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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 – June 2011

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In this month’s enews we report on HMRC’s plans to extend their ‘tax cheats’ campaigns.

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

 

eNEWS quicklinks
HMRC extend ‘tax cheats’ campaigns Another email scam warning from HMRC
Workplace pensions reform Consultation on residency
The Bribery Act Tax credits renewal deadline
Changes to the law to protect Patent and Design rights P11D deadline looming

 

HMRC extend ‘tax cheats’ campaigns

HMRC have announced that they will be launching new campaigns over the next year targeting VAT defaulters, private tutors and e-marketplaces.

HMRC will use more IT, such as ‘web robot’ software, to search the internet and find targeted information about specified people and companies. Using the software, HMRC feel that they can pinpoint more accurately people who have failed to pay the right tax. The software, used with HMRC’s Connect computer system, also helps find people who are trading without telling HMRC.

The Connect computer system alerts HMRC to previously invisible tax evasion by matching a vast amount of HMRC and third-party data. It can identify previously hidden relationships, uncovering anomalies between such elements as bank interest, property income and lifestyle indicators before homing in on unexplained inconsistencies.

HMRC announced last month that a campaign targeting VAT rule-breakers trading above the £73,000 turnover threshold but who have not registered for VAT will be launched in the summer.

Other campaigns to be launched in 2011/12 will focus on:

  • those who provide private tuition and coaching
  • e-marketplaces, which buy and sell goods as a trade or business
  • trades, which will build on HMRC’s plumbers’ campaign and give an opportunity to another group of ‘tradespeople’ to declare unpaid tax.

Mike Wells, HMRC’s Director of Risk and Intelligence, said:

‘We want to make sure HMRC listens to as many informed views as possible for our future campaigns. We want the views and experience of people and organisations outside the department to play a fuller part in the campaigns that we design for customers.’

‘By being open about our areas of interest for the coming year we hope to maximise that exchange of information and ensure we reduce the tax gap and help customers pay what they owe.’

‘We will use the information we gather to pursue people who choose not to use the opportunities we provide for them to put their affairs in order on the best possible terms. It will be more expensive if we come and find people, so I urge them to come forward and disclose voluntarily.’

Internet link: News release

Another email scam warning from HMRC

HMRC are once again alerting taxpayers to a surge of fake ‘phishing’ emails sent out by fraudsters in the run-up to the tax credits renewal deadline.

The email informs the recipient they are due a tax rebate and provides a click-through link to a cloned replica of the HMRC website. The recipient is asked to provide their credit or debit card details. Fraudsters then try to take money from the account using the details provided.

Since the beginning of April 2011, when the first tax credits renewals forms were sent out to claimants, more than 46,000 phishing emails have been reported. During the same period of time HMRC helped shut down more than 150 scam websites.

Joan Wood, Director of HMRC Online and Digital, said:

‘We currently only ever contact customers who are due a tax refund in writing by post. We don’t use telephone calls, emails or external companies in these circumstances. If anyone receives an email claiming to be from HMRC, please send it to phishing@hmrc.gsi.gov.uk before deleting it permanently.’

HMRC strongly advises taxpayers to:

Internet links: News Release www.hmrc.gov.uk/security/index.htm

Workplace pensions reform

The government has introduced measures aimed at encouraging greater private saving which includes workplace pension reforms. New legal obligations will require employers to automatically enrol their eligible jobholders into a qualifying pension scheme.

A new workplace pension scheme called NEST (National Employment Savings Trust) will be one of the qualifying schemes and will be open to any employer who wants to use it to meet their obligations.

The initial roll out of the scheme will be October 2012 but this will impact on employers with 120,000 employees or more. For those with a more modest workforce the start date varies; for example, those with less than 500 employees the date is 1 January 2014 and for those with less than 50 employees the earliest start date is 1 March 2014.

Employees eligible for automatic enrolment will be:

  • those who are not already active members of a qualifying scheme
  • are aged at least 22 years and below the State Pension age, and
  • earn over £7,475 gross a year.

The qualifying scheme may be the existing employer pension scheme if it meets certain conditions or if an employer does not have a qualifying scheme, they will have to set one up or use a NEST pension scheme.

Minimum contributions levels for qualifying schemes are as follows:

Minimum Contribution Employee Pays Tax Relief Minimum Employer Contribution
8% 4% 1% 3%

Employees will be able to opt out of the scheme if they so wish. However, for those employees within the scheme it is expected that the employer will have to contribute at least 3% of ‘qualifying’ earnings. These earnings are the employees’ basic salary plus commissions, bonuses and overtime between £5,035 and £33,540 a year (in 2006/07 terms but to be uprated). Pension contributions are to be phased in.

A great deal more information is starting to be released and can be viewed via The Pensions Regulator website.

Internet links: The Pensions Regulator website Basic employers guide

Consultation on residency

Over recent weeks, HMRC have issued numerous consultation documents totalling hundreds of pages.

One of these details how individuals will be judged to be resident or not resident in the UK for tax purposes.

The government proposes to introduce a statutory residence test (SRT) to take into account both the amount of time the individual spends in the UK and the other connections they have with the UK.

There are parts of the test where a distinction will be made between:

  • arrivers – defined as individuals who were not UK resident in all of the previous three tax years; and
  • leavers – defined as individuals who were resident in one or more of the previous three tax years.

The SRT will:

  • determine tax residence for individuals but not companies
  • apply for the purposes of income tax, capital gains tax and inheritance tax
  • not apply for non-tax purposes (including national insurance contributions), and
  • supersede all existing legislation, case law and guidance for tax years following its introduction.

The SRT will have three parts:

  • Part A contains conclusive non-residence factors that would be sufficient in themselves to make an individual not resident.
  • Part B contains conclusive residence factors that would be sufficient in themselves to make an individual resident.
  • Part C contains other connection factors and day counting rules which will only need to be considered by those whose residence status is not determined by Part A or Part B.

The above is part of a consultation process at present. HMRC intend to implement the measures from 6 April 2012.

We will keep you informed of developments but please do contact us if you have any concerns in the meantime.

Internet link: Press release

The Bribery Act

The Bribery Act 2010 comes into force on 1 July 2011. The new Act replaces, updates and extends the existing UK law against bribery and corruption. This important new legislation:

  • introduces a corporate offence of failure to prevent bribery by persons working on behalf of a business. A business can avoid conviction if it can show that it has adequate procedures in place to prevent bribery;
  • makes it a criminal offence to give, promise or offer a bribe and to request, agree to receive or accept a bribe either at home or abroad. The measures cover bribery of a foreign public official; and
  • increases the maximum penalty for bribery from seven to 10 years imprisonment, with an unlimited fine.

The introduction into law of the new corporate offence of failure of commercial organisations to prevent bribery is an important development that essentially requires all businesses to consider the requirements of the new Act. This new corporate offence is coupled with a defence where, if the business can show that it had ‘adequate procedures’ in place to prevent bribery, it can be protected from committing the new criminal offence.

All businesses should familiarise themselves with the statutory guidance and assess the risk of bribery occurring in the business. The extent of any further action will be dependent on the results of this risk assessment.

The Act also requires the government to produce guidance on what constitutes ‘adequate procedures’ and the Ministry of Justice has produced this. This can be found using the links below.

Internet links: Bribery Act 2010 guidance Quick start guide

Tax credits renewal deadline

Tax credits are state benefits which are generally available to lower income families. However, entitlement to the credits is significantly increased where individuals pay for childcare or suffer a drop in normal levels of income perhaps due to incurring trading losses or redundancy.

Individuals who have already claimed tax credits for 2010/11 have to finalise their provisional award, which would have originally been based on their 2009/10 income, and advise HMRC of any changes in their circumstances for 2011/12. This procedure is known as the renewals process. The deadline for the submission of tax credit renewals is generally 31 July 2011.

HMRC have been busily advertising the renewals process in the national press and on their website. Claimants need to be aware that the payment of tax credits will stop at the end of July if they have not renewed their applications by that date. There are significant changes to the income limits and claw back of entitlements for 2011/12 so you may wish to review the HMRC guidance. Alternatively if you need any help with the completion of your form or any advice on tax credits generally please do get in touch.

Internet links: HMRC tax credit deadlines HMRC Tax credit changes

Changes to the law to protect Patent and Design rights

The government has announced that it expects small and medium sized businesses to benefit from a new law which gives them easier access to justice to protect their patent and design rights. The introduction of a damages cap of £500,000 for claims made in the Patents County Court (PCC) means smaller businesses seeking damages up to that amount are less likely to have to resort to the High Court which could prove more costly.

The Patents County Court (Financial Limit) Order 2011 sets out to create a clearer definition of what disputes can be heard in the PCC and which ones should go to the High Court. Under the previous system businesses with a legal case worth less than £500,000 could face litigation in either court. This potentially exposed them to unknown levels of financial risk.

According to the press release:

‘The change in law will ensure that lower value, less complex cases, which would typically involve small businesses, will automatically fall within the jurisdiction of the lower, cheaper PCC. Therefore the risk of having costly disputes over where the case should be heard will be reduced. In the past some companies were put off protecting their rights due to the uncertainty of how much it would cost.’

Minister for Intellectual Property, Baroness Wilcox said:

‘Maintaining an effective and efficient intellectual property framework for businesses is not enough to drive innovation. We must offer businesses a more accessible justice system for them to enforce their rights. By making it easier for small firms and entrepreneurs to use the legal processes it will give them more time to concentrate on business activities.’

‘These changes will help small businesses and encourage them to innovate. It will also provide clarity over the legal processes, certainty over the risks and give small enterprises the confidence to stand on an equal footing with financially stronger companies.’

Internet link: News release

P11D deadline looming

The forms P11D, and where appropriate P9D, which report benefits and expenses for both employees and directors for the year ended 5 April 2011, are due for submission to HMRC by 6 July 2011.

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 12.8% (for 2010/11) on the provision of most benefits. The calculation of this liability is detailed on the P11D(b) form. For those employers who submit paper forms P11D these should all be sent to the address detailed in the link at the end of this article.

If you would like any help with the forms P11D or the calculation of the Class 1A liability please get in touch.

Internet links: HMRC P11D guidance HMRC advice HMRC new address for paper forms P11D