Newsletter – May 2018

eNews May 2018

In this month’s eNews we report on the latest announcement from HMRC regarding Making Tax Digital. We also consider the looming deadline for GDPR, changes to tax reliefs following the Scottish Budget and issues to do with EMI share options. With articles on benefits in kind forms P11D,the VAT fuel scale charges and a new benefits exemption for workplace charging of employee vehicles there is lots to consider.

Changing priorities at HMRC

Over the coming years, the government plans to phase in its landmark Making Tax Digital (MTD) initiative, which will see taxpayers move to a fully digital tax system. However HMRC has shared a statement about how they are prioritising change in the department and as a result some parts of MTD will be delayed. HMRC has acknowledged the challenges in:

  • exiting the EU and
  • the ambition to become the world’s most digitally advanced tax authority.

While some of the finer details are still being decided, HMRC have announced that, to achieve the above, some aspects of MTD are to be delayed. HMRC still plan to go ahead with MTD for VAT from April 2019. Information on some of the delayed projects is set out below:

Plans to introduce further digital services for individuals

There will be ‘halted progress’ on simple assessment and real-time tax code changes. Additional services in this area will only be added where they reduce phone or post contact or otherwise deliver ‘significant savings’.

Other digitalisation of services affecting fewer individuals

This includes Inheritance Tax payments, Tax Advantaged Venture Capital Schemes applications and PAYE Settlement Agreements

Creation of the single digital account for all businesses

HMRC has confirmed this will now happen at a ‘slower pace’. HMRC has confirmed the single digital account remains an aim of the department and they stress it will not impact the delivery of Making Tax Digital.

Voluntary Making Tax Digital for Business service for income tax

HMRC has confirmed this will continue to be available for any sole trader wishing to make quarterly updates to HMRC.

Mandatory Making Tax Digital for VAT – still ‘on track’

HMRC stated that MTD for VAT is still on track. VAT registered businesses with a turnover in excess of the £85,000 VAT registration threshold, will be required to comply with the requirements of MTD for VAT for all VAT periods commencing on or after 1 April 2019.

In addition, the government has confirmed that, it will not mandate any further MTD for Business changes before 2020, at the earliest.

Internet link: ICAEW blog

GDPR compliance deadline looms

With less than one month until the introduction of the new General Data Protection Regulation (GDPR), the Federation of Small Businesses (FSB) is warning small and medium-sized enterprises (SMEs) that time is running out for them to prepare.

The business group stated that small businesses face an ‘uphill challenge’ in ensuring that they are compliant by the date when GDPR takes effect of 25 May 2018.

Under the new rules, organisations which collect, store and process individuals’ personal data will be subject to new obligations, with an increased emphasis on accountability and transparency.

The financial penalties for failing to comply are severe, with fines costing up to €20 million or up to 4% of total annual worldwide revenue, whichever is the greater.

Mike Cherry, National Chairman of the FSB said:

‘As the GDPR deadline swiftly approaches, there is a real danger that many small businesses are yet to have adequately prepared for the changes. Fortunately for these businesses, there is still time on the clock to start, or finish, their preparations.’

‘The GDPR is the largest shake-up of data protection laws for years, and whether you are a personal trainer or a consultant, most businesses will have to implement changes to their current practices to make sure they are complying with the new rules.’

Further information on the GDPR can be found on the ICO website.

Internet links: ICO guidance FSB press release

Tax reliefs following the Scottish Budget

The Government has stated that it will ensure that tax reliefs continue to work as they were intended as the new Scottish Income Tax rates and bands are introduced from 6 April 2018. The Government has confirmed:

  • Marriage Allowance
    Marriage Allowance allows taxpayers to transfer 10% of their tax-free Personal Allowance to their spouse or civil partner, reducing their tax bill by up to £230 in 2017 to 2018, and £238 in 2018/19. The UK government will ensure that all those claiming Marriage Allowance in Scotland can continue to do so at the current rate (20%).
  • Gift Aid
    Gift Aid allows charities to claim back 25p for every £1 donated. The UK government will make changes to ensure that Scottish taxpayers can benefit from the right rate of tax relief on Gift Aid. Gift Aid will continue to be paid to charities at the basic rate, with Scottish taxpayers able to claim the correct amount of additional relief on top of this.
  • Pensions relief at source
    The UK government confirmed that current processes will continue while it works with stakeholders to establish how this will work in the longer term. For 2018/19, Scottish taxpayers who receive relief on their contributions at source will, therefore, continue to receive relief in their pension pot at 20%, with no adjustment for those taxed at a rate of less than 20%, and scope for those taxed at a rate higher than 20% to claim additional relief.
  • Social security pension lump sum
    The UK government will make changes so that Scottish taxpayers who receive a social security pension lump sum will be taxed, where appropriate, at the new Scottish starter rate.
  • Finance cost relief This will continue to apply at 20%, the same rate applicable to landlords across the UK.

Please contact us if you have queries on the workings of any of these tax reliefs for Scottish taxpayers and those resident elsewhere across the United Kingdom.

Internet link GOV.UK changes to tax relief Scotland

EMI options may not qualify for tax relief

The Enterprise Management Incentive (EMI) allows selected employees (often key to the employer) to be given the opportunity to acquire a significant number of shares in their employer through the issue of options. An EMI can offer significant tax advantages as the share option scheme allows options to be granted to employees which may allow the shares to be received without any tax bill arising until the shares are sold.

HMRC have warned that EMI share options granted in the period from 7 April 2018 until EU State Aid approval is received may not be eligible for the tax advantages presently afforded to option holders, and accordingly share options granted in that period as EMI share options may necessarily fall to be treated as non-tax advantaged employment-related securities options meaning that the options may be taxable when exercised.

To read more, please visit the link below or contact us for specific advice.

Internet link: GOV.UK EMI Bulletin

P11D deadline approaching

The forms P11D which report details of benefits and some expenses provided to employees and directors for the year ended 5 April 2018, are due for submission to HMRC by 6 July 2018. The process of gathering the necessary information can take some time, so it is important that this process is not left to the last minute.

Employees pay tax on benefits provided as shown on the P11D, generally via a PAYE coding notice adjustment or through the self assessment system. Significant changes were introduced to the rules for reporting expenses from 6 April 2016.

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

In addition, regardless of whether the benefits are being reported via P11D or payrolled the employer has to pay Class 1A National Insurance Contributions at 13.8% on the provision of most benefits. The calculation of this liability is detailed on the P11D(b) form. The deadline for payment of the Class 1A NIC is 19th July (or 22nd for cleared electronic payment).

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

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

Internet links: HMRC guidance Toolkit

VAT fuel scale charges

HMRC have issued details of the updated VAT fuel scale charges which apply from the beginning of the next prescribed VAT accounting period starting on or after 1 May 2018.

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

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

Internet link: GOV.UK fuel scale charges

HMRC consultation on benefits exemption for workplace charging facilities

HMRC are consulting on the tax exemption which will apply from 6 April 2018 on workplace electric charging facilities used by employees.

It was announced in the Autumn Budget 2017 that the government intends to implement an exemption for the benefit of electricity provided by an employer, at the workplace, to charge electric or plug-in hybrid vehicles. The necessary legislation will be included in the Finance Bill later this year and its effect will be made retrospective to 6 April 2018.

This means that there is no need for employers to report the value of electricity provided for the workplace charging of employees’ vehicles from that date.

This consultation seeks comments on workplace charging tax exemptions for electric and plug-in hybrid vehicles.

This guidance will be of interest to employers that pay taxable benefits to employees and provide electric charging points for employee use and the provision of workplace charging facilities, which vehicles the exemption covers and the qualifying conditions of the exemption.

Internet link: GOV.UK consultations/draft guidance

Newsletter – May 2017

Enews – May 2017

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

General Election and tax law

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

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

Anita Monteith, tax manager at ICAEW said:

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

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

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

Internet links: ICAEW news Parliamentary Bill

Business response to General Election on 8 June

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

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

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

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

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

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

Internet link: CBI News

Off payroll working in the public sector rules amended

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

Where these rules apply:

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

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

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

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

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

Internet link: GOV.UK amendment

P11D deadline approaching

The forms P11D which report details of benefits and some expenses provided to employees and directors for the year ended 5 April 2017, are due for submission to HMRC by 6 July 2017. The process of gathering the necessary information can take some time, so it is important that this process is not left to the last minute.

Employees pay tax on benefits provided as shown on the P11D, generally via a PAYE coding notice adjustment or through the self assessment system. Significant changes were introduced to the rules for reporting expenses from 6 April 2016.

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

In addition, regardless of whether the benefits are being reported via P11D or payrolled the employer has to pay Class 1A National Insurance Contributions at 13.8% on the provision of most benefits. The calculation of this liability is detailed on the P11D(b) form. The deadline for payment of the Class 1A NIC is 19th July (or 22nd for cleared electronic payment). As 22nd July is a Saturday it may be appropriate to ensure cleared payment is made by Friday 21st July unless you can arrange for faster payment.

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

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

Internet links: HMRC guidance Toolkit

VAT fuel scale charges

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

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

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

Internet link: GOV.UK fuel scale charges

Investment Bond launched

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

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

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

Internet links: GOV.UK news NS&I Moneyfacts

Changes to the PAYE Tax system using Real Time Information

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

HMRC states that this change in procedures will:

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

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

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

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

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

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

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

Internet links: GOV.UK Briefing Employer Bulletin 65

Newsletter – May 2016

Enews – May 2016

In this month’s eNews we report on various issues including a tribunal ruling that parking fines are not deductible. The latest HMRC guidance for employers, changes to the VAT Fuel Scale charges, an update on the uptake of Pensions Freedom and the introduction of new rules for the averaging of farming profits.

We also include details of the new rules for the taxation of savings income. Please contact us for further information on any of these areas.

Parking fines ruled not deductible

A tribunal has ruled that security firm G4S cannot reduce its profits for tax purposes by deducting parking fines.

The company, G4S Cash Solutions, tried to reduce their corporation tax bill by approximately £580,000 but the first-tier tribunal has ruled in HMRC’s favour in rejecting the claim for the deduction of the fines.

The company G4S incurred a substantial amount of parking fines usually while delivering consignments of cash over the pavement. The business tried to claim these were a business expense and so could be used to reduce the company’s profits for tax purposes.

The tribunal ruled G4S staff consciously and deliberately decided to break parking restrictions for commercial gain.

The ruling upholds HMRC’s long standing view that fines for breaking the law cannot be used to reduce a tax bill.

HMRC’s Director General of Business Tax, Jim Harra, said:

‘We’ve always said fines incurred for breaking the law are not tax deductible. The tribunal has now established a clear precedent for rejecting any future such claims.’

If you would like advice on calculating your taxable profits and the deductibility of any expenditure please get in touch.

Internet links: Press release Tribunal decision

Farmers’ averaging

Changes have been made to the rules which allow farmers to average their profits for tax purposes. Under the new rules unincorporated farmers will be able to average their profits for income tax purposes over five years rather than the previous two years.

The amendment to the rules which took effect from 6 April 2016 is aimed at helping farmers with fluctuating profits better manage the ‘risk and the impact of global volatility which has become an inherent feature of the agricultural industry’.

Chancellor George Osborne said:

‘… reforms will provide farmers with additional security to plan and invest for the future, allowing them to spread profits over a longer period of time. Over 29,000 farmers can benefit from the changes, saving an average of £950 a year.’

As well as having the new option to average tax over five years, farmers will also retain the choice to average profits over two years.

If you would like guidance on how these rules will affect you please get in touch.

Internet link: Gov.uk publications

VAT fuel scale charges

HMRC have issued details of the updated VAT fuel scale charges which apply from the beginning of the next prescribed VAT accounting period starting on or after 1 May 2016.

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

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

Internet link: Gov.uk Fuel scale charges

Savings allowance

A new savings allowance is available to basic and higher rate taxpayers for 2016/17. The amount available depends on the individual’s circumstances:

  • If any of the individual’s income for the year is additional rate income then the individual’s savings allowance for the year will be nil.
  • If any of the individual’s income for the year is higher-rate income and none of the individual’s income for the year is additional rate income, the individual’s savings allowance for the year is £500.
  • If none of the individual’s income for the year is higher rate income, the individual’s savings allowance for the year is £1,000.

No tax will be payable on savings income until the new savings allowance has been used up.

In a further change, banks and building societies will no longer deduct tax at source from interest at 20%. This means that non-taxpayers will no longer need to fill out an R85 to receive bank and building society interest gross. However, companies will still need to account for 20% at source on payments of interest.

The 0% savings starting rate also remains available on the first £5,000 of taxable savings income for those with the correct split of income. This would apply where non savings income, broadly pay, trade profits and property income are no more than the personal allowance. This means that for some, the effect of the personal allowance (£11,000 for 2016/17), the £5,000 starting rate band and the new savings allowance (£1,000 for basic rate taxpayers for 2016/17) means that it may be possible to receive up to £17,000 savings income tax-free in 2016/17.

In light of the above changes please contact us if you would like to review your tax position on savings income.

Internet link: Gov.uk Publication

Pensions Freedom Update

According to HMRC figures over 230,000 people have used the new pension freedoms introduced one year ago and accessed over £4.3 million in pensions saving.

In April 2015, the government introduced significant pension reforms giving people the ability to access their pensions savings how and when they want. The statistics show that in the first year of these new rules being available, more than 232,000 people have accessed £4.3 billion flexibly from their pension pots.

The Economic Secretary to the Treasury, Harriett Baldwin said:

‘It’s only right that people should have a choice over what they do with their money and in their first year our successful pension freedoms have already given thousands of people access and responsibility over their hard-earned savings.

We will continue to make sure that the pension freedoms work well for everyone, including through working with our partners to ensure consumers are protected and that there is simple information to help people understand their options.

The government has already taken action to ensure the new freedoms work for consumers and that they have the right information to make informed decisions.

It has announced that it will be capping early exit fees, allowing earlier access to Pension Wise guidance, and working with industry to introduce a Pensions Dashboard.

It has also announced that it is extending the popular freedoms even further, giving millions more people the right to sell their annuities if it’s best for them from April 2017.’

Since the pension flexibility rules took effect from 6 April 2015:

  • 232,000 individuals have accessed their money flexibly
  • People have flexibly accessed over £4.3 billion of their own money through 516,000 payments.
  • In the most recent quarter, 74,000 individuals withdrew £820 million. In the previous quarter, 67,000 individuals withdrew £800 million.
  • Figures are taken from information voluntarily reported to HMRC by pension scheme administrators from 6 April 2015 to 31 March 2016. It is not mandatory for scheme administrators to flag these up as pension flexibility payments until April 2016.
  • HMRC statistics cover ‘flexible payments’, which means partial or full withdrawal of the pension pot, taking money from a flexible drawdown account, or buying a flexible annuity.

If you would like advice on the tax implications of pensions freedom please contact us.

Internet links: Gov.uk Pensions flexibility Gov.uk News

HMRC guidance for employers

The April Employer Bulletin includes articles on:

  • reporting expenses and benefits in kind for 2015/16 using form P11D
  • Scottish Rate of Income Tax coding notice issues
  • Class 1 National Insurance contributions for apprentices under the age of 25
  • changes to Student Loans Deductions including the introduction of type 1 and type 2 loans and the reminders which HMRC will issue to employers who fail to make deductions.

The Bulletin also includes links to HMRC’s guidance on the restriction to Employment Allowance for Single Director Companies.

If you would like any help with payroll or P11D completion issues please contact us.

Internet link: Employer Bulletin