Newsletter 140

SIMPLIFY APPRENTICESHIP FUNDING

The Institute of Chartered Accountants in England and Wales (ICAEW) has urged the government to simplify the complexities of accessing apprenticeship funding.

The Apprenticeship Levy took effect from 6 April 2017 and changed the way in which apprenticeships are funded. Larger employers are required to pay a levy of 0.5% of their annual pay bill. However an annual allowance of £15,000 is available so employers only pay the Levy if their annual pay bill is over £3 million. The Levy is reported and paid through Pay as You Earn (PAYE).

According to ICAEW, the benefits for non-levy paying employers are particularly enticing, with the government committing to paying 95% of its apprenticeship training costs, however, the complexities in accessing the funds are putting SMEs off applying. Apprenticeship funding is devolved across the UK.

Iain Wright, Director for Business and Industrial Strategy at the ICAEW, said:

‘In our interactions with businesses up and down the country, we find SMEs more and more reluctant to run their own apprenticeship schemes due to the complexity of accessing Levy funds and the lack of flexibility built into the scheme.

‘The SME sector has traditionally been a big recruiter of 16-18 year-olds for apprenticeships, so this is a concerning development which could mean that talented young people are unable to access the skills and training they need to prosper in the workplace.’

Internet link: ICAEW news

HMRC ISSUES CUSTOMS EORI NUMBERS

In order to try and ensure that businesses are ready to trade post-Brexit, HMRC is automatically enrolling them in the customs system.

HMRC has confirmed that more than 88,000 VAT-registered businesses across the UK will be allocated an Economic Operator Registration and Identification (EORI) number in order to enable them to keep trading with customers and suppliers in the EU after the UK has left.

The government announced that 72,000 businesses have already registered for EORI numbers and numbers will be allocated to VAT-registered businesses to speed up the rollout of the scheme and help ensure the smooth transit of goods.

EORI numbers are a unique ID number allocated to businesses that enables them to be identified by Customs authorities when doing business with other traders.

HMRC has warned that if businesses do not have an EORI number post-Brexit, they will be unable to continue to trade with EU Member States.

Internet link: GOV.UK news

TRUSTS WITH SMALL AMOUNTS OF SAVINGS INCOME

In the latest Trusts and Estates Newsletter HMRC has confirmed the continuation of the interim arrangement for interest reporting.

In 2016 the requirement for payers to deduct tax at source on bank and building society interest was removed and income from these sources is now paid gross. Due to this change, trustees and personal representatives had increased reporting requirements.

HMRC introduced an interim arrangement so trustees do not have to submit returns, or make payments under informal arrangements, where the only source of income is savings interest and the tax liability is below £100.

HMRC has confirmed that these arrangements have been extended to include the 2019/20 and 2020/21 tax years. The situation will continue to be reviewed in the longer term.

Contact us for help with trusts.

Internet link: GOV.UK Newsletter

ADVISORY FUEL RATES FOR COMPANY CARS

New company car advisory fuel rates have been published which take effect from 1 September 2019. 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 2019 are:

Engine size	Petrol
1400cc or less	12p
1401cc – 2000cc	14p
Over 2000cc	21p
Engine size	LPG
1400cc or less	8p
1401cc – 2000cc	10p
Over 2000cc	14p
Engine size	Diesel
1600cc or less	10p
1601cc – 2000cc	11p
Over 2000cc	14p

HMRC guidance states that the rates only apply when you either:

• reimburse employees for business travel in their company cars or
• require employees to repay the cost of fuel used for private travel.

You must not use these rates in any other circumstances.

The Advisory Electricity Rate for fully electric cars is 4 pence per mile. Electricity is not a fuel for car fuel benefit purposes.

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

Internet link: GOV.UK AFR

PAYE LATE FILING AND LATE PAYMENT PENALTIES

HMRC has confirmed that it will continue its risk-based approach to payroll Real Time Information (RTI) late filing and late payment penalties this tax year.

Rather than late filing and late payment penalties being issued automatically, HMRC will continue to issue them on a risk-assessed basis during 2019/20. HMRC has also confirmed that penalties for 2019/20 will be issued from September 2019.

The August issue of the Employer Bulletin confirms:

‘HMRC will not charge penalties automatically for 2019/20, provided a Full Payment Submission (FPS) is filed within three days of the payment date. Where there is a pattern of persistent late-filing within three days of the statutory filing date, employers will be reviewed and may be charged a filing penalty as part of HMRC’s risk-based approach.’

The deadline for cleared electronic payments is the 22nd of the month following the end of tax month. For cheque payments or other non-electronic methods, payment is due by the 19th.

HMRC may charge interest on the amount outstanding for late payment, which will accrue until the total amount is paid. Contact us for help with payroll matters.

Internet link: Employer Bulletin

SELF ASSESSMENT DEADLINES

Two self assessment deadlines are approaching:

• 5th October 2019

For those individuals who have not previously completed a tax return but need to report a liability for 2018/19.

• 31st October 2019

For those individuals who have previously submitted ‘paper’ self assessment tax returns the deadline for the 2018/19 return is 31 October 2019. 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: HMRC deadlines

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:

• Class 1A liabilities payable on Termination Awards and Sporting Testimonial Payments
• Off-payroll working rules from April 2020
• Disguised Remuneration
• Seasonal Workers
• Contractors operating CIS – new VAT reverse charge on building and construction services
• ‘Trivial Benefits’
• Welsh rates of Income Tax
• Student Loans
• Good Work Plan proposals to support families
• Sickness absence costs £9 billion per year

For help with payroll matters, please contact us.

Internet link: Employer Bulletin

STRONG CUSTOMER AUTHENTICATION

The Financial Conduct Authority (FCA) has agreed a plan to give the payments and e-commerce industry extra time to implement Strong Customer Authentication (SCA).

From 14 September 2019, new European Union (EU) rules apply that impact how banks or payment services providers verify their customers’ identities and validate payment instructions. The Strong Customer Authentication (SCA) rules are intended to enhance the security of payments and limit fraud.

The FCA has agreed an 18-month plan to implement SCA with the e-commerce industry which includes card issuers, payment firms and online retailers. The plan reflects the opinion of the European Banking Authority (EBA) that more time was needed to implement SCA given the complexity, lack of preparedness and the potential for a significant impact on consumers.

Jonathan Davidson, Executive Director for Supervision – Retail and Authorisations, said:

‘The FCA has been working with the industry to put in place stronger means of ensuring that anyone seeking to make payments is not a fraudster. While these measures will reduce fraud, we want to make sure that they won’t cause material disruption to consumers themselves; so we have agreed a phased plan for their timely introduction’.

The FCA has confirmed that it will not take enforcement action against businesses if they do not meet the relevant requirements for SCA from 14 September 2019 in areas covered by the agreed plan as long as there is evidence that they have taken the necessary steps to comply with the plan. At the end of the 18-month period, the FCA expects all businesses to have made the necessary changes and undertaken the required testing to apply SCA.

Internet link: FCA press release

VAT DOMESTIC REVERSE CHARGE FOR BUILDING AND CONSTRUCTION SERVICES DELAYED

HMRC has announced a one-year delay to the introduction of the VAT domestic reverse charge for building and construction services.

The reverse charge represents part of a government clamp-down on VAT fraud. According to the government, large amounts of VAT are lost through ‘missing trader’ fraud. As part of missing trader fraud, VAT is charged by a supplier, who then disappears, along with the output tax. The VAT is thus lost to HMRC. The construction industry is considered a particularly high-risk sector.

The reverse charge when introduced will not change the VAT liability but instead it will change the way that VAT is accounted for. In the future, the recipient of the services, rather than the supplier, will account for VAT on specified building and construction services. This is called a reverse charge. The reverse charge is a business-to-business charge, applying to VAT-registered businesses where payments are required to be reported through the Construction Industry Scheme (CIS).

The charge was due to come into effect on 1 October 2019. It has now been delayed by 12 months until 1 October 2020 due to fears that businesses in the construction sector were not ready.

HMRC says it remains ‘committed to the introduction of the reverse charge’, and has put a robust compliance strategy into place in order to tackle fraud in the construction sector.

Internet link: GOV.UK revenue and customs brief

INDEPENDENT REVIEW OF THE LOAN CHARGE

The government has initiated a review of the Loan Charge and whether the policy is an appropriate way of dealing with disguised remuneration loan schemes used by individuals who entered directly into these schemes to avoid paying tax.

Sir Amyas Morse, the former Comptroller and Auditor General and Chief Executive of the National Audit Office (NAO), will lead an independent review of the Loan Charge.

The government has asked Sir Amyas Morse to report back by mid-November, giving taxpayers certainty ahead of the January Self Assessment deadline.

Internet link: GOV.UK news

SENIOR CLINICIANS' PENSIONS CONSULTATION

The government has launched a consultation on proposals to give senior NHS doctors and nurses access to more flexible pensions. The proposals aim to offer senior clinicians more control over their pensions growth.

The consultation follows reports that senior NHS clinicians pension tax charges are making them retire early or change their working habits. The Department of Health and Social Care estimates that a third of consultants and GPs may be turning down extra shifts because of how the NHS Pension Scheme interacts with the wider pension tax rules.

The new proposals are designed to allow those affected to have freedom to individually control how much their pension fund grows, allowing them to maximise the amount they can save without facing significant pension tax bills having breached limits on tax relief.

The new proposals include:

• a ‘flexible accrual’ option where scheme members can choose an accrual level in 10% increments
• the option to ‘fine tune’ pension growth towards the end of the scheme year, when total earnings are clearer.

The consultation closes on 1 November 2019.

Internet link: GOV.UK news

HMRC COLLECTS RECORD AMOUNTS OF IHT

The government has announced that HMRC collected a record sum of £5.4 billion in inheritance tax (IHT) during the 2018/19 tax year.

The increase comes on the back of a 15% rise in the number of estates liable for IHT. Between 2015/16 and 2016/17, the number of estates paying IHT rose by 3,600 to 28,100.

Rising asset values, particularly in regard to properties in London and the South East of England, have been a key factor behind the increased number of estates falling into the IHT net. The freezing of the tax-free nil-rate band threshold also played a key role.

The residence nil-rate band (RNRB) gives an additional allowance to people leaving their family home to direct descendants, such as children or grandchildren. The amount of relief is £150,000 for 2019/20, rising to £175,000 for 2020/21.

Despite the increase in estates paying IHT, the tax only applies to 4.6% of deaths in the UK. The average amount of tax paid was £179,000.

Please contact us for advice on estate and IHT planning.

Internet link: GOV.UK IHT statistics

'MAJOR GAPS' IN NO-DEAL BREXIT GUIDANCE

According to the British Chambers of Commerce (BCC) there are ‘major gaps’ in the government’s no-deal Brexit guidance for UK businesses.

The BCC carried out a review of official government no-deal Brexit guidance for businesses, and found that 31 of 36 critical areas are still marked amber or red, suggesting that businesses have ‘incomplete or insufficient information available to plan thoroughly for a no-deal outcome’.

Dr Adam Marshall, Director General of the BCC, said:

‘While the government has ramped up communication to businesses in recent weeks, there are still big gaps in the guidance available to help businesses to prepare for Brexit, with just weeks to go until 31 October.

Our business communities don’t want to see a disorderly no-deal exit on 31 October, which would lead to an overnight change in trading conditions.

Averting a messy and disorderly exit is still critical. Businesses across the UK want politicians on all sides to come together and find a way forward – fast.’

Internet link: BCC news

BREXIT-READINESS EVENTS FOR BUSINESS

The Department for Business has launched a nationwide programme of events to help businesses prepare for Brexit.

The free events are designed to provide free advice on a range of Brexit-related topics, including exporting, importing and employing EU citizens. Attendees will also have the opportunity to hear from senior government officials and access support tailored to their location and business.

More than 30 Brexit-readiness events have been scheduled to take place across the UK.

Internet link: GOV.UK news

EXPERTS WARNING OVER INSOLVENCY DEBTS

Prioritising HMRC over other creditors in insolvencies will have a ‘negative impact on the UK’s economic growth’, experts have warned Chancellor of the Exchequer Sajid Javid.

The warning was issued in a letter from 11 business organisations and insolvency experts to the Chancellor. Signatories of the letter include the Institute of Chartered Accountants in England and Wales, the Institute of Chartered Accountants of Scotland, the Insolvency Practitioners Association and the City of London Law Society.

The letter says that the proposed change will make it more difficult to rescue businesses. According to the organisations, it will also reduce access to finance for small businesses, increase the harm done to other businesses in insolvencies and could ultimately result in losses to the Exchequer.

Writing in the letter, the organisations said:

‘While we understand that the government wishes to increase the value of taxes repaid in the event of insolvency, there is a serious risk that the wider costs of the government’s approach will outweigh any expected benefit.

This proposed policy would reverse successive governments’ attempts to encourage a culture of business rescue in the UK, and would undermine the government’s recent work to strengthen the UK’s insolvency and restructuring framework.’

The proposal, which was announced in the 2018 Budget and is now included in the draft Finance Bill, will see a change implemented from 6 April 2020. This would entail taxes, including the VAT, Pay as You Earn (PAYE), CIS and employee national insurance contributions (NICs) owed by an insolvent company to be paid to HMRC ahead of floating charge holders and unsecured creditors.

Internet link: Economia news

MONEY LAUNDERING NON-COMPLIANCE

HMRC has published details of businesses that have failed to comply with the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017.

HMRC is also advising that the published person may have changed their behaviour or no longer be based at the published address. Also that the business currently at the published address may have no connection with the published business, or may have the same name as the published business but could be under new, and completely different, management.

If you would like advice on anti-money laundering procedures please contact us.

Internet link: GOV.UK money laundering non-compliance