over and in the first year of their apprenticeship £3.40 £3.50

This will be the second increase in six months for the NMW rates. Going forward the NMW and NLW rates will both be reviewed annually in April.

In a recent article in the Employer Bulletin, HMRC cite common errors:

  • not paying the right rate, perhaps missing an employee’s birthday,
  • making deductions from wages which reduce the employee’s pay below the NMW/NLW rate,
  • including top ups to pay that do not qualify for NMW/NLW,
  • failure to classify workers correctly, so treating them as interns volunteers or self employed and
  • failure to include all the time a worker is working, for example time spent shutting up shop or waiting to clear security.

What are the penalties for non-compliance?

The penalties imposed on employers that are in breach of the minimum wage legislation are 200% of arrears owed to workers. The maximum penalty is £20,000 per worker. The penalty is reduced by 50% if the unpaid wages and the penalty are paid within 14 days. HMRC also name and shame employers who are penalised.

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

Internet link: GOV.UK NMW news

Landlords to receive less tax relief on interest

In a change that will impact residential landlords, the amount of income tax relief available on residential property finance costs will be restricted to the basic rate of income tax. This change will mean that landlords will no longer be able to deduct all of their finance costs from their property income. They will instead receive a basic rate reduction from their income tax liability for their finance costs.

The restriction in the relief will be phased in over a four year period as follows:

  • in 2017/18, the deduction from property income will be restricted to 75% of finance costs, with the remaining 25% being available as a basic rate tax reduction;
  • in 2018/19, 50% finance costs deduction and 50% given as a basic rate tax reduction;
  • in 2019/20, 25% finance costs deduction and 75% given as a basic rate tax reduction;
  • from 2020/21, all financing costs incurred by a landlord will be given as a basic rate tax reduction.

These rules do not apply to residential properties held in companies.

In addition rules may further restrict the relief which is due where the individual’s property income or total income is less than the amount on which basic rate relief is due. The computation is complex so please do get in touch if you would like us to review your position.

Internet link: GOV.UK guidance

More silly taxpayer excuses from HMRC

HMRC have released more unusual excuses from taxpayers who failed to complete their self assessment tax return on time. These include:

  1. ‘My tax return was on my yacht…which caught fire’
  2. ‘A wasp in my car caused me to have an accident and my tax return, which was inside, was destroyed’
  3. ‘My wife helps me with my tax return, but she had a headache for ten days’
  4. ‘My dog ate my tax return…and all of the reminders’
  5. ‘I couldn’t complete my tax return, because my husband left me and took our accountant with him. I am currently trying to find a new accountant’
  6. ‘My child scribbled all over the tax return, so I wasn’t able to send it back’
  7. ‘I work for myself, but a colleague borrowed my tax return to photocopy it and lost it’
  8. ‘My husband told me the deadline was the 31 March’
  9. ‘My internet connection failed’
  10. ‘The postman doesn’t deliver to my house’

With the self assessment submission deadline of 31 January now past and an automatic penalty of £100 for failing to submit your return on time, please contact us if you need help bringing your affairs up to date.

Internet link: GOV.UK news

Tax cheats – HMRC’s criminal case highlights of 2016

HMRC have revealed their top ten most significant fraud and organised crime cases of the last year.

Simon York, Director of HMRC’s Fraud Investigation Service, said:

‘Day in, day out, HMRC is coming down hard on tax cheats. As these cases show, we’ll tackle anyone committing tax fraud, regardless of how well resourced, well advised, or well organised. These ten prosecutions are among the most significant cases we’ve handled this year, and they reflect the wide range of work carried out by HMRC.’

Internet link: GOV.UK news

Tax helpline for people affected by severe weather and flooding

HMRC have made available a telephone helpline (0800 904 7900) for anyone affected by severe weather or floods. The helpline allows anyone affected to get practical help and advice on a wide range of tax problems they may be facing. These could be financial issues regarding making payment, issues regarding lost or damaged records and may include cancelling penalties where deadlines are missed due to severe weather and flooding.

Internet link: GOV.UK helpline

Pensions auto enrolment

The Department for Work and Pensions has confirmed the thresholds for pensions automatic enrolment for 2017/18.

The main qualifying threshold or ‘trigger’ for employees to be automatically enrolled will be maintained at £10,000 per annum. The lower limit of the qualifying earning band and will be £5,876 and the upper limit £45,000.

The written statement also includes:

‘Automatic enrolment has been a great success to date with almost 7 million people enrolled by more than 293,000 employers. It will give around 11 million people the opportunity to save into a workplace pension and we expect this to lead to around 10 million people newly saving or saving more by 2018, generating around £17 billion a year more in workplace pension saving by 2019/20.’

With over a million micro (1 – 4 employees) and small (5 – 49 employees) employers reaching their staging date for auto enrolment in the last quarter of 2016/17 and throughout 2017/18 it is important to ensure employers comply with their obligations. The Pensions Regulator has confirmed the exceptions which apply to employers which can be found at on their website (see the TPR link below).

Please contact us if you would like help with auto enrolment compliance or to determine whether or not your business is exempt from auto enrolment.

Internet links: Parliament written statement TPR exemptions

Newsletter – April 2016

Enews – April 2016

In this month’s eNews we report on pertinent Budget announcements. We also report on the introduction of the register of people with significant control and proposals for different Scottish tax bands.

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

Budget 2016

George Osborne presented his Budget on Wednesday 16 March 2016.

In his speech the Chancellor reported on ‘an economy set to grow faster than any other major advanced economy in the world’. Towards the end of 2015 the government issued many proposed clauses of Finance Bill 2016 together with updates on consultations. The Budget proposed further measures and some of the articles which follow summarise some of the key changes.

CBI Director-General, Carolyn Fairbairn, said:

‘After a year of surprises, this was a stable Budget for business facing global stormy waters. The Chancellor has listened to our concerns about the mounting burden on firms and chosen to back business to grow the economy out of the deficit.’

Internet links: GOV.UK CBI News

Register of people with significant control

From April 2016, rules are introduced which require companies to keep a register of People with Significant Control (PSC). In addition, the details of PSC will have to be filed with Companies House from 30 June 2016.

A PSC is defined as an individual that:

  • holds, directly or indirectly, more than 25% of the shares or voting rights in the company; or
  • holds the right, directly or indirectly, to appoint or remove a majority of the board of directors of the company; or
  • has the right to exercise, or actually exercises, significant influence or control over the company; or
  • where a trust or firm would satisfy any of the above conditions, any individual that has the right to exercise, or actually exercises, significant influence or control over the activities of that trust or firm.

The details of the individuals which need to be entered on the register include:

  • name and address
  • usual residential address, country of residence and nationality
  • date of birth
  • date when they became a PSC
  • the nature of their control over the company.

Failure to comply with the requirements of the PSC regime could lead to the company or directors, or identified PSCs committing a criminal offence. The company and its directors could face a fine or imprisonment or both.

Further guidance can be found on the Companies House website or please contact us for more guidance in this area.

Internet link: Companies House

National Minimum Wage rises

The National Minimum Wage (NMW) rates will increase from 1 October 2016 as follows:

Current rate Rate from 1 October 2016
21-24 year olds £6.70 £6.95
18-20 year olds £5.30 £5.55
16-17 year olds £3.87 £4.00
Apprentice rate* £3.30 £3.40

From 1 April 2016 following the introduction of the National Living Wage all workers aged 25 and over are legally entitled to at least £7.20 per hour. Employers should ensure that all affected employees benefit from this new rate from 1 April 2016.

*This apprentice rate is for apprentices aged 16 to 18 and those aged 19 or over who are in their first year. All other apprentices are entitled to the National Minimum Wage for their age.

Internet links: Parliament Living Wage

First Minister for Scotland plans to block UK tax ‘cuts’ in favour of public services

First Minister Nicola Sturgeon has announced plans that income tax rates in Scotland will be frozen, with no increases in the basic, higher or additional rates. However the significant cuts (reduction in income tax liabilities) which would result from the increases to the higher rate threshold proposed by the UK government would not be adopted in Scotland under the proposals. Their plans are that the higher rate threshold will be frozen in real terms and increased only in line with CPI inflation in 2017/18 and by no more than inflation until 2021/22.

The exact level of the higher rate threshold will be set out each year by the Scottish Government at the budget.

The Scottish Government’s believe their proposals are a more balanced approach which ‘will be fair to higher rate taxpayers while also generating additional revenue to be invested in Scotland’s public services such as the NHS’.

Under the proposals, the Scottish Government will ensure a Personal Allowance of £12,750 in 2021/22. If necessary, the Scottish Government will create a zero rate band to ensure that this protection for low income households is delivered.

Alongside the tax proposals, the First Minister published Scottish Government analysis that demonstrated any increase in the additional rate for top earners; whilst the UK rate remains at 45p; could put millions of pounds of revenue at risk. Accordingly, she confirmed that the additional rate will not increase in 2017/18, but that the analysis will be updated each year to inform decisions in future budgets.

Nicola Sturgeon said:

‘In setting out our proposals we have balanced the need to invest in and support our public services with a recognition that many households are still facing difficult economic challenges, and with the need to grow the Scottish economy.

We will not allow our public services to pay the price of an inflation busting tax decrease for the highest earning 10% of the population. We think that is the wrong choice and today we set out our alternative.

We will freeze the basic rate of tax for the duration of the next parliament. We do not believe it is right that those on low incomes are asked to pay for austerity. That does not tackle austerity, it simply shifts the burden to those who can least afford it.

No taxpayer will see their bill increase as a result of these Scottish Government proposals.

In 2017/18, instead of offering a large tax cut we will ensure the higher rate threshold rises only by inflation.

That means next year the threshold for higher rate taxpayers will go from £43,000 to £43,387’.

These proposals would introduce a difference between the amount of income tax payable by higher and additional rate taxpayers in Scotland to that paid by taxpayers with similar income in the rest of the UK.

Other parties have their own plans for the income tax rules for Scotland.

Internet link: Scotland Gov.News

Personal allowances and tax bands

For those born after 5 April 1938 the personal allowance is currently £10,600. Those born before 6 April 1938 have a slightly higher allowance. Legislation has already been enacted to increase the personal allowance to £11,000 in 2016/17. From 2016/17 onwards one personal allowance will apply regardless of age.

Not everyone has the benefit of the full personal allowance. There is a reduction in the personal allowance for those with ‘adjusted net income’ over £100,000 which is £1 for every £2 of income above £100,000. So for 2015/16 there is no personal allowance where adjusted net income exceeds £121,200 (£122,000 for 2016/17).

Tax bands and rates

The basic rate of tax is currently 20%. The band of income taxable at this rate is £31,785 so that the threshold at which the 40% band applies is £42,385 for those who are entitled to the full basic personal allowance.

Legislation has already been enacted to increase the basic rate limit to £32,000 for 2016/17. The higher rate threshold will therefore rise to £43,000 in 2016/17 for those entitled to the full personal allowance.

The additional rate of tax of 45% remains payable on taxable income above £150,000.

Tax bands and personal allowance for 2017/18

The Chancellor has announced that the personal allowance will be increased to £11,500 and the basic rate limit increased to £33,500 for 2017/18. The higher rate threshold will therefore rise to £45,000 for those entitled to the full personal allowance.

Reduction in corporation tax rate

The main rate of corporation tax is currently 20% and this rate will continue for the Financial Year beginning on 1 April 2016. In the following years the rate of tax will fall as follows:

  • 19% for the Financial Years beginning on 1 April 2017, 1 April 2018 and 1 April 2019.
  • 17% for the Financial Year beginning on 1 April 2020.

The 17% rate from April 2020 is a reduction of 1% from the rate previously announced by the Chancellor in his Summer Budget in 2015.

CBI Director-General, Carolyn Fairbairn, said:

‘The reduction in the headline Corporation Tax rate sends out a strong signal that the UK is open for global business investment, and reforms to Interest Deductibility are rightly in line with the international consensus.’

Personal service companies in the public sector

From April 2017, individuals working through their own company in the public sector will no longer be responsible for deciding whether the intermediaries legislation applies and then paying the relevant tax and NIC. This responsibility will instead pass to the public sector employer, agency or third party that pays the worker’s intermediary. The employer, agency or third party will have to decide if the rules apply to a contract and if so, account for and pay the liabilities through the Real Time Information (RTI) system and deduct the relevant tax and NIC.

HMRC has announced they will will provide help for public sector employers and agencies with their new responsibilities. They plan to introduce clear, objective tests for employers to use to decide at the point of hire whether or not they need to consider the new rules and then identify those engagements that are caught by the rules.

For cases that are less clear cut, HMRC have announced that they will develop a simple digital tool. This will be designed to provide employers engaging an incorporated worker with a ‘real-time’ HMRC view on whether or not the intermediaries rules need to be applied.

Chris Bryce, Chief Executive of the Association of Independent Professionals and the Self Employed (IPSE), commented:

‘The Chancellor announced a number of measures today which are likely to impact independent professionals and the self-employed. His move to extend rules for off-payroll working in the public sector will create confusion and disruption. The engaging department or agency will be made responsible for any tax liability. This will result in genuine businesses having to jump through numerous hoops and will see the cost of engaging contractors increase. It will endanger the delivery of vital public services and important projects like HS2.’

Internet link: HMRC Off payroll working

Business rates

Business rates have been devolved to Scotland, Northern Ireland and Wales. The Chancellor has announced cuts on business rates for half of all properties in England from 1 April 2017. In particular the government proposes to:

permanently double the Small Business Rate Relief (SBRR) from 50% to 100% and increase the thresholds to benefit a greater number of businesses. Businesses with a rateable value of £12,000 and below will receive 100% relief, rateable values between £12,000 and £15,000 will receive tapered relief increase the threshold for the standard business rates multiplier to a rateable value of £51,000 taking 250,000 smaller properties out of the higher rate.

The government also proposes to modernise the administration of business rates to revalue properties more frequently and make it easier for businesses to pay the taxes that are due.

CBI Director-General, Carolyn Fairbairn, said:

‘Businesses will welcome the Chancellor’s permanent reforms to business rates – taking more small firms out of the regime and changing the uprating mechanism from RPI to CPI, which the CBI has long been calling for.’

Lifetime ISA

A new Lifetime ISA will be available from April 2017 for adults under the age of 40. 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.

Further details of the new account, which will be available from 2017, 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, or continue saving into both. However only the bonus from one account can be used to buy a house.
  • Where the funds are withdrawn at any time before the account holder is aged 60 they will lose the government bonus (and any interest or growth on this) and will also have to pay a 5% charge. After the account holder’s 60th birthday they will be able to take all the savings tax-free.

The Chancellor said in his speech:

‘My pension reforms have always been about giving people more freedom and more choice.

So faced with the truth that young people aren’t saving enough, I am today providing a different answer to the same problem.’

Internet link: GOV.UK lifetime-isa-explained

Capital gains tax rates

The current rates of capital gains tax (CGT) are 18% to the extent that total taxable income does not exceed the basic rate band and 28% thereafter.

The government is to reduce the higher rate of CGT from 28% to 20% and the basic rate from 18% to 10%. The trust CGT rate will also reduce from 28% to 20%.

The 28% and 18% rates will continue to apply for carried interest and for chargeable gains on residential property that do not qualify for private residence relief. In addition, the 28% rate still applies for ATED related chargeable gains accruing to any person (principally companies).

These changes will take effect for disposals made on or after 6 April 2016.

The rate for disposals qualifying for Entrepreneurs’ Relief (ER) remains at 10% with a lifetime limit of £10 million for each individual.

 

Newsletter – November 2015

Enews – November 2015

In this month’s eNews we report on expectations of issues likely to be covered in the Autumn Statement, NMW defaulters, state pension top up and auto enrolment research and advertising. We also include information on safeguarding against identity theft and results of HMRC’s recent campaigns.

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

Autumn Statement 2015 expectations

Tax credits have been in the news and this is one issue the Chancellor George Osborne is expected to review in the Autumn Statement. The House of Lords voted to reject the Statutory Instrument which contained the cut backs to tax credits.

He has promised to ‘continue to reform tax credits…while at the same time lessening the impact on families during the transition’.

The key changes originally proposed were:

  • lowering the income threshold for Working Tax Credits from £6,420 to £3,850 a year from April 2016
  • increasing the rate at which those payments are cut. Currently, for every £1 claimants earn above the threshold, they lose 41p. It was proposed that from April 2106, the taper rate would accelerate to 48p.

There are some tax issues which may also be progressed in the Autumn Statement these include:

  • IR35 – following a period of discussion proposals are expected to be announced to reform the system and operation of taxation which applies to personal service companies.
  • Pensions tax relief – limiting the amount of tax reliefs for pensions. The government has been consulting to establish whether the tax relief system provides incentives for individuals to save and that the costs of pension tax relief are affordable.

The Chancellor will make his 2015 Autumn Statement on Wednesday 25 November. We will update you on pertinent announcements.

Internet links: GOV.UK BBC news

UK tax gap falls to 6.4%

The government has announced that the tax gap for 2013/14 was 6.4% of tax due.

The tax gap, which is the difference between the amount of tax due and the amount collected, has fallen from 8.4% in 2005/06. The government estimates that this reduction in the percentage tax gap since 2005/06 represents an additional £57 billion in cumulative tax collected over the eight-year period.

According to HMRC the largest reduction is in the corporation tax gap which has halved since 2005/06, from 14% to 7% of tax liabilities. The downward trend applies to all sizes of businesses, with the overall reduction driven mainly by large businesses.

David Gauke, Financial Secretary to the Treasury, said:

‘The UK has one of the lowest tax gaps in the world, and this Government is determined to continue fighting evasion and avoidance wherever it occurs.

If the tax gap percentage had stayed at its 2009/10 value of 7.3%, £14.5 billion less tax would have been collected.

There is understandable anger when individuals or companies are perceived not to be contributing their fair share, but we can reassure the public that the proportion going unpaid is low and this Government is dedicated to bringing it down further.’

Internet link: HMRC press release

CBI warns government not to ‘tinker’ with pensions tax

The first industry-wide survey since the general election sets out businesses’ pensions priorities this Parliament.

The CBI has reported that according to the latest survey companies wish for stability on tax, policy and funding to boost pensions. The survey, which was carried out in conjunction with Mercer, reported that:

  • Almost eight out of ten respondents are against further changes in pension taxation, while the majority cited certainty as the government’s top pension priority in this Parliament, as recent substantial reforms bed in.
  • The percentage of respondents identifying the need to make auto-enrolment administration easier leaped to nearly 70% compared with just 41% in 2013. Two thirds also cited changing regulation adding to the compliance burden. And the vast majority indicated that increasing take-up levels among employees for existing schemes must be a priority, rather than raising minimum contributions.

Neil Carberry, CBI Director of Employment and Skills, said:

‘Recent regulatory changes, coupled with auto-enrolment and state pension reform, mean UK business leaders now crave stability.

Businesses want to focus on ensuring employees are making the most of what’s on offer, but there is clear concern about regulatory changes eroding incentives to save, which must be avoided at all costs.’

‘Businesses are clear that the current framework of pensions tax relief at the point of saving – while complex – is the best for encouraging pension saving.

Losing this would remove company incentives, as employer-provided pensions are the only way to deliver low-cost saving at substantial scale at levels above automatic enrolment rules. A change would cause damage to the fiscal position too in the long-term.’

If you would like help with pensions please get in touch.

Internet links: CBI news Report

HMRC’s landlord campaign nets £50 million

HMRC have announced that a campaign aimed at helping residential landlords get their tax affairs in order has brought in more than £50 million making it one of their most successful voluntary disclosure opportunities.

As a result of the Let Property Campaign, which HMRC launched in September 2013, more than 10,000 landlords have come forward to disclose tax on previously undeclared income.

Caroline Addison, Head of Campaigns at HMRC, said:

‘The Let Property Campaign bringing in more than £50 million is further proof that our campaigns approach works. HMRC’s 20 campaigns have now together generated over £1 billion across a variety of sectors.

Throughout the Let Property Campaign, HMRC has written to over 80,000 landlords and over 50,000 customers have used the campaign’s online educational products.’

Please contact us if you would like advice on this area.

Internet link: HMRC press release

Identity theft – ICO guidance

Following the data security incident at TalkTalk with customer details being ‘hacked’ and many customers remaining unsure if they have been affected, an ICO spokesperson stated:

‘Any time personal data is lost there can be a risk of identity theft. There are measures you can take to guard against identity theft, for instance being vigilant around items on your credit card statements or checking your credit ratings. There are tips and information about identity theft available on our website.’

Please follow the link to the ICO guidance on identity theft.

Internet link: ICO news

‘State Pension top up’ scheme

A new scheme is being launched offering anyone reaching State Pension age before 6 April 2016 a chance to increase their State Pension by up to £25 a week.

People are eligible if they are entitled to a UK State Pension and have already reached their State Pension age or reach it before 6 April 2016. This includes men born before 6 April 1951 and women born before 6 April 1953.

The scheme will remain open for 18 months and those who think they can benefit will be able to buy additional State Pension, worth up to £1,300 a year. In most cases, surviving spouses and civil partners will be able to inherit at least 50% of the extra pension.

Minister for Pensions, Baroness Altmann said:

‘This government’s commitment is to provide security for working people at every stage of their lives, and that includes giving people the chance to enjoy a financially secure retirement. We have already committed to protecting pensioner incomes with the triple lock – uprating the basic State Pension by at least 2.5% each year of this Parliament. The new State Pension, coming in from April 2016, will ensure a simpler, more sustainable State Pension for the pensioners of tomorrow.

Top up is an opportunity for people already retired, or reaching State Pension age before April 2016, to boost their later life income. It won’t be right for everybody and it’s important to seek guidance or advice to check if it’s the right option for you. But it could be particularly attractive for those who haven’t had the chance to build significant amounts of State Pension, particularly many women and people who have been self-employed.’

Anyone who thinks they might benefit should seek advice and can use the online calculator to help them find out more. More information on State Pension top up and how to apply is available at www.gov.uk/statepensiontopup.

Internet links: GOV.UK news GOV.UK policies

Workplace Pensions – don’t ignore it

The Department of Work and Pensions and the Pensions Regulator have launched a new advertising campaign promoting auto enrolment which aims to change the country’s perception of pensions in the workplace.

Workie, ‘a striking physical embodiment of the workplace pension’, will be seen visiting people in different work environments over the coming months, asking them not to ignore him.

The advertisements come with a message, whilst automatic enrolment into workplace pensions has been rolling out across the UK since 2012, it is only now that 1.8 million small and micro employers need to act. In a phased process over the next three years, every employer will have to enrol their eligible staff into a pension scheme, by reference to their staging date.

Pensions Minister, Baroness Altmann, said:

‘We have made great strides forward by automatically enrolling more than 5 million people into a workplace pension – now the challenge is to make sure hardworking people with every type of employer get to enjoy this major financial benefit.

This is a fun and quirky campaign but behind it lies a very serious message. We need everyone to know they are entitled to a workplace pension – and we need all employers to understand their legal responsibility to their staff, but also to feel more positive about engaging with workplace pensions.

This government is committed to providing security for working people at every stage of their lives, and that includes giving people the chance to plan for a financially secure retirement. Automatic enrolment is a big part of that.

Since 2012, more than 5.4 million workers have been automatically enrolled into a workplace pension by almost 61,000 employers. By the time the process is complete in 2018, it is estimated that around 9 million workers will either be newly saving or saving more into a workplace pension thanks to the policy.

The new campaign will include radio, print, online and outdoor advertising and will run for the remainder of this year and into 2016. It is being coordinated jointly by the Department for Work and Pensions and The Pensions Regulator.’

If you would like help with pensions auto enrolment please get in touch.

Internet links: GOV.UK news www.workplacepensions.gov.uk

NMW offenders named and shamed

Over 100 employers who have failed to pay their workers the National Minimum Wage (NMW) have been named and shamed.

Between them, the 113 employers owed workers over £387,000 in arrears, and span sectors including hairdressing, retail, education, catering and social care. The cases named were thoroughly investigated by HMRC.

Since the scheme was introduced in October 2013, 398 employers have been named and shamed, with total arrears of over £1,179,000 and total penalties of over £511,000.

Business Minister, Nick Boles said:

‘Employers that fail to pay the minimum wage hurt the living standards of the lowest paid and their families.

As a one nation government on the side of working people we are determined that everyone who is entitled to the National Minimum Wage receives it.

Next April we will introduce a new National Living Wage which will mean a £900-a-year pay rise for someone working full time on the minimum wage and we will enforce this equally robustly.’

On 1 October 2015, the main rate of the NMW rose to £6.70 per hour.

Acas online offers advice to both businesses and employees that have any questions about the NMW.

For help with payroll issues contact us.

Internet links: GOV.UK news NMW rates

Newsletter – October 2015

Enews – October 2015

This month we report on changes to business rates, tougher NMW sanctions and tax guidance for charities. We also include a reminder that the deadline for ‘paper’ self assessment returns is approaching and details of the 5p carrier bag charge.

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

Deadline for ‘paper’ self assessment tax returns

For those individuals who have previously submitted ‘paper’ self assessment tax returns the deadline for the 2014/15 return is 31 October 2015. 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

Autumn Statement date announced

The government has announced that the date of the Autumn Statement will be 25 November 2015.

The Chancellor of the Exchequer, George Osborne, has announced that there will be an Office for Budget Responsibility forecast alongside the Spending Review on Wednesday 25 November 2015. The government will therefore publish a joint Autumn Statement and Spending Review on this date.

We will keep you informed of key announcements.

Internet link: GOV.UK News

5p carrier bag charge comes into force

Carrier bag charges will begin in England on 5 October 2015. For a large retailer the minimum charge is 5p for single-use plastic carrier bags. For small or medium-sized businesses no charge is required but can be made on a voluntary basis.

A business that employs 250 or more full-time equivalent employees, in all roles not just in retail roles, will be treated as being large and must charge the 5p. The number of employees is calculated at the start of each reporting year. The first reporting year will start on 5 October and run to 6 April 2016. Subsequent reporting years will start on 7 April.

When calculating full-time equivalent employees a business that is operated under a franchise needs to only include employees in that business, not the whole franchise.

The type of bags that will carry the charge will be:

  • unused
  • plastic
  • with handles and
  • 70 microns thick or less.

Where deliveries or online sales are made to customers any plastic bags used will also have to be included in the total cost. It may be that the amount of bags to be used is unknown when the order is placed. In this situation an average number of bags can be used in the charge as long as 5p or more is charged per bag overall.

There are a number of specific exemptions on the types of bags which would not be subject to the charge. These include bags for:

  • uncooked fish and fish products
  • uncooked meat, poultry and their products
  • prescription medicine
  • free promotional material given away.

Retailers will need to maintain reporting records and also make a report to Defra on or before 31 May following the end of the reporting year. The first report should therefore be sent to Defra by 31 May 2016.

The details to be sent to Defra are as follows:

  • number of bags distributed
  • the amount of money received from selling the bags
  • any VAT paid from the money received from selling bags
  • what the business did with the proceeds from the charge
  • any reasonable costs (see below) and how they break down.

Reasonable costs include costs to comply with the legislation and do not include the costs of the bags. Examples would be:

  • costs of changing till systems
  • training staff
  • communicating the policy to staff.

Once reasonable costs have been deducted, the remaining proceeds should all be donated to good causes.

The local authority, where the shop is based, is authorised to make inspections to ensure the law is being followed. Where there is non-compliance, they will have the authority to issue a notice to the retailer to correct the non-compliance or issue a fixed fine of up to £200 or a variable penalty of up to £20,000. In additional the local authority can order the retailer to advertise that they have broken the law.

Internet link: GOV.UK Guidance

Making tax simpler for charities

In September HMRC updated their detailed guidance notes which outline how the tax system operates for charities. The notes include how to apply to be recognised as a charity for tax and the operation of gift aid and payroll giving.

Over the last five years the government has brought in a range of changes to the tax system to make it simpler for charities to make the most of tax reliefs, so that more money can go to good causes.

Gift aid small donation scheme

Through the gift aid small donations scheme charities can claim a gift aid-style top-up on small donations eg a donation to a charity vendor in the street, up to a limit of £5,000 per year. This limit will increase to £8,000 per year from April 2016.

Charities online

Charities can submit claims for gift aid tax relief online which speeds up the claims process. 95% of charities now use this online system and the claims are processed within five working days.

HMRC outreach team

To date an HMRC outreach team has delivered face-to-face presentations to over 650 charities to spread awareness and help charities to successfully claim tax relief.

Community amateur sports clubs

The government has amended the law so that local sports clubs registered as community amateur sports clubs can receive corporate gift aid to help these clubs benefit their local communities.

Social investment tax relief

The social investment tax relief scheme has been created to encourage people to invest in social enterprises including charities. Individuals making an eligible investment will be able to deduct 30% of the cost of that investment from their income tax liability.

Lower IHT rate

If people leave at least 10% of the net value of their estate (its worth, minus any debt, other liabilities and reliefs) to charity, then 36% inheritance tax can be paid instead of 40%.

If you want further details on the tax treatment of charities please contact us.

Internet links: GOV.UK news GOV.UK guidance

Government toughens National Minimum Wage (NMW) sanctions

The government has announced a package of measures including tougher NMW penalties to ensure employees receive the pay they are entitled to.

The measures include:

  • doubling the penalties for non-payment of the NMW and the new National Living Wage
  • increasing the enforcement budget
  • setting up a new team in HMRC to take forward criminal prosecutions for those who deliberately do not comply
  • ensuring that anyone found guilty will be considered for disqualification from being a company director for up to 15 years

Business Secretary Sajid Javid said:

‘There is no excuse for employers flouting minimum wage rules and these announcements will ensure those who do try and cheat staff out of pay will feel the full force of the law.

This one nation government is committed to making work pay and making sure hardworking people get the salary they are entitled to.’

The government has announced the introduction of a new team of HMRC compliance officers who will investigate the most serious cases of employers not paying the NMW and National Living Wage. The team will have the power to use all available sanctions, including penalties, prosecutions and naming and shaming the most exploitative employers.

Stiffer penalties

Employers who fail to pay employees the minimum wage will have to pay penalties which will be up to twice what they currently are. This reform is intended to increase compliance and make sure those who break the law face tough consequences.

The calculation of penalties on those who do not comply will rise from 100% of arrears to 200%. This will be halved if employers pay within 14 days. The overall maximum penalty of £20,000 per worker remains unchanged.

Other changes

In other related changes a new Director of Labour Market Enforcement and Exploitation will be created to oversee enforcement of the NMW, the Employment Agency Standards Inspectorate and the Gangmasters Licensing Authority. The Director will set priorities for enforcement based on a single view of the intelligence about exploitation and non-compliance.

A consultation will be launched in the autumn on the introduction of a new offence of aggravated breach of labour market legislation. The consultation will also propose giving the Gangmasters Licensing Authority additional investigatory powers and a wider remit to tackle serious labour exploitation more effectively.

The government has also announced they will improve the guidance and support made available to businesses on compliance. They will also work with payroll providers to be sure payroll software contains checks that staff are being paid what they are entitled to.

If you would like help with payroll or employment law please do get in touch.

Internet link: GOV News

Business rates appeal proposals are a ‘barrier to justice’

The Enterprise Bill is currently going through Parliament. Part of the Bill reforms the business rates appeals system. The government’s changes have been criticised by rates experts and business groups, amid concerns that the changes will act as a ‘barrier to justice’.

The Valuation Office Agency (VOA), which is part of HMRC, is responsible for compiling and maintaining non-domestic rating lists. Currently officers of the VOA are prevented from sharing the information they collect about properties and ratepayers with local government. This means that businesses have to provide the same information twice to the VOA and local government. It can also mean that the properties have to be inspected by both the VOA and the local authority.

The Bill therefore allows the VOA to disclose information to a ‘qualifying person for a qualifying purpose’ such as a local authority.

The changes have been criticised by some people. They say the legislation will act as a ‘barrier to justice’ for businesses seeking to appeal.

Transparency around how business rates or tax on commercial property is measured has long been called for by small businesses. Critics of the bill claim that it has failed to address this issue, as it permits the VOA to share rate measurement information with local authorities but not with individual businesses.

Jerry Schurder, former chairman of the Royal Institution of Chartered Surveyors said:

‘In business rates, your own liability depends not on your own property but what’s being paid by lots of other people and you have no right to obtain that information. In any other tax, the taxpayer has the relevant information to make an appeal but not on rates.’

Meanwhile John Allan, national chairman at the Federation of Small Businesses, commented:

‘While we support moves to make it easier to navigate business rates appeals, we have concerns around the proposals in the Bill.

Their primary aim seems to be reducing the number of appeals by making the process more difficult, rather than by addressing the underlying issues, in particular making the appeals system and the VOA more transparent.

If increased transparency is not delivered, then confidence in the business rates system will continue to be undermined.’

Internet links: Link to legislation Telegraph

Newsletter – September 2015

eNews – September 2015

In this month’s eNews we report on how dividends will be taxed from 2016 and changes to ATED reporting requirements and increases in the NMW and the latest target for non compliance. We also update you on HMRC’s latest taskforce target, the new advisory fuel rates and an update on auto enrolment.

Please contact us if you would like further help or advice.

Taxing dividends from April 2016

In the Summer 2015 Budget, George Osborne announced fundamental changes to the way in which dividends are taxed and HMRC have issued a factsheet setting out examples of how the new regime will work.

An extract from the HMRC Factsheet states:

‘From April 2016 you have to apply the new headline rates on the amount of dividends you actually receive, where the income is over £5,000 (excluding any dividend income paid within an ISA).

The Dividend Allowance will not reduce your total income for tax purposes. However, it will mean that you don’t have any tax to pay on the first £5,000 of dividend income you receive.

Dividends within your allowance will still count towards your basic or higher rate bands, and may therefore affect the rate of tax that you pay on dividends you receive in excess of the £5,000 allowance.’

The changes will affect dividend receipts from 6 April 2016 however those who extract profits from their company as dividends may wish to consider whether to increase dividend payments before this date.

The table below shows a comparison between the current and prospective tax rates.

Dividend falls into : Basic rate band Higher rate band Additional rate band
Effective dividend tax rate now (taking into account notional tax credit) 0% 25% 30.6%
Rate from 6 April 2016 7.5% 32.5% 38.1%

Please contact us if you would like advice on this issue.

Internet link: Factsheet

National Minimum Wage rates and National Living Wage

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 2015.

From 1 October 2015:

  • the adult rate will increase by 20 pence to £6.70 per hour
  • the rate for 18 to 20 year olds will increase by 17 pence to £5.30 per hour
  • the rate for 16 to 17 year olds will increase by 8 pence to £3.87 per hour
  • the apprentice rate will increase by 57 pence to £3.30 per hour.

Employers also need to be aware that from April 2016, the government will introduce a new mandatory National Living Wage (NLW) for workers aged 25 and above. This will initially be set at £7.20 which is a 50p increase in the adult rate of NMW coming into force in October 2015. This represents an increase of in excess of £1,200 per annum in earnings for a full-time worker on the current NMW.

The NMW will continue to apply for those aged under 25. The government has issued further details of the new NLW policy.

Penalties

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

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

Internet links: Press release NLW policy

ATED updated procedures

Since 2013 a range of measures have been introduced to discourage the holding of residential property in the UK via companies, partnerships and collective investment schemes. In summary, these measures are:

  • Stamp Duty Land Tax (SDLT) is payable at 15% on the acquisition on or after 20 March 2014 of properties costing more than £500,000
  • an Annual Tax on Dwellings (ATED) applies at a fixed amount depending on value and
  • Capital gains tax (CGT) at 28% is payable on a proportion of gains for the period that the property has been subject to ATED.

There are specific reliefs and exemptions for certain types of properties.

Changes in limits

Prior to 1 April 2015 the lower property value threshold for ATED was a value of more than £2m on 1 April 2012, or at acquisition, if later. With effect from 1 April 2015, residential properties valued at more than £1m and up to £2m on 1 April 2012, or at acquisition if later, were brought into the charge.

From 1 April 2016 another new valuation band comes into effect for properties valued at more than £500,000 but less than £1 million.

The threshold for ATED-related CGT disposal consideration has also reduced from £2m to £1m from 6 April 2015 and will further reduce to £500,000 from 6 April 2016.

ATED Procedures

ATED is reported and the tax paid through an annual return. The return periods run from 1 April to 31 March each year.

Normally an ATED return must be made within 30 days of the date on which the property first comes within the charge to ATED for any chargeable period. Where the property is within the scope of ATED on 1 April each year, the return must be filed by 30 April in the year of charge. Payment of the tax is due with the return.

There is a special rule for properties coming within the scope of ATED from 1 April 2015 under the lower threshold of £1m detailed above. The rule is that returns for the chargeable period beginning 1 April 2015 must be filed by 1 October 2015 if the property was held on 1 April 2015 or within 30 days of acquisition if this is later. Payment of the tax is due 31 October 2015.

The chargeable person must submit an ATED return for any property that is within the scope of ATED for the relevant chargeable period. There are reliefs available which may reduce the liability in part or to zero. However, all claims for reliefs must be made in a new ‘relief declaration return’ and these new returns to claim relief have now been made available.

Returns for properties falling within the lower band of £500,000 are due for the chargeable period 1 April 2016 to 31 March 2017. The normal filing dates apply to properties within this new band. For example, if you hold a property valued at more than £500,000 on 1 April 2016, you must file your return and pay the tax by 30 April 2016.

Returns

In addition, a new ‘relief declaration return’ is introduced. Broadly, for each type of ATED relief being claimed, the company can submit a relief declaration return stating that a relief is being claimed in respect of one or more properties held at that time. No details are required of the individual properties or the number of properties eligible. Where a property is acquired in-year which also qualifies for the same type of relief, the existing return is treated as also having been made in respect of that property.

A normal ATED return will still be required in respect of any property which does not qualify or ceases to qualify for a relief i.e. where tax is due.

ATED and the reliefs available are a complex area. Please contact us if you would like specific advice.

Internet links: ATED relief declaration returns ATED

HMRC targets wealthy ‘tax cheats’ in Scotland

A taskforce which aims to tackle wealthy ‘tax cheats’ who are living beyond their means in Scotland has been launched by HMRC.

HMRC is identifying individuals with ‘badges of wealth’ such as large houses, investments, aeroplanes, boats and undeclared offshore bank accounts which are not in keeping with the information they report to HMRC.

HMRC expects the taskforce to recover nearly £4.5million. It will bring together specialist officers from across HMRC to identify wealth indicators and cross reference them with the data HMRC holds about their owners.

HMRC’s Michael Connolly, HMRC Taskforce Lead in Scotland, said:

‘HMRC’s intelligence shows that people being targeted by this taskforce have no intention of playing by the rules. They are deliberately failing to declare all their income to HMRC in a crude attempt to line their own pockets, and they will be investigated.

As a result of this behaviour, they could end up facing a heavy fine or even a criminal conviction. Those who pay the tax they are supposed to have nothing to worry about.

Using information we hold, we can target people whose lifestyle does not reflect the tax they are paying. It’s not fair that a small minority are living millionaire lifestyles as a result of not paying the tax they owe.’

Internet link: Press release

Auto enrolment ‘engagement’ and calculation tool

The Pensions Regulator (‘TPR’) has announced that following consultation they will develop a basic automatic enrolment tool. The basic tool should be available to download from TPR’s website by the end of 2015.

TPR consulted earlier this year on proposals to develop a basic tool to support those employers who use HMRC’s Basic PAYE Tools (BPT) to carry out their payroll function. HMRC’s BPT are used by many small employers to calculate PAYE, national insurance contributions and statutory payments such as Statutory Maternity Pay but has no pension function.

According to the TPR approximately 200,000 small and micro employers who use BPT are due to stage over the next two and half years and TPR’s experience indicates that using appropriate software either through payroll or pension provider systems helps employers to comply with their duties.

The majority of consultation responses were supportive of the TPR’s proposal, although some payroll firms and pension schemes were against the regulator developing a new tool.

Executive Director for Automatic Enrolment Charles Counsell said:

‘We will continue to recommend that BPT users consider using software with integrated automatic enrolment functionality, but by developing this basic contribution calculation tool we aim to ensure that BPT users have access to the help they need to support compliance.

The decision to develop a basic tool is recognition that significant numbers of BPT users will not seek a more integrated solution and will attempt manual calculations. This is another example of how The Pensions Regulator seeks to develop new ways to ensure we are meeting the needs of the diverse group of employers due to stage in the coming years.’

TPR has also issued the third edition of ‘Automatic enrolment: Commentary and analysis’, which reports on the impact of automatic enrolment and the increasing participation in workplace pension schemes. The commentary states:

  • By March 2015, over 5.2 million workers had been successfully automatically enrolled since the reforms began in 2012, an increase of more than 2.2 million workers from 2014, and 4.2 million from 2013.
  • Automatic enrolment is helping to turn around the decade-long decline in pension provision, with 59% of all employees now active members of a pension scheme, compared with just 47% in 2012. This increase suggests that pension saving is now becoming the norm.
  • The pensions landscape has been transformed as the majority of people are enrolled into defined contribution schemes. We have witnessed the growth in master trusts – 94% of employers who chose a trust-based scheme opted for a master trust.
  • We now expect that significantly more employers will be subject to automatic enrolment duties than originally anticipated, mainly due to an increase in the number of new companies that have started up, and fewer going out of business than was forecast. We have revised the staging profile accordingly, so that it reflects the 1.8 million employers we expect to help through the automatic enrolment process from now until 2018.

If you would like help with your payroll or advice on Pensions Auto Enrolment please contact us.

Internet links: Press release Commentary

Advisory fuel rates for company cars

New company car advisory fuel rates have been published which took effect from 1 September 2015. Due to the reduction in fuel prices many rates have reduced this quarter so please take care to update your expenses payments. However, 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 September 2015 are:

Engine size Petrol
1400cc or less 11p
1401cc – 2000cc 14p
Over 2000cc 21p

 

Engine size LPG
1400cc or less 7p
1401cc – 2000cc 9p
Over 2000cc 14p

 

Engine size Diesel
1600cc or less 9p
1601cc – 2000cc 11p
Over 2000cc 13p

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: Advisory fuel rates

Newsletter – September 2014

eNews – September 2014

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

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

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

RTI penalties for small employers delayed

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

Level of penalties

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

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

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

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

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

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

Internet link: Press release

VAT for digital businesses and the Mini One Stop Shop

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

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

Change of place of supply

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

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

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

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

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

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

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

Internet links: HMRC MOSS  News story

National Minimum Wage rises

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

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

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

Penalties

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

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

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

Internet link: Acas

Fuel Advisory rates

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

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

The advisory fuel rates for journeys undertaken on or after 1 September 2014 are:

Engine size Petrol
1400cc or less 14p
1401cc – 2000cc 16p
Over 2000cc 24p

 

Engine size LPG
1400cc or less 9p
1401cc – 2000cc 11p
Over 2000cc 16p

 

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

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

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

  • Employers do not need a dispensation to use these rates.
  • Employees driving employer provided cars are not entitled to use these rates to claim tax relief if employers reimburse them at lower rates. Such claims should be based on the actual costs incurred.
  • The advisory rates are not binding where an employer can demonstrate that the cost of business travel in employer provided cars is higher than the guideline mileage rates. The higher cost would need to be agreed with HMRC under a dispensation.

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

Internet link: HMRC advisory fuel rates

Autumn Statement date announced and have your say

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

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

We will keep you informed of announcements.

Internet link: News

Newsletter – July 2014

eNEWS – July 2014

In this month’s enews we report on VAT and prompt payment discounts, changes to flexible working rights, challenges to the calculation of holiday pay and new PAYE messages for employers. Please do get in touch if you would like more detail on any of the articles.

VAT and prompt payment discounts

Businesses which currently offer prompt payment discounts (PPD) to their customers need to be aware that there are some changes ahead to the rules.

Currently under UK law VAT is payable on the net amount after deducting the discount, whether or not the customer takes advantage of the PPD and pays promptly.

For example if you sell some goods for £1,000 plus VAT and offer 5% discount if the customer pays within 10 days then VAT is charged at 20% on £950 being £190, rather than 20% of £1,000 which is £200. Even if the customer takes 30 days to pay and therefore does not qualify for the PPD, the amount due will be £1,190.

This rule regarding PPD is in the process of being changed and from 1 April 2015 VAT will be due on the amount the customer actually pays. So using the above example if the customer fails to take advantage of the PPD he would need to pay the full £1,000 plus VAT of £200.

The business making the supply will have to issue a credit note to account for the PPD where this is taken up. So using the same example if the customer takes up the discount then the credit note would be for £50 plus £10 VAT.

Apparently PPD have been widely used by suppliers of telecommunications and broadcasting services and so the use of PPD to reduce VAT due has already been blocked in those sectors from 1 May 2014. This applies where the customer cannot recover the VAT charged.

If your business currently offers PPD you may need to change your invoicing procedures from 1 April 2015 and the Government are going to consult on the implementation of the change. We will keep you informed of the details of the changes as and when further detailed guidance is made available.

Internet link: VAT TIIN

Holiday pay law

The CBI are warning that employers are facing the risk of significant additional costs, potentially ‘billions of pounds’, from employment tribunals challenging the normal calculation of holiday pay under the Working Time Regulations (WTR).

In the UK holiday pay is currently calculated on the basis of a ‘week’s pay’ which is based on basic salary and excludes payments such as working allowances, expenses, overtime, commission and bonus payments as these payments relate to specific work done by an employee whilst performing their duties of employment.

A recent European Court of Justice (ECJ) judgment redefined holiday pay to include an allowance for commission, even though commission is paid on sales made and the employee would not have delivered those sales whilst on holiday.

If liabilities on holiday pay are backdated then employers may face huge liabilities for holiday pay arrears.

Katja Hall, CBI Deputy Director-General, said:

‘Backdated claims on holiday pay could lead to bills of millions of pounds for each business, and ultimately threaten their very existence.’

‘Businesses that have done the right thing and fully complied with UK law suddenly face the threat of substantial additional costs. And the companies most at risk are in vital sectors for our economy, such as manufacturing, construction and civil engineering.’

‘Moving the legal goalposts in this way is unacceptable. Although most businesses believe we are better off in a reformed EU, there is a real danger of expansive decisions being made by the European Court of Justice on the UK labour market. As part of an EU reform programme, this has to be addressed and it’s time to put a stop to back-door EU employment law being made.’

‘We need the UK Government to take a strong stand and do all it can to remove this threat. Otherwise we face the very real prospect of successful firms in this country going out of business, with the jobs they provide going too.”

Cases on commission and overtime are currently in progress and we will keep you informed of developments. Meanwhile the CBI is calling for the Government to use its powers under British law to limit the retrospective liability UK employers face.

Internet link: CBI press release

NMW consultation

The Low Pay Commission (LPC) has launched a National Minimum Wage (NMW) consultation which runs until 26 September 2014. The LPC would like to hear from individuals and organisations affected by the NMW, including employers of low-paid workers including those involved in sectors such as retail, hospitality, social care, cleaning and hairdressing and focuses on the particular impact of the NMW on young people.

To find out more on the consultation visit the link below. If you would like any advice on the payment of the NMW please do get in touch.

Internet link: NMW consultation

Extension to flexible working rights

The right to request flexible working has been extended to all employees with at least 26 weeks’ service from 30th June 2014.

Before this change in the law, only employees with children aged 16 or under (17 or under if the child is disabled) or those acting as carers had the right to request flexible working.

Employers are required to consider requests and deal with applications in a ‘reasonable manner’ as the previous statutory procedure for dealing with flexible working requests has been abolished.

Employers do not have to accept an employee’s request as there are a number of legitimate reasons for turning down a flexible working request, including the burden of additional costs to the business and an inability to recruit additional staff.

For information on how to make and deal with requests see the ACAS website guidance

Internet link: News

PAYE messages for employers

HMRC will shortly start alerting employers where their records show that they have failed to make their PAYE or Construction Industry Scheme payments in full by their due date.

HMRC review the payments after each monthly (or quarterly) payment deadline has passed. Shortly after that, HMRC will issue a late payment Generic Notification Service (GNS) message to employers and contractors if they believe they have an underpayment of £100 or more for the month or quarter.

The messages will state:

‘HM Revenue & Customs (HMRC) records show you did not make full payment on time. If you have not already done so, please bring your payments up to date and ensure future payments are made on time and in full. Paying on time and in full is important as otherwise you may be charged in-year interest and late payment penalties.’

‘If you had no PAYE payment to make because you didn’t pay any employees during this tax period, you should let HMRC know by sending an Employer Payment Summary (EPS) for this tax period.’

‘To see why HMRC have issued this notice, please check HMRC Tax Dashboard or PAYE Online which provides details of your payments and PAYE charges.’

Employers should:

  • submit an EPS as instructed, if appropriate
  • ensure that they pay their PAYE in full and on time in future.

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

Internet link: HMRC news

Zero hours contracts and exclusivity clauses

Zero hours contracts are those where the employer does not guarantee to provide the worker with any work and pays the worker only for work actually carried out. The Government estimates that some 125,000 employees are on such contracts.

Some employers argue that they are an important tool to enable a business to maintain flexibility to deal with fluctuations in demand whereas some employee groups claim that businesses use them to avoid giving workers the status of ‘employee’ and eligibility for the full range of employment rights.

The Business Secretary, Vince Cable, has announced that employers hiring workers on zero hours contracts will no longer be able to compel staff to work exclusively for them. These ‘exclusivity clauses’ will not be permitted in contracts and will therefore give workers the freedom to take employment elsewhere. The ban on exclusivity clauses will be contained in the Small Business, Enterprise and Employment Bill.

The Government considers zero hours contracts have a place in the labour market but that the use of these contracts needs tightening up to protect employees from employers who misuse the contracts.

Internet link: Government news

Newsletter – June 2014

In this month’s enews we report on a number of issues relevant to employers and employees. We also advise of the latest reported scam emails and also new rules for retailers.

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

 

 

New rules for retailers

From 13 June 2014 retailers who sell to consumers, including those selling digital content, must comply with the Consumer Contracts (Information, Cancellation and Additional Charges) Regulations 2013.

Some of the key rules introduced are:

  • consumers will be entitled to clearer and more prominent information before and after a sale is made to them
  • if the consumer is buying digital content, they must have more information about such issues as compatibility and functionality and the fact that a digital download may not have a cancellation period must be made clear to the consumer at the point of sale and the consumer must agree to this
  • the cancellation period for distance and doorstep sales will be increased from 7 to 14 days
  • forbidding the use of premium rate customer telephone helplines.

The Regulations will have an impact on many areas of a business including websites, marketing literature and terms and conditions.

Internet link: Regulations

Deliberate defaulters

From time to time HMRC publish details of deliberate defaulters, those who have received penalties for deliberate errors in their tax returns or deliberately failing to comply with their tax obligations.

The latest list can be viewed by following the attached link.

Internet link: HMRC website

Advisory fuel rates for company cars

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

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

The advisory fuel rates for journeys undertaken on or after 1 June 2014 are:

Engine size Petrol LPG
1400cc or less 14p 9p
1401cc – 2000cc 16p 11p
Over 2000cc 24p 16p
Engine size Diesel
1600cc or less 12p
1601cc – 2000cc 14p
Over 2000cc 17p

 

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 links: HMRC advisory fuel rates

HMRC writes to taxpayers about effective tax rates

HMRC is writing to certain taxpayers to tell them their effective rate of tax is lower than average and to ask them to check if it’s right.

The letter states:

‘A person’s effective rate of tax is the percentage of their income they have paid in tax.’

‘Looking at the figures in your self assessment tax calculation for the year ended 5 April 2012, we can see your effective rate of tax is lower than the average for people with a similar amount of income to you. This means there could be something wrong with your self assessment tax return.’

Recipients are then asked to check their returns for 2011/12 and contact HMRC if something is wrong.

There could be many reasons why an individual’s effective rate of tax could be low including claims having been made for tax reliefs for Gift Aid payments, pension payments and tax efficient investments such as the Enterprise Investment Scheme.

If you receive one of these letters and are concerned please do get in touch.

Internet link: ICAEW

Latest employment and pay statistics

The Office for National Statistics has announced the latest employment and pay statistics. These include:

  • There were 30.54 million people in work for February to April 2014, 345,000 more than for November 2013 to January 2014 and 780,000 more than a year earlier.
  • There were 2.16 million unemployed people for February to April 2014, 161,000 fewer than for November 2013 to January 2014 and 347,000 fewer than a year earlier.
  • There were 8.82 million economically inactive people (those out of work but not seeking or available to work) aged from 16 to 64 for February to April 2014. This was 80,000 fewer than for November 2013 to January 2014 and 178,000 fewer than a year earlier.
  • Pay including bonuses for employees in Great Britain for February to April 2014 was 0.7% higher than a year earlier, with pay excluding bonuses 0.9% higher.

Neil Carberry, CBI Director for Employment and Skills, said:

‘While there is still lots to do to tackle unemployment, this is an unprecedented rise in the number of people in work. And more than three times as many people found full-time than part-time work in another positive sign for the recovery.’

‘The private sector is driving new jobs with positions created across a range of sectors, from entertainment to transport.’

Internet links: ONS  Press release

Change of approach on PAYE penalty notices

HMRC have announced that they are changing their approach to issuing multiple penalty notices for the same PAYE non filing default.

These changes impact both the 2012/13 and 2013/14 tax years.

HMRC will issue reminder letters to those employers who have not yet filed their 2013/14 end of year, or final PAYE returns most of which should have been submitted using RTI. The deadline for submitting these returns was 19 May 2014.

If you receive a letter and would like any help with payroll or believe the returns have been submitted please do get in touch.

For 2012/13 HMRC will not issue any further updated penalty notices until the return has been filed.

Internet link: HMRC guidance on penalty notices

HMRC warn of ‘phishing’ emails

HMRC are warning tax credits claimants to be wary of scam or ‘phishing’ emails which are being sent out by fraudsters in the run up to the 31 July renewal deadline.

HMRC are advising that although they worked with other agencies to shut down over 600 scam websites during the tax credits renewal period last year, others sites continue to be created. Reported scam emails for this May are already in excess of 11,000.

HMRC advise:

Phishing emails often promise money back and, if the recipient clicks on a link, they are taken to a fake replica of the HMRC website. They are then asked to provide credit or debit card details or other sensitive information such as passwords. The fraudsters then try to take money from their account.

They often ask for the recipient’s name, address, date of birth, bank account number, sort code, credit card details, national insurance number, passwords and mother’s maiden name.

In addition to money being stolen from victims’ bank accounts, their personal details can be sold to criminal gangs, leading to possible identify theft.

Nick Lodge, Director General of Benefits and Credits, HMRC, said:

‘HMRC will never ask people to disclose personal or payment information by email. We are committed to claimants’ online security but the methods fraudsters use to get information are constantly changing, so people need to be alert.’

‘HMRC is asking people to be wary of e-mails with attachments which might contain viruses designed to steal personal or financial information, and not to open them.’

‘One scam is contained in an email circulated from taxreturn@hmrc.gov.uk telling recipients about a 2013 tax refund report. The email appears to have been issued by ‘Tax Credit Office Preston’, but it is a scam. It includes an attachment that contains a virus. Recipients are urged not to respond and to delete it immediately.’

For more information about advice on scam emails visit the link below.

Internet links: HMRC news

Employers who failed to pay NMW named

Twenty five employers who failed to pay their employees the National Minimum Wage (NMW) have been named. According to the press release the employers owed workers more than £43,000 in arrears and in addition have incurred financial penalties totalling over £21,000.

Business Minister Jenny Willott said:

‘Paying less than the minimum wage is not only wrong, it’s illegal. If employers break the law they need to know that they will face tough consequences.’

If you would like any help with National Minimum Wage issues please do get in touch.

Internet link: News

Newsletter – April 2014

In this month’s enews we report on pensions announcements and other issues pertinent to employers with many deadlines approaching.

Please contact us if you would like any further information.

 

 

HMRC guidance on new pension flexibility

Following the Budget announcements regarding pension flexibility HMRC have now issued some guidance for those individuals who may wish to review their pension options.

New rules are being introduced to ensure that people do not lose their right to a tax-free lump sum if they would rather use the new flexibility this year or next, instead of buying a lifetime annuity.

Internet link: Pensions flexibility

Employers no longer able to reclaim SSP

The Percentage Threshold Scheme (PTS), which allows employers to reclaim Statutory Sick Pay (SSP) in certain circumstances, is abolished from 6 April 2014.

Under PTS employers have been able to reclaim SSP where the SSP paid is more than 13% of the Class 1 NIC due for the month. Employers are not entitled to recover any of the SSP paid to their employees unless they qualify for the reimbursement scheme.

The following example explains how the scheme worked for a tax month:

SSP paid = £630.00
Gross NI £3,704.29 x 13% = £481.56
SSP recoverable: (£630 – £481.56) = £148.44

From 6 April 2014 employers are unable to recover SSP however they will continue to be able to recover unclaimed SSP for previous years until 5 April 2016. Do contact us if you think this may apply to your business.

The government has announced that the current PTS funding will be moved into a new scheme to help employees who have been incapacitated for four weeks or more get back to work as part of the government’s Health Work and Wellbeing Initiative.

Internet link: Employer bulletin

Disclosure facility for those with undisclosed second incomes

The Second Incomes Campaign is an opportunity open to individuals in employment who have an additional untaxed source of income.

The new facility allows those with untaxed income to get up to date with their tax affairs in a simple, straightforward way and take advantage of the best possible terms.

If you would like any advice on this area please do get in touch.

Internet links: Second incomes campaign  Guide to disclosure

More guidance on Class 3A NIC

Further guidance has been issued on Class 3A National insurance contributions (NIC).

In the autumn of 2013 the Government announced plans to introduce a scheme to allow pensioners to top up their Additional State Pension by paying a new class of voluntary National Insurance contribution, to be known as Class 3A.

‘The scheme will open in October 2015 and will be available to all pensioners who reach State Pension age before the introduction of the new State Pension in April 2016. The scheme is expected to run for 18 months.’

‘Class 3A will give pensioners an option to top up their pension by up to £25 a week in a way that will protect them from inflation and offer protection to surviving spouses. In particular, it could help women, and those who have been self-employed, who tend to have low additional State Pension entitlement.’

Internet link: Publication

More HMRC guidance on the Employment Allowance

The Employment Allowance of up to £2,000 is available to most employers from 6 April 2014. Employers can reduce the amount of National Insurance contributions (NICs) they pay for their employees by up to £2,000. This is called the ‘Employment Allowance’.

Employers generally won’t have to pay any employer National Insurance contributions at all if they usually pay less than £2,000 a year.

HMRC has issued more guidance on the practicalities of claiming the allowance which can be found by visiting the link below.

For help with payroll matters please do contact us.

Internet links: Employment allowance detail  Employment allowance key facts

Tax-free childcare

Details of the new Tax-Free Childcare scheme which is to be launched in autumn 2015 have been announced.

The scheme will be worth a maximum of £2,000 per child per year. The maximum amount due is calculated on 20% of the costs of childcare (up to a total of childcare costs of £10,000 per child per year).

The scheme will be launched in autumn 2015. All children under 12 within the first year of the scheme will be eligible. To qualify for Tax-Free Childcare all parents in the household must:

  • meet a minimum income level based on working eight hours per week at the National Minimum Wage (around £50 a week at current rates)
  • each earn less than £150,000 a year, and
  • not already be receiving support through Tax Credits or Universal Credit.

Self-employed parents will be able to get support with childcare costs in the Tax-Free Childcare scheme, unlike the current employer supported childcare scheme. To support newly self-employed parents, the Government is introducing a ‘start-up’ period. During this period a newly self-employed parent will not have to earn the minimum income level.

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 the new scheme is available.

It is proposed that parents register with the Government and open an online account. The scheme will be delivered by HMRC in partnership with National Savings and Investments, the scheme’s account provider. The Government will then ‘top up’ payments into this account at a rate of 20p for every 80p that families pay in.

Internet link: News

Increase in NMW rates

The Government has approved a rise in the National Minimum Wage rates which will come into effect on 1 October 2014:

  • a 19p (3%) increase in the adult rate (from £6.31 to £6.50 per hour)
  • a 10p (2%) increase in the rate for 18 to 20 year olds (from £5.03 to £5.13 per hour)
  • a 7p (2%) increase in the rate for 16 to 17 year olds (from £3.72 to £3.79 per hour)
  • a 5p (2%) increase in the rate for apprentices (from £2.68 to £2.73 per hour.

The rise will take effect in October 2014, as Business Secretary Vince Cable has accepted in full the independent Low Pay Commission’s recommendations for 2014, including plans for bigger increases in future than in recent years.

The Low Pay Commission (LPC) has said the rise, the first real terms cash increase since 2008, is manageable for employers and will support full employment.

Business Secretary Vince Cable said:

‘The recommendations I have accepted today (12 March 2014) mean that low paid workers will enjoy the biggest cash increase in their take home pay since 2008. This will benefit over 1 million workers on National Minimum Wage and marks the start of a welcome new phase in minimum wage policy.’

Meanwhile HMRC have revealed some of the excuses given for not paying the NMW.

Internet links: Press release  HMRC NMW excuses

Advisory fuel rates for company cars and fuel benefit charge

Where private fuel is provided by the employer for a company car then a separate benefit is assessable on the employee. This benefit charge is calculated by applying the same percentage figure used to calculate the company car benefit to a fixed figure which for 2014/15 is set at £21,700. The percentage is linked to the car’s CO2 emission figures.

Now is a good time to consider whether this benefit is value for money for both the employee and employer.

The alternative is to reimburse the employee for business miles using the company car advisory fuel rates. The current rates are:

Engine size Petrol
1400cc or less 14p
1401cc – 2000cc 16p
Over 2000cc 24p

 

Engine size LPG
1400cc or less 9p
1401cc – 2000cc 11p
Over 2000cc 17p

 

Engine size Diesel
1600cc or less 12p
1601cc – 2000cc 14p
Over 2000cc 17p

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: HMRC advisory fuel rates

P11d deadline approaching

The forms P11D, and where appropriate P9D, which report details of expenses and benefits provided to employees and directors for the year ended 5 April 2014, are due for submission to HMRC by 6 July 2014. The process of gathering the necessary information can take some time, so it is important that this process is not left to the last minute.

Employees pay tax on benefits provided as shown on the P11D, either via a PAYE coding notice adjustment or through the self assessment system. In addition, the employer has to pay Class 1A National Insurance Contributions at 13.8% on the provision of most benefits. The calculation of this liability is detailed on the P11D(b) form.

HMRC have updated their expenses and benefits toolkit for 2013/14 and record keeping for 2014/15. The toolkit consists of a checklist which may be used by advisers or employers to check they are completing the forms P11D correctly.

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

Internet links: http://www.hmrc.gov.uk/payerti/exb/forms.htm  Toolkit

Newsletter – February 2014

In this month’s enews we advise on several issues relevant to employers. We also report on the help available for those affected by floods.

Please contact us if you would like any further information.

 

 

Employment Allowance

The Government has announced further details of the Employment Allowance which is available from 6 April 2014. Eligible employers can reduce their employer Class 1 NICs by up to £2,000 each tax year.

The Employment Allowance can be claimed by a business or charity (including Community Amateur Sports Clubs) that pays employer Class 1 NICs on their employees’ or directors’ earnings.

However there are some circumstances which may limit the availability of the allowance:

  • if a company belongs to a group of companies or a charity is part of a charities structure, only one company or charity can claim the allowance
  • the £2,000 Employment Allowance can only be claimed against one PAYE scheme, even if the business has more than one PAYE scheme.

Not all businesses can claim the Employment Allowance and the government guidance gives the following details of excluded employers.

You cannot claim the Employment Allowance, for example if you:

  • employ someone for personal, household or domestic work, such as a nanny, au pair, chauffeur, gardener or care support worker
  • already claim the allowance through a connected company or charity
  • are a public authority, this includes; local, district, town and parish councils
  • carry out functions either wholly or mainly of a public nature (unless you have charitable status), for example:
    • NHS services
    • General Practitioner services
    • the managing of housing stock owned by or for a local council
    • providing a meals on wheels service for a local council
    • refuse collection for a local council
    • prison services
    • collecting debt for a government department

If you would like any guidance on claiming the allowance please do get in touch. If we deal with your payroll we will ensure this matter is dealt with on your behalf.

Internet link: Gov.uk

Increases to NMW penalties and latest targets

The Government has announced that rogue employers who do not pay their workers the National Minimum Wage (NMW) will face an increased penalty of up to £20,000 as part of a Government crackdown.

Currently employers that break NMW law must pay the unpaid wages plus a financial penalty calculated as 50% of the total underpayment for all workers found to be underpaid. The maximum penalty an employer can face is £5,000.

The Government plans to increase the financial penalty percentage from 50% to 100% of the unpaid wages owed to workers. The maximum penalty will increase from £5,000 to £20,000. Regulations introducing these new limits are subject to Parliamentary approval and are expected to be enacted this month.

Latest target

Major record labels involved in this year’s Brit Awards are among the latest targets of HMRC’s continued crackdown on unpaid internships.

HMRC have written to record labels and event companies warning them about the consequences for non-payment of the NMW for any unpaid interns they take on. HMRC intend to follow up these letters with compliance visits later in the year to ensure the rules are being followed.

Michelle Wyer, HMRC’s Assistant Director NMW, said:

‘Non-payment of the National Minimum Wage is not an option, it’s the law, and we’re letting the music industry know that we’ve got them in our sights. If they are not playing by the rules, now is the time to put things in order.

Last year we fined over around 800 employers, so our message is clear: if you are not paying your interns, but should be, come forward now and put things right to avoid a penalty.’

Internet link: Press release

Help for those affected by floods

The Prime Minister has announced a package of measures to help flood affected businesses get back on their feet. The package of measures includes:

  • A Government Business Support Helpline providing comprehensive advice and support to businesses affected by floods. The helpline number is 0300 456 3565.
  • A new Business Support Scheme to provide hardship funding for SME businesses in areas affected by the floods. Both businesses that have been flooded, and businesses that are in affected areas and have suffered significant loss of trade, will be able to apply for support. Eligible businesses will be able to claim for funding for things like immediate clean-up costs, materials, and exceptional costs to help them continue trading.
  • Extra time for businesses to file accounts without any penalties.
  • All affected businesses will be able to apply to their local authority to get business rate relief for 3 months.
  • HMRC will also set up a new hotline for those who have been affected by flooding and may have difficulties in meeting their tax liabilities. HMRC will look to offer up to 3 months additional time to pay. This will cover all taxes owed to HMRC, including VAT, PAYE and corporation tax. The helpline number is 0800 904 79000800 904 7900.

Help is also available for communities affected. To read more about the help on offer visit the links below.

Internet links: HMRC website  News Communities  News business support

No penalties for some late Self Assessment returns

HMRC have announced that more than 10 million tax returns were filed on time meeting the 31 January deadline.

Approximately 8.5 million returns were filed online with the rest being paper filed. Perhaps not surprisingly the busiest day for tax return submission was 31 January when HMRC received over half a million returns.

For those failing to meet the deadline there is an automatic £100 late filing penalty regardless of whether the tax has been paid on time or indeed there is a refund due. Further penalties may also be imposed for continued failure to submit the return.

It has been widely reported that HMRC would not be charging penalties where returns were submitted before midnight on 15 February 2014. However this ‘reprieve’ only applies in limited circumstances as set out in the following HMRC statement:

‘We haven’t extended the Self Assessment deadline. Tax returns and any tax due must be received by HMRC by midnight tonight 31 January.

If someone has registered for our Online Service or existing customers have lost their User ID or password and realise they have left it too late we will allow a bit of extra time for this information to be received. This only applies to taxpayers who did the following between midnight on 21 January and midnight on 31 January 2014:

  • enrolled for the Self Assessment online service, or
  • requested a replacement user ID or password’

If you are one of the half a million people who have not yet submitted your self assessment return and you would like some help please do get in touch.

Internet links: Gov news  SA leniency

HMRC warning about phishing scams

HMRC are warning taxpayers to be wary of the latest in a long line of email phishing scams that claim to offer tax rebates in return for bank account details.

HMRC have received over 23,000 reports of phishing scam emails in the three months to the 31 January 2014 self assessment deadline which is a 47% increase on the same period in 2013.

HMRC have confirmed that it never contacts taxpayers via e-mail regarding a refund and advised anyone who receives an email claiming to be from HMRC:

HMRC have published advice and examples of typical fake emails at www.hmrc.gov.uk/security/index.htm.

Internet link: News

PAYE end of year approaching

HMRC are reminding employers that with the end of the 2013/14 tax year approaching they will soon need to make their final 2013/14 PAYE (RTI) submission.

For most employers, the final submission will be their final Full Payment Submission (FPS) which advises HMRC about the very last employee payments for 2013/14 and this needs to be made on or before 5 April 2014. Details of how to make the final submission can be found on the HMRC website using the link below.

If we deal with the payroll on your behalf we will ensure this matter is dealt with on a timely basis.

Internet link: HMRC news

Electronic messages to employers

HMRC have issued an electronic warning message to employers who have not submitted their Full Payment Submission (FPS) return(s) during the January tax month. The message is intended to be a reminder to employers and is not a penalty notice.

HMRC are advising employers who receive this message that they should check that they have sent all the submissions that are due for their PAYE scheme.

If employers have notified HMRC recently that their business has ceased, then they can ignore the electronic message and do not need to contact HMRC.

HMRC started issuing these messages in December 2013 and this following link sets out instances where an employer may receive a non-filing message, although they have filed on time and where not action is required.

Internet links: HMRC news

Employee travel disruption

From time to time and particularly with the current weather conditions, travel disruption can affect an employee’s ability to get to work on time, or in some cases at all. For situations ranging from public transport cancellations to severe weather, employers and employees should consider how this could impact on the workforce.

Acas provide some useful guidance on these issues.

Internet link: Acas

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