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