Newsletter – December 2021

Posted on December 20, 2021 by Henry Cooper

Enews – December 2021

In this month’s Enews we consider the impact of the pandemic on HMRC’s receipts as well as the tax details published on the first Tax Administration and Maintenance (TAM) Day.

With guidance on the rules around Statutory Sick Pay, new laws for pensions trustees and an increase to the Real Living Wage, there is a lot to update you on.

HMRC’s tax take falls by billions due to pandemic
Government sets out tax details on TAM Day
Three-day wait for Statutory Sick Pay to return next year
HMRC issues warning on self assessment scams
New law introduced to help protect pension savers from scammers
Services sector continues to recover despite rising costs
Advisory fuel rates for company cars
Costs ‘weighing on businesses’ sustainability intentions’, FSB finds

HMRC’s tax take falls by billions due to pandemic

HMRC saw a drop of almost £30 billion in tax revenues in the latest financial year because of the pandemic, according to its annual accounts.

In its 2020/21 annual report, HMRC reported that it had collected £608.8 billion in tax revenues, which is down from £636.7 billion collected in 2019/20.

HMRC said the drop was due to the ‘unprecedented economic circumstances caused by COVID-19, and because pandemic restrictions meant HMRC had to reduce its compliance activity’.

The reduction in compliance activity resulted in a drop of 18% in the additional tax generated by HMRC’s work tackling avoidance, evasion, and other non-compliance. This fell from £36.9 billion to £30.4 billion. The tax authority has estimated that the tax gap is now 5.3%.

HMRC reported that it delivered £60.7 billion in grants through the Coronavirus Job Retention Scheme (CJRS).

Jim Harra, HMRC’s First Permanent Secretary and Chief Executive, said:

‘Throughout this exceptionally challenging year, we kept all our core services running and ensured customers could access the right help when they needed it. To do this, we had to make choices about how we balanced our resources – for example, we took the conscious decision to divert some of our skilled advisers from PAYE and Self Assessment services to provide COVID-19 support because that’s what individuals and small businesses needed from us most urgently at a time of acute crisis.’

Internet link: GOV.UK

Government sets out tax details on TAM Day

The UK government marked the inaugural Tax Administration and Maintenance (TAM) Day with the publication of 30 papers covering a wide range of tax issues.

Chancellor Rishi Sunak made the commitment to have a TAM Day in the Autumn Budget. The aim was for a dedicated day for the administration and maintenance of the UK tax system. The 30 publications released by the government on TAM Day (30 November) include Calls for Evidence, Draft Regulations, Policy Papers and Corporate Reports.

The government has set out further detail on the conclusions to its review of business rates, including more frequent revaluations, improvement relief, exemptions for green technology, and administrative reforms.

A report on Research and Development (R&D) tax reliefs was published, providing further details on announcements made at the Budget which included refocusing relief in the UK; targeting abuse; and supporting innovation by expanding qualifying expenditure to capture cloud and data costs.

Additionally, an update on reforms to Small Brewers’ Relief was published, which will see the government invest around £15 million of additional funding into the craft brewing sector.

Jim Harra, HMRC’s First Permanent Secretary and Chief Executive, said:

‘As we continue our work to improve the tax system for UK taxpayers and clamp down on avoidance and evasion, we know that an open dialogue with our stakeholders is vital.

‘With thanks to the tax profession for their views, we can now announce the next steps for how we will simplify the legislative framework and raise standards in the tax advice market. We are also announcing new areas on which we are inviting views, including reforming Income Tax Self-Assessment registration for the self-employed.’

Internet link: GOV.UK

Three-day wait for Statutory Sick Pay to return next year

The standard three-day waiting time for Statutory Sick Pay (SSP) will be reinstated for coronavirus (COVID-19)-related claims from 25 March 2022, unless the government intervenes.

Under standard rules in the UK, employers do not have to pay SSP to an employee until the fourth qualifying day in the Period of Incapacity for Work (PIW). The PIW is a period of sickness lasting four or more consecutive calendar days, not all of which may be qualifying days.

During the COVID-19 pandemic, the government suspended the three-day wait for COVID-related SSP, meaning that employers must pay it from the first qualifying day.

The amendment to the SSP rules was made in the Coronavirus Act 2020 which is due to expire after two years. This means that, unless there is an intervention to continue the measure, COVID-related SSP waiting time will automatically revert to three days on 25 March 2022.

Frank Haskew, Head of the Tax Faculty at the Institute of Chartered Accountants in England and Wales (ICAEW), said:

‘The SSP rules were not really designed with a highly infectious global pandemic in mind, which is why the current easements have been welcome.

‘While some employees who are ill from coronavirus or required to self-isolate may be unable to afford not to go to work unless they are paid SSP for the first three days, there are also small businesses where the unreimbursed cost of paying three days’ coronavirus-related SSP to employees is a real burden.’

Internet links: ICAEW website

HMRC issues warning on self assessment scams

HMRC has warned taxpayers completing their 2020/21 tax returns to ‘be on their guard’ and stay vigilant in regard to tax-related scams.

Nearly 800,000 tax scams were reported in the last year, HMRC revealed. It said that fraudsters use self assessment to attempt to steal money or personal information from taxpayers.

In the last year, HMRC received almost 360,000 bogus tax rebate referrals. HMRC will send more than four million emails and SMS messages this week to self assessment taxpayers, prompting them to think about how they intend to pay their tax bill.

It is warning taxpayers ‘not to be taken in’ by malicious emails, phone calls or texts, and to not mistake them for genuine HMRC communications.

Myrtle Lloyd, Director General for Customer Services at HMRC, said:

‘Scams come in many forms. Some threaten immediate arrest for tax evasion, others offer a tax rebate. Contacts like these should set alarm bells ringing, so if you are in any doubt whether the email, phone call or text is genuine, you can check the ‘HMRC scams’ advice on GOV.UK and find out how to report them to us.’

The self assessment deadline is 31 January 2022.

Internet link: HMRC press release

New law introduced to help protect pension savers from scammers

New rules to help protect pension savers from scammers have become law.

Under the regulations, pension trustees and scheme managers will be given the power to stop suspicious transfers before cash gets into the hands of fraudsters.

Fraudsters frequently offer ‘too good to be true’ incentives to pension savers, such as free pension reviews, early access to pension cash and other time-limited offers. Lured in by these bogus offers, individuals are then tricked into transferring their savings into a scam scheme and defrauded out of their money.

Between January and May 2021, pension scam losses totalling over £2.2 million were reported to Action Fraud.

The new regulations will take force on 30 November. From this date, trustees and scheme managers will be able to prevent transfer requests if suspicious activity is suspected by giving it a ‘red flag’. If a red flag is present, the transfer cannot go ahead.

Where fraud is suspected, trustees and scheme managers will be able to pause transfer requests by giving it an ‘amber flag’. In this scenario, the pension saver will need to prove they have taken scam specific guidance from the free Money and Pensions Service before the transfer can go ahead. This is the only way a transfer can then proceed.

Nicola Parish, The pension Regulator’s (TPR) Executive Director of Frontline Regulation, said:

‘We welcome these new regulations which further empower trustees to act as the first line of defence against scammers.

‘We are pleased these new rules enshrine in legislation two of the key parts of the pledge to combat pension scams – around due diligence measures and issuing members warnings of high-risk transfers.

‘We urge all trustees and pension providers to take note of these new rules and continue to play their part in stopping scams.’

Internet links: TPR website

Services sector continues to recover despite rising costs

Optimism improved for firms across the services sector in the three months to November, according to the latest Service Sector Survey from the Confederation of British Industry (CBI).

However, cost growth continued to pick up, increasing at the fastest pace since survey records began in 1998. Additionally, business volumes continued to grow at a strong pace across the services sector, although there are signs of slowing growth.

The CBI found that cost pressures are building, with both consumer services and business and professional services seeing costs rise at the fastest pace in survey history.

As a result, selling price growth accelerated too, with expectations for significantly faster growth in the coming quarter for both sub-sectors. Despite elevated cost pressures, profitability grew in business, professional and consumer services, with the strongest growth recorded since February 2018 for the latter.

Charlotte Dendy, Head of Economic Surveys and Data at the CBI, said:

‘With COVID still a concern with impacts for consumer confidence together with cost and supply chain issues continuing to bite, a difficult winter lies ahead.

‘It is therefore vital that the government works with business to help address these challenges, ease cost and supply pressures, giving businesses the platform to ensure the recovery does not fizzle out before Christmas.’

Internet link: CBI website

Advisory fuel rates for company cars

New company car advisory fuel rates have been published and took effect from 1 December 2021.

The guidance states: ‘you can use the previous rates for up to one month from the date the new rates apply’. The rates only apply to employees using a company car.

The advisory fuel rates for journeys undertaken on or after 1 December 2021 are:

Engine size	Petrol
1400cc or less	13p
1401cc – 2000cc	15p
Over 2000cc	22p

Engine size	LPG
1400cc or less	9p
1401cc – 2000cc	10p
Over 2000cc	15p

Engine size	Diesel
1600cc or less	11p
1601cc – 2000cc	13p
Over 2000cc	16p

HMRC guidance states that the rates only apply when you either:

reimburse employees for business travel in their company cars
require employees to repay the cost of fuel used for private travel.

You must not use these rates in any other circumstances.

The Advisory Electricity Rate for fully electric cars is 5p per mile. Electricity is not a fuel for car fuel benefit purposes.

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

Internet link: GOV.UK AFR

Costs ‘weighing on businesses’ sustainability intentions’, FSB finds

A report published by the Federation of Small Businesses (FSB) has revealed that the costs associated with going green have impacted small firms’ plans for becoming more sustainable.

The FSB’s report found that the majority of UK small firms are concerned about climate change but just one in three has plans in place to combat it.

67% of firms polled stated that they have started to address their energy usage, and 18% said they have invested in microgeneration.

However, 24% of businesses said that uncertainty around return on investment has prevented them from taking action, and 22% cited a lack of sufficient capital to invest in assets as a barrier.

The business group is urging the government to launch a ‘Help to Green’ initiative and roll out a nationwide scrappage scheme.

National Chair of the FSB, Mike Cherry, said:

‘If we are to successfully transition to net zero, it’ll be through grassroots action, enabled by smart and supportive policies.

‘Whilst the Chancellor rightly embraced some of our proposed changes in this area at the Budget, it was disappointing to see that the government’s recent net zero strategy contained only four specific mentions of small business.’

Internet links: FSB website

Budget 2020 – March 2020

Posted on March 12, 2020 by Henry Cooper

Budget 2020

The Chancellor Rishi Sunak presented his first Budget on Wednesday 11 March 2020. In his speech he stated ‘we are at the beginning of a new era in this country. We have the freedom and the resources to decide our own future’.

‘It is a Budget of a government that gets things done’.

Our summary focuses on the tax measures which may affect you, your family and your business. To help you decipher what was said we have included our own comments. If you have any questions please contact us for advice.

Main Budget tax proposals

Our summary concentrates on the tax measures which include:

a reduction in the Entrepreneurs’ Relief lifetime limit
an increase in the Employment Allowance
an increase in the rate of Structures and Buildings Allowance
an increase in the Research and Development Expenditure Credit.

Other measures include:

an increase and extension of business rates discounts
extended access to Statutory Sick Pay due to coronavirus.

Previously announced measures include:

the increase to the National Insurance thresholds
the introduction of off-payroll working for the private sector
changes to Principal Residence Relief.

Some Budget proposals may be subject to amendment in the 2020 Autumn Budget and subsequent Finance Act. You should contact us before taking any action as a result of the contents of this summary.

Business Tax

Corporation tax rates

Corporation tax rates have already been enacted for periods up to 31 March 2021.

The main rate of corporation tax is 19%. The rate for the Financial Year beginning on 1 April 2020 was due to fall to 17% but the Chancellor has announced the rate will remain at 19%.

Capital Allowances: Structures and Buildings Allowance

The annual rate of capital allowances available for qualifying investments to construct new, or renovate old, non-residential structures and buildings will increase from 2% to 3%. The change will take effect from 1 April 2020 for corporation tax and 6 April 2020 for income tax.

Enhanced Capital Allowances in Enterprise Zones

The government has announced the 100% first year allowance for investment in new plant and machinery within designated assisted areas within Enterprise Zones will remain available for expenditure incurred in relation to all areas, whenever designated, until at least 31 March 2021.

First year allowances for business cars from April 2021

The government has announced an extension to 100% first year allowances for zero-emission cars, zero-emission goods vehicles and equipment for gas refuelling stations by four years from April 2021. CO₂ emission thresholds will also be amended from April 2021. These determine the rate of capital allowances available through which the capital expenditure for business cars can be written down. The thresholds will be reduced from 50g/km to 0g/km for the purpose of the first year allowances for low CO₂ emission cars and from 110g/km to 50g/km for the purpose of WDAs for business cars.

Comment

The reduction in thresholds will mean that only business cars acquired with CO₂ emissions of 0g/km will be eligible for first year allowances. Ultra-low emission vehicles which currently qualify for first year allowances if 50g/km or less will no longer qualify. They will be eligible for WDAs at the main rate (18%). Cars with CO₂ emissions exceeding 50g/km will be eligible for WDAs at the special rate (6%).

Research and Development (R&D) tax relief

The rate of tax credit for companies falling within the Research and Development Expenditure Credit (RDEC) scheme will rise by 1% to 13% from 1 April 2020. This relief is given as an above the line credit for companies undertaking qualifying R&D.

Budget 2018 announced that, from 1 April 2020, the amount of payable R&D tax credit that a qualifying loss-making company can receive in any tax year will be restricted to three times the company’s total PAYE and NICs liability for that year. The government has now announced the implementation of the restriction will be delayed to 1 April 2021.

Corporation tax loss relief

Draft legislation has been issued to extend the rules that potentially limit the use of brought forward losses to include brought forward capital losses. Companies (and corporate groups) will continue to have a £5 million ‘deductions allowance’ before restrictions apply.

The changes will have effect where carried forward capital losses are used to offset chargeable gains accruing from 1 April 2020.

Comment

The inclusion of capital losses will mean that it will be more likely that the deductions allowance will be exceeded.

Intangible fixed assets

The government has announced an extension to corporation tax relief for intangible fixed assets. All pre-Finance Act 2002 intangible assets acquired from 1 July 2020 will come within the intangible fixed asset regime, subject to certain transitional provisions.

Comment

This measure removes a restriction that exists in relation to pre-Finance Act 2002 intangible assets that prevents some companies from claiming relief for older, well-established intellectual property rights. The change will mean that corporate intangible assets will now be relieved and taxed under a single regime for acquisitions from 1 July 2020.

Digital Services Tax

The government has confirmed a new 2% tax on the revenues of search engines, social media platforms and online marketplaces which derive value from UK users. The tax only applies when the group’s worldwide revenues from these digital activities are more than £500 million and more than £25 million of these revenues are derived from UK users.

The tax will apply from 1 April 2020.

Freeports

The government is consulting on proposals to create up to ten freeports across the UK which would have different customs rules to those which apply in the rest of the UK.

The government is considering a UK freeport model which would include multiple customs zones located within or away from a port, as well as a type of special economic zone (SEZ) designated over or around the customs zones. The government intends to work with the devolved administrations to develop proposals to allow freeports to be created in Scotland, Wales and Northern Ireland, in addition to those in England.

The proposals include the following customs and tariff benefits for businesses bringing goods into a freeport site:

duty suspension, with no tariffs, import VAT or excise to be paid on goods brought into a freeport from overseas until they leave the freeport and enter the UK’s domestic market
duty inversion, if the duty on a finished product is lower than that on the component parts, allowing businesses to import components duty free, manufacture the final product in the freeport, and then pay the duty at the rate of the finished product when it enters the UK’s domestic market
duty exemption for re-exports, allowing businesses to import components duty free, manufacture the final product in the freeport and pay no tariffs when the final product is re-exported
simplified customs procedures for businesses accessing freeports.

Comment

Freeports are secure customs zones located at ports where business can be carried out inside a country’s land border, but where different customs rules apply. Typically, goods brought into a freeport do not attract a requirement to pay duties until they leave the freeport and enter the domestic market. No duty is payable at all if the goods are re-exported.

Business rates

Business rates have been devolved to Scotland, Northern Ireland and Wales. The government has already announced that, for one year from 1 April 2020, the business rates retail discount for properties with a rateable value below £51,000 in England will increase from one third to 50% and will be expanded to include cinemas and music venues. To support small businesses in response to COVID-19, the retail discount will be increased to 100% and expanded to include hospitality and leisure businesses for 2021.

The government previously committed to introducing a £1,000 business rates discount for pubs with a rateable value below £100,000 in England for one year from 1 April 2020. To further support pubs, in response to COVID-19 the discount for pubs will be increased to £5,000.

The government is launching a fundamental review of business rates to report in the autumn. A call for evidence will be published in the spring.

Time to Pay

The government will ensure that businesses and self-employed individuals in financial distress and with outstanding tax liabilities receive support with their tax affairs.

HMRC has set up a dedicated COVID-19 helpline to help those in need, and they may be able to agree a bespoke Time to Pay arrangement. Time to Pay gives businesses a time-limited deferral period on HMRC liabilities owed and a pre-agreed time period to pay these back.

Statutory Sick Pay

The government will support small and medium-sized businesses and employers to cope with the extra costs of paying COVID-19 related SSP by refunding eligible SSP costs. The eligibility criteria for the scheme include:

the refund will be limited to two weeks per employee
employers with fewer than 250 employees will be eligible. The size of an employer will be determined by the number of people they employed as of 28 February 2020
employers will be able to reclaim expenditure for any employee who has claimed SSP (according to the new eligibility criteria) as a result of COVID-19
employers should maintain records of staff absences, but should not require employees to provide a GP fit note
the eligible period for the scheme will commence from the day on which the regulations extending SSP to self-isolators come into force.

Capital Taxes

Capital gains tax (CGT) rates

The current rates of CGT are 10%, to the extent that any income tax basic rate band is available, and 20% thereafter. Higher rates of 18% and 28% apply for certain gains; mainly chargeable gains on residential properties with the exception of any element that qualifies for Private Residence Relief.

There are two specific types of disposal which potentially qualify for a 10% rate up to a lifetime limit for each individual:

Entrepreneurs’ Relief (ER). This is targeted at directors and employees of companies who own at least 5% of the ordinary share capital in the company, provided other minimum criteria are also met, and the owners of unincorporated businesses.
Investors’ Relief. The main beneficiaries of this relief are external investors in unquoted trading companies who have newly-subscribed shares.

Investors’ Relief has a lifetime limit of £10 million, however the lifetime limit position for ER has been changed in the Budget and is considered further below.

CGT annual exemption

The CGT annual exemption is £12,000 for 2019/20 and £12,300 for 2020/21.

Entrepreneurs’ Relief (ER)

The lifetime limit is reduced from £10 million to £1 million for ER qualifying disposals made on or after 11 March 2020.

There are special provisions for disposals entered into before 11 March 2020 that have not been completed.

Comment

The government’s manifesto stated clearly that there would be a reform and review of this relief, so a reduction in the limit was not unexpected, though the magnitude of the reduction and the immediate implementation will be a surprise. No other consultations to reform the relief were announced.

Private Residence Relief (PRR)

Draft legislation has been issued to make changes to the PRR regime from 6 April 2020. For properties that have not been occupied throughout the period of ownership, available deductions for capital gains tax purposes will be amended as follows:

the final period exemption will be reduced from 18 months to nine months (there are no changes to the 36 months that are available to disabled persons or those in a care home)
lettings relief will be reformed so that it only applies in those circumstances where the owner of the property is in shared occupancy with a tenant.

Comment

At present, lettings relief gives up to £40,000 relief (£80,000 for a couple who jointly own the property) for someone letting part, or all, of a property which is their main residence, or was the former main residence at some point in their period of ownership. Despite concerns raised during the consultation about periods of letting prior to April 2020 and whether the current rules should be allowed to apply, the government is proceeding as planned and lettings reliefs will be abolished except in very limited circumstances of co-occupation with a tenant. The changes apply for disposals on or after 6 April 2020, regardless of when the period of letting took place.

Payments on account and 30 day returns

Legislation has been enacted to change reporting obligations for residential property gains chargeable on UK resident individuals, trustees and personal representatives. Also introduced is a requirement to make a payment on account of the associated CGT liability. For disposals made on or after 6 April 2020:

a tax return is required if there is a disposal of UK land on which a residential property gain accrues
CGT is required to be computed on the reported gain in the tax return.

The return needs to be filed and the CGT paid within 30 days of the completion date of the property disposal.

The new requirements do not apply if a chargeable gain does not arise, for example where the gains are covered by PRR.

Inheritance tax (IHT) nil rate bands

The nil rate band has remained at £325,000 since April 2009 and is set to remain frozen at this amount until April 2021. An additional nil rate band, called the ‘residence nil rate band’ (RNRB), continues to be phased in. For deaths in 2019/20 it is £150,000 rising to £175,000 for deaths in 2020/21. Thereafter it will rise in line with CPI.

Comment

The RNRB was introduced in April 2017 to allow the family home to be passed more easily to direct descendants on death without incurring a charge to IHT. There are, however, a number of conditions that must be met in order to obtain the RNRB, which may involve redrafting an existing will.

Stamp Duty Land Tax (SDLT) surcharge

A SDLT surcharge on non-UK residents purchasing residential property in England and Northern Ireland is to go ahead. The 2% surcharge is to take effect from 1 April 2021. Where contracts are exchanged before 11 March 2020 but complete or are substantially performed after 1 April 2021, transitional rules may apply.

Employment Taxes

National Insurance thresholds

The government has recently announced National Insurance thresholds for 2020/21. Most thresholds will rise with inflation. Two thresholds, however, will rise by 10% from £8,632 to £9,500:

the primary threshold – which sets the level at which employees start to pay Class 1 National Insurance contributions (NICs)
the lower profits limit – which sets the level at which the self-employed start to pay Class 4 NICs.

The upper thresholds which apply to these two classes of NICs remain at £50,000.

Comment

The secondary threshold, which sets the level at which employers pay the main rate of NICs, only rises in line with inflation.

Off-payroll working in the private sector

The changes to the off-payroll working rules (commonly known as IR35), which came into effect in April 2017 for the public sector, will be extended to the private sector from April 2020. Draft legislation has been issued. The new rules apply to payments made for services provided on or after 6 April 2020.

The off-payroll working rules apply where an individual (the worker) provides their services through an intermediary (typically a personal service company) to another person or entity (the client). The client will be required to make a determination of a worker’s status and communicate that determination. In addition, the fee-payer (usually the organisation paying the worker’s personal service company) will need to make deductions for income tax and NICs and pay any employer NICs.

Only medium and large businesses will be subject to the 2020 rules, so small businesses will not need to determine the status of the off-payroll workers they engage. A small company is one which meets two of these criteria: its annual turnover is not more than £10.2 million: it has not more than £5.1 million on its balance sheet: it has 50 or fewer employees. For unincorporated organisations it is only the annual turnover test that applies.

Review

In January 2020, the government announced a review of the implementation of the April 2020 reform, to address concerns from affected businesses and individuals. The government has confirmed the changes will go ahead but:

businesses will not have to pay penalties for errors relating to off-payroll working in the first year, except in cases of deliberate non-compliance
there will be a legal obligation on clients to respond to a request for information about their size from the worker or the fee-payer.

Employer provided cars

The scale of charges for calculating the taxable benefit for an employee who has use of an employer provided car is computed by reference to bands of CO₂ emissions multiplied by the original list price of the vehicle. The maximum charge is capped at 37% of the list price of the car.

For 2019/20 the rates increased by 3% from the rates applying for 2018/19.

The government announced in Budget 2017 that CO₂ emissions for cars registered from April 2020 will be based on the Worldwide Harmonised Light Vehicles Test Procedure (WLTP). Draft legislation has been issued to amend the previously planned benefit percentages for 2020/21 through to 2022/23:

All zero emission cars will attract a reduced percentage of 0% in 2020/21 and 1% in 2021/22, before returning to the planned 2% rate in 2022/23.
For cars registered before 6 April 2020, the current test procedure will continue to apply and there are no further changes to percentages previously set for 2020/21. These rates will be frozen at the 2020/21 level for 2021/22 and 2022/23.
For cars first registered from 6 April 2020 most rates will reduce by 2% in 2020/21 before returning to planned rates over the following two years, increasing by 1% in 2021/22 and 1% in 2022/23.

Comment

WLTP aims to be more representative of real world driving conditions, compared to the current test known as the New European Driving Cycle. The government estimates that reported CO₂ values may be on average about 20 – 25% higher under WLTP compared to the current test.

Employment Allowance

The Employment Allowance provides businesses and charities with relief from their employer NICs bill. Regulations have been issued to restrict the Employment Allowance, from 6 April 2020, to those employers whose employer NICs bill was below £100,000 in the previous tax year. Employers who are connected to other employers (such as companies within a group) will need to add together all of their employer Class 1 NICs liabilities incurred in the tax year prior to the year of claim to determine eligibility.

The maximum Employment Allowance will be increased from £3,000 to £4,000 with effect from 6 April 2020.

From 6 April 2020 the Employment Allowance will operate as de minimis State aid. This means it will contributeto the total aid a business is entitled to under the relevant de minimis State aid cap.

Comment

De minimis State aid rules apply if a business engages in economic activity, providing goods or services to the market. Most businesses will not have received de minimis State aid before so will not need to do further checks to determine if they are eligible for the Employment Allowance.

Class 1A liabilities on Termination Awards

A new liability to Class 1A NICs comes into effect on 6 April 2020 on termination awards over £30,000 and payments from sporting testimonials above £100,000. The new Class 1A NICs liability applies to non-contractual taxable termination awards over a £30,000 threshold, that have not already incurred a payroll Class 1 NICs liability as earnings.

Unlike the Class 1A NICs liability payable on benefits in kind this new liability will not be payable and reported via the annual P11D(b) payment/reporting process. Instead, from 6 April 2020 onwards, Class 1A liabilities arising on taxable termination awards which comprise of cash and/or cash equivalent payments, will be paid and reported through the PAYE/Real Time Information (RTI) process.

This new Class 1A liability will not apply to any termination awards paid after 5 April 2020 in respect of employment which was terminated before 6 April 2020.

Comment

Before 6 April 2020, employers should ensure that their payroll software has been updated to enable them to pay and report the new Class 1A NICs liabilities, arising on termination awards, through RTI.

Loan Charge review

The Loan Charge tackles disguised remuneration tax avoidance schemes. These are tax arrangements that seek to avoid income tax and NICs by paying income to individuals in the form of loans, usually via an offshore trust, with no expectation that the loans will ever be repaid. The charge applies to any loans made through disguised remuneration schemes after 6 April 1999, which had not been repaid by 5 April 2019.

Draft legislation has been issued to amend the scope of the Loan Charge:

It will now only apply to outstanding balances of disguised remuneration loans made between 9 December 2010 and 5 April 2019 inclusive.
It will not apply to loans made in tax years before 2016/17 where a reasonable disclosure of the use of a disguised remuneration tax avoidance scheme was made within the relevant tax return or associated documents where appropriate, and HMRC failed to take any action (for example by opening an enquiry).
Those affected by the Loan Charge will be able to elect to split their loan balance over three consecutive years 2018/19 to 2020/21 (rather than the full charge arising in 2018/19).
The date by which the additional information form must be returned to HMRC will move from 1 October 2019 to 1 October 2020. The form requires taxpayers to provide full information to HMRC relating to any outstanding disguised remuneration loans for which they will need to make tax payments.

Comment

The amendments have been made due to concerns raised about the impact of some aspects of the charge, particularly the large tax bills arising in 2018/19 for individuals who had used the schemes. An estimated 11,000 individuals will be removed from the charge due to the date the loan charge applies being changed to 2010 and the provisions for those who have made reasonable disclosures. There are many individuals who will still have tax bills to pay and HMRC is introducing special ‘time to pay’ arrangements to allow some individuals to pay over a number of years.

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

Significant increases in minimum wage rates take effect from 1 April 2020. The NLW, which is the rate for workers aged over 25 years, increases by 6.2%. The government states this equates to an annual pay rise of up to £930 for a full time worker. From 1 April 2020, the new hourly rates of NLW and NMW are:

£8.72 for those over 25 years old
£8.20 for 21-24 year olds
£6.45 for 18-20 year olds
£4.55 for under 18s
£4.15 apprentice rate for apprentices under 19, and those 19 and over in their first year of apprenticeship.

Tax treatment of welfare counselling provided by employers

The government will extend the scope of non-taxable counselling services to include related medical treatment, such as cognitive behavioural therapy, when provided to an employee as part of an employer’s welfare counselling services. The changes will take effect from April 2020.

National Insurance holiday for employers of veterans in the first year of civilian employment

To support the employment of veterans, the government is meeting the commitment to introduce a National Insurance holiday for employers of veterans in their first year of civilian employment.

A full digital service will be available to employers from April 2022. However, transitional arrangements will be in place in 2021/22 which will effectively enable employers of veterans to claim this holiday from April 2021.

The holiday will exempt employers from any NICs liability on the veteran’s salary up to the Upper Earnings Limit. The government will consult on the design of this relief.

Increasing the flat rate deduction for homeworking

The government will increase the maximum flat rate income tax deduction available to employees to cover additional household expenses from £4 per week to £6 per week where they work at home under homeworking arrangements. This will take effect from April 2020.

Review of Enterprise Management Incentives (EMI) scheme

The government will review the EMI scheme to ensure it provides support for high-growth companies to recruit and retain the best talent so they can scale up effectively, and examine whether more companies should be able to access the scheme.

Van benefit charge nil-rating for zero emission vans

From April 2021, the government will apply a nil rate of tax to zero-emission vans within the van benefit charge.

Other Matters

VAT

E-publications

The government will introduce legislation to apply a zero rate of VAT to e-publications from 1 December 2020, to make it clear that e-books, e-newspapers, e-magazines and academic e-journals are entitled to the same VAT treatment as their physical counterparts.

Tampon tax

From 1 January 2021 the government will apply a zero rate of VAT to women’s sanitary products.

Postponed accounting

From 1 January 2021 postponed accounting for VAT will apply to all imports of goods, including those from the EU.

Comment

The postponed accounting for VAT aims to provide a boost to those VAT registered UK businesses which are integrated in international supply chains as they adapt to the UK’s new trading arrangements under Brexit.

Insolvency

Draft legislation has been issued to amend insolvency legislation from 1 December 2020. Broadly, HMRC will move up the creditor hierarchy for the distribution of assets in the event of an insolvency. HMRC will become a secondary preferential creditor in respect of certain tax debts held by a business which represent amounts paid by customers or employees. The taxes include VAT, PAYE, employee NICs and Construction Industry Scheme deductions.

The rules will remain unchanged for taxes owed by businesses themselves, such as Corporation Tax and employer NICs.

Draft legislation has also been issued to make directors, and other persons connected to companies subject to an insolvency procedure, jointly and severally liable for amounts payable to HMRC by the company in certain circumstances. This is mainly for cases where the company has engaged in avoidance, evasion or ‘phoenixism’. This measure applies to all tax periods ending, and to facilitation penalties determined and issued, after the date of Royal Assent of the next Finance Act.

Comment

The rationale for HMRC to become a preferential creditor for certain taxes is that the taxes represent payments by customers (such as VAT) or deductions from employees (such as PAYE) and these amounts should ‘go to fund public services rather than being distributed to other creditors’.

Plastic Packaging Tax

This will be a new tax that applies to plastic packaging produced in or imported into the UK that does not contain at least 30% recycled plastic. The tax rate will be £200 per tonne of non-compliant plastic packaging. A consultation on the design and implementation of the tax has been issued and the tax is to take effect from April 2022.

Personal Tax

The personal allowance

The personal allowance is currently £12,500. Budget 2018 announced that the allowance will remain at the same level in 2020/21 and then increase by CPI. There is a reduction in the personal allowance for those with ‘adjusted net income’ over £100,000. The reduction is £1 for every £2 of income above £100,000. So for the current and next tax year there is no personal allowance where adjusted net income exceeds £125,000.

The marriage allowance

The marriage allowance permits certain couples, where neither pays tax at more than the basic rate, to transfer 10% of their personal allowance to their spouse or civil partner.

Comment

The marriage allowance reduces the recipient’s tax bill by up to £250 a year in 2019/20 and 2020/21. The marriage allowance was first introduced for 2015/16 and there continue to be couples who are entitled to claim but have not yet done so. It is possible to claim for all years back to 2015/16 where the entitlement conditions are met. The total tax saving for all years up until 2019/20 could amount to £1,150. A claim for 2015/16 will need to be made by 5 April 2020.

Tax bands and rates

The basic rate of tax is 20%. In 2019/20 and 2020/21 the band of income taxable at this rate is £37,500 so that the threshold at which the 40% band applies is £50,000 for those who are entitled to the full personal allowance.

Individuals pay tax at 45% on their income over £150,000.

Scottish residents

The tax on income (other than savings and dividend income) is different, for taxpayers who are resident in Scotland, from taxpayers resident elsewhere in the UK. The Scottish income tax rates and bands apply to income such as employment income, self-employed trade profits and property income.

In 2019/20 there are five income tax rates which range between 19% and 46%. Scottish taxpayers are entitled to the same personal allowance as individuals in the rest of the UK. The two higher rates are 41% and 46% rather than the 40% and 45% rates that apply to such income for other UK residents. For 2019/20, the threshold at which the 41% band applies is £43,430 for those who are entitled to the full personal allowance.

The Scottish Government has confirmed that the Scottish income tax rates will be frozen for 2020/21. The thresholds from which the 20% and 21% bands apply will be increased to £14,585 and £25,158 respectively for those who are entitled to the full personal allowance.

Welsh residents

From April 2019, the Welsh Government has the right to vary the rates of income tax payable by Welsh taxpayers. The UK government has reduced each of the three rates of income tax paid by Welsh taxpayers by 10 pence. The Welsh Government set the Welsh rate of income tax at 10 pence which has been added to the reduced rates. This means the tax payable by Welsh taxpayers continues to be the same as that payable by English and Northern Irish taxpayers.

The Welsh Government has confirmed that the income tax rate will remain at 10 pence for 2020/21.

Tax on savings income

Savings income is income such as bank and building society interest.

The Savings Allowance applies to savings income and the available allowance in a tax year depends on the individual’s marginal rate of income tax. Broadly, individuals taxed at up to the basic rate of tax have an allowance of £1,000. For higher rate taxpayers the allowance is £500. No allowance is due to additional rate taxpayers.

Some individuals qualify for a 0% starting rate of tax on savings income up to £5,000. However, the rate is not available if taxable non-savings income (broadly earnings, pensions, trading profits and property income less allocated allowances and reliefs) exceeds £5,000.

Tax on dividends

The first £2,000 of dividends is chargeable to tax at 0% (the Dividend Allowance). Dividends received above the allowance are taxed at the following rates:

7.5% for basic rate taxpayers
32.5% for higher rate taxpayers
38.1% for additional rate taxpayers.

Dividends within the allowance still count towards an individual’s basic or higher rate band and so may affect the rate of tax paid on dividends above the Dividend Allowance.

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

Child Trust Funds (CTFs)

Junior ISAs and its precursor CTFs allow tax free savings to be made for children under 18. There is no access to the investments until the child is 18. CTF accounts will start to mature in September 2020 when the first children reach 18. Without regulatory change the investments would lose their tax advantaged status. CTF and ISA regulations have therefore recently been made which:

make sure that investments in CTF accounts retain their tax advantaged status post maturity, pending instructions from the account holder
allow savings transferred from a matured CTF to be disregarded for the annual ISA subscription limit.

Comment

Around six million children hold a CTF and approximately 800,000 will mature each year from September 2020. A significant proportion of these accounts are thought to be ‘dormant’ – holding just the contributions made by the government. Government contributions are not made to Junior ISAs. This government webpage: bit.ly/2s8ceyz allows a check to be made as to where a CTF is held but a Government Gateway user ID is required first.

Junior ISA and CTF annual subscription limits

The annual subscription limit for Junior ISAs and CTFs will be increased from £4,368 to £9,000 for 2020/21.

Pensions changes

The pensions annual allowance (currently £40,000) is the maximum amount of tax-relieved pension savings that can be accrued in a year. However, for those on higher incomes, the annual allowance is reduced by £1 for every £2 that an individual’s ‘adjusted income’ exceeds £150,000, to a minimum annual allowance of £10,000. Adjusted income is broadly net income before tax with the addition of any pension accrual. The taper potentially applies to an individual with income before tax, without the addition of the pension accrual, above £110,000. This is known as the ‘threshold income’.

Adjusted income and threshold income will each be raised by £90,000 for 2020/21. The threshold income will be £200,000, so individuals with income below this level will not be affected by the tapered annual allowance. The annual allowance will begin to taper down for individuals who also have an adjusted income above £240,000.

There is also a change to the minimum annual allowance. The minimum level to which the annual allowance can taper down will reduce from £10,000 to £4,000 from 6 April 2020. This reduction will only affect individuals with adjusted income over £300,000.

Support during the coronavirus

The Prime Minister previously announced that the forthcoming COVID-19 Bill will temporarily allow Statutory Sick Pay (SSP) to be paid from the first day of sickness absence, rather than the fourth day, for people who have COVID-19 or have to self-isolate in accordance with government guidelines. The Budget sets out a further package to widen the scope of SSP and make it more accessible. The government will temporarily extend SSP to cover:

individuals who are unable to work because they have been advised to self-isolate
people caring for those within the same household who display COVID-19 symptoms and have been told to self-isolate.

Support for those ineligible for SSP

The government recognises that self-employed people and employees earning below the National Insurance Lower Earnings Limit are not entitled to SSP and will offer financial support to these individuals through a ‘new style’ Employment and Support Allowance and Universal Credit.

Newsletter – April 2014

Posted on April 25, 2014 by Henry Cooper

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

Please contact us if you would like any further information.

eNEWS quicklinks
HMRC guidance on new pension flexibility	Employers no longer able to reclaim SSP
Disclosure facility for those with undisclosed second incomes	More guidance on Class 3A NIC
More HMRC guidance on the Employment Allowance	Tax-Free Childcare
Increase in NMW rates	Advisory fuel rates for company cars and fuel benefit charge
P11D deadline approaching

HMRC guidance on new pension flexibility

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

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

Internet link: Pensions flexibility

Employers no longer able to reclaim SSP

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

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

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

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

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

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

Internet link: Employer bulletin

Disclosure facility for those with undisclosed second incomes

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

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

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

Internet links: Second incomes campaign Guide to disclosure

More guidance on Class 3A NIC

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

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

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

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

Internet link: Publication

More HMRC guidance on the Employment Allowance

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

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

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

For help with payroll matters please do contact us.

Internet links: Employment allowance detail Employment allowance key facts

Tax-free childcare

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

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

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

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

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

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

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

Internet link: News

Increase in NMW rates

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

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

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

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

Business Secretary Vince Cable said:

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

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

Internet links: Press release HMRC NMW excuses

Advisory fuel rates for company cars and fuel benefit charge

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

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

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

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

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

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

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

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

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

Internet link: HMRC advisory fuel rates

P11d deadline approaching

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

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

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

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

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

Newsletter – December 2013

Posted on December 18, 2013 by Henry Cooper

In this month’s enews we report on pertinent announcements from the Autumn Statement and the subsequent publication of draft Finance Bill legislation.

We also report on the proposals for shared parental leave and the latest fuel advisory rates.

Please contact us if you would like any further information.

eNEWS quicklinks
Autumn Statement	Advisory Fuel rates for company cars
Employers will no longer be able to reclaim SSP	Shared Parental Leave
Changes for Limited Liability Partnerships (LLPs)	‘False self-employment’ via intermediaries
CGT – Private Residence Relief	HMRC advise register for Self Assessment now

Autumn Statement

Earlier this month the Office for Budget Responsibility (OBR) published its updated forecast for the UK economy and Chancellor George Osborne responded to that forecast in a statement to the House of Commons later on that day. This statement was followed by the issue of draft legislation together with consultation documents.

Some of the key new announcements made as part of the Autumn Statement are as follows:

the introduction from April 2015 of an exemption from employer NICs for employees under 21 on earnings paid up to the Upper Earnings Limit
allowing companies to claim tax relief on donations to Community Amateur Sports Clubs by extending Gift Aid
the introduction from October 2015 of a new class of voluntary NIC (Class 3A) that gives those who reach state Pension age before 6 April 2016 an opportunity to boost their Additional State Pension entitlement.

The link below gives access to the government information on these and other areas.

Please also refer to the separate articles in this newsletter on some specific announcements where further details are available.

However please do contact us if you would like further details on any announcements.

John Cridland, CBI Director-General has issued the CBI’s response to the statement some of which is reproduced below:

‘We have always advocated the dual approach of tackling the deficit and driving growth – the OBR forecasts confirm it is working. Let’s stick with what works.’

‘The pressure on the high street has been recognised; the 2% cap on business rates and discount for very small businesses are positive, as is the reoccupation relief.’

‘Abolishing a jobs tax on employing young people under 21 will make a real difference and help tackle the scourge of youth unemployment.’

‘But it was a missed opportunity not to support our hard-pressed energy intensive businesses which are also struggling with rising costs, and the package on housing supply could have been more ambitious.’

‘Alongside the positive measures to help the high street, including the 2% cap on rates, empty property incentive and £1,000 boost for smaller retailers, we need to see a review of the outmoded business rates system.’

“Reducing the cost of employing 18-20 year olds will help more young people find jobs when it comes into force in 2015. Job centres will have an important role to play and will need to work more effectively with businesses to ensure young people get the right advice.’

‘Businesses will now be looking for government action in the Budget and this has to include looking at the impact of the Carbon Price Floor. Shale gas will play a role in delivering a balanced energy mix, but we need action on all fronts to keep costs down and secure our future supply.’

Internet links: Autumn Statement CBI press release

Advisory fuel rates for company cars

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

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

Engine size	Petrol	LPG
1400cc or less	14p (15p)	9p (10p)
1401cc – 2000cc	16p (18p)	11p
Over 2000cc	24p (26p)	16p

Engine size	Diesel
1600cc or less	12p
1601cc – 2000cc	14p (15p)
Over 2000cc	17p (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

Employers will no longer be able to reclaim SSP

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

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

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

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

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

Internet links: ICAEW health work and wellbeing initiative

Shared parental leave

The government has announced how the new system of shared parental leave will operate for employees and employers.

Earlier this year the government invited views on how the system for shared parental leave and pay should operate.

The consultation considered how the new system should work and align with current arrangements for maternity and paternity leave.

The proposals for shared parental leave and flexible working are included in the Children and Families Bill 2013 which is currently going through Parliament. The details will be set out in regulations and are expected to be introduced from April 2015.

The new leave system will allow eligible working families to have more choice about how they balance their work and caring commitments. Parents can choose to be at home together or to work at different times and share the care of their child.

The government hopes that businesses will also benefit from being able to have more open discussions about patterns of leave with their employees.

Internet link Parental Leave

Changes for 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.

The new rules will apply when an individual is a member of an LLP and three conditions are met. The conditions are:

There are arrangements in place under which the individual is to perform services for the LLP, in their capacity as a member, and it would be reasonable to expect that the amounts payable by the LLP in respect of their performance of those services will be wholly, or substantially wholly, disguised salary. An amount is disguised salary if it is fixed or, if is variable, it is varied without reference to the overall profits of the LLP.
The mutual rights and duties of the members and the LLP and its members do not give the individual significant influence over the affairs of the LLP.
The individual’s contribution to the LLP is less than 25% of the disguised salary. The individual’s contribution is defined (broadly) as the amount of capital which they contributed to the LLP.

The new rules will have effect from 6 April 2014.

Internet link: Partnerships

‘False self-employment’ via intermediaries

Following announcements made as part of the Autumn Statement the government has announced some further information ‘false self-employment’ via intermediaries.

The government believes that employment intermediaries are increasingly being used to disguise employment as self-employment. The largest business sector being the construction industry where the government believes 200,000 workers are engaged via intermediaries. However, there are other sectors such as the driving, catering and security industries where there is evidence of existing permanent employees being taken out of direct employment and being moved into false self-employment arrangements involving intermediaries.

The central proposal is to make a change to the agency legislation so that it will apply to these type of intermediary arrangements where the worker is:

subject to (or to the right of) control, supervision or direction as to the manner in which the duties are carried out
providing their services personally
remunerated as a consequence of providing their services
receiving remuneration not already taxed as employment income.

After the change the intermediary will be responsible for deduction PAYE and NIC from the worker and paying employers NIC.

The legislation will be amended with effect from 6 April 2014.

Internet link: False self employment

CGT – Private Residence Relief

It was announced in the Autumn Statement that there will be changes made to the rules for 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. 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.

The final period exemption will be reduced from 36 months to 18 months with two exceptions. An individual that:

is a disabled person or
is a long term resident in a care home, where they have been there for at least three months, or can reasonably be expected to be resident there for three months, and
has no other property, on which they, or their spouse or civil partner, can claim private residence relief

will continue to be able to claim a 36 month final period exemption.

The rules apply to disposals made on or after 6 April 2014.

Internet link: Draft legislation and TIIN

HMRC advise register for Self Assessment now

HMRC is urging those who have to file a Self Assessment return for the first time to register for its online services now.

The process of registration can take up to seven working days to complete and involves HMRC sending you an activation code in the post. It’s therefore important not to leave this to the last minute, to avoid a rush to beat the 31 January filing deadline. Those needing to complete a Self Assessment return for the first time this year will include parents with income above £50,000 who received Child Benefit payments from 7 January 2013. The High Income Child Benefit Charge is based on their incomes and how much of the benefit they received in the 2012/13 tax year.

The 31 January is also the deadline for paying any tax owed for 2012/13. Taxpayers who owe less than £3,000, and want HMRC to collect the tax they owe through next year’s tax code, need to submit their online return by midnight on 30 December.

If you would like any help with Self Assessment please do get in touch.

Internet link: News

Newsletter – December 2011

Posted on December 31, 2011 by Henry Cooper

eNEWS – December 2011

In this month’s enews we report on some further announcements made following the Autumn Statement.

Please browse through this month’s articles using the links below and contact us if any issues or questions arise.

With best wishes for 2012.

eNEWS quicklinks
Pensions Auto Enrolment	Advisory fuel rates for company cars
Capital allowances in Enterprise Zones	Seed Enterprise Investment Scheme
Statutory Residence Test	Self assessment deadline fast approaching
The Portas Review	HMRC to accept Faster Payments
2012/13 Statutory Payments

Pensions Auto Enrolment

The Government has confirmed that pensions auto enrolment will commence in Autumn 2012 and all employers will remain within the scope of the rules.

However small businesses, those with less than 50 employees, will be given additional time to prepare for the implementation. The government have confirmed that no small employers are affected by the reforms before the end of this Parliament.

Minister for Pensions Steve Webb said:

‘Our society and economy needs to be based on a foundation of saving, not debt. Automatic enrolment will help millions save, and to not act will leave people poorer in retirement. That is why I am confirming today that automatic enrolment will start on time and all employers will be part of it.

We recognise that small businesses are operating in tough economic times so we are softening the timetable for implementation to give them some additional breathing space. This is a sensible step that ensures long term pension issues are addressed while meeting the short and medium term needs of small business.

We are committed to ensuring the employees of these small businesses get the chance to save and that is why no one will miss out.

Under the revised timeline, small business would begin automatically enrolling their staff in May 2015, instead of the current timing of April 2014. Half of all workers will still be automatically enrolled before the end of this Parliament.’

It is expected that further details will be announced in January 2012 and we will keep you informed of developments.

Internet link: DWP press release

Advisory fuel rates for company cars

New company car advisory fuel rates have been published to take effect from 1 December 2011. HMRC’s website states:

‘These rates apply to all journeys on or after 1 December 2011 until further notice, allowing them to reflect fuel prices more quickly. 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 December 2011 are:

Engine size	Petrol	Diesel	LPG
1400cc or less	15p (15p)		10p (11p)
1401cc – 2000cc	18p (18p)		12p (12p)
Over 2000cc	26p (26p)		18p (18p)
1600cc or less		12p (12p)
1601cc – 2000cc		15p (15p)
Over 2000cc		18p (18p)

Please note that most rates have not changed. However the rate for LPG cars has reduced for those with an engine size of 1400cc or less.

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

Capital allowances in Enterprise Zones

Following the Autumn Statement at the end of November 2011, more information is now available in respect of the proposal to give 100% first year allowances on plant and machinery expenditure for use in some Enterprise Zone areas.

The relief will only be available to trading companies.
The plant must be new and represent an investment not a replacement of existing plant.
The plant must be used primarily in designated assisted areas within Enterprise Zones.
The allowance will apply for purchases made from 1 April 2012 up to 31 March 2017.
Some businesses and some types of expenditure are specifically excluded from the provisions.

Internet link: Draft rules CA Enterprise Zones

Seed Enterprise Investment Scheme

The government has released more information on the new Seed Enterprise Investment Scheme (SEIS) aimed at smaller companies. The proposals include the following:

The relief will initially run from 6 April 2012 until 5 April 2017 but may continue after that date.
Income tax relief on a qualifying investment will be 50%.The relief is available to be set against any income tax liability that is due, whether at basic, higher or additional rate.
Income tax relief will be withdrawn in certain circumstances including a disposal of the shares within three years.
There will be an annual limit of £100,000 investment by an individual.
A director may make a qualifying investment but not an employee or an associate of an employee.
An individual may not hold more than 30% of the shares in the company.
The issuing company must have been incorporated within two years of the date on which the qualifying shares are issued.
The company must exist to carry on a qualifying trade.
The gross assets of the company (including a proportion of assets of companies which hold at least 25% of the shares in the issuing company) must not exceed £200,000 immediately before the shares are issued.
The issuing company must not have more than the equivalent of 25 full-time employees immediately before the shares are issued.
The maximum amount which can be raised by a company through SEIS is £150,000 and this is an overall total not an annual limit.
Subject to conditions, the disposal of SEIS shares will be exempt from CGT.
Where an individual makes a capital gain in 2012/13 and invests an amount which is at least equal to the gain in qualifying SEIS shares before 6 April 2013 then the gain will be exempt from CGT. If the shares fail to meet the qualifications for SEIS for three years then the exemption will be withdrawn.

If you are interested in this new relief and wonder if it may be relevant to you or your business please do get in touch.

Internet link: Treasury SEIS

Statutory Residence Test

The government has been consulting on introducing a Statutory Residence Test (SRT). The test which was expected to be introduced from 2012 has been delayed until 6 April 2013. More details are expected to be announced in the 2012 Budget.

There is currently no definition of ‘residence’ in UK tax law and yet the liability to income tax and capital gains tax (CGT) rests on knowing an individual’s UK residence status for a tax year. Currently the determination of residence is based on old case law and, as a recent Supreme Court decision has shown, it can lead to significant uncertainty and large tax liabilities.

The SRT is expected to be based on three parts and an individual would consider each part in turn. If a definite answer on their residence status is found on the first part then there is no need to proceed further. Similarly if the second part gives a definitive answer there is no need to move to the third part. That final test then provides a definitive answer.

The parts and the conditions are as follows:

Part A – satisfy any one of three conditions and the individual is conclusively non-resident in the year.

Part B – satisfy any one of three conditions and the individual is conclusively resident for the year.

If no definite answer under Part B then proceed to Part C

Part C – here the rules combine the time spent in the UK and a number of connection factors which are deemed to link an individual to the UK.

Some individuals who are currently outside the UK, particularly those working abroad, will need to note that the new rules could change their residence status and they may wish to review plans for visits back to the UK and the impact of any potential connecting factors.

Please contact us if you have any concerns in this area.

Internet link: Treasury consultation on residence

Self assessment deadline fast approaching

HMRC are reminding taxpayers that the deadline for filing self assessment tax returns is fast approaching. According to their website:

‘You must send your online tax return by midnight on Tuesday 31 January 2012.

The deadline is only later than this if you received your tax return, or the letter telling you to complete a tax return, after 31 October 2011. In this case you’ll have three months from the date you received that letter.

If your online tax return is late, you’ll have to pay a penalty. This applies even if you have no tax to pay or if you pay all the tax you owe on time.’

The following illustrates that missing the deadline and failing to submit the return online may result in significant penalties.

‘What happens if you miss the deadline?

If you miss the 31 January deadline for online tax returns, you will have to pay a penalty.

The penalty is £100. You’ll still have to pay this even if

your return is just a day late
you have no tax to pay
you pay all the tax you owe before 31 January 2012.

The longer you delay, the more you’ll have to pay. If your tax return is three months late, you’ll have to pay a penalty for each additional day it is late. If it’s six months late, you’ll have to pay a further penalty and another final penalty if it’s 12 months late. Together these could add up to a penalty of £1,600 or more.

Don’t send a paper tax return now – the deadline was 31 October 2011. You’ll have to pay a £100 penalty straight away if you do and the daily penalties above will start even earlier. Send it online instead.’

If you require any help with your tax return please do get in touch.

Internet link: HMRC news

The Portas Review

The CBI commented on a report by Mary Portas on the future of the high street.

Dr Neil Bentley, CBI Deputy Director-General, said:

‘Retail represents about 10% of our economy, and the high street is a vital part of this.

The Portas Review makes some sensible suggestions about how we can inject life back into town centres, including increased use of Business Improvement Districts and relaxing planning restrictions on the high street, in particular on change of use.

More importantly, she recognises the growing burden business rates are placing on companies right across the country at a critical time.

We need to make sure the UK remains attractive to investors, as it’s their decisions that will ultimately lead to regeneration of our town centres. Any changes to the planning and business rate regimes must therefore encourage investment in the broadest sense, and not just rob Peter to pay Paul.’

Internet links: BIS press release with access to report CBI press release

HMRC to accept Faster Payments

HMRC have announced that they will now accept payments made using the Faster Payments Service. This will allow taxpayers to make faster electronic payments, typically via internet or telephone banking, enabling them to be processed on the same or next day.

HMRC advise that if you want make payments using this method you should contact your bank or building society to confirm the following:

the services available to you
whether there are any single transaction or daily limits on the amount you can pay
their latest cut off times for making a payment.

They are also stressing that when making a payment to HMRC it is important to ensure that you are using the correct bank account details and reference number.

Internet link: HMRC news

2012/13 Statutory Payments

HMRC have announced the following statutory payment rates which are due to take affect for 2012/13. These rates are still subject to Parliamentary approval and HMRC will confirm the rates before 1 April 2012.

Statutory Maternity Pay (SMP) £135.45 per week

Ordinary Statutory Paternity Pay £135.45 per week

Additional Statutory Paternity Pay £135.45 per week

Statutory Adoption Pay (SAP) £135.45 per week

Statutory Sick Pay (SSP) £85.85 per week

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

Internet link: HMRC statutory payment rates