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Newsletter – May 2017

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Enews – May 2017

In this month’s eNews we report on the short Finance Act which has been rushed through Parliament in advance of the General Election. We also include details of changes to the off payroll working rules that exclude some businesses from being unintentionally caught by the provisions. We also consider changes to the timing of issuing PAYE coding notices and the P11D deadline together with the launch of the latest National Savings and Investment Bond.

General Election and tax law

With the announcement of a snap General Election on 8 June the time available for scrutinising proposed legislation was short so the Finance Act was rushed through Parliament. Many clauses have not made it to the final legislation due to time constraints. These include the provisions to enable Making Tax Digital, changes for Non Domiciled individuals and corporate losses.

The clauses are likely to be reinstated after the General Election, when, hopefully, there will be more time to debate the measures in greater detail. The clauses that will make it through to the Finance Act are contained in the version of the Finance Bill introduced into the House of Lords.

Anita Monteith, tax manager at ICAEW said:

‘Making Tax Digital plans remain controversial and need more scrutiny by those who will be affected, and most importantly proper parliamentary debate – a clear roadmap as to how MTD will work in practice is needed.’

‘MTD is not coming into effect until April 2018, and the announcement of the general election on 8 June 2017 provided an opportunity to withdraw these clauses and schedule from the Finance Bill which will be debated today and likely to be enacted on 27 April.’

‘These seminal clauses and schedule can be reintroduced after the election which will allow more time for proper scrutiny.’

Internet links: ICAEW news Parliamentary Bill

Business response to General Election on 8 June

In response to the announcement of a General Election on 8 June Carolyn Fairbairn, CBI Director-General, said:

‘With a snap General Election now called, businesses will be looking to each political party to set out their plans to support economic stability and prosperity over the next Parliament in a way that is fair and sustainable for communities across the UK. ‘Distraction from the urgent priorities of seeking the best EU deal and improving UK productivity must be kept to a minimum.’

‘Firms will want to hear commitments from all parties to work in close partnership with business and back a new Industrial Strategy to make the UK economy the most competitive in the world by 2030.’

‘It is essential to get the UK’s foundations right, from building a skills base for the next generation, to investing in infrastructure, energy and delivering a pro-enterprise tax environment.’

‘As EU negotiations now get underway, firms are clear about the serious risks of failing to secure a deal and falling into World Trade Organisation rules. It is vital that negotiators secure some early wins and all parties should commit to working to ensure businesses can continue to trade easily with our EU neighbours, while seeking new opportunities around the world.’

‘Whoever forms the next Government, they should seek to build a partnership between business and government that is the best in the world, based on trust and shared interest.’

Internet link: CBI News

Off payroll working in the public sector rules amended

From 6 April 2017, new tax rules were introduced which potentially affect individuals who provide their personal services via their own companies (PSCs) to an organisation which has been classified as a ‘public authority’. Amendments have now been made to the definition of a public authority.

Where these rules apply:

  • the public authority (or an agency paying the PSC) calculates a ‘deemed payment’ based on the fees the PSC has charged for the services of the individual
  • the entity that pays the PSC for the services must first deduct PAYE and employee National Insurance contributions (NICs) as if the deemed payment is a salary payment to an employee
  • the paying entity will have to pay to HMRC not only the PAYE and NICs deducted from the deemed payment but also employer NICs on the deemed payment
  • the net amount received by the PSC can be passed onto the individual without paying any further PAYE and NICs.

The rules were intended to cover those engaged by public sector organisations including government departments and their executive agencies, many companies owned or controlled by the public sector, universities, local authorities, parish councils and the National Health Service.

However, prior to this amendment, private sector retail businesses including high street pharmacies and opticians would have inadvertently been within the scope of the off payroll working in the public sector measure. As a result, such businesses would have been required to consider whether the new rules applied to all contractors working for them through an intermediary. This was not the intention of this policy and the rules have been amended.

The rules operate in respect of payments made on or after 6 April 2017. This means that they are relevant to contracts entered into before 6 April 2017 but where the payment for the work is made after 6 April 2017.

If you would like any help with these new rules contact us.

Internet link: GOV.UK amendment

P11D deadline approaching

The forms P11D which report details of benefits and some expenses provided to employees and directors for the year ended 5 April 2017, are due for submission to HMRC by 6 July 2017. 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, generally via a PAYE coding notice adjustment or through the self assessment system. Significant changes were introduced to the rules for reporting expenses from 6 April 2016.

Some employers payrolled the benefits and in this case the benefits do not need to be reported on forms P11D but employers should advise employees of the amount of benefits payrolled.

In addition, regardless of whether the benefits are being reported via P11D or payrolled 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. The deadline for payment of the Class 1A NIC is 19th July (or 22nd for cleared electronic payment). As 22nd July is a Saturday it may be appropriate to ensure cleared payment is made by Friday 21st July unless you can arrange for faster payment.

HMRC produce an expenses and benefits toolkit. The toolkit consists of a checklist which may be used by advisers or employers to check they are completing the forms correctly.

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

Internet links: HMRC guidance Toolkit

VAT fuel scale charges

HMRC have issued details of the updated VAT fuel scale charges which apply from the beginning of the next prescribed VAT accounting period starting on or after 1 May 2017.

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

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

Internet link: GOV.UK fuel scale charges

Investment Bond launched

National Savings and Investments (NS&I) has recently launched a government-backed Investment Bond. The main details of the Bond are as follows:

  • minimum deposit of £100
  • balances on the account must be between £100 – £3000
  • applications can only be made online and up to April 2018
  • applicants must be aged 16+ years
  • fixed interest rate of 2.2% for three years paid yearly and without tax deduction
  • early withdrawals incur a penalty equal to 90 days’ interest on the amount cashed in.

According to Moneyfacts, the NS&I offering is a market leader on the interest rate with similar three-year fixed term bonds having an average interest rate of 1.24%. Competitors’ minimum investment thresholds are generally higher, typically starting upwards from £1,000 and caps on the maximum capital invested are significantly higher than the NS&I limit of £3,000.

Internet links: GOV.UK news NS&I Moneyfacts

Changes to the PAYE Tax system using Real Time Information

HMRC have announced that from the end of May 2017 they will be using Real Time Information (RTI) to make adjustments to employee tax codes in-year as and when the need arises.

HMRC states that this change in procedures will:

  • offer more certainty to employers and their employees
  • reduce the instances of unexpected tax bills arising
  • ensure that more employees end the tax year having paid the right amount of tax.

Details of the change in procedures can be found in the HMRC Policy Paper briefing ‘Changes to our PAYE Tax System – helping customers pay the right amount of tax on time’. Further information about the changes can be found on page 4 of the Employer Bulletin April 2017 (Issue 65).

The Policy Paper confirms that individuals will be issued with a new tax code if their circumstances change. This brings about a marked change from the current system which deals with adjustments after the tax year end and codes any underpayment out via a coding notice adjustment in a subsequent tax year.

Affected employees should shortly be in receipt of tax code notices explaining the changes to the system and what they can do if they need help and support to manage their taxes.

Under the new procedures, once HMRC are aware that an employee’s circumstances have changed, they will amend the individual’s tax code and follow it up with a notification of the amendment to the employee. A copy notification will also be sent to the employer. It is important for employers and employees to ensure that HMRC are made aware of any changes in an individual’s circumstances as soon as possible.

Employers are advised to expect, from 1 June onwards, some employee enquiries relating to tax code changes. In the longer term, HMRC envisages reduced contact from employees regarding under or overpayments of tax.

If you would like help with Payroll or checking your tax code please contact us.

Internet links: GOV.UK Briefing Employer Bulletin 65

Newsletter – February 2016

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Enews – February 2016

In this month’s eNews we report on the extra 3% SDLT charge which will apply on the purchase of second homes from April. We also include several announcements relevant to employers, the latest tax return statistics and information about the new state pension.

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

Extra 3% SDLT on the horizon for buy to lets and second homes

HMRC reveal tax return statistics and worst excuses

Reporting PAYE information ‘on or before’ paying employees

Digital quarterly updates

New National Living Wage to boost living standards

Pensioners ‘to gain’ from new single tier state pension but younger people ‘worse off’

Apprentices and employer National Insurance

Extra 3% SDLT on the horizon for buy to lets and second homes

The Chancellor announced in the Autumn Statement last November that he would be introducing new rates of Stamp Duty Land Tax (SDLT) on purchases of buy to let properties or second homes. An additional 3% SDLT charge will apply to the purchase of residential properties caught by the new rules and this change is expected to come into effect for completions on or after 1 April 2016. There is an exemption from the charges for transactions under £40,000.

In December the Scottish government announced a Land and Buildings Transaction Tax (LBTT) supplement on additional homes. A bill has been introduced in the Scottish Parliament to introduce similar changes to LBTT.

The government is currently consulting on how the rules will be implemented and in which circumstances they will apply. It should be noted that the proposed changes will significantly increase the SDLT and LBTT on the purchase of second homes.

The rules will also impact on those individuals who purchase a new home where they have yet to sell their current home. The higher SDLT and LBTT rates would be payable on the purchase of the second property although this additional tax may be refunded if the first property is sold within 18 months.

To read the consultation which includes some examples of how the rules will operate use the link below.

Please also do get in touch if you would like specific advice on how these rules will affect you and whether or not you should buy or sell before or after April 2016.

Internet links: Consultation Scottish Parliament

HMRC reveal tax return statistics and worst excuses

HMRC have revealed that 10.39 million Self Assessment tax returns were completed ahead of the 31 January deadline which is more than 92% of the total returns expected, and 150,000 more than last year.

More than 89% of taxpayers (9.24 million) filed their return electronically.

An automatic £100 penalty applies to those failing to file their return by 31 January 2016 midnight deadline. Use the following link for more information about HMRC Self Assessment deadlines.

HMRC have also revealed the top 10 worst tax return excuses for 2014. They include:

‘I had an argument with my wife and went to Italy for 5 years’

Ruth Owen, HMRC Director General of Personal Tax, said:

‘Untidy family members and hungry pets are very unlikely to be accepted as a legitimate excuse for completing your tax return late.

We understand that life can be unpredictable and for those customers who have a genuine excuse for missing the 31 January deadline, such as the flooding, help is on hand. My advice would be to contact us through our helplines or online, as soon as possible. But for those who are trying to play the system, while the rest of us do the right thing, the message is clear: submit your tax return online by 31 January or face a fine. We’re here to help people in genuine distress, but not to act as a free lender to people who can’t meet their responsibilities to pay their tax.’

The deadline for sending 2014/15 tax returns to HMRC, and paying any tax owed, was 31 January 2016.

If you need help getting your tax affairs up to date please contact us.

Internet link: GOV.UK Top 10 Worst Tax Return Excuses for 2014

Reporting PAYE information ‘on or before’ paying employees

HMRC have announced that the relaxation which has permitted some employers with no more than nine employees to report their PAYE information for the tax month ‘on or before’ the last payday in the tax month, instead of ‘on or before’ each payday, is to be withdrawn from April 2016.

Guidance on the limited situations where pay details may be provided late can be found at www.gov.uk/running-payroll/fps-after-payday. If you would like any help with payroll matters please contact us.

Internet link: GOV.UK Employer Bulletin 57

Digital quarterly updates

Following concerns raised in response to the government’s proposals to ‘Make Tax Digital’ the government has issued a myth buster which hopes to lessen the fears of many regarding the government’s proposals for quarterly updates.

We will keep you informed of developments.

Internet link: GOV.UK Making Tax Digital – Myth Buster

New National Living Wage to boost living standards

The government is reminding employers that a new National Living Wage (NLW) is being introduced from 1 April 2016 and advising employers to get ready for this change.

The NLW rate will be payable to workers in the UK who are 25 or over. For workers currently being paid the National Minimum Wage (NMW) this will mean a 50 pence increase in their hourly earnings.

The government expects over a million workers in the UK aged 25 and over to directly benefit from the increase, which sees the current minimum rate of £6.70 increase by 50p. Many will see their pay packets rise by up to £900 a year.

Business Secretary Sajid Javid said:

‘The government believes that Britain deserves a pay rise and our new National Living Wage will give a direct boost to over a million people. We are building a more productive Britain and giving families the security of well-paid work.

This is a step up for working people, so it is important workers know their rights and that employers pay the new £7.20 from April 1 this year.’

The government has launched an advertising campaign to highlight the new wage. More details are available at: livingwage.gov.uk.

The government is encouraging employers to ensure they are ready to pay the new wage on 1 April 2016. As part of this, it has published a four-step guide for businesses on the living wage website, asking employers to:

  1. Check you know who is eligible in your organisation.
  2. Take the appropriate payroll action.
  3. Let your staff know about their new pay rate.
  4. Check your staff under 25 are earning at least the right rate of NMW.

HMRC will have responsibility for enforcing the new NLW in addition to the NMW.

For those not affected by the NLW the following NMW rates apply:

  • £6.70: for 21s and over
  • £5.30: for 18 to 20-year-olds
  • £3.87: for under 18s
  • £3.30: for apprentices (the rate applies to all apprentices in year 1 of an apprenticeship, and 16-18 year old apprentices in any year of an apprenticeship)

Internet link: GOV.UK NLW

Pensioners ‘to gain’ from new single tier state pension but younger people ‘worse off’

A new single tier state pension is to be introduced for those reaching state pension age from 6 April 2016 onwards. According to research by the Department for Work and Pensions (DWP) many pensioners will receive a boost from the new single tier pension following its introduction from 6 April 2016.

Under the ‘flat-rate’ system, new pensioners could receive up to £155.65 per week, compared to the current state pension entitlement of £119.30.

The press release states:

‘The data shows the long-term impact of the new State Pension on people’s pensions, with 75% of people set to gain in the first 15 years.

The move to the new system will provide a boost to the State Pension for many women, with over 3 million women receiving an average of £11 more per week by 2030 as a result of the changes, – helping to address the gender inequalities that have persisted under the old scheme.’

To find out what your pension entitlement is visit www.gov.uk/state-pension-statement

Internet link: GOV.UK news

Apprentices and employer National Insurance

From 6 April 2016, if you employ an apprentice you may not need to pay employer Class 1 national insurance contributions (NICs) on their earnings up to £827 a week (£43,000 per annum). To be eligible for this relief the apprentice should be under 25 years old and be following an approved UK government statutory apprenticeship scheme.

If the apprentice meets the conditions, then the employer needs to have evidence to allow them to apply the relief, by adjusting the employee’s NIC category. The evidence required will be either

  • a written agreement between you, the apprentice and a training provider, which meets the conditions, or
  • in England and Wales, evidence that the apprenticeship receives government funding.

When the apprenticeship stops or the apprentice turns 25 you will need to start paying the relevant NICs. For full details visit the link below.

The relief does not apply to employee’s NICs, it is only the employer who benefits but the employee’s entitlement to social security benefits will not be affected.

Internet link: GOV.UK

Newsletter – March 2015

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eNews – March 2015

This month we report on the latest round of penalties issued by the Pensions Regulator and end of year filing and payment reminders for employers. We also include details of how to claim the new ‘Marriage Allowance’. Please contact us if you would like any further information on these or any other issues.

Fines for those who fail to comply with Pensions Auto Enrolment

Registration opens for new married couples tax break

Charities Digital Service launched

PAYE end of year – pay on time reminder

HMRC concession for late RTI returns and payments

Advisory fuel rates for company cars

Car benefits online

Fines for those who fail to comply with Pensions Auto Enrolment

The Pensions Regulator (TPR) has issued 166 Fixed Penalty Notices of £400 to employers who failed to meet their obligations in the last quarter of 2014.

The number of employers approaching the date when they must confirm that they have complied with new workplace pensions duties (known as a declaration of compliance) is now beginning to rise significantly as Auto enrolment is rolled out across all employers. In future months, TPR expects to see more employers who, despite the message to prepare early, leave it too late or do not comply at all.

The Pensions Regulator’s Director of automatic enrolment, Charles Counsell, said,

‘My message to all employers is that failing to declare within five months of your staging date means you risk being fined, which is why we recommend you start your automatic enrolment planning and preparation 12 months before staging.

It appears some medium employers waited for a prompt from the regulator before completing their automatic enrolment duties. Employers must complete all their duties including making their declaration of compliance to The Pensions Regulator.’

Experience to date also shows that employers should begin gathering the information they need to complete their declaration of compliance well in advance of their deadline.

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

Internet link: Press release

Registration opens for new married couples tax break

HMRC have announced that registration for the new ‘Marriage Allowance’ for married couples and those in civil partnerships is now open.

From 6 April 2015 certain married couples and civil partners may be eligible for a new Transferable Tax Allowance referred to by the Government as the ‘Marriage Allowance’. The allowance will enable eligible spouses and civil partners to transfer a fixed amount of their personal allowance to their spouse. The option to transfer is not available to unmarried couples.

The option to transfer will be available to couples where neither pays tax at the higher or additional rate. If eligible, one partner will be able to transfer 10% of their personal allowance to the other partner which means £1,060 for the 2015/16 tax year which could save them tax of up to £212 a year.

Couples can register their interest to receive the Allowance.

The government estimates that more than four million married couples and 15,000 civil partnerships will be eligible for the tax break.

Chancellor of the Exchequer George Osborne said:

‘We made a promise to introduce a recognition of marriage into our tax system – and now we’re delivering on that promise.

This includes updating the tax system so that it recognises marriage and civil partnerships.

Our new Marriage Allowance means saving £212 on your tax bill couldn’t be simpler or more straightforward.’

From April, HMRC will contact those who have already registered for the ‘Marriage Allowance’ to apply. People can register at any point in the tax year and still receive the full benefit of the allowance. It is also possible to claim the allowance after the end of the tax year where claimants are unsure if they will qualify.

Applying online is simple. One person in a couple will apply online to transfer the allowance to their spouse or civil partner, and HMRC will tell the recipient about the change to their Pay As You Earn (PAYE) tax code.

Internet link: GOV.UK

Charities Digital Service launched

HMRC have launched an online registration service for charities.

Until now charities have been required to complete a paper form (ChA1). Approximately 15,500 new charities are registered each year.

Chief digital and information officer at HMRC, Mike Dearnley, said:

‘We are completely changing the way we work with our customers – including charities. Our new digital services are straightforward, easy to use and convenient. The charities service minimises the risk of making mistakes, so applications are less likely to be returned to the organisation’.

All registration must now be completed online. Please contact us if you would like help with a charity.

Internet link: Charities Digital

PAYE end of year – pay on time reminder

HMRC are reminding employers that with the end of the 2014/15 tax year approaching they will soon need to make their final 2014/15 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 2014/15 and this needs to be made on or before 5 April 2015. Details of how to make the final submission can be found on the GOV.UK website using the link below. Alternatively if you would like help with your payroll please do get in touch.

HMRC are also advising employers to take extra care as the deadline for electronic payment of 22nd March falls on a Sunday.

HMRC are advising that employers should ensure their payment reaches HMRC on time, which means that cleared funds should be in HMRC’s account by the 20th unless employers are able to arrange a Faster Payment. For more details about paying HMRC electronically visit Pay PAYE tax.

Internet link: GOV payroll annual reporting Employer Bulletin

HMRC concession for late RTI returns and payments

HMRC have announced that employers will not incur penalties for delays of up to three days in filing RTI returns. There is no change to the filing deadlines and employers should generally file their full payment submissions (FPS) ‘on or before’ each payment date unless a concession applies.

HMRC are also advising any employer that has received an in-year late filing penalty for the period 6 October 2014 to 5 January 2015 and was 3 days late or less, to appeal online by completing the ‘Other’ box and add ‘Return filed within 3 days’.

In addition, to prevent unnecessary penalties being issued, HMRC will be closing around 15,000 PAYE schemes next month that have not made a PAYE report since April 2013 and which appear to have ceased.

HMRC will write to the affected schemes to tell them about the planned closure and what to do if they are, or should be, operating PAYE.

Employers with fewer than 50 employees are reminded that PAYE late filing penalties will apply to them from 6 March.

Internet link: News

Advisory fuel rates for company cars

New company car advisory fuel rates have been published which took effect from 1 March 2015. Due to the reduction in fuel prices many rates have reduced this quarter between two and three pence 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 March 2015 are:

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

 

Engine size LPG
1400cc or less 8p
1401 cc – 2000cc 10p
Over 2000cc 14p

 

Engine size Diesel
1600cc or less 9p
1601cc – 2000cc 11p
Over 2000cc 14p

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

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

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

Internet link: GOV.UK

Car benefits online

As part of HMRC’s digitisation campaign, an online trial allows company car drivers to make changes to car and fuel benefits that will affect their tax codes.

It is important to ensure the benefits included in your tax code are as accurate as possible or large under or overpayments of tax may arise. For information on how to amend your tax code visit the link below. Alternatively if you would like help checking your tax code please do get in touch.

Internet link: GOV.UK

Newsletter – January 2015

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eNews – January 2015

In this month’s eNews we report on a number of issues including an update on the calculation of holiday pay, construction industry changes ahead, guidance on VAT and digital services and the latest disclosure opportunity for solicitors.

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

Changes to the Construction Industry Scheme (CIS)

VAT and digital services

1,773 ‘happy returns’ at Christmas

Holiday pay and overtime update

Tax on the diverted profits dubbed the new ‘Google tax’

Solicitors’ Tax Campaign

RTI: filing penalties and appeals

Changes to the Construction Industry Scheme (CIS)

The government has announced that it will implement a package of improvements to the CIS. The stated aim of the changes is to reduce the administrative and related cost burden on construction businesses. The measures should result in more subcontracting businesses being able to achieve and maintain gross payment status so improving their cashflow. These changes are to be implemented in stages.

From 6 April 2015 the following amendments will be made to the system:

  • The requirement for a contractor to make a return to HMRC even if the contractor has not made any payments in a tax month will be removed. Contractors may make a voluntary nil return but will no longer be obliged to do so.
  • The requirements for joint ventures to gain gross payment status will be relaxed where one member already has this status and that firm or company has a right to at least 50% of the assets or the income or holds at least 50% of the shares or the voting power in the joint venture.
  • Earlier repayments can be made to liquidators in insolvency proceedings. Currently where a subcontractor is a company, no repayment of any amount deducted and paid over to HMRC by a contractor can be made to the subcontractor until after the end of the tax year in which the deduction was made. These rules will be amended so that in certain cases where the amount deducted by the contractor is excessive, a repayment can be made during the tax year.

From 6 April 2016 further changes are proposed:

  • Mandatory online filing of CIS returns will be introduced with the offer of alternative filing arrangements for those unable to access an online channel by reason of age, disability, remote location or religious objection.
  • The directors’ self assessment filing requirements will be removed from the initial and annual compliance tests.
  • The threshold for the turnover test will be reduced to £100,000 in multiple directorship situations.

From 6 April 2017 mandatory online verification of subcontractors will be introduced.

Internet link: CIS

VAT and digital services

HMRC have issued some additional guidance for small businesses which supply digital services to consumers in other EU Member States.

The guidance advises:

  • how to comply with new VAT rules on the place of supply of digital services that came into force on 1 January 2015
  • how to register for HMRC’s VAT Mini-One Stop Shop (MOSS) and still benefit from the UK’s VAT registration threshold for sales to UK consumers.

On 1 January 2015, the VAT rules for cross-border Business to Consumer supplies of ‘digital services’ (for example broadcasting, telecoms and e-services) changed. Broadly from that date, VAT must be accounted for in the Member State where the consumer normally is, rather than where the supplier of the service is established.

HMRC have also issued more general guidance on the change to all businesses which can be found here

If you would like further information on this issue please contact us.

Internet links: News Guidance

1,773 ‘happy returns’ at Christmas

HMRC have reported that they received 1,773 online tax returns on Christmas Day, with the busiest time for online returns on 25 December between midday and 1pm, when 148 Yuletide returns were delivered electronically.

Christmas Eve, which has traditionally been a much busier day for festive filing than Christmas Day, saw 17,644 online returns successfully submitted.

In total, 24,228 online returns were received over the three-day festive period (including Boxing Day) which was a 5% increase on the 2013 total.

HMRC Director General of Personal Tax, Ruth Owen, said:

‘You can file your online return at any time of day or night – even Christmas Day, if it suits you. But don’t leave it too late. Give yourself plenty of time to resolve any problems and if you need to call us, do it now, as our phone lines get much busier as the 31 January deadline approaches.’

The deadline for sending 2013/14 tax returns to HMRC, and paying any tax owed, is 31 January 2015.

Internet link: Gov news

Holiday pay and overtime update

We have previously reported that in the judgment an Employment Appeal Tribunal (EAT) decided that holiday pay should reflect non-guaranteed overtime.

Under the Working Time Regulations 1998 most workers are entitled to paid statutory annual leave. This is 5.6 weeks (28 days) if the employee works five days a week. A worker is entitled to be paid in respect of any period of annual leave for which they are entitled, at a rate of one week’s pay for each week’s leave.

The EAT considered three cases in which employees were required to work overtime if requested by their employees. The EAT referred to this type of overtime as non-guaranteed overtime. The Tribunal decided in the context of non-guaranteed overtime:

  • overtime payments must be taken into account in the calculation of holiday pay if there is a settled pattern of work
  • if the amount of overtime varies but is regularly paid, overtime payments must also be taken into account on an average basis.

Following fears that employers may face large backdating claims the Government has taken action to reduce potential costs to employers by limiting claims by introducing regulations which will mean that claims to Employment Tribunals on this issue cannot stretch back further than two years.

Employees can still make claims under the existing arrangements for the next six months which will act as a transition period before the new rules come into force. The changes apply to claims made on or after 1 July 2015.

Employers and employees can also contact the Acas helpline for free and confidential advice.

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

Internet links: ACAS guidance Gov news

Tax on the diverted profits dubbed the new ‘Google tax’

The government has published draft tax legislation to implement the new tax on diverted profits which has been referred to as the ‘Google tax’. The introduction of a new Diverted Profits Tax which was announced in the 2014 Autumn Statement will target multinational enterprises with business activities in the UK who ‘enter into contrived arrangements to divert profits from the UK by avoiding a UK taxable presence and/or by other contrived arrangements between connected entities’.

The Diverted Profits Tax will be applied using a rate of 25% from 1 April 2015 and is expected to raise £1.4bn over the course of the next five years.

Commenting on the new measure, John Cridland, Director General of the CBI said:

‘International tax rules are in urgent need of updating but there is already an OECD process underway to do this. It is unfortunate that the UK has decided to go it alone with a Diverted Profits Tax outside this process, which will be a real concern for global businesses.’

‘The legislation will be complex to apply, and if other countries follow suit businesses will have a patchwork of uncoordinated unilateral rules to navigate, which risks undermining the whole OECD approach.’

Internet link: CBI News

Solicitors’ Tax Campaign

Solicitors are being given the chance by HMRC to bring their tax affairs up to date or face tougher penalties, as part of a new tax campaign.

The Solicitors Tax Campaign gives solicitors the opportunity to declare any undisclosed income by making a voluntary disclosure. The disclosure opportunity is available to those working within the legal profession either as a solicitor in a partnership or company, or as an individual.

Those affected have until 9 March 2015 to notify HMRC of the undisclosed income and need to complete a disclosure form and pay the outstanding liability by 9 June 2015.

Caroline Addison, Head of Campaigns, HMRC, said:

‘Information gathered by HMRC has allowed us to identify solicitors who thought they could operate without declaring income and paying the taxes that others have to pay. If you have not declared all of your income, you need to put your tax affairs in order. Take this chance to come forward and put things right in a straightforward way and on the best possible terms. It will be easier and cheaper for you to come to us than for us to come to you. Those who make a deliberate decision not to pay the taxes due could face a penalty of 100% or more of the tax due, or even a criminal prosecution.’

Internet links: Gov news1 Gov news2

RTI: filing penalties and appeals

In the latest Employer Bulletin HMRC are reminding employers that they are about to issue penalty notices to those employers who have failed to meet their RTI filing obligations.

Late filing penalties began on 6 October for employers with schemes of 50 or more employees. Those employers who have incurred these penalties will start to receive the penalty notices, which will be issued on a quarterly basis, from the beginning of February 2015.

The notice will be in the form of a ‘paper letter’, and will set out all filing penalties incurred for the third quarter of 2014/15 ( for tax months 7, 8 and 9 covering the period 6 October to 5 January 2015). The penalty notices may contain more than one penalty.

Agents are not sent a copy of this notice so if you receive one and would like guidance on whether the penalty is due or how to appeal against it please do get in touch as soon as possible. Further guidance on this issue can be found on page four of the latest Employer Bulletin.

Internet link: Employer bulletin

Newsletter – September 2014

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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

VAT and the digital business

National Minimum Wage rises

Fuel Advisory rates

Autumn Statement date announced and have your say

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 – August 2014

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eNews – August 2014

In this month’s enews we report on a number of issues including HMRC’s latest disclosure opportunity, warnings of incorrect PAYE overpayment notifications and the introduction of late submission penalties and guidance on pension scams. We also advise on HMRC guidance on exceptions to the VAT return electronic filing rules and the Pensions Regulator issues first report on auto enrolment penalties.

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

eNEWS quicklinks

Guidance on changes to VAT filing rules

Pensions Regulator uses formal powers over Auto Enrolment

Pension scams

HMRC latest disclosure opportunity

HMRC warn of incorrect RTI letters

HMRC to issue penalties for late submission of PAYE returns

Guidance on changes to VAT filing rules

The majority of businesses have to file their VAT returns online. HMRC have issued guidance on changes to VAT rules which introduce additional exemptions to the requirement to file VAT returns online. The changes, which came into effect at the beginning of July 2014, allow business owners that satisfy HMRC that it is ‘not reasonably practicable’ for them to use the online system to submit ‘paper’ VAT returns.

HMRC will also be able to approve telephone filing as an alternative method of electronic filing in certain circumstances.

If you would like any advice on VAT issues please do get in touch.

Internet link: HMRC VAT Brief

Pensions Regulator uses formal powers over Auto Enrolment

The Pensions Regulator (TPR) has issued the first quarterly bulletin which details how many times it has needed to use its formal powers to ensure employers comply with their automatic enrolment duties.

The first of the new quarterly bulletins shows the regulator had used its powers on 23 occasions up until the end of June this year. The powers listed include the ability to carry out inspections and to issue statutory notices including fixed penalty and escalating fines.

Executive director of automatic enrolment Charles Counsell said:

‘Employers and the pensions industry are understandably interested to know how and when we use our powers. To date the vast majority of employers are complying with their new workplace pension duties without the regulator needing to use our enforcement powers.’

‘I believe this is a testament to the success of our proportionate, risk-based approach to compliance and enforcement. We target our resources where they will maximise compliance and work with employers to help them comply with their duties.’

‘We have provided the tools and assistance that large and medium employers need to ensure millions of workers didn’t miss out on the pension contributions they are entitled to. On a small number of occasions, when our intervention has not resulted in the required outcome, we have used our powers to help to ensure employers comply with their duties.’

For general guidance on employers auto enrolment duties see TPR website. If you would like specific guidance, help or advice on how to deal with your auto enrolment obligations please do get in touch.

Internet link: Bulletin

Pension scams

HMRC and the Pensions Regulator (TPR) are publicising the availability of revised leaflets which warn people of the consequences of pension liberation scams.

HMRC are advising that individuals with pension savings continue to be targeted by unscrupulous companies encouraging them to access their pension savings early. Options are given for personal loans, cash incentives and one-off pension investments to encourage people to invest in these pension scams. Pension savers involved in these pension liberation scams face significant tax consequences.

HMRC has worked closely with TPR on publishing a revised set of leaflets highlighting the serious downsides of pension scams. The leaflets provide guidance on what trustees and scheme members can do to reduce the risk of becoming involved in these scams, and the tax impact of releasing pension funds early using these types of arrangements.

Internet links: HMRC news TPR website

HMRC latest disclosure opportunity

HMRC have announced the details of their latest disclosure opportunity which is expected to give approximately 16,000 tax avoidance scheme users the opportunity to pay the tax they owe.

The contractor loan scheme used non-UK employers to pay untaxed income or a loan instead of paying part of an employees salary.

HMRC are inviting those who have used the scheme to bring their affairs up to date using the contractor loans settlement opportunity which will allow taxpayers to settle their liability in the best possible terms. This opportunity is for the tax years up to 5 April 2011 and is open until 9 January 2015.

If they do, they will pay the tax and interest due on the sums they received as loans under the scheme. HMRC are warning that if participants continue to challenge HMRC in the courts, they risk having to pay additional tax charges and penalties – as well as the costs of litigation if they lose.

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

‘Many people regret ever getting involved with complex aggressive tax avoidance schemes and HMRC is providing an opportunity for contractors to come forward and straighten out their tax affairs.’

‘This is an important opportunity and we are working hard to encourage users to withdraw from such schemes. We also want to ensure they’ve understood our position. They can choose to continue to litigate for a better outcome but they risk a worse result. HMRC has a strong track record of winning tax avoidance cases in court, with around 80% of decisions in our favour. The costs for users are high, potentially resulting in penalties, charges and significant legal costs for scheme users.’

Please get in touch if you have any concerns in this area.

Internet link: Contractor loan disclosure opportunity

HMRC warn of incorrect RTI letters

HMRC have warned that incorrect RTI letters have been issued. The full statement reads:

‘We are aware that a batch of RTI 201 letters has been sent to employers and agents in error, containing incorrect information about overpayments. Any employer or agent receiving one of these letters in August should please ignore it. Those wishing to check their tax position can do so on the Business Tax Dashboard. We are very sorry for any inconvenience caused.’

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

Internet link: HMRC What’s new

HMRC to issue penalties for late submission of PAYE returns

In the latest Employer Bulletin HMRC are warning that employers’ who fail to submit their PAYE submissions, Full Payment Submission (FPS) or where appropriate Employer Payment Summary (EPS) on time will face penalties. The penalties are being introduced from October 2014.

Penalty notifications will be issued on a quarterly basis.

Please do get in touch for advice on PAYE matters.

Internet link: Employer Bulletin

Newsletter – January 2014

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In this month’s enews we report on announcements regarding Real Time Information (RTI), PAYE tax codes and some details on the new class of national insurance contributions (NIC).

We also report on the consultation on zero hours contracts and if you are reading this on your smart phone does your business have a ‘bring your own device’ policy?

Please contact us if you would like any further information.

 

eNEWS quicklinks
RTI and micro employers DWP issue guidance on new Class 3A NIC
Personal device at work policy PAYE coding notices
Help to Buy mortgage guarantee completions Zero hours contracts
Excuses excuses

 

RTI and micro employers

HMRC have announced that, although the vast majority of employers are finding PAYE reporting in real time straightforward, a small proportion of micro employers and their agents still need more time to adapt. They have therefore announced that existing employers with nine or fewer employees who need more time to adapt will be able to report PAYE information on or before the last payday in the tax month until April 2016.

HMRC will be encouraging micro businesses to adapt their processes sooner to ensure that they are ready to report all payments each time they pay their employees by April 2016.

End to the current relaxation

The current relaxation which applies to employers with fewer than 50 employees comes to an end in April 2014. Conditions for the current relaxation can be found by visiting the link at the end of the HMRC article.

All employers starting to operate PAYE after 6 April 2014, as well as existing employers with 10 or more employees, will need to report each time they pay their employees from April 2014.

This relaxation is part of a package of measures to help micro employers as they move towards full reporting of PAYE information in real time. The package also includes:

  • guidance such as ‘Situations where employers will not have to report PAYE information ‘on or before’ the time they pay their employee’ which can be found at the end of the HMRC article and
  • ongoing work to develop new ways to report PAYE information on a timely basis, for example using mobile apps.

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

Internet link: HMRC news

DWP issue guidance on new Class 3A NIC

The Government wants to offer help to existing pensioners and people who reach State Pension age before 6 April 2016, when the single-tier pension is introduced, to give:

  • ‘people in the pre single tier population, who may have lost out because of the structure of the legacy second pension system, the opportunity to increase their state pension in retirement
  • hard pressed pensioners, especially those who rely on their capital to supplement their income, an opportunity to top up their pension in a way that will protect them from inflation and
  • people with small amounts of pension saving a secure way of achieving an income.’

The Government intends to introduce Class 3A in October 2015 and the scheme will be open for a limited period. There will be two entitlement conditions:

  • contributors must have entitlement to a UK State Pension (either basic State Pension or additional State Pension) and
  • must reach State Pension age before 6 April 2016.

‘Prices will reflect the age an individual takes up Class 3A. This is a key component of an actuarially fair price. Prices will be lower for older pensioners simply because on average they will have a shorter life in retirement at the point they take up Class 3A. The Government intends to publish a list showing prices of a unit by age.

Class 3A will not replace the existing Class 3…The Class 3A information products will make clear that individuals should consider making Class 3, contributions where that is possible, before taking up Class 3A. HMRC intend to identify applicants in that position and inform them of the option.

Each Class 3A contribution will result in the acquisition of a unit of extra pension which will increase the contributor’s additional State Pension by £1 a week up to a cap of potentially £25.’

‘We estimate that around 7 million pensioners will have enough savings to pay the new National Insurance contribution.’

‘Class 3A will be set at an actuarially fair rate which means that over time the policy will be broadly cost neutral. This reflects the funding position of the single tier and means that today’s workers will not have to fund the policy.’

We will keep you informed of further announcements.

Internet link: Government publication

Personal device at work policy

The Information Commissioner’s Office (ICO) is advising that organisations should have a clear personal device at work policy.

A recent survey showed that 60% of the UK population now own a smart phone and 20% a tablet and an increasing number want to use their personal devices at work. Known as ‘bring your own device’ the ICO state that the benefits include increased efficiency, flexibility and employee morale but the practice also carries a number of risks which organisations must consider when allowing employees’ devices to be used to process work-related personal information.

Simon Rice, Group Manager (Technology), said:

‘As the line between our personal and working lives becomes increasingly blurred it is critical employers have a clear policy about personal devices being used at work.’

‘The benefits must be balanced against the potential risks to work-related personal data but the organisation should not underestimate the level of effort which may be required to ensure that the processing of personal data with BYOD remains compliant with all 8 Principles of the Data Protection Act. Remember, it is the employer who is held liable for any breaches under the DPA.’

The ICO’s key ‘bring your own device’ recommendations are:

  • ensure devices are secure
  • ensure data transfers are secure
  • retain control
  • have an ‘end of contract’ policy
  • have a clear ‘acceptable use policy’.

Internet link: ICO news

PAYE coding notices

Over the next few months HMRC will be sending out new PAYE tax codes for the 2014/15 tax year.

HMRC are advising that some individuals may receive more than one coding especially if they have:

  • two or more employments at the same time
  • income from two or more pensions
  • pension income and employment income.

HMRC may send a PAYE coding notice for each job or pension and the new tax codes will be used from 6 April 2014.

If you would like help checking your tax code please do get in touch so we can ensure you pay the correct amount of tax.

Those individuals with more straightforward affairs may not receive a coding notice and their tax codes will be automatically updated, generally to reflect the increase in the personal allowance from the current £9,440 to £10,000.

Internet link: HMRC news

Help to buy mortgage guarantee completions

The Government has announced that ‘nearly 750’ homes have been bought and 6,000 offers made since the mortgage guarantee scheme started.

In November 2013, ministers published figures showing that in the first month of the scheme more than 2,000 people had put in offers on homes and applied for a Help to Buy mortgage. That number has now trebled to more than 6,000.

For more information on Help to Buy mortgages visit http://www.helptobuy.org.uk/

Internet link: Press release

Zero hours contracts

Business Secretary Vince Cable has announced that, under new proposals, employers could be banned from imposing ‘exclusivity’ on zero hours contracts which offer no guarantee of work and stop employees from working for another employer.

In the consultation, the Government also outline proposals on ways to tackle the lack of transparency in the way zero hours contracts are currently being used and improve guidance for both employers and employees around their use.

Business Secretary Vince Cable said:

‘A growing number of employers and individuals today are using zero hours contracts. While for many people they offer a welcome flexibility to accommodate childcare or top up monthly earnings, for others it is clear that there has been evidence of abuse around this type of employment which can offer limited employment rights and job security. We believe they have a place in today’s labour market and are not proposing to ban them outright, but we also want to make sure that people are getting a fair deal.’

The public consultation will seek views on a range of proposals will run until 13 March 2014.

Internet link: Press release

Excuses excuses

HMRC have released the ‘Top 10 oddest excuses’ for sending in a late self assessment return. These include a dead goldfish and a run in with a cow!

Internet link: HMRC top 10

The Chancellor’s 2013 Autumn Statement

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2013 AUTUMN STATEMENT

On Thursday 5 December the Office for Budget Responsibility (OBR) published its updated forecast for the UK economy. Chancellor George Osborne responded to that forecast in a statement to the House of Commons later on that day.

In the period since the Budget in March a number of consultation papers and discussion documents have been published by HMRC and some of these proposals are summarised here. Draft legislation relating to many of these areas will be published on 10 December and some of the details in this summary may change as a result.

Our summary also provides a reminder of other key developments which are to take place from April 2014.

The Chancellor’s statement

His speech and the subsequent documentation announced tax measures in addition to the normal economic measures.

Our summary concentrates on the tax measures which include:

  • the introduction of a transferable tax allowance for some married couples and civil partners
  • the introduction of an exemption from employer National Insurance Contributions for employees under 21
  • allowing companies to claim tax relief on donations to Community Amateur Sports Clubs
  • measures to tackle employment intermediaries disguising employment as self-employment
  • anti-avoidance measures which will affect some partnerships in which the partners include individuals and companies
  • changes to the CGT Private Residence Relief deemed occupation rules
  • the introduction of new CGT rules for non-residents and UK residential property.

Personal Tax

The personal allowance for 2014/15

For those born after 5 April 1948 the personal allowance will be increased from £9,440 to £10,000. When the current Government came into power in 2010 the personal allowance was £6,475 so there has been a significant increase.

The reduction in the personal allowance for those with ‘adjusted net income’ over £100,000 will continue. The reduction is £1 for every £2 of income above £100,000. So for this year there is no allowance when adjusted net income exceeds £118,880. Next year the allowance ceases when adjusted net income exceeds £120,000.

Comment

The increase in the personal allowance gives more importance to planning before 6 April 2014 where adjusted net income is expected to exceed £100,000. Broadly, adjusted net income is taxable income from all sources reduced by specific reliefs such as Gift Aid donations and pension contributions.

Tax bands and rates for 2014/15

The basic rate of tax is currently 20%. The band of income taxable at this rate is being reduced from £32,010 to £31,865 so that the threshold at which the 40% band applies will rise from £41,450 to £41,865 for those who are entitled to the full basic personal allowance.

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

Dividend income is taxed at 10% where it falls within the basic rate band and 32.5% where liable at the higher rate of tax. Where income exceeds £150,000, dividends are taxed at 37.5%.

Transferable Tax Allowance for some

In October the Government announced that from April 2015 married couples and civil partners may be eligible for a new Transferable Tax Allowance.

The Transferable Tax Allowance will enable spouses and civil partners to transfer a fixed amount of their personal allowance to their spouse.

The option to transfer will be available to couples where neither pays tax at the higher or additional rate. If eligible, one partner will be able to transfer £1,000 of their personal allowance to the other partner. The transferor’s personal allowance will be reduced by £1,000. It will mean that the transferee will be able to earn £1,000 more before they start paying income tax.

The claim will be made online and entitlement will be from the 2015/16 tax year. Couples will be entitled to the full benefit in their first year of marriage.

Comment

For those couples where one person does not use all of their personal allowance the benefit will be up to £200.

Class 3A Voluntary National Insurance

From October 2015 a new class of voluntary National Insurance Contributions (Class 3A) will be introduced that gives those who reach State Pension age before 6 April 2016 an opportunity to boost their Additional State Pension.

Venture Capital Trusts (VCTs)

From April 2014 the Government is to withdraw income tax relief on share buy-backs in VCTs. Investments that are conditionally linked in any way to a VCT share buy-back, or that have been made within six months of a disposal of shares in the same VCT, will not qualify for new tax relief.

Individual Savings Accounts (ISAs)

From April 2014 the overall ISA savings limit will be increased to £11,880 of which £5,940 can be invested in cash, a 2.7% increase from the limit for the current year.

Regulations were issued in 2013 to allow shares listed on the Alternative Investment Market (AIM) to be permitted ISA investments in stocks and shares ISAs.

To further support these companies, the Government will abolish stamp tax on shares for companies listed on growth markets including AIM and the ISDX Growth Market, from April 2014.

The Government is exploring whether to increase the number of retail bonds eligible for stocks and shares ISAs, by reducing the requirement that such securities must have a remaining maturity above five years.

Comment

Shares held in an ISA are exempt from capital gains tax (CGT) and income tax. AIM shares can also have inheritance tax benefits. Many AIM shares benefit from Business Property Relief (BPR) which provides an IHT exemption once the shares have been held for two years.

Junior ISA and Child Trust Fund

The annual subscription limit for Junior ISA and Child Trust Fund accounts will increase from £3,720 to £3,840.

Pensions saving – annual allowance

The annual allowance is an annual limit for giving tax relief on pension contributions. Contributions can be paid in excess of the limit but may give rise to an income tax charge on the member of the pension scheme. For tax year 2014/15 onwards the annual allowance will be reduced from £50,000 to £40,000.

Pensions saving – lifetime allowance

There is also an overall limit, known as the lifetime allowance, on the total amount of tax relieved pension savings that an individual can have over their lifetime. Savings in excess of the allowance can be charged at 55% if taken as a lump sum or 25% if taken as income (in addition the pension is taxable as income in the normal way). For most individuals the charge will occur when they start to take their benefits from their pension scheme.

For tax year 2014/15 onwards:

  • the standard lifetime allowance will be reduced from £1.5 million to £1.25 million
  • a transitional ‘fixed protection’ regime has been introduced for those who believe they may be affected by the reduction in the lifetime allowance. Applications for this protection must be received by HMRC on or before 5 April 2014. However any new pension savings made by or on behalf of the individual on or after 6 April 2014 are likely to lead to the loss of fixed protection. This means that, normally, individuals have to opt out of active membership of all registered pension schemes of which they are members.

The Government will also be introducing an individual protection regime (IP14) in addition to fixed protection. IP14 will provide individuals with a personal lifetime allowance equal to the total pension savings they have on 5 April 2014 with a value of between £1.25 million and £1.5 million.

Individuals will have three years from 6 April 2014 to apply for IP14.

Comment

Individuals with IP14 will be able to carry on actively saving in a registered pension scheme, should they so wish. However when benefits are taken any pension savings above the individual’s personal lifetime allowances will be subject to charge. An example of when IP14 would be beneficial may be for an individual whose employer normally contributes towards their pension scheme but, if the individual opted out of the pension scheme, they would not be able to receive the value of those employer contributions in another form such as higher pay.

Business Tax

Corporation tax rates

The main rate of corporation tax will be 21% from 1 April 2014. The current rate is 23%. From 1 April 2015 the main rate of corporation tax will be reduced to 20% and unified with the small profits rate.

The small profits rate will therefore remain at 20% until then.

Close company loans to participators

A close company (which generally includes an owner managed company) may be charged to tax in certain circumstances where it has made a loan or advance to individuals who have an interest or shares in the company (known as participators). Loans and advances are also caught where they are made to an associate of the individual such as a family member. The corporation tax charge is 25% where the loan is outstanding nine months after the end of the accounting period.

The Government was considering making changes to the structure and operation of the tax charge but has now announced that it will not make any immediate changes.

Members of Limited Liability Partnerships (LLPs)

Since their introduction in 2000, LLPs have become increasingly popular as a vehicle for carrying on a wide variety of businesses. The LLP is a unique entity as it combines limited liability for its members with the tax treatment of a traditional partnership. Individual members are deemed to be self-employed and are taxed as such on their respective profit shares.

The Government now considers that deemed self-employed status is not appropriate in some cases. For example, individuals who would normally be regarded as employees in high-salaried professional areas such as the legal and financial services sectors are benefitting from self-employed status for tax purposes which leads to a loss of employment taxes payable.

Full details of the changes have not yet been announced. The legislation may be amended by simply removing the provision which deems individual members to be self-employed. This would mean applying the normal (but sometimes difficult) tests that characterise employment and self-employment. A consultation document proposed additional tests which may be easier to apply in certain scenarios.

The new regime is expected to come into force on 6 April 2014.

National insurance and self-employed entertainers

Following consultation, the Government has decided to repeal the current NIC regulations in respect of entertainers. From 6 April 2014, those individuals engaged as an actor, singer, or musician, or in any similar performing capacity will pay Class 2 and Class 4 NIC as self-employed earners.

Community Amateur Sports Club (CASC)

The Community Amateur Sports Club (CASC) scheme provides a number of tax reliefs, similar to those available to charities, to support amateur sports clubs. For example an individual can make a donation to a CASC as Gift Aid.

The Finance Bill 2014 will include provisions to extend corporate Gift Aid to donations of money made by companies to CASCs. This will allow companies to claim tax relief on qualifying donations they make on or after 1 April 2014.

Comment

The corporate Gift Aid provisions will not only encourage companies to make donations to clubs which are registered as CASCs but will also encourage clubs with high levels of commercial trading to potentially benefit from CASC status. A club with significant trading receipts may well not qualify for CASC status because of the trading receipts. It could however set up a trading subsidiary and donate the profits to the club. The donation received by the club will not be treated as trading receipts and thus the club could apply for CASC status. The new Gift Aid relief will eliminate the corporation tax charge on the profits of the company.

Partnerships with mixed membership

Anti-avoidance measures will be introduced which will affect partnerships, including LLPs, where the partners or members include both individuals and non-individuals (mixed membership partnerships). Most commonly the non-individuals will be company members of the partnership. There will be two areas potentially affected:

  • where partnership profits are allocated to a non-individual partner in circumstances where an individual member may benefit from those profits
  • where partnership losses are allocated to an individual partner, instead of a non-individual partner, to enable the individual to access certain loss reliefs.

The main changes relate to profit allocation and these rules come into force on 5 December 2013.

Excess profits will be reallocated to an individual partner from a non-individual partner where the following conditions are met:

  • a non-individual partner has a share of the firm’s profit
  • the non-individual’s share is excessive
  • an individual partner has the power to enjoy the non-individual’s share or there are deferred profit arrangements in place
  • it is reasonable to suppose that the whole or part of the non-individual’s share is attributable to that power or arrangements.

The Government is proposing to introduce legislation which will result in certain income tax loss reliefs and capital gains relief for a loss allocated to an individual partner being denied.

The reliefs will not be available where the individual is party to arrangements, the main purpose of which, or one of the main purposes of which, is to secure that some or all of the loss is allocated, or otherwise arises, to the individual, instead of a non-individual, with a view to the individual obtaining relief.

These changes will take effect from 6 April 2014.

Comment

Some changes to the treatment of mixed member partnerships have been expected following the issue of a consultative document. The difficulty with the proposed legislation may be determining the boundary between profit allocations which are caught or not caught by the legislation.

Employment intermediaries and ‘false self-employment’

The Government will amend existing legislation to prevent employment intermediaries being used to avoid employment taxes by disguising employment as self-employment. The Government will consult on strengthening existing legislation to ensure the correct amount of tax and NIC are paid where the worker is, in effect, employed. The legislation will be amended with effect from 6 April 2014.

Comment

The Government expects this measure to raise around £400 million each year.

Other tax avoidance measures

The Government has announced a number of measures to help tackle tax avoidance which have effect from 5 December 2013 including changes to:

  • the debt cap provisions
  • the controlled foreign companies legislation to counter some aspects of profit shifting
  • the double tax relief system to prevent avoidance.

Legislation will be introduced in Finance Bill 2014 to prevent a charity from being entitled to claim charity tax reliefs if one of the main purposes of establishing the charity is tax avoidance. The definition of a charity for tax purposes will be amended to exclude such charities.

Social investment tax relief

The Government will introduce a new tax relief for equity and certain debt investments in social enterprises with effect from April 2014. Organisations which are charities, community interest companies or community benefit societies will be eligible. Following consultation, investment in social impact bonds issued by companies limited by shares will also be eligible. The Government will publish a ‘roadmap’ for social investment in January 2014.

Theatre Relief

A consultation will be launched in spring 2014 on the introduction of a limited corporation tax relief for commercial theatre productions and a targeted relief for theatres investing in new works or touring productions to regional theatres.

Employment Taxes

Employer provided cars

The scale of charges for working out the taxable benefit for an employee who has use of an employer provided car are now announced well in advance. From 6 April 2014, the bands used to work out the taxable benefit remain the same but the percentage applied by each band goes up by 1%. There is an overriding maximum charge of 35% of the list price of the car. From 6 April 2015, the percentage applied by each band goes up by 2% and the maximum charge is increased to 37%.

Comment

These increases have the perverse effect of discouraging retention of the same car. New cars will often have lower CO2 emissions than the equivalent model purchased by the employer, say three years ago. Particular attention should be paid to the benefit increase from 6 April 2015.

Car fuel benefit charge

Employees and directors who are provided with an employer provided car and who also receive free private fuel from their employers are subject to the fuel benefit charge. The benefit charge is determined by multiplying a set figure by the appropriate percentage for the car, based on its CO2 emissions.

The car fuel benefit charge multiplier will be increased from £21,100 to £21,700 with effect from 6 April 2014.

Vans

For 2014/15 the private use of a company van will result in a benefit assessable on the employee of £3,090, an increase on the current benefit of £3,000. The charge will not apply to vans which cannot emit CO2 or if a restricted private use condition is met throughout the year. If fuel for private purposes is also provided, a benefit of £581 will be assessable on the employee.

Exemption threshold for employment-related loans

Where an employer provides an employee with a cheap or interest free loan they have to report notional interest on the loan at 4% per annum on the form P11D. Where the balance of the loan is no more than £5,000 throughout the tax year no benefit is reportable.

The exemption applies if the total balance, at any point in the tax year, does not exceed the limit of £5,000 and includes the total of low cost or interest free loans, or notional loans arising from the provision of employment-related securities.

From 6 April 2014 where the total outstanding balances on all such loans do not exceed £10,000 at any time in the tax year, there will not be a tax charge and employers will no longer be required to report the benefit to HMRC.

Comment

This change reflects the increase in the cost of commuting for an employee and allows the employer to provide finance for the purchase of season tickets for rail fares.

National Insurance – £2,000 employment allowance

The Government will introduce an allowance of up to £2,000 per year for many employers to be offset against their employer Class 1 National Insurance Contributions (NIC) liability from April 2014. The legislation is contained in the National Insurance Contributions Bill 2013.

There will be some exceptions for employer Class 1 liabilities including liabilities arising from:

  • a person who is employed (wholly or partly) for purposes connected with the employer’s personal, family or household affairs
  • employer contributions deemed to arise under IR35 for personal service companies.

There are also rules to limit the employment allowance to a total of £2,000 where there are ‘connected’ employers. For example, two companies are connected with each other if one company controls the other company.

The allowance is limited to the employer Class 1 NIC liability if that is less than £2,000.

It is expected that the allowance will be claimed as part of the normal payroll process. Employer’s payment of PAYE and NIC will be reduced each month to the extent it includes an employer Class 1 NIC liability until the £2,000 limit has been reached.

Employer NIC for the under 21s

From April 2015 the Government will abolish employer NIC for those under the age of 21. This exemption will not apply to those earning more than the Upper Earnings Limit, which is £42,285 per annum for 2015/16. Employer NIC will be liable as normal beyond this limit.

Tax exemption for employer funded occupational health treatments

As announced at Budget 2013 the Government will introduce a tax exemption for amounts up to £500 paid by employers for medical treatment for employees. Following consultation the Government will extend the exemption to medical treatments recommended by employer arranged occupational health services in addition to those recommended by the new Health and Work Service.

Employee ownership

Following a consultation the Government will introduce three new tax reliefs to encourage and promote indirect employee ownership. The reliefs are as follows:

  • From April 2014 disposals of shares that result in a controlling interest in a company being held by an employee ownership trust will be relieved from CGT.
  • Transfers of shares and other assets to employee ownership trusts will also be exempt from inheritance tax providing certain conditions are met.
  • From October 2014 bonus payments made to employees of indirectly employee owned companies which are controlled by an employee ownership trust will be exempt from income tax up to a cap of £3,600 per annum.

Share Incentive Plans (SIP)

From 2014/15 the individual limits on the ‘free’ shares companies can award to employees will be increased from £3,000 to £3,600 per year. The individual limit on the ‘partnership’ shares employees can purchase will be increased from £1,500 to £1,800 per year.

Save as You Earn (SAYE)

The amount that an employee can save and apply towards the purchase of shares for 2014/15 will be increased from £250 to £500 per month.

Real Time Information (RTI) late filing and late payment penalties

RTI requires employers operating PAYE to report information on employees’ pay and deductions in ‘real time’ to HMRC. Under RTI employers are obliged to tell HMRC about payments they make to their employees, on or before the date payments are made. Employers continue to pay over to HMRC the sums deducted from their employees under the PAYE system either monthly or quarterly.

HMRC have introduced a new penalty regime for RTI to encourage compliance with the information and payment obligations. The penalty regime will apply from 6 April 2014.

In essence late filing penalties will apply to each PAYE scheme, with the size of the penalty based on the number of employees in the scheme. Monthly penalties of between £100 and £400 will apply to micro, small, medium and large employers.

Each scheme will be subject to only one late filing penalty each month regardless of the number of returns due in the month. There will be one unpenalised default each year with all subsequent defaults attracting a penalty. Penalties will be charged quarterly and subject to the usual reasonable excuse and appeal provisions.

A new employer will not receive a late filing default provided the first RTI return is filed within 30 days of making the first payment to an employee.

HMRC have the option of charging further tax geared ‘extended failure’ penalties where a return is more than three months late. The penalty will be 5% of the amount due on the late return.

Changes will be made to the late payment penalty regime, which is based on the number of late payments relating to each tax year. Where an employer pays over a sum that is within £100 of the total shown as due to HMRC from the RTI returns filed for the tax period, no late payment penalty will arise.

HMRC will send a late payment penalty notice quarterly in July, October, January and April, if necessary.

Capital Taxes

CGT rates

The current rates of CGT are 18% to the extent that any income tax basic rate band is available and 28% thereafter. The rate for disposals qualifying for Entrepreneurs’ Relief is 10% with a lifetime limit of £10 million for each individual.

CGT annual exemption

The CGT annual exemption is £10,900 for 2013/14 and will be increased to £11,000 for 2014/15. The exemption for most trustees will be £5,000 and £5,500 respectively.

CGT – Private Residence Relief

A gain arising on a property which has been an individual’s private residence throughout their period of ownership is exempt from CGT. There are deemed period of occupation rules which may help to provide an exemption from CGT even if the individual was not living in the property at the time. This may mean the individual is accruing private residence relief on another property at the same time.

The final period exemption applies to a property that has been an individual’s private residence at some time even though they may not be living in the property at the time of disposal. From 6 April 2014 the final period exemption will be reduced from 36 months to 18 months.

CGT – non-residents and UK residential property

From April 2015 a CGT charge will be introduced on future gains made by non-residents disposing of UK residential property. A consultation on how best to introduce this will be published in early 2014.

IHT nil rate band

The IHT nil rate band remains frozen at £325,000 until 5 April 2018.

Changes to the trust IHT regime

Certain trusts, known as ‘relevant property trusts’, provide a mechanism to allow assets to be held outside of an individual’s estate for the purpose of calculating a 40% IHT liability on the death of an individual. The downside is that there are three potential points of IHT charge on relevant property trusts:

  • a transfer of assets into the trust is a chargeable transfer in both lifetime and on death
  • a charge has to be calculated on the value of the assets in the trust on each ten-year anniversary of the creation of the trust
  • an exit charge arises when assets are effectively transferred out of the trust.

The calculation of the latter two charges is currently a complex process which can take a significant amount of time to compute for very little tax yield. HMRC therefore wants to simplify the process and will consult on proposals to take effect in 2015.

Two changes will however be introduced in Finance Bill 2014:

  • simplification of filing and payment dates for IHT relevant property trust charges
  • income arising in such trusts which remains undistributed for more than 5 years will be treated as part of the trust capital when calculating the ten-year anniversary charge.

Comment

Part of the price of the tax simplification proposals will be that some planning techniques where an individual creates more than one relevant property trust will no longer work. For example, a nil rate band that may be currently available for each trust may, in future, need to be split between the trusts resulting in higher IHT charges.

Vulnerable Beneficiary Trusts

The Government will extend from 5 December 2013 the CGT ‘uplift’ provisions that apply on the death of a vulnerable beneficiary. It will also extend from 2014/15 the range of trusts that qualify for special income tax, CGT and IHT treatment.

The Government will consult further on ways to reform the tax treatment of trusts established to safeguard property for the benefit of vulnerable people. 

Non-tax measures for smes

Business rates

A package to help all businesses in England with the cost of business rates, with particular support for the smallest businesses has been announced. The following measures are introduced from 1 April 2014:

  • businesses with retail and food and drink premises with a rateable value of up to £50,000 will receive a discount of £1,000 on their business rates for a period of two years (subject to state aid limits)
  • the RPI rate increase will be capped at 2% for one year
  • a ‘reoccupation relief’ will be introduced which will provide a 50% business rates discount for 18 months where businesses move into retail premises that have been empty for more than 12 months. Businesses which move into empty premises between 1 April 2014 and 31 March 2016 will be eligible for the relief (subject to state aid limits)
  • businesses will be allowed to pay their rates in 12 monthly instalments, rather than 10
  • the doubling of the Small Business Rate Relief (SBRR) will be extended for a further 12 months to April 2015
  • the SBRR criteria will be amended to allow businesses in receipt of SBRR to keep it for one year when they take on an additional property that would currently cause them to lose SBRR.

Comment

The doubling of the SBBR will mean that around 360,000 of the smallest businesses will continue to receive 100% relief from business rates until April 2015, with around a further 180,000 benefiting from tapering relief.

Retail Export Scheme

HMRC has consulted on options for making the Retail Export Scheme easier to use and will publish a formal Summary of Responses before the end of 2013.

Fuel duty

The planned increase in fuel duty set to take place in September 2014 has been cancelled. The Government will instead freeze fuel duty for the remainder of this parliament. This equates to a saving of £680 for a typical motorist, £1,300 for a small business with a van, and £21,000 for a haulier by 2015/16.

 

This summary is published for the information of clients. It provides only an overview of the main proposals announced by the Chancellor of the Exchequer in his Autumn Statement, and no action should be taken without consulting the detailed legislation or seeking professional advice. Therefore no responsibility for loss occasioned by any person acting or refraining from action as a result of the material contained in this summary can be accepted by the authors or the firm.

Newsletter – September 2013

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In this month’s enews we report on a variety of issues including an update for employers on payroll and NMW increases. We also report on the implementation of Universal Credit and the latest crackdown by HMRC utilising card payment transactions.

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

eNEWS quicklinks
Advisory fuel rates for company cars Data payment crackdown
HMRC chase those who have missed RTI deadlines Universal Credit criticised by NAO
HSE guidance on new first aid training rules RTI issue affecting student loan borrowers
HMRC issue guidance on the Statutory Residence Test National Minimum Wage
Deadline for ‘paper’ self assessment tax returns Latest Job figures

Advisory fuel rates for company cars

New company car advisory fuel rates have been published which took effect from 1 September 2013. HMRC’s website states:

‘These rates apply to all journeys on or after 1 September 2013 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 2013 are:

Engine size Petrol LPG
1400cc or less 15p 10p
1401cc – 2000cc 18p (17p) 11p (12p)
Over 2000cc 26p (25p) 16p (18p)

 

Engine size Diesel
1600cc or less 12p
1601cc – 2000cc 15p (14p)
Over 2000cc 18p

Please note that not all of the rates have been amended, so care must be taken to apply the correct rate. The amounts for the previous quarter are shown in brackets where the rate has been amended.

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

Data payment crackdown

HMRC have announced that for the first time they now have access to information on all credit and debit card payments to UK businesses. HMRC intend to use this information to aid them in a new crackdown on tax evasion.

Under new powers introduced from 1 September, HMRC can now access information from ‘merchant acquirers’ which are the companies that process card payment transactions. HMRC will use the information to determine the amount and value of transactions completed by a specific trader.

HMRC do not have access to personal data identifying the card owners or card numbers but this data will be used to ensure that traders have correctly accounted for all taxes due.

HMRC estimate that this information could reduce fraud by over £50 million a year.

Exchequer Secretary to the Treasury David Gauke said:

‘Tax evasion and the hidden economy cost the taxpayer £9 billion a year. While the majority of traders are honest, they may find themselves undercut by the minority who seek to lower prices by cheating the tax system.’

‘The Government has given HMRC nearly £1 billion to tackle fraud and evasion, and these new powers give HMRC an extra tool to ensure a level playing field between businesses, and also reducing opportunities for those who try and cheat the system.’

Internet link: News

HMRC chase those who have missed RTI deadlines

HMRC are writing to the 167,000 employers who have missed one or more of the deadlines for reporting their PAYE information in real time.

The majority of employers should have started to report their PAYE information under RTI from the first payday on or after 6 April 2013. According to HMRC more than 1.6 million employer PAYE schemes, covering over 40 million individual records, are already reporting under RTI.

If you receive a letter and would like help with your payroll procedures, or do not believe you need to report any payments, please do get in touch.

Internet link: Press release

Universal Credit criticised by NAO

The implementation of the Government’s welfare reform programme, Universal Credit, has been criticised in a report by the National Audit Office (NAO).

Universal Credit will merge a number of existing benefits into a single payment in order to reduce the costs and fraud associated with the current multi-benefit system.

Amyas Morse, head of the National Audit Office said

‘The Department’s plans for Universal Credit were driven by an ambitious timescale, and this led to the adoption of a systems development approach new to the Department. The relatively high risk trajectory was not, however, matched by an appropriate management approach. Instead, the programme suffered from weak management, ineffective control and poor governance. Universal Credit could well go on to achieve considerable benefits if the Department learns from these early setbacks and puts realistic plans and strong discipline in place for its future roll-out.’

The DWP will now extend pilot schemes to six more areas of the UK, with these sites taking on simple welfare claims.

Internet links: Response NAO report

HSE guidance on new first aid training rules

The Health and Safety Executive has issued guidance to help employers assess their first aid training needs and comply with amendments to the Health and Safety (First Aid) Regulations.

Under the amended regulations the requirement for workplace first aid training providers to be approved by the HSE is removed from 1 October 2013.The amendments cover carrying out a first aid needs assessment and selecting a first aid training provider.

Internet link: HSE press release

RTI issue affecting student loan borrowers

HMRC would like employers to be aware that they have identified an issue with some employees who have student loans.

A few of the employees in this situation have had their employment status incorrectly ‘ceased’ on HMRC’s PAYE systems and this incorrect information has been passed to the Student Loans Company (SLC).

The SLC have written to these borrowers, querying their employment status. Employees affected by this issue are being asked to reply to the SLC saying they have not ceased or changed employer.

HMRC are hoping to correct their systems in the next few weeks. They have identified that there is an issue getting this corrected information on to the student loans system and are taking steps to resolve this issue.

Internet link: HMRC website

HMRC issue guidance on the Statutory Residence Test

HMRC have issued some updated guidance on the Statutory Residence Test which took effect from 6 April 2013.

Residence is a complex issue, if you would like any advice in this area please do get in touch.

Internet link: SRT guidance

National Minimum Wage

National Minimum Wage rates increases come into effect on 1 October 2013:

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

The accommodation offset rate is used where the employer provides you with accommodation, some of the value of which can count towards NMW pay.

It is important to note that these rates, which are in force from 1 October 2013, apply to pay reference periods beginning on or after that date.

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

Internet links: Gov.uk ACAS

Deadline for ‘paper’ self assessment tax returns

For those individuals who have previously submitted ‘paper’ self assessment tax returns the deadline for the 2012/13 return is 31 October 2013. 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: HRMC deadlines

Latest Job figures

According to the latest information published by the ONS, employment rose by 80,000 and unemployment fell by 24,000 in the three months to July.

The employment rate for those aged from 16 to 64 (for May to July 2013) was 71.6%, an increase of 0.2%. There were 29.84 million people in employment aged 16 and over.

The unemployment rate for May to July 2013 was 7.7% of the economically active population a reduction in 0.1%. There were 2.49 million unemployed people.

Between May to July 2012 and May to July 2013 total pay rose by 1.1% and regular pay rose by 1.0%.

Stephen Gifford, CBI Director of Economics, said:

‘These figures show the upturn in economic data we’ve seen through the spring and summer is starting to show up in job creation. Encouragingly, jobs growth in the private sector was more than three times greater than losses in the public sector.’

‘Despite better news on the direction of travel, youth unemployment is persistently high and growth alone will not address this problem.’

‘We’ve called on the Government to reduce employers’ National Insurance to help tackle this, and the launch of the Million Jobs campaign further emphasises the need for action to help young people enter a tough jobs market.’

Internet links: ONS report Press release

Newsletter – August 2013

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In this month’s enews we report on a variety of issues including an update on child benefit for higher earners, RTI changes and a warning about pension ‘liberation’.

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

eNEWS quicklinks
Parents with higher incomes must register for Self Assessment PAYE RTI and annual schemes
Pension ‘liberation’ Consultation on Tax-Free Childcare for working families
HMRC’s most wanted tax fugitives A million zero hour contracts
HMRC introduce new safeguards for debt collection visits

Parents with higher incomes must register for Self Assessment

HMRC are reminding parents with higher incomes who continued to receive Child Benefit after January 2013 that they must register for Self Assessment by 5 October 2013 to avoid any penalties in relation to the High Income Child Benefit Charge.

HMRC have announced that they will be writing to approximately 2 million higher rate taxpayers over the next few weeks, including those affected by recent changes to Child Benefit. The letter reminds them that if their income is over £50,000 and they or their partner received Child Benefit in 2012/13, they will need to complete a Self Assessment tax return for the 2012/13 tax year. They must register with HMRC for Self Assessment if they have not already done so.

According to HMRC, over 390,000 people with higher incomes have already opted out of receiving Child Benefit.

HMRC’s Chief Executive, Lin Homer, said:

‘HMRC is committed to helping people pay the right amount of tax. If you have had certain changes to your income in the last year, including those affected by the changes to Child Benefit, you have until 5 October to register for Self Assessment.’

If the charge does apply, then the taxpayer must register for Self Assessment for the 2012/13 tax year by 5 October 2013, so that they can declare the Child Benefit received, and pay the tax charge on time and avoid any penalties.

If you would like any help or advice on whether or not you need to register, or whether you should opt to stop receiving Child Benefit, please do get in touch.

Internet link: Press release

PAYE RTI and annual schemes

HMRC are advising that they have now fixed the issue with Annual PAYE schemes.

HMRC received a number of requests since April from employers, asking that the status of their PAYE scheme be changed to annual. Due to technical issues they were unable to process the requests at the time. HMRC have now resolved the issue and have accepted all the requests that have been made and changed those schemes to annual. They will not however, be notifying employers that the change has been made.

If you are interested in changing your scheme to annual please do get in touch. However please be aware that under an annual scheme the payroll must meet all of the following requirements:

  • all the employees are paid annually (generally only applicable to directors only PAYE schemes)
  • everyone is paid within the same, single tax month and
  • the employer is only required to pay HMRC annually.

Internet link: HMRC news

Pension ‘liberation’

The ICAEW have issued a warning that individuals are being approached by firms offering to help them ‘unlock’ their pensions or access them early. Some unscrupulous firms are using misleading information and in some cases offering personal loans or cash incentives to entice savers to cash in their pensions early. This is known as pension ‘liberation’. For further information use the link to the Pensions Regulator website below.

The ICAEW are warning that those taxpayers who decide to take the initiative themselves and access their pensions early will find that some or all of their hard earned pension savings may be at stake. This is because the normal rule is that you cannot generally access pension savings before you reach the age of 55 at the earliest.

Those opting for pension ‘liberation’ will generally be liable to pay a tax bill of more than half of their pension savings and may have to pay further tax penalties as well. Additionally, the provider usually imposes significant charges, sometimes up to 20%. The ICAEW website provides details of the potential tax liabilities and charges and also a link to report firms promoting pension ‘liberation’.

Please do get in touch if you would like further guidance in this area.

Internet links: ICAEW website Pensions Regulator action pack

Consultation on Tax-Free Childcare for working families

Earlier this year the government announced that it plans to introduce a new childcare scheme for working families. The proposal is that Tax-Free Childcare will provide 20% of working families’ childcare costs, up to £1,200 for each child. The scheme is expected to be introduced from 2015.

The consultation invites interested parties to comment on the detailed design and operation of Tax-Free Childcare.

Internet link: Consultation

HMRC’s most wanted tax fugitives

HMRC has published an updated list of their most wanted ‘tax fugitives’ and announced that a ‘fraudster’ has been apprehended at Heathrow Airport whilst travelling on a false passport, following almost ten years on the run.

HMRC have published a gallery of its 2013 most wanted and announced the capture of one of the most wanted tax criminal fugitives. To view the gallery see the link to the flickr page below.

The 2013 list includes updated information on the original 20 together with the addition of 10 more tax fugitives. These fugitives are being pursued for a range of crimes including VAT fraud, tax evasion and money laundering. According to HMRC their crimes have cost the taxpayer between £100,000 and £10 million.

Anthony Judge, who was wanted for his role in over £350,000 of tax fraud, was stopped at Heathrow Airport last month as he attempted to enter the UK on a forged passport.

Chancellor of the Exchequer George Osborne said:

‘Our message is clear; tax fraud and evasion is illegal and will not be tolerated. Millions of hard-working people pay their taxes and it is they who are being defrauded. The government has stepped up HMRC’s enforcement activities to enable them to pursue tax cheats relentlessly around the world.’

Internet links: flickr Press Release

A million zero hour contracts

New research suggests that the number of workers on zero hour contracts, with no guarantee of hours or pay, are becoming more widespread.

Research by the Chartered Institute of Personnel and Development (CIPD) shows that there are up to a million workers on zero hour contracts. The survey also showed that only 14% of workers on these contracts were let down by their employers by them failing to provide sufficient hours each week.

However figures from the Office for National Statistics (ONS) show that only 250,000 people on zero hour contracts.

Zero hour contracts have become more widespread over recent years, particularly in the hospitality and retail sectors, where businesses view them as a cost effective way of satisfying short term staffing needs by using ‘on call’ staff.

Peter Cheese the CIPD’s CEO said:

‘Zero hours contracts, used appropriately, can provide flexibility for employers and employees and can play a positive role in creating more flexible working opportunities. This can for example allow parents of young children, carers, students and others to fit work around their home lives.’

‘However, for some this may be a significant disadvantage where they need more certainty in their working hours and earnings, and we need to ensure that proper support for employees and their rights are not being compromised through such arrangements. Zero hours contracts cannot be used simply to avoid an employer’s responsibilities to its employees.’

Internet link: Press release

HMRC introduce new safeguards for debt collection visits

HMRC have introduced a Field Force Verification Helpline, so that taxpayers can easily check whether or not a caller on their doorstep claiming to be from HMRC is genuine.

Every year, HMRC visit a small number of taxpayers who have not paid their tax or arranged to repay overpayments of tax credits, in order to collect the debt. The Debt Management and Banking’s Field Force Collectors may visit a taxpayer’s home or business premises. HMRC always give advance warning that a visit may take place if a debt is not paid.

HMRC advise:

‘To provide a safeguard against bogus callers in these situations, HMRC has introduced a new Field Force Verification Helpline

To access the helpline, customers should follow these simple steps:

  • Ask to see the Collector’s photo ID
  • Make a note of the ID number on the photo ID
  • Call 0300 200 3862
  • Provide HMRC with the ID number you’ve noted

Our operators will then be able to confirm to you whether or not your caller is genuinely an HMRC Collector.

To help to explain the purpose of the visit and the rights and responsibilities of customers, we have also produced a new leaflet. Every customer visited, from 13 August onwards, will be given a copy of this by the Collector on arrival at the customer’s premises. This also includes the Field Force Verification Helpline number.’

If you have any concerns about paying your liabilities please do get in touch.

Internet link: HMRC news