HAPPY CHRISTMAS

FROM THE PARTNERS & STAFF

AT

WALKER THOMPSON

Newsletter 131 / 132

OFFICE WEDDING



We are pleased to announce that on 3 November, Meena Bali married Pardeep Singh in a traditional Indian fire wedding ceremony, witnessed by family, friends and colleagues from the office.

Meena who has worked with us for just over a year deals mainly with payrolls, VAT Returns and bookkeeping for clients whilst her new husband works for BP as a Site Manager.

We would like to wish both the bride and groom every happiness for their future life together.

BUDGET 2018

The Chancellor Philip Hammond presented his second Autumn Budget on Monday 29 October 2018. In his speech he stated that ‘austerity is coming to an end – but discipline will remain’. He also promised a ‘double deal dividend’ if the Brexit negotiations are successful but stated that there may be a full-scale Spring Budget in 2019 if not.

We have included separate articles on some of the key announcements.

We will keep you informed of developments.

Internet link: GOV.UK Budget 2018

PERSONAL TAX CHANGES – ALLOWANCE AND BASIC RATE BAND INCREASED

At the Budget, the Chancellor announced that increases to the personal allowance and basic rate band for 2019/20.

The personal allowance is currently £11,850. The personal allowance for 2019/20 will be £12,500. Also for 2019/20, the basic rate band will be increased to £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. The additional rate of tax of 45% will remain payable on taxable income above £150,000.

The government had pledged to raise the thresholds to these levels by 2020/21.

Internet link: GOV.UK income tax

CAPITAL ALLOWANCES CHANGES

A number of changes to capital allowances were announced at the Budget, including an increase in the Annual Investment Allowance (AIA), for two years to £1 million, in relation to qualifying expenditure incurred from 1 January 2019. The AIA is currently £200,000 per annum. Complex calculations may apply to accounting periods which straddle 1 January 2019.

Other changes to the rules include:

• a reduction in the rate of writing down allowance on the special rate pool of plant and machinery, including long-life assets, thermal insulation, integral features and expenditure on cars with CO₂ emissions of more than 110g/km, from 8% to 6% from April 2019. Complex calculations may apply to accounting periods which straddle this date
• clarification as to precisely which costs of altering land for the purposes of installing qualifying plant or machinery qualify for capital allowances, for claims on or after 29 October 2018
• the end of the 100% first year allowance and first year tax credits for products on the Energy Technology List and Water Technology List from April 2020
• an extension of the current 100% first year allowance for expenditure incurred on electric charge-point equipment until 2023.

In addition, a new capital allowances regime will be introduced for structures and buildings. It will be known as the Structures and Buildings Allowance and will apply to new non-residential structures and buildings. Relief will be provided on eligible construction costs incurred on or after 29 October 2018, at an annual rate of 2% on a straight-line basis.

Internet link: GOV.UK Budget 2018

ENTREPRENEURS’ RELIEF CHANGES

The government announced, as part of the Budget, that some changes are being made to the rules for Entrepreneurs’ Relief (ER) with immediate effect for disposals on or after 29 October 2018. Two new tests are to be added to the definition of a ‘personal company’, requiring the claimant to have a 5% interest in both the distributable profits and the net assets of the company. The new tests must be met, in addition to the existing tests, throughout the specified period in order for relief to be due. The existing tests already require a 5% interest in the ordinary share capital and 5% of voting rights.

Minimum qualifying period

The government will legislate in Finance Bill 2018-19 to increase the minimum period throughout which certain conditions must be met to qualify for ER, from one year to two years. The measure will have effect for disposals on or after 6 April 2019 except where a business ceased before 29 October 2018.

Where the claimant’s business ceased, or their personal company ceased to be a trading company (or the holding company of a trading group) before 29 October 2018, the existing one year qualifying period will continue to apply.

Dilution of holdings below 5%

Draft legislation has already been issued to provide a potential entitlement to ER where an individual’s holding in a company is reduced below the normal 5% qualifying level (meaning 5% of both ordinary share capital and voting power). The relief will only apply where the reduction below 5% occurs as a result of the company raising funds for commercial purposes by means of an issue of new shares, wholly for cash consideration.

Where a disposal of the shareholding prior to the issue would have resulted in a gain which would have qualified for ER, shareholders will be able to make an election treating them as if they had disposed of their shares and immediately reacquired them at market value just before dilution. To avoid an immediate CGT bill on this deemed disposal, a further election can be made to defer the gain until the shares are sold. ER can then be claimed on the deferred gain in the year the shares are sold under the rules in force at that time.

The new rules will apply for share issues which occur on or after 6 April 2019.

Please contact us if you would like further information on how this may affect you.

Internet link: GOV.UK ER

MAKING TAX DIGITAL FOR VAT PUBLIC PILOT OPENS AND DEFERRAL FOR SOME BUSINESSES

HMRC has opened the Making Tax Digital for VAT (MTDfV) public pilot. However certain VAT-registered businesses (around 3.5% according to HMRC) with more complex requirements will be deferred from being subject to MTD for six months.

Essentially, the public pilot is now open to sole traders and companies using standard VAT accounting. This applies whether returns are done monthly or quarterly provided they are up to date. Those signing up for the pilot will be required to keep their VAT records digitally from the first day of the period covered by their next VAT Return and submit their return using the appropriate software.

Further piloting plans

HMRC intends to roll out further pilots for partnerships, those that trade with the EU and users of the Flat Rate scheme as set out in the timetable.

Date	Activity
Late 2018	Private testing begins with partnerships, those customers that trade with the EU, and users of the Flat Rate Scheme.
Late 2018 / early 2019	Open to other sole traders and companies who are not up to date with their VAT and businesses newly registered for VAT that have not previously submitted a VAT return.
Early 2019	Open to partnerships and those taxpayers that trade with the EU.

Six months’ deferral

Making Tax Digital for VAT is to be introduced from 1 April 2019. However, HMRC has announced that the mandated implementation has been deferred until 1 October 2019 for certain taxpayers:

• trusts
• ‘not for profit’ organisations that are not set up as a company
• VAT divisions
• VAT groups
• public sector entities required to provide additional information on their VAT return (Government departments, NHS Trusts)
• local authorities
• public corporations
• traders based overseas
• those required to make payments on account (very large traders)
• Annual Accounting Scheme users.

Pilot testing for these groups is expected to open in Spring 2019. For help with MTD please contact us.

Internet links: GOV.UK MTD overview MTD timeline

NEW GUIDANCE FOR EMPLOYERS

HMRC has issued the October 2018 Employer Bulletin which contains a number of articles relevant to employers on payroll related issues.

The articles cover a number of areas including:

• clarification of the rules regarding paying employees when the regular payday is a non-banking day
• dealing with PAYE Settlement Agreements and new procedures to accommodate Scottish income tax rates
• Construction Industry Scheme reminders for contractors
• an update on the Welsh rates of income tax (WRIT) and new tax codes for Welsh taxpayers
• guidance on the correct pay rates for apprentices
• how to apply for advance statutory payment of Maternity, Parental, Paternal or Adoption Pay
• spotlight on umbrella companies
• Real Time adjustments to tax codes and their timing
• closure of childcare vouchers and directly contracted childcare to new entrants from 4 October 2018
• Disguised Remuneration Loan Charge – reporting requirements and
• improving the wellbeing of your employees

For help with payroll matters please contact us.

Internet link: Employer Bulletin

HMRC COUNTDOWN : FILE YOUR TAX RETURN

With less than 100 days until the self assessment tax return deadline of 31 January 2019, HMRC is urging taxpayers to complete their tax returns early, in order to avoid the last minute rush.

The deadline for submitting 2017/18 self assessment tax returns online is 31 January 2019. An automatic penalty of £100 applies if the return is late.

HMRC advise that last year, more than 11 million taxpayers completed a 2016/17 Self Assessment tax return, with 10.7 million completing on time. There were 4,852,744 taxpayers who filed in January 2018 (44.8% of the total), and 758,707 on 31 January, the deadline day.

HMRC is advising taxpayers not to leave the completion of their 2017/18 Self Assessment tax until the last minute.

Angela MacDonald, HMRC’s Director General for Customer Services, said:

‘The deadline for completing Self Assessment tax returns may be 100 days away, yet many of us wait until January to start the process. Time flies once the festive period is underway, yet the ‘niggle’ to file your tax return remains.’

‘We want to help people get their tax returns right – starting the process early and giving yourself time to gather all the information you need will help avoid the last minute, stressful rush to complete it on time. Let’s beat that niggle.’

Contact us for help with your self assessment tax return.

Internet link: GOV.UK news

FURTHER CONTINGENCY PLANNING GUIDANCE ON A ‘NO DEAL BREXIT’

HMRC has issued a Partnership Pack to help businesses carry out contingency planning and to help their customers, members and clients to:

• think about how they will need to adapt their business to comply with new systems, processes and controls
• assess the impact of the increased demand for customs declarations on their business
• consider whether they need to recruit and train additional staff
• stay up-to-date with these changes

Meanwhile the Confederation of British Industry (CBI) reports that ‘patience is now threadbare’ amongst UK businesses in regard to the government’s progress in its Brexit negotiations with the EU.

A survey, carried out by the CBI, revealed that 80% of firms believe that Brexit uncertainty is having a ‘negative impact’ on their investment decisions. The majority of businesses polled stated that they may have to implement ‘damaging’ contingency plans if no further progress is made by December.

Carolyn Fairbairn, Director General of the CBI, said:

‘The situation is now urgent. The speed of negotiations is being outpaced by the reality firms are facing on the ground.

‘Unless a Withdrawal Agreement is locked down by December, firms will press the button on their contingency plans. Jobs will be lost and supply chains moved.’

‘As long as ‘no deal’ remains a possibility, the effect is corrosive for the UK economy, jobs and communities.’

Internet links: GOV.UK partnership pack CBI news

In this, our last Newsletter of 2018 it is worth reflecting upon some of the things that we have witnessed this year. Some  events are trivial, some are more serious, some are global in their impact whilst others are closer to home. We appreciate that 2018 may leave both good and not so good memories for many of us but we thought it worth sharing one or two of the more light hearted moments from this year;

• The England football team reached a World Cup semi-final by virtue of a successful penalty shoot out
• Prince Harry married Meghan Markle, an American divorcee and actress. They moved into Kensington Palace but in November, after only 6 months, it was announced they were moving out to live in Windsor. It was probably the noise of the three children living down the corridor.
• President Trump became the first US president to visit North Korea , he was apparently trying to find a friend
• Aretha Franklin – the Queen of Soul – sadly passed away this year. Respect.
• HMRC have pressed ahead with plans to “Make Tax Digital” The House of Lords criticised the Treasury for “running before it could walk” – This is the same organisation that takes over 2 months to answer a letter and then blames the pigeon when the letter goes astray.
• Roger Allmark retired from Walker Thompson after more than 20 years working with us. He is to be found travelling around the UK and on warmer days out tending his garden.

Walker Thompson will be closed for the festive period as follows:

Friday 21 December at 4.30pm

until

Wednesday 2 January at 9.00am

 

In the meantime the Directors and Staff would like to take the opportunity of wishing all our Clients, Colleagues & Friends,
a very Merry Christmas and a Happy & Prosperous New Year.

COMMITTEE WARNS SMALL BUSINESSES ‘COULD PAY HEAVY PRICE’  FOR MTD AND LATEST ‘ENCOURAGEMENT LETTERS’

The Economic Affairs Committee has warned HMRC that small businesses ‘could pay a heavy price’ for Making Tax Digital for VAT (MTDfV).

The Committee stated that HMRC has ‘failed to adequately support small businesses’ ahead of the introduction of MTDfV.

MTDfV is generally set to come into effect for the from 1 April 2019 for businesses which have a taxable turnover above the current VAT registration threshold of £85,000. Under MTDfV, businesses must keep some records digitally and submit their VAT returns via an Application Programming Interface (API).

The Committee has urged HMRC and the government to ‘start listening’ to small businesses MTDfV concerns.

HMRC recently sent businesses within the scope of MTDfV so-called ‘encouragement letters’. These letters were sent to 200,000 businesses which are eligible to join the pilot scheme.

Please contact us for help with MTDfV.

Internet links: Parliament.uk/news  

LEAVING THE EU WITH NO DEAL

The government has published a collection of documents in preparation for the scenario of the UK leaving the EU without a Withdrawal Agreement a so called ‘no deal’ Brexit.

The guidance states:

‘The government does not want or expect a no deal scenario. However, it is the duty of a responsible government to prepare for a range of potential outcomes, including the unlikely event of no deal. In the event of leaving the EU without a deal, legislation will be necessary to ensure the UK’s Customs, VAT and Excise regimes function as intended after the UK leaves the EU and so, on a contingency basis, HM Treasury and HM Revenue and Customs will lay a number of Statutory Instruments (SIs) under the Taxation (Cross-border Trade) Act 2018 (TCTA) and the EU Withdrawal Act 2018 (EUWA).’

We will keep you informed of developments.

Internet link: GOV.UK no deal brexit collection

180,500 NEW HOMEOWNERS BENEFIT FROM STAMP DUTY TAX RELIEF

According to statistics published by HMRC more than 180,500 first-time buyers have benefitted from First Time Buyers Relief (FTBR). The relief introduced in November 2017 has saved eligible first-time buyers an estimated total amount of more than £426 million.

Mel Stride MP, Financial Secretary to the Treasury, said:

‘These statistics show that the government was right to offer a helping hand to first time buyers. Without this investment more than 180,500 new homeowners may have struggled in getting onto the property ladder. Maintaining the status quo was not an option.’

FTBR is a Stamp Duty Land Tax relief for eligible first-time buyers. The tax relief can be used when buying a residential property where the purchase price is no more than £500,000 in England and Northern Ireland. Land and Buildings Transaction Tax and Land Transaction Tax apply to property in Scotland and Wales.

The press release goes on to state:

‘The amount of relief reported should not be used to infer average house prices for first time buyers; first-time buyer purchases below £125k and above £500k are not included in the statistics as they are below the lower SDLT threshold (£125k) or ineligible for the relief (above £500k).For purchases up to £300,000 no SDLT is payable. Where the purchase price is between £300,000 and £500,000 SDLT at 5% is due on the amount above £300,000. For example, a property purchased for £450,000 would pay £7,500 SDLT (5% of £150,000). This gives a saving of up to £5,000 for each first-time buyer.’

Extension of FTBR

It was announced in the Autumn Budget 2018 that the relief for first-time buyers will be extended to purchasers of qualifying shared ownership properties who do not elect to pay SDLT on the market value of the whole property when they purchase their first share. Relief will be applied to the first share purchased, where the market value of the shared ownership property is £500,000 or less. This relief will apply retrospectively from 22 November 2017, meaning that a refund of tax will be payable for those who have paid SDLT after 22 November 2017 in circumstances which now qualify for FTBR.

Internet link: HMRC press release 

TAX-FREE GIFTS TO EMPLOYEES

Some employers may wish to give a small gift to their employees. As long as the employer meets the relevant conditions, no tax charge will arise on the employee.

A tax exemption is available which should help employers ensure that the benefits provided are exempt and do not result in a reportable employee benefit in kind. In order for the benefit to be exempt it must satisfy the following conditions:

• the cost of providing the benefit does not exceed £50 per employee (or on average when gifts made to multiple employees)
• the benefit is not cash or a cash voucher
• the employee is not entitled to the benefit  as part of a contractual arrangement (including salary sacrifice)
• the benefit is not provided in recognition of particular services performed by the employee as part of their employment duties
• where the employer is a ‘close’ company and the benefit is provided to an individual who is a director, an office holder or a member of their household or their family, then the exemption is capped at a total cost of £300 in a tax year.

If any of these conditions are not met then the benefit will be taxed in the normal way subject to any other exemptions or allowable deductions.

No more than £50

One of the main conditions is that the cost of the benefit does not exceed £50. If the cost is above £50 the full amount is taxable, not just the excess over £50.The cost of providing the benefit to each employee and not the overall cost to the employer determines whether the benefit can be treated as a trivial benefit. So, a benefit costing up to £50 per employee whether provided to one or more employees can be treated as trivial. Where the individual cost for each employee cannot be established, an average could be used. Some HMRC examples consider gifts of turkeys, a bottle of wine or alternatively a gift voucher.

Further details on how the exemption will work, including family member situations, are contained in the HMRC manual.

However if you are unsure please do get in touch before assuming the gift you are about to provide is covered by the exemption.

Internet link: HMRC manual 

ADVISORY FUEL RATES FOR COMPANY CARS

New company car advisory fuel rates have been published which took effect from 1 December 2018. 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 2018 are:

Engine size	Petrol
1400cc or less	12p
1401cc – 2000cc	15p
Over 2000cc	22p
Engine size	LPG
1400cc or less	8p
1401cc – 2000cc	10p
Over 2000cc	15p
Engine size	Diesel
1600cc or less	10p
1601cc – 2000cc	12p
Over 2000cc	14p

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.

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

Internet link: GOV.UK AFR 

PHISHING TAX REFUND EMAIL TARGETS UNIVERSITY STUDENTS

HMRC has warned that university students are being bombarded with fake tax refund emails. The scammers have targeted university students in an attempt to steal their banking and personal details using.ac.uk email addresses that look genuine, in order to avoid detection.

Mel Stride, Financial Secretary to the Treasury said:

‘Although HMRC is cracking down hard on internet scams, criminals will stop at nothing to steal personal information.

‘I’d encourage all students to become phishing-aware – it could save you a lot of money.’

In common with other tax scams, fraudsters send a message, including HMRC, GOV.UK or credit card branding, supposedly advising the recipient about a tax refund. Those taken in by the fake email are asked to click on a link and enter their banking and personal details. Fraudsters can use this information to steal money from bank accounts or to sell on to other criminals.

Internet link: GOV.UK press release 

INHERITANCE TAX REVIEW BY OFFICE OF TAX SIMPLIFICATION

The Office of Tax Simplification (OTS) has published the first of two reports on inheritance tax.

The first report sets out an explanation of the issues and complexities of IHT, gives an overview of concerns raised by the public and professional advisors during the review and then makes recommendations. This first report examines the administrative issues that people complain about and which were raised in the responses. The second report covering other wider areas of concern to people will follow in Spring 2019.

The first report highlights the benefits of:

• reducing or removing the requirement to submit forms for smaller or simpler estates, especially where there is no tax to pay
• simplifying the administration and guidance
• the advantages of banks and other financial institutions having standardised requirements
• automating the whole system by bringing it online

Angela Knight CBE, OTS Chairman, said:

‘Inheritance tax is both unpopular and complicated. The basic design of the tax itself is for government, but at the OTS we can address that most frequent of all comments “at least make it easier for the families to fill in the forms”. The OTS has worked on ways to address these practical complexities, which have come through loud and clear.’

‘The recommendations in this report will make it easier for the majority, and would mean that in future, many may not have to do the forms at all. Improving the administration of this tax in these ways is important as having to deal with the current process can seem overwhelming to people at a time when they are both preoccupied and distressed.’

Internet link: GOV.UK OTS IHT report

Newsletter 130

Please click on any of the links below for further information :

UK BUDGET DATE ANNOUNCED: MONDAY 29 OCTOBER

The Chancellor of the Exchequer, Philip Hammond, has announced that the Budget will take place on Monday 29 October.

Breaking with the tradition of a Wednesday in November, perhaps in a bid to avoid the ongoing Brexit negotiations, the government is expected to set out its plans ‘to build a stronger, more prosperous economy, building on the recent Spring Statement and last year’s Budget’.

The government announcements are expected to include updates on draft legislation and consultations, and proposed tax rates and reliefs.

Internet link: GOV.UK news

SELF-EMPLOYED CLASS 2 NATIONAL INSURANCE WILL NOT BE SCRAPPED

The government has decided not to proceed with plans to abolish Class 2 National Insurance Contributions (NICs) from April 2019.

Class 2 NICs are currently paid at a rate of £2.95 per week by self-employed individuals with profits of £6,205 or more per year. The government had planned to scrap the Class 2 contribution and had been investigating ways in which self-employed individuals with low profits, could maintain their State Pension entitlement if this inexpensive contribution had been abolished.

In a written statement to MPs, Robert Jenrick, Exchequer Secretary to the Treasury, stated that:

‘This change was originally intended to simplify the tax system for the self-employed. We delayed the implementation of this policy in November to consider concerns relating to the impact on self-employed individuals with low profits. We have since engaged with interested parties to explore the issue and further options for addressing any unintended consequences.’

‘A significant number of self-employed individuals on the lowest profits would have seen the voluntary payment they make to maintain access to the State Pension rise substantially. Having listened to those likely to be affected by this change we have concluded that it would not be right to proceed during this parliament, given the negative impacts it could have on some of the lowest earning in our society.’

Internet link: Parliament written statement

‘NO DEAL’ BREXIT GUIDANCE AND SMALL BUSINESS SURVEY

Following the issue of some ‘no deal’ Brexit technical notices, in August, the government has issued further notices with the aim of helping both businesses and individuals to prepare in the event of a UK-EU agreement not being realised.

The second and third batches of notices cover topics such as passports, driving licences together with data protection and mobile phone roaming charges amongst other topics. The full list and access to the collection of technical notices can be viewed by visiting the link at the end of this article. The government has confirmed they plan to issue further technical notices.

Although reaching a deal remains the ‘overriding priority’ unless a Withdrawal Agreement is ratified by the UK and European Parliaments, the possibility of the UK leaving the EU without a deal on 29 March 2019 remains.

Meanwhile, a survey by the Federation of Small Businesses (FSB) has revealed that:

• Only 14% of small businesses have started planning for a no deal Brexit.
• A further 41% believe that a no deal Brexit will have an impact on their business but have not yet started planning for the possibility.
• 10% believe that a no deal Brexit will have a positive impact on their ability to do business whilst 48% believe that a no deal Brexit will have a negative effect on their ability to do business. This figure rises sharply to 66% for those small firms that trade with the EU and to 61% for those that employ a staff member from the EU.

FSB National Chairman, Mike Cherry, said:

‘Looking at this research it is obvious that our small firms are not prepared or ready for a chaotic no deal Brexit and the impact that it will have on their businesses. If you sell your products to the EU, buy goods from the EU or if your business relies on staff from the EU, you now see this outcome as a clear and present threat to your business.’

We will keep you informed of developments.

Internet links: GOV.UK no deal brexit collection FSB press release

DEADLINE FOR ‘PAPER’ SELF ASSESSMENT TAX RETURNS

For those individuals who have previously submitted ‘paper’ self assessment tax returns the deadline for the 2017/18 return is 31 October 2018. Returns submitted after that date must be submitted electronically or they will incur a minimum penalty of £100. The penalty applies even when there is no tax to pay or the tax is paid on time.

If you would like any help with the completion of your return, please do get in touch.

Internet link: GOV.UK deadline

HMRC HAS PUBLISHED AN UPDATED LIST OF DELIBERATE TAX DEFAULTERS

HMRC has published an updated list of deliberate tax defaulters. The list includes details of taxpayers who have incurred a penalty because they have either:

• deliberately provided one or more inaccurate documents to HMRC
• deliberately failed to comply with an HMRC obligation
• committed a VAT or excise wrongdoing.

HMRC’s criteria for publishing this information also states that ‘These deliberate acts have resulted in HMRC establishing an additional amount of tax of more than £25,000. HMRC only publish the details where the taxpayer has not made a full and immediate disclosure when HMRC started to investigate or prior to any investigation.’

Internet link: GOV.UK/deliberate tax defaulters

GENUINE HMRC CONTACT AND RECOGNISING PHISHING EMAILS AND TEXTS

HMRC has updated their guidance on how to recognise when contact from HMRC is genuine and how to recognise phishing or bogus emails and text messages.

Internet link: GOV.UK recognising phishing emails

HMRC IDENTIFY RECORD £15.6 MILLION MINIMUM WAGE UNDERPAYMENTS

HMRC has announced that they achieved record enforcement results this year, identifying £15.6million of minimum wage underpayments.

The number of workers identified as underpaid was double that in 2016/17 and the highest number since the National Minimum Wage came into force.

The figures reveal:

• a record £15.6 million of underpayment identified for more than 200,000 workers
• employers fined £14 million for not meeting legal obligations
• more than 600 employers named in 2017/18 as part of ‘naming’ rounds.

Business Minister Kelly Tolhurst, said:

‘We are dedicated to stopping underpayment of the minimum wage. Employers must recognise their responsibilities and pay their workers the money they are entitled to.’

‘The UK’s lowest paid workers have had the fastest wage growth in 20 years thanks to the National Living Wage and today’s figures serve as a reminder to all employers to check they are getting their workers’ pay right.’

HMRC has prioritised the social care, retail, commercial warehousing and gig economy sectors for enforcement of the minimum wage. This is alongside employment agencies, apprentices and migrant workers. These are the sectors where HMRC believes non-compliance with National Minimum Wage is more widespread.

For advice on payroll please contact us.


Internet links: GOV.UK news GOV.UK naming

Newsletter 129

Please click on any of the links below for more information :

WELCOME TO A NEW MEMBER OF STAFF

This month we are pleased to announce the addition of a new member of our team.
Hollie Cox has joined Walker Thompson as a trainee accountant, having concluded her A level education at King Edward VI Sixth Form College. She will shortly commence studies for her AAT qualification, which will hopefully be followed by ACCA examinations.
Outside of work Hollie enjoys swimming, jogging and walking. She also expresses an aptitude for Sudoku and card games, so should excel at solving client problems.

MAKING TAX DIGITAL FOR VAT

HMRC has published further information on Making Tax Digital for VAT (MTDfV). The VAT notice sets out some further details of the MTDfV regime, which will ultimately require taxpayers to move to a fully digital tax system.
Under the rules, businesses with a taxable turnover above the VAT threshold (currently £85,000) will be required to keep digital records for VAT purposes using ‘functional compatible software’ and provide their VAT return information to HMRC via an application programming interface.
This notice explains:

• the digital records businesses must keep and the ways to record transactions digitally in certain special circumstances
• what counts as ‘functional compatible software’, and when software programs do and do not need to be digitally linked where a combination of programs is used.

The new rules have effect from 1 April 2019, where a taxpayer has a ‘prescribed accounting period’ which begins on that date, and otherwise from the first day of a taxpayer’s first prescribed accounting period beginning after 1 April 2019.
Please contact us for advice and support on the introduction of MTDfV.

Internet link: GOV.UK MTD

SCOTLAND INTRODUCES RELIEF FOR FIRST TIME BUYERS

First-time buyers in Scotland will be helped to purchase their first home through a new tax relief which applies to Scottish Land and Buildings Transaction Tax (LBTT).
According to the Scottish Parliament approximately 80% of first-time buyers will pay no LBTT once the LBTT First Time Buyer relief takes effect. The change sees the zero-rated LBTT threshold raised to £175,000 for first-time buyers. Those purchasing property at a higher value will have their tax reduced by a maximum of £600. The Scottish Parliament expect that around 12,000 first-time buyers will benefit each year.
Minister designate for Public Finance and Digital Economy Kate Forbes said:
‘From today, around 80% of first-time buyers will pay no LBTT, helping thousands of people across the country buy their first home.’

Internet link: GOV.SCOT news

ONE MILLION COUPLES STILL ELIGIBLE FOR £900 TAX BOOST

HMRC has highlighted that three million UK couples have already taken advantage of Marriage Allowance but a million more are still eligible for the tax break.
The Marriage Allowance allows certain couples, where neither pay tax at more than the basic rate, to transfer 10% of their unused personal allowance to their spouse or civil partner, reducing their tax bill by up to £238 a year in 2018/19.  The allowance was introduced in 2015 and it is possible to backdate the claim to earlier tax years.
Please contact us if you would like to know more about this allowance and whether you are eligible.

Internet link: GOV.UK news

HMRC WARNING: TIME TO DECLARE OFFSHORE ASSETS

HMRC is warning that taxpayers could face penalties if they fail to declare their income on foreign assets before new ‘Requirement to Correct’ legislation comes into force.
HMRC is urging UK taxpayers to come forward and declare any foreign income or profits on offshore assets before 30 September to avoid higher tax penalties.
New legislation called ‘Requirement to Correct’ requires UK taxpayers to notify HMRC about any offshore tax liabilities relating to UK income tax, capital gains tax, or inheritance tax. The most common reasons for declaring offshore tax are in relation to foreign property, investment income and moving money into the UK from abroad. HMRC has stated that over 17,000 people have already been in contact to notify they have tax due from sources of foreign income, such as their holiday homes and overseas properties.
The Financial Secretary to the Treasury, Mel Stride MP, said:
‘Since 2010 we have secured over £2.8bn for our vital public services by tackling offshore tax evaders, and we will continue to relentlessly crack down on those not playing by the rules.’
‘This new measure will place higher penalties on those who do not contact HMRC and ensure their offshore tax liabilities are correct. I urge anyone affected to get in touch with HMRC now.’
Common Reporting Standard (CRS)
From 1 October more than 100 countries, including the UK, will be able to exchange data on financial accounts under the CRS. It is expected that the CRS data will significantly enhance HMRC’s ability to detect offshore non-compliance and it is in taxpayers’ interests to correct any non-compliance before that data is received.
Taxpayers can correct their tax liabilities by:

• Using HMRC’s digital disclosure service as part of the Worldwide Disclosure Facility or any other service provided by HMRC as a means of correcting tax non-compliance.
• Telling an officer of HMRC in the course of an enquiry into your affairs.
• Or any other method agreed with HMRC.

Once a taxpayer has notified HMRC of their intention to make a declaration, by the deadline of 30 September, they will then have 90 days to make the full disclosure and pay any tax owed. To ensure there is an incentive for taxpayers to correct any offshore tax non-compliance on or before 30 September 2018 there are increased penalties for any failures to correct by that date.
If taxpayers are confident that their tax affairs are in order, then they do not need to worry. However if you are unsure, please contact us.

Internet link: GOV.UK news

NON-RESIDENTS CAPITAL GAINS TAX ON RESIDENTIAL PROPERTY

Non-residents are reminded that they have to inform HMRC within 30 days of completion of the conveyance of a UK residential property. You must report the disposal online using the non-resident Capital Gains Tax return even if:

• you’ve no tax to pay
• you’ve made a loss
• you’re registered for Self Assessment
• you’re registered with HMRC for Corporation Tax
• you send HMRC Annual Tax on Enveloped Dwellings (ATED) or ATED-related Capital Gains Tax returns

If a property was jointly owned, each owner must tell HMRC about their own gain or loss. Special rules apply if you give a UK residential property to your spouse, your civil partner, or to charity.
You might also have to pay any non-resident Capital Gains Tax due within the same 30 day period, although there are exceptions to the pay now rule if you already have an existing relationship with HMRC – for example, through Self Assessment. If you do, you can either:

• pay when you submit your return
• defer payment until your normal due payment date

Penalties

You have 30 days from the date of conveyance to report your disposal on the non-resident Capital Gains Tax return, and pay any tax due. You’ll get a late filing penalty and be charged interest if you do not do this by the 30 day deadline.
If you miss the deadline by:

• up to 6 months, you will get a penalty of £100
• more than 6 months, a further penalty of £300 or 5% of any tax due, whichever is greater
• more than 12 months, a further penalty of £300 or 5% of any tax due, whichever is greater

If you have to pay any non-resident Capital Gains Tax within the same 30 day period, late payment penalties and interest may also be due if you miss the deadline.
If any non-resident Capital Gains Tax remains unpaid after 31 January after the end of the tax year of the disposal, a late payment penalty of 5% of the tax outstanding will be charged.

Internet link: Capital Gains Tax

STAMP DUTY CUT: 121,500 HOUSEHOLDS SAVE £284 MILLION

According to the latest statistics 121,500 first-time buyers have saved a total of £284,000,000 following the introduction of a relief for first-time buyers under the Stamp Duty Land Tax rules which apply in England and Northern Ireland.
Over the next five years, it is estimated that this relief, part of the UK government’s housing policy will help over 1 million people getting onto the housing ladder.
First-time buyers purchasing homes of £300,000 and under pay no stamp duty at all, and those who bought properties of up to £500,000 will also have benefitted from a stamp duty cut.
Financial Secretary to the Treasury, Mel Stride, said:
‘Once again, we can see that our cut to stamp duty for first-time buyers is helping to make the dream of home ownership a reality for a new generation – exactly as we intended.’
‘In addition, we’re building more homes in the right areas, and have introduced generous schemes such as the Lifetime ISA and Help to Buy.’
Those purchasing properties in Wales (since 1 April 2018) pay Land Transaction Tax and those in Scotland pay Land and Buildings Transaction Tax.  First-time buyers in Scotland also benefit from a relief for first-time buyers.

Internet link: GOV.UK news

SOFTWARE SUPPLIERS – MAKING TAX DIGITAL FOR VAT

HMRC is working with more than 150 software suppliers who have said they will provide software for Making Tax Digital for VAT (MTDfV) in time for April 2019.
From 1 April 2019, businesses will be mandated to use the MTDfB system to meet their VAT obligations under MTDfV. Only businesses with a taxable turnover above the VAT threshold (currently £85,000) will be required to use MTDfV, however HMRC is piloting the new system, on a small scale, from April 2018.
HMRC has advised that more than 40 suppliers have said they will have software ready during the first phase of the pilot and other software suppliers are expected to follow. HMRC will open up the pilot to allow more businesses and agents to join later in 2018.
HMRC has advised that the list will be updated as more software meets the criteria. HMRC are advising businesses to check with their existing software supplier to find out if they will be supplying suitable software.
Contact us for help with Making Tax Digital for VAT.

Internet link: GOV.UK software suppliers

ADVISORY FUEL RATES FOR COMPANY CARS

New company car advisory fuel rates have been published which take effect from 1 September 2018. 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 September 2018 are:

Engine size	Petrol
1400cc or less	12p
1401cc – 2000cc	15p
Over 2000cc	22p
Engine size	LPG
1400cc or less	7p
1401cc – 2000cc	9p
Over 2000cc	13p
Engine size	Diesel
1600cc or less	10p
1601cc – 2000cc	12p
Over 2000cc	13p

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

Internet link: GOV.UK AFR

HMRC LATEST GUIDANCE FOR EMPLOYERS

HMRC has published the latest edition of the Employer Bulletin. This guidance for employers, and their agents, includes articles on:

• Reporting your payroll information accurately and on time
• Irregular payments and completion of Full Payment Submissions
• Starter Declaration on a Full Payment Submission (FPS)
• PAYE Settlement Agreements and Scottish Income Tax
• National Living Wage and National Minimum Wage – are you paying the correct rate?
• Advisory Electricity Rate for fully electric company cars
• Welsh Rates of Income Tax
• Construction Industry Scheme (CIS) webinars
• Postgraduate Loans
• Benefits and Expenses: Company cars
• Tax avoidance loan schemes – settle now
• Completing an EYU in respect of Employee’s National Insurance Contributions
• Employment Income: Draft Legislation
• Deadline for post 16 Child Benefit looms.

For help with payroll matters, please contact us.

Internet link: Employer Bulletin

‘NO DEAL’ BREXIT GUIDANCE

The government has issued some ‘no deal’ Brexit technical notices, with the aim of helping both businesses and individuals to prepare in the event of a UK-EU agreement not being realised.
The government has published the first 25 notices. Brexit Secretary Dominic Raab was keen to emphasise that reaching a deal remains the ‘overriding priority’. However, until a Withdrawal Agreement is ratified by the UK and European Parliaments, the possibility of the UK leaving the EU without a deal on 29 March 2019 remains.
The 25 documents cover a range of different areas, including VAT and trading, financial services, farming and workplace rights.
Josh Hardie, Deputy Director General at the CBI, said:
‘It’s right and responsible that the government has supplied information to businesses on issues from financial services passporting to food labelling, all of which will help lower the risks of the harshest outcomes from a ‘no deal’ Brexit.’
The government has confirmed further technical notices will be issued in September.

Internet link: GOV.UK no deal brexit collection

Newsletter 128

Please click on any of the links below for more information :

FAREWELL

In August, Walker Thompson will be saying farewell to one of its longest serving employees.

Roger Allmark is retiring from the firm to spend more time with his wife Sandra and to enjoy the opportunity to travel more and indulge in his hobbies which include keeping his garden in order, supporting The National Trust and watching Formula One racing. (he has been an avid Ferrari supporter for many years)

Roger joined us here in 1993 after spending some time working in the finance department for a construction & plant hire company.  Prior to that he had worked in a Nuneaton based accountancy practice and Francis Webb & Son in Coventry which is where I first met him in 1976 when I started my training with that firm.  He has been regarded very much as a safe pair of hands by the many clients who have come into contact with him.

There may be a short period of time during which clients who are used to seeing or speaking to Roger will have questions or technical queries, in which case they will be directed to my partners Kim Knowles or Chris Irvine or me but in any event we want to ensure that as Roger leaves us we can continue in a seamless fashion to deal with any client matters which arise.

Finally, on a personal note, having known him for over 40 years, I would like to wish him and Sandra a very happy retirement.

Sherod Williams – Director

WORKERS’ RIGHTS FOR PIMLICO PLUMBER

A plumber has won a legal battle for working rights in a Supreme Court ruling.

The Supreme court has backed up an earlier ruling by an Employment Tribunal in the case of a contractor engaged by Pimlico Plumbers.

Plumber Gary Smith carried out plumbing jobs for Pimlico Plumbers. He was VAT registered and paid tax on a self employed tax basis.

The Supreme Court has ruled that Gary Smith was entitled to workers’ rights and confirmed that the Employment Tribunal was ‘entitled to conclude’ that Mr Smith was a worker.

As a worker Mr Smith was entitled to rights including holiday and sick pay.  Details of workers rights can be found GOV.UK worker

Pimlico Plumbers chief executive Charlie Mullins said that he was ‘disgusted by the approach taken to this case by the highest court in the United Kingdom.

‘This was a poor decision that will potentially leave thousands of companies, employing millions of contractors, wondering if one day soon they will get a nasty surprise from a former contractor demanding more money, despite having been paid in full years ago. It can only lead to a tsunami of claims.’

Internet links: Press summary BBC News

LATEST GUIDANCE FOR EMPLOYERS

HMRC have issued the latest version of the Employer Bulletin. This June edition has articles on a number of issues including:

• P11D and P11D(b) filing and payment deadlines
• benefits in kind with cash allowances, flexible benefit packages and salary sacrifice
• important information about childcare voucher and directly-contracted childcare schemes
• Construction Industry Scheme – helpful reminders for subcontractors

If you have any queries on payroll matters please contact us.

Internet link: HMRC Employer Bulletin June 2018

UK ‘TAX GAP’ FALLS TO 5.7%

HMRC has confirmed that the tax gap for 2016/17 has fallen to 5.7%.

The ‘tax gap’ is the difference between the tax that should theoretically be paid to HMRC and the actual tax that has been paid. HMRC believes that the tax gap is lower as a result of its work to help taxpayers get things right from the start, and the department’s sustained efforts to tackle evasion and avoidance.

Key findings from the Measuring the Tax Gap publication include:

• small businesses made up the largest proportion of unpaid tax by taxpayer group at £13.7 billion
• taxpayer errors and failure to take reasonable care made up £9.2 billion of unpaid taxes by behaviour, while criminal attacks made up £5.4 billion
• income tax, national insurance contributions and capital gains tax made up the largest proportion of the tax gap by tax type at £7.9 billion for 2016/17; equivalent to 16.4% of self assessment liabilities
• the VAT gap showed a declining trend over time, falling from 12.5% in 2005/06 to 8.9% in 2016/17.

Mel Stride, Financial Secretary to the Treasury, said:

‘These really positive figures show that the tax gap is the lowest in the last 5 years, which reflects the hard work that HMRC and I have been doing to ensure we support businesses to pay the right tax at the right time and clamp down on tax evasion and avoidance.’

‘Collecting taxes is essential for funding our vital public services such as the NHS – indeed, had the tax gap remained at its 2005/06 level the UK would have lost £71 billion in revenue destined for public services, enough to build 200 hospitals.’

Internet link: GOV.UK tax gap

HMRC EXTENDS RTI LATE FILING EASEMENT UNTIL APRIL 2019

HMRC has extended the payroll Real Time Information (RTI) late filing easement until April 2019.

Under RTI payroll obligations employers must submit details of payments made to employees on or before the day that wages are paid via a Full Payment Submission.

The updated guidance extends the easement, introduced in April 2015 to April 2019. The easement applies where an employer’s FPS is late but all reported payments on the FPS are within three days of the employees’ payday. This easement applies from 6 March 2015 to 5 April 2019. However, HMRC go on to clarify that employers who persistently file after the payment date but within three days may be contacted or considered for a penalty. Potential monthly penalties range from £100 to £400 depending on the size of the employer.

Please contact us for help or advice with payroll matters.

Internet link: GOV.UK PAYE guidance

HMRC SAVES PUBLIC £2.4M BY STOPPING FRAUDSTERS

HMRC has announced that it has saved the public over £2.4m by tackling fraudsters that trick them into using premium rate phone numbers for services that HMRC provide for free.

HMRC has reported that scammers create websites that look similar to HMRC’s official site and then direct the public to call numbers with extortionate costs in comparison to the low cost and no cost services that HMRC provides.

These websites promote premium rate phone numbers as a means of phoning HMRC but these are call forwarding services which connect the unsuspecting to HMRC at a premium rate.

HMRC’s has confirmed that its genuine 0300 numbers are mainly free or charged at the local landline rate. In other cases, websites charge for forwarding information to HMRC which can be provided free of charge via GOV.UK website.

HMRC has successfully challenged the ownership of these websites, masquerading as official websites, and removed them from the hands of cheats. Analysis carried out shows that had HMRC not taken this action then the public would have lost £2.4m to these scams.

Mel Stride, Financial Secretary to the Treasury said:

‘We know that HMRC is the most spoofed government brand as criminals try to take advantage of the fact that everyone has some involvement with the tax authority. In this particular case, scammers try to dupe the public into paying large sums for services that are available for free or low cost.’

‘This is a brazen con, charging premium rates whilst simply redirecting calls to the real HMRC numbers that are available at low or no cost. It is a testament to the hard work of HMRC that they have prevented criminals extracting £2.4m from the public.’

Internet link: GOV.UK news

VAT REVERSE CHARGE FOR CONSTRUCTION SERVICES CONSULTATION

HMRC proposes to introduce new VAT rules for construction services which are subject to consultation.

HMRC has published a draft statutory instrument for technical consultation together with a draft explanatory memorandum and a draft tax information and impact note.

Under the draft legislation supplies of standard or reduced-rated construction services between construction or building businesses will be subject to a domestic reverse charge. This means that the customer will be liable to account for VAT due, instead of the supplier.

The legislation will not apply to specified supplies made to customers who are consumers, or to those that use specified supplies to make other supplies, such as those selling new houses.

The legislation is expected to take effect from 1 October 2019. More details of the proposed new rules can be found at the following link.

Internet link: GOV.UK consultation

ENTERPRISE MANAGEMENT INCENTIVE CONTINUES

It has previously been reported that the Enterprise Management Incentive scheme State Aid approval lapsed on 6 April 2018. HMRC had previously warned that EMI share options granted in the period from 7 April 2018 until EU State Aid approval was received may not be eligible for the tax advantages afforded to option holders but has now confirmed the scheme will operate as before.

On 15 May EU approval was granted and HMRC has now confirmed that the Enterprise Management Incentives scheme will continue to operate as before and no changes have therefore been made to the scheme.

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 scheme allows options to be granted to employees which then allows shares to be acquired without any tax bill arising until the shares are sold.

Internet link: GOV.UK bulletin

Newsletter 127

Headlines from our latest newsletter.  Please click on any of the links below for more information :

ADVISORY FUEL RATES FOR COMPANY CARS

New company car advisory fuel rates have been published which take effect from 1 June 2018. 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 June 2018 are:

Engine size	Petrol
1400cc or less	11p
1401cc – 2000cc	14p
Over 2000cc	22p
	LPG
1400cc or less	7p
1401cc – 2000cc	9p
Over 2000cc	14p
Engine size	Diesel
1600cc or less	10p
1601cc – 2000cc	11p
Over 2000cc	13p

The 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.

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

Internet link: GOV.UK AFR

TAX REFUND SCAMS WARNING FROM HMRC

HMRC has issued a warning to taxpayers regarding the latest tax refund scams. These scams are targeting individuals via email and SMS messages.

HMRC is currently processing genuine tax refunds for the 2017/18 tax year and the fraudsters are sending scam messages which claim that taxpayers are entitled to a rebate. These messages go on to request that they provide their personal and account details in order to make their claim.

HMRC is keen to stress that it will only ever inform individuals of a tax refund by post or through their employer, and never via email, text messaging or voicemail.

Commenting on the issue, Treasury Minister Mel Stride said

‘We know that criminals will try and use events like the end of the financial year, the self assessment deadline, and the issuing of tax refunds to target the public and attempt to get them to reveal their personal data’.

HMRC is advising taxpayers not to click on any links, download any attachments or provide any personal information, and to forward any suspect messages to HMRC.

Internet link: GOV.UK news

200,000 RECEIVE BACK PAY AS HMRC ENFORCE NATIONAL MINIMUM WAGE

BEIS and HMRC are urging underpaid workers to complain about National Minimum Wage (NMW) and National Living Wage (NLW) underpayments. Recent figures show that the number of workers receiving the money they are owed has doubled.

During 2017/18, HMRC investigators identified £15.6 million in pay owed to more than a record 200,000 of the UK’s lowest paid workers. This is an increase on the previous years figures of £10.9 million for more than 98,000 workers.

HMRC launched its online complaints service in January 2017 and believes this has contributed to the 132% increase in the number of complaints received over the last year and the amount of money HMRC has been able to recoup for those unfairly underpaid.

The figures are published as the government launches its annual advertising campaign which encourages workers to take action if they are not receiving the NMW or NLW. The online campaign urges underpaid workers to proactively complain by completing an HMRC online form.

HMRC state that the types of business receiving most complaints include restaurants, bars, hotels and hairdressing.

Business Minister Andrew Griffiths said:

‘Employers abusing the system and paying under the legal minimum are breaking the law. Short changing workers is a red line for this government and employers who cross the line will be identified by HMRC and forced to pay back every penny, and could be hit with fines of up to 200% of wages owed.

I would urge all workers, if you think you might be being underpaid then you should check your pay and call Acas on 0300 123 1100 for free and confidential advice.’

Please contact us for help with payroll matters.

Internet link: GOV.UK news 200000 receive back pay

OFF-PAYROLL WORKING IN THE PRIVATE SECTOR CONSULTATION

HMRC has launched a consultation on how to tackle non-compliance with the off-payroll working rules in the private sector and are asking for comments on the best way to do this.

HMRC estimates only 10% of PSCs that should apply the legislation actually do so, and the the cost of this is projected to increase from £700m in 2017/18 to £1.2bn in 2022/23.

This consultation provides an early evaluation of the public sector reform and invites responses on how best to deal with non-compliance in the private sector.

This consultation considers a number of potential options for tackling the non-compliance with the off-payroll working rules in the private sector. However, the fundamental principles of the off-payroll working rules, that the employment status test determines who should be taxed as employees, are not being considered as part of this consultation.

In respect of the public sector

‘HMRC has analysed PAYE data covering the first 10 months of the reform, from April 2017 to February 2018. This shows that in any given month since the reform was introduced, there are an estimated 58,000 extra individuals who are paying income tax and NICs undertaking work for a public authority above expected levels.

HMRC estimates that an additional £410 million of income tax and NICs has been remitted from these engagements, since the public sector reform was introduced.

On the basis of this evidence, the government’s assessment is that the public sector reform has been successful both in increasing tax compliance and resolving the compliance challenges faced by HMRC in enforcing the off-payroll working rules in the public sector.’

Private sector

‘The government considers extension of similar reform to the private sector to be the lead option which will effectively tackle non-compliance.’

The consultation closes on 10 August. We will keep you updated on this issue.

Internet link: GOV.UK consultation

UNIVERSAL CREDIT AND SELF EMPLOYMENT

The government has published a report, Universal Credit: supporting self employment which considers the issues faced by self employed claimants.

The report considers the impact of the Monthly Income Floor (MIF) earnings requirement. To be eligible for Universal Credit (UC) claimants must earn the MIF. However, the MIF assumes self employed claimants earn a regular income at least equal to the National Minimum Wage, and makes no provision for those with income and expenditure that vary from month to month. The report states that the MIF has been designed with monthly paid employed individuals in mind rather than the self employed who may have more volatile earnings.

It also considers the current system which allows self employed individuals to be exempt from meeting the MIF for the first 12 months of self employment and whether this is sufficient. The report urges the Government to extend the exemption period.

Internet link: Universal Credit Self Employed report

STATE AID APPROVAL GRANTED FOR THE ENTERPRISE MANAGEMENT INCENTIVE

It has previously been reported that the Enterprise Management Incentive State Aid approval lapsed on 6 April 2018. On 15 May EU approval was granted however HMRC have not confirmed expressly that this approval will be backdated to 6 April 2018.

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 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 had previously 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 afforded to option holders.

We await official confirmation on the position from HMRC.

Please contact us for specific advice on this issue.

Internet link: Europa press release

WALES TO SET DEVOLVED INCOME TAX RATES

From April 2019, the National Assembly for Wales will be able to vary the rates of income tax payable by Welsh taxpayers.

Responsibility for many aspects of income tax will remain with the UK government, and the tax will continue to be collected by HMRC for Welsh taxpayers.

The process for setting Welsh rates of income tax

From April 2019, the UK government will reduce each of the three income tax rates: basic, higher and additional rate, paid by Welsh taxpayers by 10 pence.

The National Assembly for Wales will then decide the three Welsh rates of income tax, which will be added to the reduced UK rates. The combination of reduced UK rates plus the Welsh rates will determine the overall rate of income tax paid by Welsh taxpayers.

If the National Assembly for Wales approves each of the Welsh rates of income tax at 10p, this will mean the rates of income tax paid by Welsh taxpayers will continue to be the same as that paid by English and Northern Irish taxpayers. However the National Assembly for Wales may decide to set different rates ‘to reflect Wales’ unique social and economic circumstances’.

Internet link: GOV.Wales

EMI Option Schemes back on track

In December 2017 someone at the Treasury dropped a clanger by not realising that EMI Option schemes would cease on 4 April 2018 because a renewal by the EU was required.

Thus with very short notice, on 4 April 2018 Accountants and Law firms were rushing around to get schemes approved before the arrangements ceased. Common sense has however prevailed and HMRC approval will be retrospectively re-instated where schemes missed the deadline. The scheme may lapse again at the point of Brexit, so planning ahead may be worth considering in the SME sector.

Interest Rates stay at 0.5%

The Bank of England yesterday backed off from raising interest rates in the face of a surprising slowdown this year, but stressed that its fundamental view on the health of the UK economy has not shifted. Threadneedle Street said the collapse in GDP growth in the first quarter of 2018 was “likely to have been overstated” thanks to temporary disruption from the poor weather suggesting the central bank is still looking to raise the cost of borrowing again later this year. ”The underlying pace of growth remains more resilient than the headline data suggest,” said the BoE’s governor Mark Carney. The Bank’s nine person Monetary Policy Committee (MPC) voted by a margin of seven to two to keep rates on hold at 0.5 per cent.

More news on credit availability

Following on from our recent blog item on SME businesses finding it difficult to obtain credit, the Federation of Small Businesses has produced results of a survey which shows only 60% of small business applications for credit are successful, the lowest since the end of 2015.  The results also showed that only one in every four business borrower said that the credit costs were “affordable”- a fall from 33% only a year ago.  Our advice is that small businesses need to be more aware of the market for borrowing and be prepared to shop around more in order to get the finance needed at the best price.

Surprising sources of business funding ? – perhaps not

If businesses are trading through online sales platforms like PayPal and Amazon, it is clearly of mutual benefit for those platforms to help smaller businesses with their expansion plans.

PayPal provides cash advances of up to £100,000 based upon a company’s trading history with them and it says that approved funding can be released within 15 minutes. PayPal states that it has lent £625m to small UK companies, a 56% increase while Amazon has a loan book of over £3 billion. 

These trading platforms are able to assess risk on current data which the banks do not have, they are still using older legacy IT systems.

Lifetime pension allowance raises £70 million

HMRC have reduced the lifetime pension allowance from £1.5m to £1.25m to currently £1.03m. If a pension fund exceeds these limits then a tax charge arises of 55% on lump sum withdrawals and 25% if taken as a pension. The tax take from this measure rose from £40m in 2014/15 to £110m in 2016/17. Protecting your pension fund at the maximum level possible year on year as the value increases is certainly worth discussing with your broker

GDPR preparation failing

The Institute of Directors have announced that only 60% of members believe that their organisations will be fully compliant by the 25 May implementation day. It noted that SME’s are finding it extremely difficult to digest the sheer scale of the changes

Taxpayers are paying too much

The UK Treasury believed that the so called “Tax Gap” referring to the difference between tax due and tax actually paid, would be closed as a result of the “Making Tax Digital” system. The initial trials of MTD involving pre-populated data obtained from employers, banks , DSS, Building Societies etc has shown that a majority of the 685,000 accounts in the trial resulted in more repayments than tax payable therefore leaving the tax gap very much intact

Director Disqualifications

Chair of the Insolvency Service Stephen Allinson has fully supported his organisations approach to identifying and disqualifying unfit company directors.

In 2017 the organisation pursued and disqualified over 1200 company directors with an average period of disqualification lasting 5 -7 years.

Brexit to blame says HMRC

HMRC has announced that its “Making Tax Digital” programme is now on hold indefinitely. Resources are being released from tax departments in order to increase capacity on EU Exit Projects.

The Revenue says that whilst it has laid foundations for the future, progress on real time tax coding changes and simple tax assessment will now be delayed. It will inevitably also hold up the gathering of data for pre-populated tax returns.

Newsletter 125

Headlines from our latest newsletter.  Please click on any of the links below for more information :

WELCOME TO A NEW MEMBER OF STAFF

This month we are pleased to announce the addition of a new member of our team.

Amy Cotton has joined Walker Thompson in our Payroll and Client Services section and she will hopefully soon become a familiar name and face to clients who use our bookkeeping and payroll services. Her experience in Sage and Xero software will be a great addition to our existing business.

Amy is a qualified MAAT who began her career in the professional sector before spreading her wings into industry and commerce.

She has most recently been working for CNC Technologies in Warwickshire.

Outside of work Amy has a young family who takes up quite a lot of her time but when she does find a few moments to herself she enjoys music and the cinema.

GDPR

New data protection rules from General Data Protection Regulation (GDPR) will replace the Data Protection Act in the UK from 25 May 2018 - see more at : http://www.walkerthompson.co.uk/news/newsletter-125/#GDPR

EMPLOYER-SUPPORTED CHILDCARE GETS A REPRIEVE

Many employers help employees with childcare costs, often by providing childcare vouchers by way of salary sacrifice. Following the roll out of Tax-Free Childcare (TFC), the new government scheme to help working parents, existing Employer-Supported Childcare (ESC) schemes were expected to close to new joiners from April 2018 - see more at : http://www.walkerthompson.co.uk/news/newsletter-125/#Employer

MAKING TAX DIGITAL FOR VAT FROM APRIL 2019

The regulations to bring into force Making Tax Digital for VAT (MTDfV) are now law, and digital VAT returns will be required from 1 April 2019 - see more at : http://www.walkerthompson.co.uk/news/newsletter-125/#Digital

WELSH LAND TRANSACTION TAX INTRODUCED

From 1 April 2018, Land Transaction Tax (LTT) will replace Stamp Duty Land Tax (SDLT). LTT will be collected by the Welsh Revenue Authority (WRA). HMRC has published guidance on the introduction of the new tax and the way in which property transactions straddling 1 April 2018 and cross border transactions will be dealt with - see more at : http://www.walkerthompson.co.uk/news/newsletter-125/#Welsh

INCOME TAX CHANGES FROM 6 APRIL 2018

The personal allowance for 2018/19 is £11,850. However, some individuals do not benefit from the full personal allowance. There is a reduction in the personal allowance for those with ‘adjusted net income’ over £100,000, which is £1 for every £2 of income above £100,000. So for 2018/19 there is no personal allowance where adjusted net income exceeds £123,700 - see more at : http://www.walkerthompson.co.uk/news/newsletter-125/#Changes

UPDATE FOR EMPLOYERS AND THEIR EMPLOYEES

HMRC’s latest Employer Bulletin includes useful updates for employers as we approach the start on the new tax year on 6 April 2018 - see more at : http://www.walkerthompson.co.uk/news/newsletter-125/#Update

SPRING STATEMENT ANNOUNCES CONSULTATIONS

Chancellor Philip Hammond delivered his Spring Statement on Tuesday 13 March 2018 - see more at : http://www.walkerthompson.co.uk/news/newsletter-125/#Spring

RISE IN NUMBER OF TOP LEVEL TAXPAYERS

The number of higher rate taxpayers (paying at the 40% & 45% rates) is now 1 in every 6 compared with 20 years ago when 1 in 12 taxpayers paid at the higher rate.

According to HMRC nearly 5 million taxpayers pay some tax at the higher level.

Commentators are viewing this as a stealth tax by the back door as the income level at which 40% tax starts has not risen in line with general earnings.

MINIMUM WAGE INCREASE

More than 2 million employees will receive an automatic pay rise this week as minimum wage levels increase. 

Employers need to ensure that they make the necessary payroll adjustments for anyone earning at or around the appropriate levels.

TAX FREE DIVIDEND ALLOWANCE REDUCES

A brief reminder that the tax free allowance applicable to dividends reduces from £5,000 to £2,000 on 6 April 2018. 

Cash extraction from SME’s will therefore be squeezed even tighter and Director Shareholders may need to seek out other routes eg; pension schemes in order to balance out the best approach.

HMRC on Social Media

HMRC have indirectly admitted to using social media platforms to identify circumstances where people’s lifestyles as explained to their friends in comments and photos are not seemingly in line with their income as declared for tax. Examples include photographs of expensive sports cars and large house extensions posted on platforms such as Facebook and the use of software like Google Earth to look at properties.

Confidence in the SME Sector

The Federation of Small Business continues to report that over 70% of SME businesses are expecting performance to improve or remain at a static level in the next 3 months. They also report increased concern over availability of finance and the rates of interest which in some cases exceed 6%. Banks are insisting that availability of credit is there whereas increasing numbers of businesses are describing availability of affordable finance as poor.