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Newsletter – November 2016

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Enews – November 2016

In this month’s eNews we report on recent developments including the announcement that the plans to introduce a secondary market for annuities have been scrapped together with advice for employers on late filing penalties, avoiding incorrect RTI returns and the provision of childcare voucher provision and how to avoid incorrect RTI returns.

We also consider the latest tax gap statistics, updated phishing guidance from HMRC and a new website to help charities tackle fraud.

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

PAYE late filing penalties

HMRC have published the latest issue of the Employer Bulletin with articles on a variety of topics relevant to employers.

One article advises that HMRC have issued the Quarter 1 late filing penalty notices, which cover the period 6 April to 5 July 2016 and have confirmed that these penalties will continue to be issued on a risk assessed basis.

HMRC have confirmed that a late filing penalty will generally not be charged for delays of up to three days after the statutory filing date, but that they may contact employers who persistently file after the statutory filing date but within three days, and they risk being considered for a penalty.

The Bulletin includes advice on how to appeal against a penalty online and states:

‘If you receive a penalty notice which includes multiple penalty defaults and you believe you had a reasonable excuse for each, make sure you appeal against all of the defaults shown on your penalty notice, including any default with a zero charge. If your appeal is accepted, the un-penalised default can then be applied to a later month, reducing the value of any future penalty charges you might incur.’

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

Internet link: Employer Bulletin

Latest guidance for employers

Statutory Maternity Leave and Childcare Vouchers

Following the decision of an Employment Appeal Tribunal (Peninsula Business services v Donaldson) regarding Childcare Vouchers (CCVs), salary sacrifice and maternity leave, HMRC are considering what guidance is needed. In the interim they have confirmed:

If CCVs are provided under an employment contract, outside the scope of a salary sacrifice scheme, then the vouchers must continue to be provided during maternity leave and other periods of family leave (other than unpaid parental leave). There is legal authority that whether an employer must provide CCVs to a person participating in a salary sacrifice scheme in respect of a period when they are on family leave, depends on the terms of the contract of employment. In the Peninsula case, the contract said that an employee on maternity leave would not continue to receive CCVs. The judgment is only of direct relevance in dealing with similar contractual exclusions. Employers are free to continue making payments into a salary sacrifice scheme to buy CCVs on behalf of an employee on family leave if they wish. Use of CCVs that employees already have is not affected by the judgment.

Avoiding errors when reporting PAYE information to HMRC

This article is particularly concerned with incorrect reporting of CIS and statutory payments.

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

Internet link: Employer Bulletin

Tax gap falls to 6.5%

The Office for National Statistics has announced that the UK tax gap fell in 2014/15 to its lowest ever level of 6.5%.

The press release confirms that the UK tax gap, the difference between the amount of tax due and the amount collected, is one of the lowest in the world.

HMRC have reduced the tax gap from 8.3% in 2005/06. If the tax gap had remained at the 2005 to 2006 level of 8.3%, it would have grown to £47 billion and the country would have been £11 billion a year poorer.

HMRC believe that the tax gap has fallen, in part, due to digital reporting. In particular Real Time Information reporting for the PAYE system has led to more accurate recording of information on payroll taxes, and the shift to VAT online has helped bring the VAT gap in 2014/15 to its lowest level of 10.3% (£12.7 billion).

The Financial Secretary to the Treasury, Jane Ellison said:

This government is committed to tackling tax evasion and avoidance wherever it occurs.

The UK has one of the lowest tax gaps in the world. By investing £1.8 billion since 2010 in boosting HMRC compliance capabilities, we’ve brought our tax gap down to its lowest ever level. And to make it even easier for people to pay the right tax in the future, we’ve invested £1.3 billion in new digital tools.

Internet link: GOV.UK

HMRC update phishing guidance

HMRC have updated their guidance to taxpayers on how to spot phishing scam emails.

Phishing is the fraudulent act of emailing a person in order to obtain their personal/financial information such as passwords and credit card or bank account details. These emails often include a link to a bogus website designed to encourage the unwary to enter their personal details.

The HMRC guidance is designed to help taxpayers to recognise genuine contact from HMRC, and how to tell when an email/text message is phishing/bogus.

Internet link: GOV.UK recognising phishing emails

New website to help charities tackle fraud

The Charity Commission for England and Wales, together with members of the Charity Sector Counter Fraud Group, have launched a new website to help charities tackle fraud. The website is designed to provide guidance for trustees, staff and volunteers who want more information on tackling fraud in their charity, and includes guidance, tips and case studies, together with links to other organisations tackling charity fraud.

The new website has been launched to mark the start of Charity Fraud Awareness Week (24-28 October). The campaign reminds charities how to limit their fraud risk and aims to ensure that trustees and charity staff can recognise the warning signs of fraud and offers advice on an effective and proportionate response.

David Kirk, Chairman of the Fraud Advisory Panel, commented:

‘Fraud presents a serious threat to every organisation but unfortunately charities can be particularly vulnerable due to the high number of financial transactions they undertake. Fraud can manifest itself in many different forms and is constantly evolving – which is why we are urging everyone working with charities and not-for-profit organisations to join together and stop fraud against charities. Charity staff and trustees must stay alert to the risks and understand how to manage them.’

Internet links: www.charitiesagainstfraud.org.uk GOV.UK news

Plans to allow pensioners to sell annuities abandoned

The government has announced that it is shelving plans to allow pensioners to sell their annuities for a lump sum.

Many experts had predicted that those who sold their annuities would be likely to get a poor deal and the government has decided not to take forward the plans to introduce a secondary annuities market because the consumer protections required could undermine the market’s development.

It has become clear that creating the conditions to allow a competitive market to emerge could not be balanced with sufficient consumer protections.

The Economic Secretary to the Treasury, Simon Kirby, said:

‘Allowing consumers to sell on their annuity income was always dependent on balancing the creation of an effective market with making sure consumers are properly protected.

It has become clear that we cannot guarantee consumers will get good value for money in a market that is likely to be small and limited.

Pursuing this policy in these circumstances would put consumers at risk – this is something that I am not prepared to do.

The government has always been clear that for the majority of people keeping their annuity incomes will be their best option, estimating that only 5% of people who currently hold an annuity would take advantage of this reform.’

Internet link: GOV.UK news

Newsletter – November 2015

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Enews – November 2015

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

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

Autumn Statement 2015 expectations

UK tax gap falls to 6.4%

CBI warns government not to ‘tinker’ with pensions tax

HMRC’s landlord campaign nets £50 million

Identity theft – ICO guidance

‘State Pension top up’ scheme

Workplace Pensions – don’t ignore it

NMW offenders named and shamed

Autumn Statement 2015 expectations

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

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

The key changes originally proposed were:

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

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

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

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

Internet links: GOV.UK BBC news

UK tax gap falls to 6.4%

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

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

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

David Gauke, Financial Secretary to the Treasury, said:

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

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

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

Internet link: HMRC press release

CBI warns government not to ‘tinker’ with pensions tax

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

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

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

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

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

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

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

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

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

Internet links: CBI news Report

HMRC’s landlord campaign nets £50 million

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

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

Caroline Addison, Head of Campaigns at HMRC, said:

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

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

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

Internet link: HMRC press release

Identity theft – ICO guidance

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

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

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

Internet link: ICO news

‘State Pension top up’ scheme

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

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

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

Minister for Pensions, Baroness Altmann said:

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

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

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

Internet links: GOV.UK news GOV.UK policies

Workplace Pensions – don’t ignore it

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

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

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

Pensions Minister, Baroness Altmann, said:

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

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

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

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

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

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

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

NMW offenders named and shamed

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

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

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

Business Minister, Nick Boles said:

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

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

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

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

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

For help with payroll issues contact us.

Internet links: GOV.UK news NMW rates

Newsletter – November 2014

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eNews – November 2014

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

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

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

Pension flexibility

HMRC Credit Card Sales Campaign disclosure opportunity

IR35 Business Entity Tests

HMRC to collect more debt through tax codes

VAT on ‘snowballs’

Acas guidance on new shared parental leave rules

Parties for employees

2012/13 tax gap

Pension flexibility

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

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

Pension expert Dr Ros Altmann CBE said:

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

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

Internet link: News

HMRC Credit Card Sales Campaign disclosure opportunity

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

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

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

Internet link: Credit card sales campaign

IR35 Business Entity Tests

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

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

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

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

  • used very little
  • not fulfilling their intended purpose.

As a result the review recommended withdrawing the BETs.

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

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

Internet link: News

HMRC to collect more debt through tax codes

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

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

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

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

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

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

Internet link: News

VAT on ‘snowballs’

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

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

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

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

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

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

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

Internet link: Brief

Acas guidance on new shared parental leave rules

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

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

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

Internet link: Acas guidance

Parties for employees

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

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

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

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

Internet link: HMRC guidance

2012/13 tax gap

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

Financial Secretary to the Treasury David Gauke said:

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

Internet link: News