Churchill Groves Chartered Accountants Burntwood

Where working beyond expectation on even the most daunting challenge comes as standard

Helping you manage your financial obligations and maintain a clear financial vista for your business

Providing a clear route to charting that unknown financial territory

Call 01543 686262

About Churchill Groves Chartered Accountants

The accountancy practices previously known as Churchills Chartered Accountants and Groves & Co are now practicing under the combined name of Churchill Groves. The combined practice will work in the Burntwood office.

Churchills Chartered Accountants was formed in 1995 by Mike Tomlinson and Ian Brown and until Mike's retirement in March 2018 they continued to run the new practice. At about the same time Groves & Co was being set up by Jackie Groves in Burntwood. Although no longer working full time both Mike and Jackie will continue to act in a consultancy role for the new practice.

We all believe in giving our clients a comprehensive, efficient and cost effective service. We also believe in plain speaking. We won't try to bamboozle you with jargon - it's just not our style!

Who We Are...

About Ian

Ian trained and qualified with a large independent practice in the West Midlands before taking up a 2 year contract in the British Virgin Islands with KPMG. He returned home to work with KPMG, Moores Rowland and Grant Thornton (where he met Mike) and then spent 4 years working in the computer industry. In 1995 he rejoined Mike who had branched out on his own and worked with him until Mike's retirement in March 2018. During the early years of the practice he lectured in accountancy and auditing at the West Midlands School of Accountancy. Outside of work he plays squash and racquetball and is a keen walker and cyclist.

About Mike

Mike trained and worked with Grant Thornton for 26 years. Following promotion to partner he worked in computer auditing, corporate recovery, corporate finance and general practice where he specialised in the music industry. He is a keen sportsman and plays golf, badminton and 'veterans' hockey. Mike was born and trained in Manchester and can often be seen on the terraces watching Manchester City with his grandson.

About Jackie

Jackie trained as an Internal Auditor with the National Coal Board and qualified as a Chartered Certified Accountant in 1976. Following a short career break, after the birth of her daughter, she took a part time job with Hednesford Raceway before moving to a local Chartered Accountant's practice for 9 years. Having grown up in the Burntwood area since the age of 11, Jackie decided in 1993, to form her own practice, Groves & Co, to provide the locality with a friendly, fully qualified accounting service.

What We Do...

If you'd like more information or would like to ask us a question then call us on 01543 686262 or fill out our contact form.

What Others Say...

Here at Churchill Groves we firmly believe that you are only as good as your last job so it's always nice to be able to post references and testimonials from satisfied clients.

For further recommendations please have a look on the Best of Cannock website through the link below.

Matthew Jones

Owner, Disklabs

Ian has turned the painful experience of dealing with accountants into a joy, his knowledge, experience, practical approach and commitment are everything you could ask for when engaging a expert. I would recommend Ian and Churchill's without hesitation. He has delivered a great service into Disklabs for the last 10 yrs.

Clare Lindstrand

Owner, Department707

Working collaboratively for a shared client, Ian and I developed a partnership which has lasted over five years. On every project we've worked on, he's been as bright as a button when it comes to all things financial. I strongly recommend Ian, who's input and insight will positively contribute to any small or medium sized business looking for a strategic business adviser or hands-on accountant.

Keith Cox

Owner, Appel

I have known Ian Brown for some 20 years both as a business colleague and lately as a service provider. I have, and will continue, to recommend all my friends and business associates to Ian as a reliable, honest, efficient and reasonably priced accountant. He's easy to get on with and knows his stuff, plus for any of the more complex accountancy issues he always knows a "man that can". I look forward to using Ian's services for many years to come.

Latest News

See some of the latest news stories that we think you might find of interest to you and your business:

Autumn Budget 2021 – Minimum Wage increases

Employment & Payroll
 

The Chancellor of the Exchequer, Rishi Sunak confirmed that the government has accepted in full the proposals of the Low Pay Commission for increasing minimum wage rates from 1 April 2022. This puts the government back on track to reach their minimum wage target of two-thirds of median earnings by 2024.

The new National Living Wage (NLW) rate of £9.50 will come into effect on 1 April 2022 and represents an increase of 59p or 6.6%. The NLW is the minimum hourly rate that must be paid to those aged 23 or over. The threshold is expected to further reduce to 21 by 2024. The increase represents a pay rise of over £1,000 for someone working full-time and earning the NLW.

The hourly rate of the NMW (for 21-22 year olds) will increase to £9.18 (a rise of 82p or 9.8%). This increase narrows the gap with the NLW and leaving this age group on course to receive the full NLW by 2024.

The rates for 18-20 year olds will increase to £6.83 (a rise of 27p) and the rate for workers above the school leaving age but under 18 will increase to £4.81 (a rise of 19p). The NMW rate for apprentices will increase by 51p to £4.81.

Autumn Budget Summary 27 October 2021

Budget Summary
 

As with the Spring Budget 2021, much of the detail for the Autumn Budget had been leaked to the press prior to the official report to parliament, 27th October 2021.

But we now have all the details and, as usual, there is much to consider. The following Budget summary is split into two sections:

  1. Taxation changes
  2. Other announcements

Please call if you need to discuss how these changes may affect your business or tax affairs in the coming months.

Taxation changes

Income Tax 2022-23 to 2025-26

No increase in rates and the higher rate threshold is frozen at £37,700 through to April 2026. For the same period, the personal tax allowance is also frozen at £12,570 (£12,570 2021-22) and will apply to all regions of the UK.

In what many commentators consider to be a “stealth tax”, wage earners benefitting from annual increases in their earnings up to April 2026 will find themselves paying tax on the full value of any increases. This is because, with personal allowances and the higher rate thresholds frozen until April 2026, any increases in earnings will be taxed and, in some cases, this may push earnings into the higher rate tax bands.

Regional variations to Income Tax rates may apply in Wales and Scotland.

Income Tax and dividend income

The current £2,000 dividend tax-free allowance is unchanged.

As announced 7 September 2021, the tax rates payable on dividend income will increase in line with the 1.25% increase in certain NIC contributions. The rates that will apply in all regions of the UK from 6 April 2022 are:

  • Dividends that form part of the basic rate band – 8.75% (7.5% 2021-22)
  • Dividends that form part of the higher rate band – 33.75% (32.5% 2021-22)
  • Dividends that form part of the additional rate band – 39.35% (38.1% 2021-22)

Starting rate for savings

The band of savings income that is subject to the 0% starting rate will remain at £5,000 for 2022-23.

Reform of Basis Periods for self-employed and partners

The basis on which profits are taxed in a tax year are to be changed from the account’s year ending in a tax year to the actual profits arising in a tax year. Self-employed sole traders and partners who already have a year end at the end of the tax year will experience no change in their basis of taxation.

For affected traders with year ends other than the end of March or 5 April, there will be a transition to an actual basis during 2023-24 and the new rules will come into force from 6 April 2024.

The reform will include greater flexibility on the use of overlap relief in the transition year and provisions to reduce the impact of transition profits on allowances and profits.

National Insurance

Boris Johnson announced – earlier this year - a 1.25% increase in certain National Insurance Contributions from April 2022. This is ring-fenced to provide funding for health and social care. From April 2023, this NIC increase will be withdrawn and replaced by a new Health and Social Care Levy at the same rate.

The government will use the September Consumer Prices Index figure of 3.1% as the basis for uprating National Insurance limits and thresholds, and the rates of Class 2 and 3 National Insurance contributions, for 2022-23.

This excludes the Upper Earnings Limit and Upper Profits Limit which will be maintained at 2021-22 levels, in line with the higher rate threshold for Income Tax.

Lifetime Allowance for pension pots

From April 2021 to April 2026 the pensions lifetime allowance will remain frozen at £1,073,100.

Capital Gains Tax

Any attempt to align CGT rates with Income Tax rates seems to be off the table for the time being. Apart from anti-avoidance changes, there are two changes worth mentioning:

  • Capping the annual exempt amount. This was fixed at £12,300 from April 2021 to April 2026 for individuals, personal representatives, and some types of trusts for disabled people; and £6,150 for trustees of most settlements, and
  • The deadline for reporting chargeable residential property sales – not a main residence, this covers sales of second homes or buy-to-let properties – is increased from 30 days to 60 days. This change applies to disposals that complete on or after 27 October 2021.

The second change is welcomed as the 30 days reporting window was a tight reporting timeline in which to gather all the relevant data to make a submission to HMRC and to pay any taxes due.

Corporation Tax

No change in Corporation Tax rates until April 2023. For the financial year beginning 1 April 2022, the rate will remain at 19%.

As announced earlier this year, from 1 April 2023, there will be two rates of CT.

  • Taxable profits up £50,000 will continue to be taxed at 19%
  • Taxable profits more than £250,000 will be taxed at 25%
  • Profits between £50,000 and £250,000 will be subject to a marginal tapering relief. This would be reduced for the number of associated companies and for short accounting periods.

Corporation Tax and banking companies

From 1 April 2023, the rate of surcharge on banking companies will be 3% and the surcharge allowance increased from £25m to £100m.

Corporate Tax – R&D Relief

R&D tax reliefs will be reformed to support modern research methods by expanding qualifying expenditure to include data and cloud costs. This will effectively capture the benefits of R&D funded by the reliefs through refocusing support towards innovation in the UK, and target abuse and improve compliance. These changes will be legislated for in Finance Bill 2022-23 and take effect from April 2023.

Museums and Galleries Exhibition Tax Relief

The sunset clause in this relief is extended for a further two years until 31 March 2024.

Cultural Relief changes

Theatre Tax Relief and Museums and Galleries Tax Relief

Rates will increase from 20% (for non-touring productions) and 25% (for touring productions) to 45% and 50% respectively from 27 October 2021.

From 1 April 2023, the rates will fall to 30% and 35%, with a return to 20% and 25% on 1 April 2024. As mentioned above, the Museums and Galleries Tax Relief will expire after 31 March 2024.

Orchestra Tax Relief

From 27 October 2021, the relief will increase from 25% to 50%, reducing to 35% from 1 April 2023, and returning to 25% from 1 April 2024.

Reliefs for investments in qualifying assets

Super-deduction

The temporary “Super-deduction” and a 50% first year allowance – that were introduced April 2021 – will continue to apply to qualifying expenditure up to 31 March 2023.

The super-deduction allows businesses to remove 130% of qualifying expenditure as a deduction from taxable profits.

Annual Investment Allowance

The existing Annual Investment Allowance (AIA) was due to reduce to £200,000 (from the present £1m) from 1 January 2022. This date has been changed. The £1m of AIA relief will now revert to £200,000 from 1 April 2023.

Business owners thinking about high-value investments in qualifying assets will now have more time to consider their timing of capital acquisitions.

Reform of loss relief rules for Corporation Tax

The government will legislate in the Finance Bill 2021-22 to amend the loss relief rules to ensure that the legislation continues to work as intended for companies adopting International Financial Reporting Standard (IFRS) 16. The changes will have retrospective effect from 1 January 2019.

Van and car benefit changes

This measure increases the van benefit charge and the car and van fuel benefit charges by the Consumer Price Index from 6 April 2022. The flat-rate van benefit charge will increase to £3,600; the multiplier for the car fuel benefit will increase to £25,300; and the flat-rate van fuel benefit charge will increase to £688.

Inheritance Tax

No changes to present rates and allowances. These are all frozen at current levels until April 2026.

This means the nil-rate band will continue to be £325,000 and the residence nil-rate band at £175,000, for this period.

VAT

There will be no changes to the 20% rate. The £85,000 registration limit and the £83,000 deregistration limit will remain at these levels until 31 March 2024.

The temporary reduced rate of 5% for hospitality, holiday accommodation and attractions was increased to 12.5% from 1 October 2021. This rate will remain until 31 March 2022 when it will revert to 20%. This acknowledges the disruption and financial hardship suffered by this sector during the COVID pandemic.

VAT rules in Freeports

From 3 November 2021, the government will introduce new elements into the VAT free zone model for Freeports.  They are:

  • implement a free zone exit charge to ensure businesses do not gain an unintended tax advantage from the zero-rate in the free zone model,
  • make amendments to existing VAT law to ensure free zone rules and warehousing rules are mutually exclusive,
  • amend some parts of historic free zone legislation which are incompatible with the new free zone VAT rules.

 

Other announcements

Business rates changes

The business rates multipliers are frozen for a second year until 31 March 2023. The small business multiplier is set at 49.9p and the standard multiplier at 51.2p. Different rates apply in London and in Wales. The freezing of the multipliers will mean that your business rates will not increase in 2022/23.

Eligible retail, hospitality and leisure properties will benefit from a 50% relief in their business rates for 2022/23, subject to a cap of £110,000 per business.

A relief is also being introduced for improvements to business properties which will delay the start date of higher business rates triggered by the improvements for 12 months. The government are to consult on how to implement the relief, which will take effect from 2023 and will be reviewed in 2028. If you are planning improvements to your business premises, this may benefit you.

From 1 April 2023 until 31 March 2035 a targeted business rates exemption will apply for eligible plant and machinery used in onsite renewable energy generation and storage, and a 100% relief will be available for eligible heat networks. This is to support the decarbonisation of non-domestic buildings.

From 2023, business rate revaluations will take place every three years rather than every five years.

Transitional relief for small and medium-sized businesses is extended for one year, which will restrict bill increases to 15% for small properties (i.e. those with a rateable value of up to £20,000 or up to £28,000 in Greater London), and to 25% for medium properties (i.e. those with a rateable value of up to £100,000).

Increasing the normal minimum pension age

The earliest age at which pension savers can access their pensions without incurring an unauthorised payments tax charge is changing.

From 6 April 2028, the normal minimum pension age is increasing from 55 to 57.

Universal Credits

To compensate for the recent withdrawal of the £20 a week UC payment, the government is to decrease the amount it reduces UC payments when a claimant works more hours. Presently, for every £1 earned UC payments decrease by 63p. From 1 December 2021 at the latest, this will be lowered to 55p for every £1 earned.

Duties and Miscellaneous taxes 

  • Tobacco Duty will be increased by agreed rates above the Retail Prices Index (RPI) from 6pm on 27 October 2021.
  • Alcohol duty rates will be frozen.
  • Landfill Tax will increase in line with RPI increases. The increase will be effective from April 2022.
  • Aggregates Levy – the government will freeze the Levy rates in 2022-23.
  • Gaming Duty will increase in line with RPI changes. The increase will be effective from April 2022.
  • VED rates for cars, vans and motorcycles will increase in line with RPI changes. Change will be effective from April 2022.
  • VED rates for HGVs. The government will continue to freeze HGV VED for 2022-23. It will also suspend the HGV Levy for a further year from 1 August 2022.
  • Fuel Duty rates for 2022-23 will remain frozen.
  • Air Passenger Duty rates for flights within the UK will be reduced from April 2023 when new bandings are introduced. Rates for short and long-haul flights will increase in line with the RPI and a new ultra-long-haul band will be introduced.

ISA investment limits for 2022-23

The limits set for 2022-23 are:

  • Adult ISAs the limit remains at £20,000
  • Junior ISA limit remains at £9,000
  • Child Trust Funds remain unchanged at £9,000

National Living Wage increases

The NLW will increase to £9.50 per hour (previously £8.91) from 1 April 2022.

The full changes to the National Minimum Wage rates from 1 April 2022 are as follows:

  • The 21 to 22 year-old rate will be £9.18 per hour
  • The 18 to 20 year-old rate will be £6.83 per hour
  • The 16 to 17 year-old rate will be £4.81 per hour
  • The apprentice rate will be £4.81 per hour

Make the most of tax-free trivial benefits

Employee Benefits
 

The trivial benefits in kind (BiK) exemption applies to small non-cash benefits, for example a bottle of wine or a bouquet of flowers, given occasionally to employees.

Although the benefit is defined as ‘trivial’, employers should remember that this can be an efficient way to provide small rewards and incentives to employees. The main requirement is that the gifts are not provided as a reward for services performed or as part of the employees’ duties. However, gifts to employees on milestone events such as the birth of a child or a marriage or other gestures of goodwill would usually qualify.

The employer also benefits as the trivial benefits do not have to be included on PAYE settlement agreements or disclosed on P11D forms. There is also a matching exemption from Class 1A National Insurance contributions. There is no requirement to let HMRC know once the benefit meets the necessary criteria.

The tax exemption applies to trivial BiKs where the BiK:

  • is not cash or a cash-voucher; and
  • costs £50 or less; and
  • is not provided as part of a salary sacrifice or other contractual arrangement; and
  • is not provided in recognition of services performed by the employee as part of their employment, or in anticipation of such services.

The rules also allow directors or other office-holders of close companies and their families to benefit from an annual cap of £300. The £50 limit remains for each gift but could allow for up to £300 of non-cash benefits to be withdrawn per person per year.  The £300 cap doesn’t apply to other employees. If the £50 limit is exceeded for any gift, the total value of the benefit will be taxable.

When is a company dormant for tax purposes?

Corporation Tax
 

If a company has stopped trading and has no other income then the company is usually classed as dormant for Corporation Tax purposes.

A company is usually dormant for Corporation Tax if it:

  • has stopped trading and has no other income, for example investments
  • is a new limited company that hasn’t started trading
  • is an unincorporated association or club owing less than £100 Corporation Tax
  • is a flat management company

HMRC can also send a notification if they think a company is dormant. This notice will state that a company or association is dormant and is not required to pay Corporation Tax or file Company Tax Returns.

Limited companies are still required to file annual accounts and a confirmation statement even if the company is dormant for Corporation Tax and according to Companies House. A company defined as 'small' by Companies House can instead file 'dormant accounts' and doesn’t have to include an auditor’s report.

A dormant company must also ensure they deregister for VAT within 30 days of the company becoming dormant and close any unused PAYE schemes. A company can stay dormant indefinitely, however there are costs associated with this option. This might usually be done if for example a company is restructuring its operations or wants to retain use of a company name, brand or trademark.

Tax-free gains on gifts to spouse or charity

Capital Gains Tax
 

In most cases, there is no Capital Gains Tax (CGT) to be paid on the transfer of assets to a spouse or civil partner. There is, however, still a disposal that has taken place for CGT purposes effectively at no gain or loss on the date of the transfer. When the asset ultimately comes to be sold, the gain or loss will be calculated based on the original cost when the asset was first owned by the spouse or civil partner.

There are a few exceptions that couples should be aware of when the relief does not apply. This relates to the use of goods which are sold on by the transferee’s business and for couples that were separated and not living together for the entire tax year when the assets were transferred. Spouses or civil partners that lived together at any point in the tax year when the assets were transferred can still benefit from these rules. If a transfer did not qualify then the asset must be retrospectively valued at the date of the transfer and the transferor is liable for any gain or loss.

There are similar rules for assets that are gifted to charities. However, CGT may be due where an asset is sold to a charity for more than was paid for it and less than the market value. The gain in this case would be calculated based on what the charity paid rather than the market value of the asset.

Are you a landlord that owes tax to HMRC?

Income Tax
 

The Let Property Campaign provides landlords who have undeclared income from residential property lettings in the UK or abroad with an opportunity to regularise their affairs by disclosing any outstanding liabilities whether due to misunderstanding the tax rules or because of deliberate tax evasion. Participation in the campaign is open to all residential property landlords with undisclosed taxes. The campaign is not suitable for those letting out non-residential properties.

Landlords who do not avail of the opportunity and are targeted by HMRC can face penalties of up to 100% of the tax for UK gains and 200% for offshore liabilities together with possible criminal investigation.

Taxpayers that come forward will benefit from better terms and lower penalties for making a disclosure. Landlords that make an accurate voluntary disclosure and have taken ‘reasonable care’ are likely to face the lowest penalties. There are higher penalties where you did not take reasonable care if you deliberately misled HMRC regarding offshore liabilities.

There are three main stages to taking part in the campaign, notifying HMRC that you wish to take part, preparing an actual disclosure and making a formal offer together with payment. The campaign is open to all individual landlords renting out residential property. That includes landlords with multiple properties and single rentals as well as specialist landlords with student or workforce rentals.

COVID support grants that are taxable

Business Support
 

We would like to remind readers that existing legislation is in place to ensure that COVID support grants are treated as taxable income in the same way as other taxable receipts. The grants are treated as income where the business is within the scope of either Income Tax or Corporation Tax.

This treatment extends to the Self-Employment Income Support Scheme (SEISS), the Coronavirus Job Retention Scheme (CJRS), the Coronavirus Statutory Sick Pay Rebate Scheme, any coronavirus business support grant scheme and any other support scheme payments.

HMRC’s guidance is clear that whether any tax is paid will depend on the business profits of the grant recipient (taking into consideration the grant and other business income and expenditure under normal tax rules), any other taxable income and personal and other allowances to which they are entitled.

The taxing of the COVID support payments is based on the fact that these payments are designed to substitute various income streams for businesses and individuals affected by the pandemic and hence should follow the same tax treatment.

HMRC also has the power to recover payments and charge penalties where claimants have made support grant claims to which they were not entitled.

Spring Budget 2021 – CJRS and SEISS schemes extended

Business Support
 

The Coronavirus Job Retention Scheme (CJRS) commonly known as the furlough scheme will be extended until the 30 September 2021. The Chancellor confirmed that employees will receive up to 80% of their salary for hours not worked subject to a monthly maximum of £2,500 until the scheme ends. The CJRS will also continue in its present form for employers until the end of June 2021. As the economy reopens and demand returns, the government will introduce employer contributions towards the cost of unworked hours of 10% in July and 20% in August and September.

The Chancellor, Rishi Sunak also confirmed that the Self Employed Income Support Scheme (SEISS) will continue for a fourth and fifth grant. The fourth grant covers the period from 1 February 2021 to 30 April 2021 and the fifth and final grant will cover the period from May onwards. The fourth grant will provide support covering 80% of average trading profits, up to a maximum of £7,500 for those who meet the eligibility requirements. The fifth and final grant will see those whose turnover has fallen by 30% or more continuing to receive the full 80% grant whilst those whose turnover has fallen by less than 30% will receive a 30% grant.

The SEISS scheme will also be extended to the newly self-employed who filed a 2019-20 tax return by midnight, 2 March 2021.

Budget Summary - March 2021

Budget Summary
 

More has been disclosed, leaked, of this year’s Budget announcements than in previous years. But we now have the details and there is a lot to consider. The following Budget summary is split into four sections:

  1. COVID-19 related support measures for UK businesses
  2. Support for the UK housing market
  3. Taxation changes
  4. Other announcements

Please call if you need to discuss how these changes may affect your business or tax affairs in the coming months.

COVID-19 related support measures for UK businesses

The Treasury is to continue the two existing major support schemes in an attempt to hold back a significant increase in unemployment rates as business owners grapple with the effects of COVID-19 disruption. Details are set out below.

Coronavirus Job Retention Scheme 

This scheme, nicknamed the Furlough Scheme, was due to end 30 April 2021. It is now being extended to 30 September 2021.

The judgement must be that there will be enough control over COVID by autumn 2021 to stimulate demand and give employers more confidence to retain staff. The Chancellor has obviously crunched the numbers and considers employment support in this way a more attractive strategy than increasing unemployment costs.

In more detail:

  • For employees, there will be no change to the terms – they will continue to receive up to 80% of their salary, for hours not worked, until the scheme ends.
  • Employers will be asked to contribute 10% towards wages for hours not worked from July 2021, rising to 20% in August and September 2021.

Self-Employed Income Support Scheme (SEISS)

There has been much criticism of this scheme as it has not been possible for self-employed businesses that commenced trading during 2019-20 to claim.

To counter this, the following changes to SEISS have been announced.

  1. All qualifying self-employed businesses can continue to claim SEISS grants if they continue to be adversely affected by COVID lockdown measures. The present scheme was due to end 30 April 2021. This has now been extended to 30 September 2021.
  2. Businesses previously excluded from claims because they commenced during the 2019-20 tax year will now be eligible to claim the fourth and fifth SEISS grants as long as their tax return for 2019-20 was filed by midnight 2 March 2021.
  3. For the fifth grant claims can be made from July 2021. Self-employed persons whose turnover has fallen by more than 30% will continue to qualify for the 80% grant. Those with decreases in turnover of less than 30% will be restricted to a 30% claim.

Restart grants

£5bn of funding is being allocated for these grants. They will support businesses obliged to close during much of lockdown. The grants will consist of:

  • A one-off grant of up to £18,000 for hospitality, accommodation, leisure, personal care and gym businesses in England.
  • Non-essential retail that have tended to open first, can apply for a one-off £6,000 grant.

Business rates holiday continued

This year, government will continue with the 100% business rates holiday for the first three months of the 2021-22 financial year, in other words, through to the end of June 2021 for the retail, leisure and hospitality sectors.

For the remaining nine months of the year, to 31 March 2022, business rates will still be discounted by two thirds, up to a value of £2 million for closed businesses, with a lower cap for those who have been able to stay open.

Exemption for COVID-19 related home office expenses

The temporary Income Tax exemption and Class 1 National Insurance Contributions disregard for employer reimbursed expenses that cover the cost of relevant home office equipment is extended and will have effect until 5 April 2022.

Exemption for reimbursement of antigen test costs

The government will legislate in Finance Bill 2021 to introduce a retrospective Income Tax exemption for payments that an employer makes to an employee to reimburse for the cost of a relevant coronavirus antigen test for the tax year 2020-21.

A new Recovery Loan Scheme

The Recovery Loan Scheme ensures businesses of any size can continue to access loans and other kinds of finance between £25,000 and up to £10 million per business once the existing COVID-19 loan schemes close. This will provide further support as businesses recover and grow following the disruption of the pandemic and the end of the transition period.

Once received, the finance can be used for any legitimate business purpose, including growth and investment.

The government guarantees 80% of the finance to the lender to ensure they continue to have the confidence to lend to businesses.

The scheme launches on 6 April 2021 and is open until 31 December 2021, subject to review. Loans will be available through a network of accredited lenders.

Reduced rate of VAT

The temporary reduced rate of 5% for hospitality, holiday accommodation and attractions will be extended until 30 September 2021. This is a welcome bonus for this sector badly affected by COVID lockdown restrictions.

This will be followed by the introduction of a new reduced rate of 12.5% from 1 October 2021 that will be in effect until 31 March 2022 at which point it will revert to the 20% standard rate.

Other support measures

Other measures outlined in the Budget include:

  • Extension of the apprenticeship hiring incentive in England to September 2021 and an increase of payment to £3,000.
  • £7 million for a new “flexi-job” apprenticeship programme in England, that will enable apprentices to work with a number of employers in one sector.
  • Additional £126 million for 40,000 more traineeships in England, funding high quality work placements and training for 16-24 year olds in 2021-22 academic year.

Support for the UK housing market

Support will include a mortgage guarantee scheme that will help home buyers purchase properties up to £600,000, and an extension to the existing stamp duty holiday that was due to end 31 March 2021.

The detail:

Mortgage guarantee scheme

The government will underwrite 95% of the risk of default. It will apply to home acquisitions up to £600,000 and set deposits required to 5%.

Stamp duty holiday

The present £500,000 threshold for paying Stamp Duty Land Tax (SDLT) was increased on a temporary basis and was due to end 31 March 2021.

The nil rate band will continue to be £500,000 for the period 8 July 2020 to 30 June 2021. From 1 July 2021 until 30 September 2021, the nil rate band will be £250,000. The nil rate band will return to the standard amount of £125,000 from 1 October 2021. This applies to England and Northern Ireland only. The devolved administrations have not announced any further extension beyond 31 March 2021 when this summary was written on Budget Day.

Non-resident SDLT

A 2% SDLT surcharge, above existing rates, for non-UK residents purchasing residential property in England and Northern Ireland is to be introduced from 1 April 2021.

Taxation changes

Many of the tax changes announced are for a fixed period, generally, from April 2021 to April 2026. This does provide welcome certainty for businesses. Announcements made include:

Income Tax 2021-22 to 2025-26

The basic rate threshold is increasing to £37,700 for 2021-22 (2020-21: £37,500) and then frozen until April 2026. For the same period, the personal tax allowance is set at £12,570 (2020-21: £12,500) and will apply to all regions of the UK.

Taxpayers who will benefit from annual increases in their earnings up to April 2026 may find themselves paying tax at the higher rates if these increases breach the £37,700 annual basic rate limit.

Regional variations to Income Tax rates apply in Scotland and may apply in Wales.

National Insurance

NIC Upper Earnings limits and Upper Profits limits will also remain at a fixed amount until April 2026 and will be based on the Income Tax higher rate threshold of £50,270.

Starting rate for savings

The band of savings income that is subject to the 0% starting rate will remain at £5,000 for 2021-22.

Lifetime Allowance for pension pots

From April 2021 to April 2026 the pensions lifetime allowance will be frozen at £1,073,100.

Cycle to work scheme change

The government will legislate in Finance Bill 2021 to introduce a time-limited easement to the employer-provided cycle exemption to disapply the condition which states that employer-provided cycles must be used mainly for journeys to, from, or during work. The easement will be available to employees who have joined a scheme and have been provided with a cycle or cycling equipment on or before 20 December 2020.

The change will have effect on and after Royal Assent of Finance Bill 2021 and be in place until 5 April 2022, after which the normal rules of the exemption will apply.

Van benefits for zero carbon emissions

The government will legislate in Finance Bill 2021 to reduce the van benefit charge to zero for vans that produce zero carbon emissions. The change will have effect on and after 6 April 2021.

Capital Gains Tax

Any attempt to align CGT rates with Income Tax rates seems to be off the table for the time being. Apart from anti-avoidance changes, the only announcement on this tax that has general relevance is capping the annual exempt amount. This will be fixed at £12,300 from April 2021 to April 2026 for individuals, personal representatives and some types of trusts for disabled people; and £6,150 for trustees of most settlements.

Corporation Tax

As expected, there will be increases in Corporation Tax, but not yet and only for larger companies. Company owners will be relieved that there are no imminent increases in CT rates until April 2023.

From 1 April 2023, there will be two rates of CT.

  • Taxable profits up £50,000 will continue to be taxed at 19% under the new Small Business Profits Rate
  • Taxable profits in excess of £250,000 will be taxed at 25%
  • Profits between £50,000 and £250,000 will be subject to a marginal tapering relief. This would be reduced for the number of associated companies and for short accounting periods.

Carry back of trading losses

The present provisions that restrict the carry back of tax losses is being relaxed, temporarily, extending the period over which incorporated and unincorporated businesses may carry-back trading losses from one year to three years.

This extension will apply to a maximum £2,000,000 of unused trading losses made in each of the tax years 2020-21 and 2021-22 by unincorporated businesses. The £2,000,000 maximum applies separately to unused trading losses made by incorporated companies, after carry-back to the preceding year, in relevant accounting periods ending between 1 April 2020 and 31 March 2021 and a separate maximum of £2,000,000 for periods ending between 1 April 2021 and 31 March 2022.

The £2,000,000 cap will be subject to a group-level limit, requiring groups with companies that have capacity to carry back losses in excess of £200,000 to apportion the cap between its companies. Further detail on the group limit will be published in due course.

R&D tax credit cap to be introduced

For accounting periods beginning on or after 1 April 2021, the amount of SME payable R&D tax credit that a company can receive in any one year will be capped at £20,000 plus three times the company’s total PAYE and National Insurance contributions liability, in order to deter abuse.

Enterprise Management Incentives

As announced on 21 July 2020, the government will legislate in Finance Bill 2021 to extend the time-limited exception that ensures that employees who are furloughed or working reduced hours because of coronavirus (COVID-19) continue to meet the working time requirements for EMI schemes.

The change will apply to existing participants of EMI schemes and it also allows employers to issue new EMI options to employees who do not meet the working time requirement as a result of COVID-19. This measure will have effect until 5 April 2022.

Major new investment reliefs

A new “super-deduction” and a 50% first year allowance are to be introduced that will allow businesses to increase the tax relief they can claim for qualifying investments in plant and other equipment. It will apply to expenditure between 1 April 2021 and 31 March 2023.

The super-deduction will mean that assets will qualify for tax relief based on 130% of the actual cost of expenditure incurred.

Assets that qualify for the special rate relief will qualify for the 50% first year allowance.

The existing Annual Investment Allowance £1m limit will continue to be available until 31 December 2021.

Freeports

In an attempt to reposition the UK as a global player a raft of tax incentives are to be provided to the eight freeport locations in England announced in the Budget. They will include enhanced structures and buildings allowances.

Inheritance Tax

No changes in the present rates and allowances that are all frozen at current levels until April 2026.

This means the nil-rate band will be £325,000 and the residence nil-rate band at £175,000 for this period.

VAT

There be no changes to the standard 20% rate.

The £85,000 registration limit and the £83,000 deregistration limit will be frozen until 31 March 2024.

Other announcements

Universal Credits

The recent increase in benefits of £20 per week is to be extended for a further six months.

Working Tax Credit claimants will receive equivalent support via a £500 one off payment.

Duties

There will be no increases in duty on alcoholic drinks or fuel.

Vehicle excise duties will see a small increase in line with the Retail Prices Index (RPI).

Air Passenger Duty long haul rates will also increase in line with RPI as will gaming duty and Landfill Tax.

ISA investment limits for 2021-22

The limits set for 2021-22 are:

  • Adult ISAs the limit remains at £20,000
  • Junior ISA limit remains at £9,000
  • Child Trust Funds remain unchanged at £9,000

National Living Wage increase

The NLW will increase to £8.91 per hour from 1 April 2021.

Visa reforms

There will also be new reforms to the immigration system that will help ambitious UK businesses entice top talent. These reforms will include a new unsponsored points-based visa to attract highly skilled migrants and a new, improved visa process for scale-ups and entrepreneurs.

Help to Grow schemes

Two new Help to Grow schemes are set to launch by the autumn to help support 130,000 small and medium sized businesses. The Help to Grow: Management scheme will help small and medium sized businesses get world-class management training with the government contributing 90% of the cost.

In addition, the Help to Grow: Digital scheme will help small businesses develop digital skills by giving them free expert training and a 50% discount on new productivity-enhancing software, worth up to £5,000 each.

Single contactless payments

Our final comment on the Budget seems to anticipate a coming consumer spending bonanza. The legal limit for single, contactless payments is increasing from £45 to £100.

VAT Construction Industry change

 

A further reminder that new VAT rules for building contractors and sub-contractors will come into effect from 1 March 2021. The new rules were originally expected to commence from 1 October 2019, but an initial 12 month delay was announced. The start date was then delayed for a further 5 months until 1 March 2021 due to the impact of the coronavirus pandemic.

The new rules will make the supply of most construction services between construction or building businesses subject to the domestic reverse charge. The reverse charge will only apply to supplies of specified construction services to other businesses in the construction sector.

This means that from 1 March 2021, sub-contractors will no longer add VAT to their supplies to most building customers, instead, contractors will be obliged to pay the deemed output VAT on behalf of their registered sub-contractor suppliers. This is known as the Domestic Reverse Charge. However, there is no loss of cashflow as the deemed output VAT can be deducted as input VAT subject to any existing restrictions; in this way the two entries on VAT returns cancel each other out.

This change will mean that contractors will have to alter the way that supplies from sub-contractors are treated by their accounting software.

HMRC’s guidance states that, for invoices issued for specified supplies that become liable to the reverse charge, the VAT treatment for invoices with a tax point:

  • before 1 March 2021 – the normal VAT rules will apply, and VAT registered subcontractors should charge VAT at the appropriate rate on supplies
  • on or after 1 March 2021 – the domestic reverse charge will apply.

Lock-down 3 – business considerations

Business Support
 

It’s official. We are in lock-down 3 in England, Scotland following suit and the other regions expected to enforce similar restrictions.
It is evident that any freeing impact of the vaccine roll-outs will not have sufficient impact before February at the earliest, and more likely, later in the year.

What now for businesses directly affected by these measures, predominantly the hospitality and entertainment trades? 

Lock-down would probably be better described as locked-out for these business sectors. Businesses that depend on social mobility are basically cut-off from their customers by COVID restrictions and there are no obvious ways for a pub or hotel to entertain its customers online.

There are still local authority support grants that may cover certain fixed costs and furlough has been extended to the end of April 2021. But this state sanctioned support will not cover all costs and affected businesses face the prospect of funding losses for yet another extended period. Many may decide that enough is enough and call it a day.

Planning is vital. Choose your next course of action, don’t get pushed into making decisions.

Clearly, economic activity will be depressed by this further period of lock-down and this may have adverse effects across many business sectors in addition to those mentioned above. All businesses would benefit from a planning review and in particular, clarifying your challenges, the effects on your finances and the choices you therefore face.

We can help. Please call if you would like to discuss your options.

Beware tax deadline scammers

General
 

Fraudsters are continuing to target taxpayers with scam emails in advance of the 31 January deadline for submission of Self-Assessment returns.  In fact, over the last year, HMRC received more than 846,000 reports about suspicious HMRC contact.

A number of these scams purport to tell taxpayers they are due a tax rebate or tax refund from HMRC and ask for bank or credit card details in order to send the refund. The fraudsters use various means to try and scam people including making contact by phone calls, texts or emails. In fact, fraudsters have been known to threaten victims with arrest or imprisonment if a bogus tax bill is not paid immediately.

HMRC’s dedicated Customer Protection team to identify and close down scams but is advising customers to recognise the signs to avoid becoming victims themselves. For example, genuine organisations like HMRC and banks will never contact customers asking for their PIN, password or bank details.

If you think you have received a suspicious call or email claiming to be from HMRC you are asked to forward the details to phishing@hmrc.gov.uk and texts to 60599. If you have suffered financial loss you should contact Action Fraud on 0300 123 2040 or use their online fraud reporting tool.

New national lockdown and changes to business support measures

Business Support
 

The Prime Minister, Boris Johnson speaking at a press conference on Saturday night, 31 October 2020, confirmed widespread expectations of a second national lockdown in England to help stem the growing resurgence of the coronavirus. The Government was faced with significant concerns that if they took no action, the NHS could be overwhelmed with death rates far exceeding those seen in the first lockdown.

The four week lockdown came into effect on Thursday 5 November and applies until Wednesday 2 December 2020. This lockdown will close pubs, restaurants, entertainment venues, hotels and non-essential shops and people will be advised to work from home if possible. In a marked departure from the first spring lockdown, schools, colleges and universities remain open. The exit strategy from this lockdown remains unclear and there are fears that the lockdown could continue beyond this period if the infection rate does not reduce significantly.

We have set out below the most up-to-date support measures available to businesses following the announcement of these new restrictions.

Coronavirus Job Retention Scheme 

The Coronavirus Job Retention Scheme (CJRS) commonly known as the furlough scheme will be extended until the 31 March 2021. The most recent update (further extending the life of the scheme) was announced by the Chancellor Rishi Sunak when delivering his fourth Winter Economic Plan to the House of Commons on 5 November 2020.

The Chancellor confirmed that employees will receive up to 80% of their salary for hours not worked. There will be a review date of the CJRS in January 2021 which may see employers taking on an increased financial contribution if the economic and health outlook of the country show signs of improvement.

It had been announced that the CJRS would be replaced by the Job Support Scheme (JSS), a scheme that would have topped up wages for people returning to work on reduced hours. The introduction of the JSS has now been put on hold.

A bullet-point summary of the main details of the CJRS extension announced is set out below:

  • People who are unable to work will receive up to 80% of their wages. This payment is subject to a monthly maximum of £2,500 per employee (for hours not worked). Employers will have the discretion to top-up the payments if they so wish.
  • The scheme will apply across the UK, in England, Wales, Scotland and Northern Ireland even where the regions are subject to different lockdown restrictions.
  • Employers will be required to pay employer NICs and pension contributions for their employees whilst on furlough.
  • Flexible furloughing, whereby employers can bring back employees to work part-time will be allowed. Employers will have to pay employees for the hours they work but can still use the scheme to cover any normal hours where employees are furloughed.
  • To be eligible, employees must have been registered on their employers PAYE payroll by 23:59 on 30 October 2020.  The employer must have made a PAYE Real Time Information (RTI) submission to HMRC between 20 March 2020 and 30 October 2020, notifying a payment of earnings for that employee.
  • Employees employed as of 23 September 2020 and on payroll, who were made redundant or stopped working for the employer afterwards can also qualify for the scheme if they are re-employed and placed on furlough.
  • All employers with a UK bank account and UK PAYE schemes can claim the grant. Neither the employer nor the employee needs to have previously used the CJRS.
  • The first claims under the extended CJRS can be made from 8am on Wednesday 11 November. Claims for November must be submitted to HMRC no later than 14 December 2020.
  • There will be no gap in eligibility between the previously announced end date of the scheme on 31 October 2020 and this extension.

Mortgage holidays

It has also been confirmed that mortgage payment holidays will no longer end as planned on 31 October 2020. Borrowers who have been impacted by coronavirus and have not yet had a mortgage payment holiday will be entitled to a six month holiday, and those that have already started a mortgage payment holiday will be able to top up to six months without this being recorded on their credit file.

Cash grants

It had been previously announced that businesses in England that are forced to shut as a result of a lockdown will be eligible for grants of up to £3,000 per month payable every two weeks. Businesses will be eligible to claim after two weeks of closure.

The amount businesses will be able to claim from their local authority depends on their rateable value:

  • Small businesses with a rateable value of or below £15,000 will be able to claim £1,334 per month or £667 per two weeks.
  • Medium-sized businesses with a rateable value between £15,000 and £51,000 will be able to claim £2,000 per month, or £1,000 per two weeks.
  • Larger businesses will be able to claim £3,000 per month, or £1,500 per two weeks.

Further support for businesses

The government is providing an additional £1.1bn to Local Authorities in England, distributed on the basis of £20 per head. These payments are designed to help Local Authorities to support businesses more broadly.

Self Employed Income Support Scheme Extension (SEISS)

The Government has also confirmed that there will be additional help for the self-employed during Lockdown 2.0.

It had previously been announced that the grants for the self-employed would be based on 40% of previous qualifying earnings for the months of November, December and January. The November figure was then increased to 80%. It has now been confirmed that the self-employed will receive 80% of average trading profits for the entire three month period. This will increase the grant for the three months to a maximum of £7,500 made available to those who meet the eligibility requirements.

It has also been confirmed that the claims window for the grant is being brought forward from 14 December to 30 November to allow payments to be made more quickly.

An additional second grant will be made available from 1 February 2021 to 30 April 2021. The level of this second grant amount is subject to review and will be set in due course.

Government-backed loan schemes

The deadline for applications for government-backed loan schemes and the Future Fund have been extended until 31 January 2021.

It will also be possible for businesses to ‘top up’ existing Bounce Back Loans should they need additional finance. This will apply to businesses who borrowed less than their maximum allowance.

Devolved administrations

There has also been an increase in the upfront guarantee of funding for the devolved administrations from £14 billion to £16 billion. This uplift will continue to support workers, business and individuals in Scotland, Wales and Northern Ireland.

Job Retention Bonus

The Job Retention Bonus was meant to provide a £1,000 bonus payment to employers that brought back employees that were furloughed under the CJRS from November 2020 to January 2021. Following the extension of the CJRS, it has been confirmed that the Job Retention Bonus will not be paid in February. The government will instead redeploy a retention incentive at the appropriate time.

Job Support Scheme Expansion

Business Support
 

On Friday 9 October, the Chancellor, Rishi Sunak announced an extension to the Job Support Scheme (JSS). The expanded scheme will include additional support for employees of businesses that are forced to close because of local or national lockdown measures. The extended scheme will run in parallel with the main JSS for 6 months from 1 November 2020. The scheme rules are due to be reviewed in January 2021.

Under the specific terms of the expanded scheme, the government will pay two-thirds (67%) of employees’ salaries, up to a maximum of £2,100 a month. Employees must be off work for at least 7 consecutive days to benefit from the expanded scheme. When premises re-open the regular JSS rules will apply, whereby employees must work at least one-third of their hours, paid as normal. The government and employer will then each cover one-third of any remaining hours the employee is not working.

Businesses will only be able to claim the extended grant whilst they are subject to specific lockdown measures that require the closure of their business premises. The expanded scheme will also be available to businesses restricted to delivery or collection services from their premises. However, businesses required to close as a result of specific workplace outbreaks are not eligible for this scheme.

In line with the main JSS, the grant will be paid in arrears, reimbursing the employer for the government’s contribution. The claim portal will be launched from December 2020 and claims will be paid on a monthly basis. This means that employers will have to use cash reserves or borrow money in order to pay their employees’ wages in advance of receiving the monthly grant.

Employees of firms that are legally closed in the period before 1 November are eligible for the Coronavirus Job Retention Scheme (CJRS). Interestingly, the new JSS expansion is more generous than the current CJRS, which pays 60% of an employee’s salary up to £1,875 a month.

The JSS grant does not cover Class 1 National Insurance Contributions or pension contributions and employers will have to continue making these contributions. Employers will not be required to contribute towards wages whilst under lockdown measures but can make top up payments if they wish.

To be eligible for the JSS or JSS expansion, employees must have been registered on their employers PAYE payroll on or before 23 September 2020. This means a Real Time Information (RTI) submission notifying payment in respect of that employee must have been made to HMRC on or before 23 September 2020.

The JSS scheme (including the expansion scheme) is available to businesses that meet the necessary criteria even if they had not previously participated in the CJRS.

New cash grants

The Chancellor also announced that businesses in England that are forced to shut as a result of lockdown measures will be eligible for grants of up to £3,000 per month, payable every two weeks. Businesses will be eligible to claim after two weeks of closure.

The amount businesses will be able to claim from their local authority depends on their rateable value:

  • Small businesses with a rateable value of or below £15,000 will be able to claim £1,300 per month.
  • Medium-sized businesses with a rateable value between £15,000 and £51,000 will be able to claim £2,000 per month.
  • Larger businesses will be able to claim £3,000 per month.

The government is also extending the scheme to include businesses that have been forced to close on a national rather than a local basis.

The devolved administrations in Scotland, Wales and Northern Ireland will receive an additional £1.3 billion in guaranteed funding in order to offer similar measures to affected businesses. This takes the additional funding to the devolved administrations this year to at least £14 billion.

Coronavirus testing guidance for employers

Employment Law
 

The government has published detailed new guidance for employers on the regulations and legal obligations relating to running internal workplace coronavirus (COVID-19) testing programmes, i.e. those which are outside of the NHS Test and Trace service. The guidance covers:

  • legislation, regulations and best practice surrounding the testing process, including compliance with the GDPR
  • selecting and procuring test kits
  • the difference between virus and antibody testing
  • what the test results mean
  • next steps after a positive or negative test, including communicating results to staff and what an employer can and cannot do with a result
  • contact tracing.

The guidance emphasises that the NHS Test and Trace service is for those who are displaying symptoms of coronavirus or who have been advised to take a test by a medical practitioner or public service, so employers must not advise any staff without symptoms to get a test from the NHS Test and Trace service. However, they may offer alternative private provision in accordance with this guidance.

The new Winter Economy Plan - Summary of Measures

Business Support
 

The Chancellor, Rishi Sunak, has today delivered a statement to the House of Commons outlining plans to help protect jobs across the UK whilst the country faces a resurgence of coronavirus and a winter of uncertainty. The Chancellor was facing mounting pressure to reveal future changes as many of the schemes and reliefs previously announced are coming to an end including the furlough scheme at the end of October.

It has also been confirmed that the Budget that was expected to be delivered in the autumn will now take place next year. The measures announced today are more clearly focused on keeping the economy ticking over during the coming weeks and months.

The main focus of the Chancellor’s announcements is a new Job Support Scheme and an extension to the Self Employment Income Support Scheme as well as additional flexibilities for businesses who have borrowed money as a result of the pandemic.

Details of these announcements follow:

Job Support Scheme

  • A new 6-month scheme starting from 1 November 2020.
  • This scheme has been designed to support viable jobs and employees must work at least one-third of their hours, paid as normal, in order to qualify for the scheme. The government and employer will then each cover one-third of any remaining hours the employee is not working.
  • Employees will therefore forego one-third of their pay for the hours that they have not been working. This means that employees working the minimum one-third of their hours will still receive at least 77% of their pay.
  • The level of the grant will be calculated based on an employee’s usual salary but subject to a cap.
  • The Chancellor said that the scheme will be open to all small and medium-sized businesses, but larger businesses will only qualify when their turnover has fallen as a result of the pandemic.
  • You can still use this scheme even if you have not previously participated in the Coronavirus Job Retention Scheme.
  • The previously announced Job Retention Bonus, allowing qualifying businesses to claim a £1,000 for each CJRS participating employee, will remain. Employers can claim both the Job Retention Bonus and funding through the Job Support Scheme.

Self-Employment Income Support Scheme extension

  • The Chancellor announced additional help for the self-employed based on similar terms and conditions as the new Jobs Support Scheme.
  • The extended scheme will apply for 6 months from 1 November 2020 with an initial taxable grant made available to those who continue to trade and are currently eligible for SEISS.
  • The initial lump sum will cover three months of profits from 1 November 2020 calculated as 20% of average monthly profits, up to a total of £1,875.
  • An additional second grant will be available from 1 February 2021 to 30 April 2021, but the level of this second grant amount is subject to review.

Loan deadlines extended

  • Businesses that have taken out a Bounce Back Loan will be able to benefit from a new Pay As You Grow flexible repayment system.
  • This will include an extension in the loan term from six to ten years. There will also be new options for interest-only repayments for up to six months as well as payment holidays.
  • The Coronavirus Business Interruption Loans will also have their Government guarantee extended to ten years.
  • The deadline for applying for all the Government’s coronavirus loan schemes will be standardised and pushed back until 30 November 2020.
  • A new successor loan guarantee programme is also expected to be introduced early next year.

New VAT Payment Scheme

  • Businesses had the option to defer the payment of any VAT liabilities due between 20 March 2020 and 30 June 2020.
  • The deferred payment was due to be paid in full to HMRC by 31 March 2021.
  • The Chancellor has now confirmed that businesses will instead be able to make 11 smaller interest-free payments during the 2021-22 financial year.

Self-Assessment payment deadlines

  • Taxpayers that were due to make their second payment on account for the 2019-20 tax year had the option to have the payment due date deferred until 31 January 2021.
  • It will now be possible to benefit from a separate additional 12-month extension from HMRC on the “Time to Pay” self-service facility for this payment and also for payments due in January 2021 extending the deadline until January 2022.

VAT reduction for hospitality and tourism sector

  • The VAT reduction that was announced as part of the Summer Economic update was scheduled to end on 12th January 2021.
  • The end date for the VAT cut has now been extended until 31 March 2021 to give the affected sectors more time to adjust to the difficult trading conditions. This means that VAT charged on food, accommodation and attractions (such as eat-in or takeaway food in restaurants, cafes and pubs, cinemas, theme parks and zoos) will see VAT reduced from 20% to 5% until the end of March 2021.

The new incentives announced today should be welcomed as the government continues to try and cope with this unprecedented pandemic. Managing the economic ramifications are causing great difficulties for many people and businesses across the country. These steps, at least, give affected businesses and individuals a degree of certainty as to the level of government assistance available to them throughout the coming months.

As more details emerge on the various schemes announced today we will update you further.

New SSP regulations confirm increased minimum self-isolation period

Employment Law
 

Public Health England (PHE) has updated its guidance to increase the minimum self-isolation period for those with symptoms of coronavirus from seven to ten days, starting from when symptoms first begin. In addition, those who test positive for coronavirus but who are not experiencing symptoms must stay at home for at least ten days starting from the day the positive test was taken, and if they then develop symptoms during this self-isolation period, the ten days must restart from the date their symptoms first appear.

To correspond with the extended self-isolation period, the Statutory Sick Pay (General) (Coronavirus Amendment) (No. 5) Regulations 2020 came into force on 5 August 2020. The regulations have amended the Statutory Sick Pay (General) Regulations 1982 to confirm that an employee self-isolating in accordance with the updated PHE guidance will be deemed incapable for work and so entitled to statutory sick pay (SSP) for the duration of the extended minimum ten-day period for which they are now required to self-isolate.

Summer Statement

 

The Chancellor, Rishi Sunak continued with his campaign to support the business and jobs community today, 8 July 2020, as firms engage with the disruption caused by the coronavirus outbreak and the measures taken to control infection.

The main thrust of his announcements during his Summer Economic update concerned his nominated Plan for Jobs 2020, details are listed below.

He also announced measures to support the hospitality and tourism industry including a novel voucher scheme and a temporary reduction in VAT. Again, details are provided in the following update.

In an attempt to boost the flagging property market Stamp Duty is being temporarily reduced in England and Northern Ireland. Separate announcements on this topic are awaited for Scotland and Wales who have their own Stamp Duty regimes.

Details of these announcements follow:

  1. Job Retention Bonus: employers that bring back an employee that was furloughed, and continuously employ them through to January 2021, will be paid a £1,000 government bonus per employee retained. Employees must be seen to be gainfully employed during this period and be paid at least £520 a month, on average, from November 2020 to January 2021. All furloughed employees returned to employment in this way will be available for the £1,000 bonus.
  2. Kickstart scheme: this new scheme will cover the wages (plus associated costs) of new jobs created for any 16 to 24-year-old - at risk of long-term unemployment - for six months. These will have to be new jobs, of at least 25 hours a week and paid the National Minimum Wage. Employers will need to offer kickstarters training and support to find a permanent job. Employers can apply to be part of this new scheme from next month – August 2020 with first jobs starting in the autumn. Government has made an initial £2bn available for this scheme, but there is no cap on the number of places made available.
  3. Apprenticeships: for the next six months government will pay employers to create new apprenticeships. The amount payable will be £2,000 for each apprentice. A new bonus to take on apprentices aged over 25 has also been announced. This will amount to £1,500 per appointment.
  4. Green jobs initiatives: as an incentive to create jobs in the green jobs’ market a number of new grants have been announced. From September 2020, homeowners and landlords in England will be able to apply for a grant to make their home more energy efficient. The £2bn Green Homes grant will cover at least two-thirds of the cost up to £5,000 per household. For low income households these grants will cover all costs up to £10,000. There will also be a further £1bn allocated to make public buildings greener.
  5. Boost for the housing market: Presently, in England and Northern Ireland (different amounts apply in the regions) no Stamp Duty Land Tax is payable on residential property purchases below £125,000. From today – for a temporary period to 31 March 2021 – this threshold is increased to £500,000. It is projected that this will reduce the average stamp duty bill by £4,500. Regional variations may apply. Purchasers buying a second residential property will still have to pay the 3% Stamp Duty Land Tax for property purchases up to £500,000.
  6. VAT reduction for hospitality and tourism: for the next six months VAT charged on food, accommodation and attractions (such as eat-in or takeaway food in restaurants, cafes, pubs, cinemas, theme parks and zoos) will see VAT reduced from 20% to 5%. This will apply from 15th July 2020 until 12th January 2021.
  7. Eat Out to Help Out discount: for the month of August 2020, meals eaten at any participating business Monday, Tuesday or Wednesday, will be 50% off up to a maximum discount of £10 per head including children. To access the discount businesses will need to register and can do so through a website to be opened next Monday, 13 July 2020. Businesses will be able to claim the money back weekly with the money in their bank accounts within 5 working days.

As we manage the cautious steps to emerge from lock-down, still wary of COVID-19, the new incentives announced by Rishi Sunak should be welcomed.

As more details emerge on the various schemes announced today they will be published accordingly.

Furlough Scheme maximum claims

Business Support
 

As our readers will be aware, the Coronavirus Job Retention Scheme (CJRS), has been extended until 31 October 2020. There are a number of important changes to the way the scheme works that will start to come into effect from 1 July 2020, when employers can bring back furloughed employees to work part-time, for any amount of time and any shift pattern.

For any periods starting on or after the 1 July, the maximum number of employees that employers can claim for cannot be higher than the maximum number they claimed for in a previous period. For example, if the highest single claim for periods up to 30 June was for 100 people, then employers cannot claim for more than this number in later periods.

The government will continue to pay 80% of costs for normal hours not worked up to the £2,500 cap during the month of July. From August 2020, employers will be expected to start contributing towards furloughed employees wage costs by paying employers’ NIC and pension costs for any normal hours an employee does not work. There will be further reductions in government support to 70% of capped wages in September and to 60% in October before the scheme is closed.

Self-Employed and Job Retention Scheme changes

Business Support
 

On Friday afternoon, in the Government's daily news briefing, the Chancellor outlined how the Coronavirus Job Retention Scheme will operate moving forward to allow for employees to return to work part time. Following that announcement, self-employed workers got a boost when it was revealed that they will be able to get Government assistance for a further three months. The new details are outlined below.

Self-Employed Income Support Scheme (SEISS)

No doubt due to recent lobbying by the press and other interested support groups, the Chancellor has extended the SEISS for a final three-month period to 31 August 2020.

This means that the self-employed who are eligible to claim will have received six-months financial support from government.

As before, applicants will have to wait until the last month of the claim period, August 2020, to make a claim.

A bullet-point summary of the changes is set out below:

  • SEISS extended for three months to 31 August 2020
  • Applications covering the June – August 2020 period will open in August.
  • Grant available will be 70% of eligible earnings (previous quarter 80%).
  • Maximum grant for the three-months will be £6,570 (previous quarter £7,500) paid in a single instalment.
  • Eligibility criteria remains unchanged.
  • A self-employed person can claim for the second grant, to August 2020, even if they had not claimed for the first grant.
  • More information on these changes will be published 12 June 2020.

If you are eligible to make a claim for this second grant under the scheme you will still be subject to the same rules regarding eligibility. You will need to confirm that your business has been adversely affected by the Coronavirus outbreak.

If you did not claim for the first quarter, to May 2020, as your business at that time was not adversely affected, but will be affected in the quarter to 31 August 2020, it will be possible to claim for the second quarter.

And finally, claims for the first quarter (March-May 2020) will close 13 July 2020.

Coronavirus Job Retention Scheme (CJRS)

As previously announced, the CJRS has been extended to 31 October 2020 and will be changed to a flexible arrangement from 1 July 2020 to allow employees to resume part-time working.

The Chancellor and his advisers will be gritting their teeth as drawing a line in the sand by tapering and then closing the CJRS on 31 October 2020 will force the hand of employers to consider their options. It is likely that redundancies will start to climb from that date as will the number of the unemployed.

A bullet-point summary of the changes announced is set out below:

  • The CJRS will close to new entrants on 30 June 2020. The final date employers can furlough staff for the first time will be 10 June 2020.
  • From 1 July 2020, employers can bring back employees to work part-time, for any amount of time and any shift pattern. Any claim under CJRS will be limited to normal hours not worked.
  • June/July 2020 – Government will continue to pay 80% of costs up to the £2,500 cap.
  • August 2020 – Government will pay 80% of wages up to £2,500 cap, but employers will have to cover employers’ NIC and pension costs for the hours the employee does not work.
  • September 2020 – Government will pay 70% of wages up to a reduced £2,187.50 cap. Employers will pay employers’ NIC, pension costs and 10% of wages to a total cap of £2,500.
  • October 2020 - Government will pay 60% of wages up to a reduced £1,875 cap. Employers will pay employers’ NIC, pension costs and 20% of wages to a total cap of £2,500.
  • The cap will be proportional to hours not worked.
  • The CJRS will be closed-down 31 October 2020.

The above changes to a flexible approach cloak a raft of detail that government is not publishing until 12 June 2020. Those responsible for making CJRS claims will need to wait for these further clarifications as they will explain how employers should calculate claims.

We will be integrating the changes into our payroll services when they are available and will contact clients if further details regarding part-time working are to be introduced.

Clearly, there are planning considerations. Please call if you have employees on furlough and you need to consider your options; for part-time working up to 31 October and longer-term considerations after this date.

Furlough Scheme Extended to 31 October 2020

Business Support
 

The Chancellor, Rishi Sunak has  announced significant changes to the Coronavirus Job Retention Scheme, now commonly referred to as the furlough scheme. The scheme had been due to run until at least 30 June 2020. The Chancellor has now confirmed to the House of Commons that the furlough scheme will be extended for a further 4 months until the end of October and kept open for all sectors. By the end of October, the scheme will have been running for an astonishing eight months.

The Chancellor promised that the scheme will continue in its current form until the end of July. From 1 August until 31 October 2020, there will be greater flexibility added and employers encouraged to bring back furloughed staff part-time. However, employers will be asked to pay a percentage towards the salaries of their furloughed staff. We are told that further details on the changes to the scheme and information about its implementation will be published by the end of May.

The Chancellor was keen to stress that workers will continue to receive the same level of overall support of 80% of their current salary, up to £2,500 until the end of October. From August, employer payments will help to substitute the contribution the government is currently making in paying their employees. These measures should help to gradually encourage employees back to work and avoid the cliff-edge cut-off that has worried many businesses.

It was also revealed that the scheme has so far supported over 7.5 million furloughed workers and almost 1 million businesses. More than £10 billion has been claimed.

There are a number of important conditions that must be met in order for an employee to be classed as a furloughed worker. These conditions will continue to apply until the end of July 2020.

This includes the following:

  • Employees must be notified that they have been furloughed.
  • Employees must be furloughed for a minimum of three weeks.
  • The employee cannot do any work for the employer that has furloughed them.

It was also rumoured that the Chancellor would announce changes to the support measures for the self-employed. However, no changes or extensions to the Self-employment Income Support Scheme were announced.

New statistics were also published that show businesses have benefitted from over £14 billion in loans and guarantees to support their cashflow during the crisis. This includes 268,000 Bounce Back Loans worth £8.3 billion, 36,000 loans worth over £6 billion through the Coronavirus Business Interruption Loan Scheme, and £359 million through the Coronavirus Large Business Interruption Loan Scheme.

The government also published the much talked about roadmap (11 May 2020) to help provide more information on the process of coming out of the lockdown without risking a second wave of infection. The roadmap discussed the development of new safety guidelines that set out how each type of physical space can be adapted to operate safely. This includes places of work that are beginning to reopen as restrictions are lifted.

The Department for Business, Energy & Industrial Strategy also published new guidance on 11 May 2020, titled ‘Working safely during Coronavirus (COVID-19)’.

The guidance provides information on making workplaces as secure as possible from the Coronavirus threat. This guidance applies to those who work in or run offices, contact centres and similar indoor environments and includes requiring employers to carry out risk assessments before they can reopen.

The guidance seeks to ensure that as many people as possible are able to safely follow social distancing guidelines at their places of work. Special consideration will also be given to those who are at higher risk or who need to self-isolate. The guidance further considers minimising the number of unnecessary visits to offices, cleaning workplaces, the use of PPE and face coverings, handling the workforce and goods entering and leaving work sites.

The Department for Transport has issued new guidance on how to make journeys safely in England during the Coronavirus outbreak. It provides guidance for walking, cycling, using private vehicles (for example cars and vans), and travelling by taxis and public transport (for example trains, buses, coaches and ferries). The guidance makes it clear that people should avoid using public transport where possible and instead try to walk, cycle or drive.

In many parts of the country, this may be easier said than done.

Coronavirus Job Retention Scheme – update for directors

Business Support
 

HMRC’s guidance on the Coronavirus Job Retention Scheme has recently been updated. HMRC will reimburse 80% of furloughed workers' wage costs, capped at £2,500 per month per employee. The scheme will run for at least 3 months, backdated from 1 March 2020, but will be extended if necessary.

Company directors and other office holders can be furloughed under the scheme. However, only PAYE income - generally salary - can be furloughed, and so the common practice of taking most of directors' earnings as dividends will limit a director's claims to salary only.

The guidance is clear that where one or more individual directors are furloughed this should be formally adopted as a decision of the company, noted in the company records and communicated in writing to the director(s) concerned.

Under the scheme no work can be undertaken by furloughed employees who remain technically employed by the company. In many scenarios, especially for sole directors, this would be untenable as all business would have to be technically suspended.

The guidance does make it clear that company directors can do what is reasonably necessary to fulfil the statutory obligations they owe to their company. These actions are not specified but do not include any work undertaken to generate commercial revenue or provide services to or on behalf of their company.

These measures also apply to salaried individuals who are directors of their own Personal Service Company (PSC). Salaried Members of Limited Liability Partnerships (LLPs) are also entitled to be furloughed but should refer to the terms of their LLP agreement in the first instance.

Latest Government Support Measure - Bounce Back Loan Scheme Announced

Business Support
 

The Chancellor, Rishi Sunak has today (27 April 2020) made a statement to the House of Commons on the government’s economic response to the Coronavirus outbreak. The Chancellor confirmed that the Office of Budget Responsibility (OBR) has said that the Coronavirus will (not surprisingly) have significant negative impacts on the UK and global economy.

The most important announcement made by the Chancellor concerned the launch of the new Bounce Back Loans scheme. The launch of this scheme will help many small and micro businesses that appeared to have fallen through the cracks and were ineligible for most of the support measures that had previously been announced.

The new scheme will allow small businesses to borrow between £2,000 and £50,000 and access the cash, in most cases, within 24 hours of approval. The loans will have a 100% government guarantee and businesses can apply for a loan of up to 25% of their turnover. The government will also pay the interest on these loans for the first 12 months and no repayments will be due during this time.

The Chancellor said that banks will not need to perform any forward-looking test of business viability or other complex eligibility criteria and that businesses will be able to apply for a loan online using a short and simple form. The new scheme will open for applications at 9am next Monday, 4 May, and firms will be able to access these loans through a network of accredited lenders.

The Chancellor has received many representations looking for the Coronavirus Business Interruption Loan Scheme (CBILS) to have a 100% government guarantees (rather than 80%) but resisted doing so saying he remained unconvinced that it was necessary to make such a move. However, many businesses are reporting difficulties accessing finance as banks are refusing to lend.

The Chancellor said:

'Our smallest businesses are the backbone of our economy and play a vital role in their communities. This new rapid loan scheme will help ensure they get the finance they need quickly to help survive this crisis. This is in addition to business grants, tax deferrals, and the job retention scheme, which are already helping to support hundreds of thousands of small businesses.'

It was also confirmed that over 1.5 million new claims have been made for Universal Credit. More than 500,000 claims have been made for the job retention scheme since it was officially launched and over 4 million jobs have been furloughed. The Chancellor also suggested that, without government interventions to assist, a quarter of businesses may have stopped trading as a result of the Coronavirus pandemic.

The Latest Measures to Support SME’s

 

The Chancellor, Rishi Sunak, outlined a raft of further measures last night to support the UK’s ailing businesses, those affected by the forbidding COVID-19 outbreak. The list that follows summarises his announcements in the order they were announced:

  • The Treasury are making available £330bn of loan guarantees. These guarantees will underpin government backed bank loans on attractive terms. The loans can be used to support businesses through financial difficulties during the COVID-19 crisis. Note they are loans. At some point interest will be charged and repayments will have to be made. The Chancellor confirmed that if this level of support was insufficient, further guarantees would be forthcoming.
  • Support for liquidity to larger firms will be provided by low-cost, easily accessible commercial paper. Support for smaller firms will be accessed via the Business Interruption Loan Scheme previously announced – the initial loan ceiling of £1.2m is to be increased to £5m and no interest due for the first six months. Both of these schemes are due to be up and running by the start of next week.
  • Further measures are to be introduced to support airlines. No details as yet.
  • Businesses in the hospitality, leisure and retail sectors who have made claims for business interruption from their insurers due to government interventions, may have had difficulties making a claim. Government have now intervened and the insurers have agreed to pay up in appropriate cases.
  • Businesses in the retail, hospitality and leisure sectors with a rateable value below £51,000, will also receive – in addition to the 100% rates relief previously announced – a cash grant of up to £25,000 per business.
  • In the same sector, the 100% rates reduction will be applied to all business irrespective of rateable value.

To clarify, the previous two bullet points mean that all businesses in the retail, hospitality or leisure sector – shops, pubs, theatres, music venues, restaurants etc – will have no rates to pay for 2020-21, and if the rateable value of their property is below £51,000, they may also be able to claim a cash grant of up to £25,000.

  • The £3,000 grants to smaller business, announced last week, are to be increased to £10,000.
  • Mortgage lenders have agreed with government that individuals disrupted by the Coronavirus can have at least a three-month holiday from making mortgage repayments.

The Chancellor also hinted that there would be further support for incomes and jobs. Perhaps an increase in statutory sick pay or increased access to State Benefits. Watch this space.

What is not clear is how we claim for the various loans and grants on offer. We offer the following suggestions although the actual processes finally agreed may differ from these:

  • Rates reductions should be made automatically and revised statement sent by local authorities in the coming weeks for 2020-21. Contact your local rating department to clarify that this is so.
  • It is not clear how qualifying businesses will claim the grants mentioned in the above list – those that range between £10,000 to £25,000 – could be applications need to be made to local authorities or another government department. We will confirm as soon as details are released.
  • We assume that you will need to apply to your bank for the guaranteed Business Interruption Loan. It is likely that your bank will need up-to-date figures to back up your application. Please call if you need help preparing these.
  • At the time this update was composed, the government had still not confirmed how employers can claim back the 14-day cost of Statutory Sick Pay paid to employees. Again, we will publish details as soon as they are released.

Although not part of the Chancellor’s presentation, Chief Secretary of the Treasury, Steve Barclay, made a further announcement to parliament last night (17 March 2020). The government are postponing the roll-out of draconian IR35 measures to the private sector that would have affected the tax status of many incorporated contractors across the UK. This a welcome change as it will defer much disruption in this sector until the worst aspects of the COVID-19 outbreak have passed. The new rules are now slated to come into effect from 6 April 2021, a year later than planned.

Our best wishes to all who are directly affected by this unprecedented outbreak. And please get in touch if you need more information or support.

Spring 2020 Budget Summary

Budget Summary
 

In the face of Brexit uncertainties and the recent Coronavirus outbreak the new Chancellor, Rishi Sunak, was faced with falling economic indicators, the need to boost NHS services and was consequently limited in his options to spend on plans to improve business confidence and fund infrastructure projects.

Interestingly, there were a number of measures that will directly benefit those affected by the current COVID-19 outbreak and these are reported in this update.

Details of other changes for 2020-21 – for individuals and businesses – are set out in our Budget Summary below.

Personal Tax and miscellaneous matters

Statutory Sick Pay (SSP)

SSP will be temporarily payable from day 1 instead of day 4 for affected individuals and will include those infected and those self-isolating, who are not infected.

Those who cannot claim SSP, the self-employed for example, are to be provided with easier access to Universal Credits and the Contributory Employment and Support Allowance.

Local Authority Hardship Fund

Government is providing a new £500m Hardship Fund so local authorities can support economically vulnerable people and households.

Most of this funding will probably support the extension of council tax relief.

Personal Tax allowance

The personal Income Tax allowance for 2020-21 is maintained at £12,500 (2019-20 £12,500).

Income Tax bands, rates and the dividend allowance

The Income Tax bands for 2020-21 have also been maintained at 2019-20 levels. They are:

  • Basic rate band £37,500 (2019-20 £37,500)
  • Higher rate band £37,501 to £150,000 (2019-20 £37,501 to £150,000)
  • Additional rate, no change, applies to income of more than £150,000.

Consequently, the higher rate threshold will stay as £50,000 from April 2020. There is no change in Income Tax rates, and the tax rates applied to dividend income.

Changes to these Income Tax bands apply to England, Wales and Northern Ireland. The Scottish parliament now set their own Income Tax bandings.

Earlier payments of Capital Gains Tax (CGT)

As previously announced, from April 2020, UK residents will be required to make a payment on account for CGT due on a chargeable residential property sale. For example, the sale of a buy-to-let property. A formal computation of any gains and payment of CGT due on the disposal will have to be made within 30 days of the property disposal.

The changes have applied from April 2019 for non-UK residents.

Capital Gains Tax Private Residence Relief changes

From April 2020, the government is making two changes to the private residence relief:

  1. The final exempt period will be reduced from 18 months to 9 months, with no change to the 36 months available for those disabled or in care homes, and
  2. Lettings relief will be reformed so that it only applies in certain circumstances where the property owner is in shared occupancy with the tenant.

CGT Entrepreneurs’ relief

One of the significant announcements in the budget speech was the reduction of the lifetime allowance for this relief from £10m to £1m. This will apply to all relevant business disposals on or after 11 March 2020. The Chancellor has avoided the abolition of the relief but has restricted lifetime claims to £1m.

Special provisions may apply to disposals contracted for sale before 11 March 2020, but when the sale was not completed at that date.

Business owners and their advisors will need to consider other options to reduce CGT on business sales in excess of this £1m limit.

CGT annual allowance

The annual tax-free allowance is to be increased to £12,300 for 2020-21 (£12,000 2019-20).

The equivalent allowance for trustees is £6,150 (£6,000 2019-20).

Tax benefit charges for low CO2 vehicles

In an attempt to support new regulation in this area, the listed benefit rates will be cut by 2% for vehicles that qualify for the new standard (Worldwide harmonised Light Vehicle Test Procedure (WLTP) for all new cars registered from 6 April 2020).

Tobacco Duty Rates

All tobacco products will see an increase in duty by 2% above the current rate of inflation.

Hand-rolling tobacco will see an increase of 6% above the rate of inflation.

These changes will impact prices from 6pm, 11 March 2020.

Vehicle Excise Duty

Rates are due to be increased in line with the Retail Prices Index from April 2020.

Fuel Duty

Is frozen for another year.

Alcohol duty rates

Alcohol Duty rates remain unchanged for 2020-21. This will be welcome news for pubs and bars.

ISA limits 2020-21

Adult savings limits remain unchanged at £20,000.

Junior ISA limits are increased to £9,000.

Zero-rating of VAT for women’s sanitary products

This measure is to be introduced from 1 January 2021.

Bank support from mortgage lenders

Although not a budget announcement, a number of banks and other mortgage lenders are offering a moratorium on mortgage repayments to those directly affected by the Coronavirus. This is welcome support for individuals whose income may be diminished by absence from work. At least one High Street lender has committed to a three-month moratorium.

Banks are also considering increasing credit card limits and cash withdrawal limits.

Business Tax changes

National Insurance

It was confirmed that the tax threshold for National Insurance Contributions will rise to £9,500 from April 2020 (was £8,632). This should save £100 a year in National Insurance contributions for some 31 million people.

Relief for Statutory Sick Pay payments

Small and medium sized businesses, those with less than 250 employees at 28 February 2020, will be able to reclaim any approved SSP payments. The actual method for making a claim is yet to be agreed as current payroll processes cannot accommodate this type of refund.

Watch this space as this is a welcome cost saver for smaller businesses.

Business Rates Retail Discount Scheme

The government has already announced that, for one year from 1 April 2020, the business rates retail discount for properties with a rateable value below £51,000 in England will increase from one third to 50% and will be expanded to include cinemas and music venues.

To support small businesses, in response to COVID-19, the retail discount will be increased to 100% and expanded to include hospitality and leisure businesses.

The government previously committed to introducing a £1,000 business rates discount for pubs with a rateable value below £100,000 in England for one year from 1 April 2020. To further support pubs, in response to COVID-19, the discount will be increased to £5,000.

Affected businesses should receive amended rates bills for 2020-21 from their local authority. Regional variations may apply.

One-off grant for small businesses

The government is to provide a £3,000 grant to businesses that presently qualify for the Small Business Rates Relief or Rural Rate Relief.

Businesses that think they may be eligible should contact their local authority.

Coronavirus Business Interruption Loan Scheme 

The government will launch a new, temporary Coronavirus Business Interruption Loan Scheme, delivered by the British Business Bank, to support businesses to access bank lending and overdrafts.

Government will provide lenders with a guarantee of 80% on each loan (subject to a per lender cap on claims) to give lenders further confidence in continuing to provide finance to SMEs. The government will not charge businesses or banks for this guarantee, and the Scheme will support loans of up to £1.2 million in value. This new guarantee will initially support up to £1 billion of lending on top of current support offered through the British Business Bank.

HMRC’s Time To Pay Scheme

HMRC are expanding the number of operatives that manage calls from taxpayers that are unable to pay their taxes on time. If readers are concerned about meeting tax payments call the dedicated help-line 0800 0159 559.

Corporation Tax

The previously announced reduction in Corporation Tax from 19% to 17% - from April 2020 - has been scrapped. Corporation Tax rates are to remain at 19% for the financial year beginning 1 April 2020.

Structures and Buildings allowance

The annual writing down rate is to be increased from 2% to 3% from April 2020.

Digital Services Tax

Despite opposition from various quarters it looks as if the new Digital Services Tax of 2% will be applied to digital businesses from April 2020.

This will be a major revenue raiser for HMRC.

Capital loss restriction from 1 April 2020

For accounting periods ending on or after 1 April 2020, companies making capital gains will only be able to offset up to 50% of those gains using carried-forward, allowable capital losses.

Employment Allowance

The present £3,000 relief that reduces employer’s NIC contributions is to be increased to £4,000 from April 2020. From 6 April 2020, you will only be able to claim if your Class 1 NIC bill was below £100,000 in the previous tax year.

Car and van benefits charges

Van benefit charges and car and van fuel benefit charges will be increased to account for inflation from April 2020.

R&D expenditure credit

This “Above the line” expenditure credit is currently 12% of qualifying R&D expenditure. This is to be increased to 13% from 1 April 2020.

Zero-rating of e-publications

From 1 December 2020, e-books, e-newspapers, e-magazines and academic e-journals will be zero-rated for VAT purposes.

VAT reverse-charge for the construction sector

A reminder that the domestic reverse charge process will apply to the construction sector from 1 October 2020.

Affected contractors that are still unsure of the changes they will need to make are invited to call so we can help you set up the relevant systems.

VAT registration threshold – no change

The present VAT registration limit (£85,000) and deregistration limit (£83,000) will continue to apply for a further two years; until 31 March 2022.

Clamp-down on tax evaders

As is usual, the budget includes a number of provisions to reduce the successful application of tax avoidance strategies.

Bank support for small businesses

In concert with the flexibility being offered to individuals, banks are looking at relaxing their criteria that would allow small businesses affected by Coronavirus disruption to obtain loans on favourable terms.

Climate issues

The government will also invest in the natural environment: planting enough trees to cover an area the size of Birmingham, restoring peatlands and providing more funding to protect the UK’s unique plants and animals.

The government will also go further to tackle the scourge of plastic waste by introducing a Plastic Packaging Tax, as well as providing further funding to encourage producers to make their packaging more recyclable.

10% reduction in Inheritance Tax rate

Inheritance Tax
 

If your total assets exceed £325,000 then the excess will usually be subject to Inheritance Tax (IHT) at 40% when you die. A reduced rate of IHT of 36% applies where 10% or more of a deceased’s net estate is left to qualifying charities or Community Amateur Sports Clubs (CASCs).

The net value of an estate is the total value of its assets (gross value) after deducting the following:

  • Debts and liabilities
  • Inheritance tax reliefs
  • Exemptions such as assets left to a married or civil partner
  • All items below the current £325,000 IHT threshold.

If you are considering making a charitable legacy this can make the process very tax efficient and significantly reduce the 'cost' of your charitable donation. It can also be a worthwhile exercise to review your will and see if your estate will qualify for this relief, especially if you are at or near the 10% limit.

Remember, the 'net estate' value on which the 10% figure is based is after all relevant deductions. So, if the value of your net estate was £100,000, the estate would have to pay IHT of £40,000 (£100,000 x 40%). If a charitable legacy was left of £10,000, then the remaining chargeable assets in the estate of £90,000 would pay IHT of £32,400 (£90,000 x 36%). This represents a saving in IHT of £7,600.

It can sometimes be a complex procedure to ensure that an estate qualifies for the reduced rate of IHT. The value of certain charitable gifts (such as a piece of land) must be calculated to establish whether or not the 10% test is met. It is possible for an election to be made that the estate does not pay the reduced rate of IHT. This could happen where the administrative costs, such as valuing assets, outweigh the benefit of the reduced rate of tax.

Spring Budget date

 

The Chancellor of the Exchequer, Sajid Javid has announced that he is planning to hold his first Budget on Wednesday, 11 March 2020.

This announcement follows a turbulent period in Parliament that saw the Autumn 2019 Budget pencilled in for 6 November 2019 and then cancelled as Brexit was delayed. The Budget traditionally took place in the spring but was moved a few years ago to the autumn. It remains to be seen if the Budget schedule will move back to the autumn and if we will have another Budget later in 2020.

The Chancellor said:

'With this Budget we will unleash Britain’s potential – uniting our great country, opening a new chapter for our economy and ushering in a decade of renewal.'

This will be the first Budget after the UK left the EU and we are likely to see many new measures being announced. We are also told that at the Budget, the Chancellor will also update the Charter of Fiscal Responsibility with new rules, to help HM Treasury take better advantage of the current low interest rates.

The Treasury has also confirmed that the opportunity to submit representations for the Budget is now available. A Budget representation is a written representation from an interest group, individual or representative body to HM Treasury with the aim of commenting on Government policy and / or suggesting new policy ideas for inclusion in the Budget. Any submissions should be sent to HM Treasury by 7 February 2020.

Details of all the Budget announcements will be made on a special section of the GOV.UK website which will be updated following completion of the Chancellor’s speech in March.

Penalties for late filing of Self-Assessment tax returns

  Income Tax
 

The 31 January is not just the final date for submission of your Self-Assessment tax return but also an important date for paying tax. It is the final payment deadline for any remaining tax due for the 2018-19 tax year and any payment on account due for 2019-20.

If you miss the filing deadline then you will be charged a £100 fixed penalty if your return is up to 3 months late, regardless of whether you owed tax or not.

If you do not file and pay before 1 May 2020, then you will face additional penalties and interest. A daily penalty of £10 per day, up to a maximum of £900 (90 days) will be charged from 1 May 2020. Further penalties then apply if your return is still outstanding for more than 6 months after the 31 January filing deadline. From 1 August 2020 you will be charged a penalty of the greater of £300 or 5% of the tax due. If your return still remains outstanding one year after the filing deadline, then further penalties will be charged from 1 February 2021.

You can appeal against any penalties that have been issued and HMRC has said that they will treat those with genuine excuses, leniently. However, you need to act fast and the excuse must be genuine and HMRC can of course ask for evidence to support any claim. An appeal must usually be made within 30 days of receipt of the penalty.

If you do not have the necessary funds to make payment you should be pro-active and contact HMRC as soon as possible. Pretending the problem does not exist will not make the problem go away and will likely make matters worse.

Using your own vehicle for work?

  Employee Benefits
 

If you are an employee and use your own money to buy things you need for your job, you can sometimes claim tax relief for the associated costs. It is usually only possible to claim tax relief for the cost of items used solely for your work.

You may also be able to claim tax relief for using you own vehicle, be it a car, van, motorcycle or bike. As a general rule, there is no tax relief for ordinary commuting to and from your work. The rules are different for temporary workplaces where the expense is usually allowable and if you use your own vehicle to do other business related mileage.

Employers usually make payments based on a set rate per mile depending on the mode of transport used. There are approved mileage rates published by HMRC. The approved mileage allowance payment rates are available where you use your own car on a business trip. Where the approved mileage rates are used, the payments to you are not regarded as a taxable benefit.

Where an employer pays less than the published rates, you could claim tax relief for the shortfall using mileage allowance relief. For all cars the approved mileage allowance payment for the first 10,000 business miles is 45p per mile and 25p per mile for every additional business mile. The approved mileage rates are 20p per mile for bicycle travel and 24p per mile for motorcycle travel.

There is an additional passenger payment you can receive of 5p per passenger per business mile from your employer. This is available if you carry fellow employees in your car or van on journeys which are also work journeys for your colleagues.

We would be happy to help you review any vehicle related expenses to understand any tax relief that may be available.

Who is eligible for 10% tax on business sale?

  Capital Gains Tax
 

Entrepreneurs' Relief (ER) can be valuable relief when selling your business, your shares in a trading company or your interest in a trading partnership. Where ER is available, Capital Gains Tax (CGT) of 10% is payable. This rate applies to qualifying lifetime gains of up to £10 million.

However, it is important to remember that there are qualifying conditions that must be met to ensure you are eligible to benefit from the lower 10% rate.

If you are selling all or part of your business, then both of the following must apply in order to qualify for relief:

  1. You must be a sole trader or business partner,
  2. You must have owned the business for at least 2 years before the date you sell it.

If you are selling shares in the business you must be an office holder or employee of the company, own at least 5% of the company and have at least 5% of the voting rights for at least 2 years before you sell your shares. You must also be entitled to at least 5% of either the profits that are available for distribution and assets on winding up the company or the disposal proceeds if the company is sold.

The company must also be a trading company or the holding company of a trading group. If the number of shares you hold falls below 5%, because the company has issued more shares, you may still be able to claim ER. The rules are different if your shares came from certain Enterprise Management Incentive (EMI) schemes.

There is also a sister relief called Investor’s Relief which has a separate £10 million lifetime cap. This is useful for investors who do not meet the officer or employee requirement for ER.

Planning a Christmas party?

 

Now is the time that many businesses are planning a Christmas celebration for staff as well as possibly for partners/spouses, clients and prospective clients.

The cost of a staff party or other annual entertainment is generally allowed as a deduction for tax purposes. If you meet the various criteria outlined below, then there is no requirement to report anything to HMRC or pay tax and National Insurance. There will also be no taxable benefit charged to employees.

  1. An annual Christmas party or other annual event offered to staff generally, is not taxable on those attending provided that the average cost per head of the function does not exceed £150.
  2. The event must be open to all employees. If a business has multiple locations, then a party open to all staff at one of the locations is allowable. You can also have separate parties for separate departments, but employees must be able to attend one of the events.
  3. There can be more than one annual event. If the total cost of these parties is under £150 per head, then there is no chargeable benefit. However, if the total cost per head goes over £150 then whichever functions best utilise the £150 are exempt and the others taxable. Note, the £150 is not an allowance and any costs over £150 per head are taxable on the full cost per head.
  4. It is not necessary to keep a running total by employee but a cost per head per function. All costs including VAT must be considered. This includes the costs of transport to and from the event, food and drink and any accommodation provided.

VAT incurred on Christmas parties for your staff can be recovered subject to the usual rules. If staff partners/spouses or clients are also invited to the event, the input tax has to be apportioned as the VAT applicable to non-staff is not recoverable. However, if non-staff attendees make a contribution to the event, all the VAT can be reclaimed and of course output tax should be accounted for on the amount of the contribution.

It is important to pay attention to the nuanced tax rules to ensure that your party is tax exempt.

VAT changes for CIS Sub-contractors

  Value Added Tax
 

Important changes to the VAT rules for building contractors and sub-contractors are coming into effect from 1 October 2019. In a nut-shell, if you are subject to the Construction Industry Scheme (CIS) and if you are registered for VAT, from the 1 October 2019 you may need to change the way you account for VAT on supplies between sub-contractors and their contractor customers.

At present, sub-contractors registered for VAT are required to charge VAT on their supplies of building services to contractors. From 1 October, this approach is changing and sub-contractors will not add VAT to their supplies to most building customers, instead, contractors will be obliged to pay the deemed output VAT on behalf of their registered sub-contractor suppliers.

This does not mean that contractors, in most cases, are paying their sub-contractors’ VAT as an additional cost. When contractors pay their sub-contractors’ VAT to HMRC, they can claim back an equivalent amount as VAT input tax; subject to the usual VAT rules. Accordingly, the two amounts off-set each other.

The change is described as the Domestic Reverse Charge (DRC) for the construction industry. It has been introduced as an increasing number of sub-contractors have been registering for VAT, collecting the VAT from their customers, and then disappearing without paying the VAT collected to HMRC.

However, the change to DRC may create cash flow issues especially if you use the VAT Cash Accounting Scheme or the Flat Rate Scheme. We recommend that all affected CIS readers contact us so we can help you make the necessary changes to your invoicing and accounting software and reconsider the use of VAT special schemes if your continued use would adversely affect your cash flow.

Claiming Entrepreneurs’ Relief when selling your business

  Capital Gains Tax
 

Entrepreneurs' Relief (ER) can be a valuable relief when selling your business, your shares in a trading company or your interest in a trading partnership. Where ER is available Capital Gains Tax (CGT) of 10% is payable in place of the standard rate. CGT on the disposal of chargeable assets is usually chargeable at 20%. There are a number of qualifying conditions that must be met in order to qualify for Entrepreneurs' Relief.

There is a lifetime limit that means that you can qualify for ER more than once, subject to an overriding total limit of £10m of qualifying capital gains. There are time limits that must be met to make a claim. To qualify for relief you should be either an officer or employee of the company and own at least 5% of the company and have at least 5% of the voting rights. There are also other qualifying conditions that must be met in order to qualify for the relief.

In a recent change, the minimum period during which certain conditions must be met in order to qualify for ER increased from one to two years (from 6 April 2019). If you are looking to sell your business, you need to be mindful of meeting all the necessary conditions in order to qualify for ER.

There is also a sister relief called Investor’s relief which has a separate £10 million lifetime cap. This is useful for investors who do not meet the officer or employee requirement for ER.

Have you adopted the new minimum wage rates?

  Payroll
 

The new National Minimum Wage (NMW) and National Living Wage (NLW) rates came into effect on 1 April 2019. The NLW first came into effect on 1 April 2016 and is the minimum hourly rate that must be paid to those aged 25 or over. The new rate for the NLW is £8.21 which is a 38p or almost 5% increase over the previous year.

The hourly rate of the NMW (for 21-24 year olds) increased to £7.70 (a rise of 32p). The rates for 18-20 year olds increased to £6.15 (a rise of 25p), and the rate for workers above the school leaving age but under 18 increased to £4.35 (a rise of 15p). The NMW rate for apprentices increased by 20p to £3.90.

Penalties may be levied if you get this wrong

It is important that you ensure that you have adopted the new rates as there are significant penalties for employers who are found to have paid workers less that they are entitled to by law. If you have underpaid an employee, you must pay any arrears immediately. There are penalties for non-payment of up to 200% of the amount owed, unless the arrears are paid within 14 days. The maximum fine for non-payment can be up to £20,000 per employee and employers who fail to pay face a possible 15-year ban from being a company director as well as being publicly named and shamed.

When do you have to register to submit a tax return?

  Income Tax
 

There are a number of reasons why you may need to register with HMRC to submit a tax return. This includes if you:

  • are self-employed and earning more than £1,000,
  • are a company director,
  • have an annual income over £100,000 and / or if you have certain income from savings, investment or property.

If you need to complete a tax return for the first time, you should inform HMRC as soon as possible. The latest date that HMRC should be notified is by 5 October following the end of the tax year for which a return needs to be filed.

So, if you had income that necessitated you registering for Self Assessment in the 2018-19 tax year, you will need to notify HMRC by 5 October 2019.

HMRC publishes a list of taxpayers who would usually be required to submit a Self Assessment return. The list includes:

  • The self-employed;
  • Taxpayers who had £2,500 or more in untaxed income;
  • Those with savings or investment income of £10,000 or more before tax;
  • Taxpayers who made profits from selling things like shares, a second home or other chargeable assets and need to pay Capital Gains Tax;
  • Company directors - unless it was for a non-profit organisation (such as a charity) and you didn’t get any pay or benefits, like a company car;
  • Taxpayers whose income (or that of their partner’s) was over £50,000 and one of you claimed Child Benefit;
  • Taxpayers who had income from abroad that they needed to pay tax on;
  • Taxpayers who lived abroad and had a UK income;
  • Those whose income was over £100,000.

In certain limited circumstances HMRC can also ask you to complete tax returns for other reasons.

Need help registering for Self-Assessment?

If you are unsure if you need to register, or would like assistance with the formal registration process, please call.

Guidance for employers on new payslip legislation

  Employment & Payroll
 

New legislation comes into force from 6 April 2019 which requires all employers to provide an itemised payslip to all workers, i.e. not just to employees, and to show hours on payslips where the pay varies by the amount of time worked.

The government has now published guidance to help employers with the new rules on showing the hours on payslips, which includes several useful example case studies. The guidance is non-statutory and has no legal effect on the interpretation of the legislation, but it will assist employers to better understand it.

The new rules apply to payslips covering pay periods which begin on or after 6 April 2019.

When to report and pay Capital Gains Tax

 

The annual Capital Gains Tax (CGT) exemption for individuals is £11,700 for 2018-19. A husband and wife each benefit from a separate exemption. Same-sex couples who acquire a legal status as civil partners are treated in the same way as married couples for CGT purposes.

CGT is normally charged at a simple flat rate of 20% and this applies to most chargeable gains made by individuals. If taxpayers only pay basic rate tax and make a small capital gain, they may only be subject to a reduced rate of 10%. Once the total of taxable income and gains exceed the higher rate threshold, the excess will be subject to 20% CGT. A higher rate of CGT applies (18% and 28%) to gains on the disposal of residential property (apart from a principal private residence).

The usual due date for paying CGT to HMRC is the 31 January following the end of the tax year in which a capital gain was made. This means that CGT will be payable for any gains made during 2018-19 on or before 31 January 2020. The usual way to report a gain is to complete the relevant sections of the Self Assessment tax return.

HMRC also offers a 'real time' Capital Gains Tax service that allows taxpayers to report any gains and pay straight away. Using this service would obviously mean paying any CGT due before the official deadline so we would assume that the use of this service would only be appealing under limited circumstances. Taxpayers using this service must wait for HMRC to issue a payment reference number before making payment.

There are also special payment and reporting requirements if you live abroad and sell a UK residential property, and you must inform HMRC within 30 days of the sale. The notification must be made whether or not there is any non-resident CGT to be paid. Any non-resident CGT that is due must also be paid within 30 days of the conveyance date. There are penalties for late payment, and we would strongly advise that you monitor any CGT due and ensure the relevant payment deadlines are met.

Genuine messages from HMRC

  General
 

HMRC has issued an updated version of their online guidance on Genuine HMRC contact and recognising phishing emails and texts. The guidance provides a current list of genuine messages from HMRC. This includes email messages, text messages and telephone contacts from HMRC.

HMRC is currently carrying out compliance checks for midsized businesses, charities and public bodies by way of a compliance check interview over the phone. If you are unsure if a request is genuine you can ask the HMRC staff member to send an email while you are on the call to confirm their identity. Their email address should have their name and end in @hmrc.gsi.gov.uk. You can also call the relevant HMRC general enquiry helpline to check if a request is genuine. HMRC may also ask for business records to be sent by post or electronically, by a secure platform.

Until December 2018, HMRC is also working with Populus, an independent research agency to carry out stakeholder engagement research. First contact will be by email with follow up contact by email and telephone. Populus may send further emails to stakeholders or telephone them to encourage them to take part in the research.

Although these communications are genuine, taxpayers should still be wary of receiving messages that are purported to come from HMRC. Fake email and text messages can appear to be genuine, but clicking on a link from these messages can result in personal information being compromised and the possibility of computer viruses affecting your computer or smartphone. If you are unsure as to the validity of any message it should not be opened until the sender can be verified.

Our Privacy Policy

Background

Churchill Groves understands that your privacy is important to you and that you care about how your personal data is used and shared online. This privacy statement describes how and why we collect and use personal data provided to us. We may use personal data provided to us for any of the purposes described in this privacy statement or as otherwise stated at the point of collection.

Personal data is any information relating to an identified or identifiable living person. Churchill Groves Chartered Accountants processes personal data for a number of purposes and the means of collections, lawful basis of processing, use and retention periods for each purpose may differ.

Security

We take the security of all the data we hold very seriously. We use reasonable and appropriate physical, technical and administrative procedures to safeguard the information we collect and process. We have a framework of policies, procedures and training in place covering data protection, confidentiality and security and regularly review the appropriateness of the measures we have in place to keep the data we hold secure.

When and how we share personal data and locations of processing

We will only share personal data with others when we are legally permitted to do so. When data is shared, Churchill Groves put contractual arrangements and security mechanisms in place to protect the data and to comply with our data protection policy.

Personal data held by us may be transferred to:

  • Third party organisations that provide applications, data processing or IT services to us. We use third parties to support us in providing our services and to help provide, manage and run our internal IT systems, for example website hosting and management, data back-up and storage services. The servers powering and facilitating the IT infrastructure are located in secure data centres within the European Economic Area.
  • Third party organisations that otherwise assist us in providing goods, services or information.
  • Law enforcement or other government and regulatory agencies or to other third parties as required by, and in accordance with, applicable laws and regulations. There are times where we may receive requests from third parties with authority to obtain disclosure of personal data. We will only fulfil requests for personal data where we are permitted to do so in accordance with applicable law or regulation.

 

Data Controller and contact information

The data controller is Churchill Groves. If you have any questions about this privacy statement or how and why we process personal data please contact Melanie Brown at:

Churchill Groves Chartered Accountants
4 Cannock Road
Chase Terrace
Burntwood
Staffordshire
WS7 1JP

Email: melanie@churchillfca.co.uk

Your rights and how to exercise them

Individuals have certain rights over their personal data and data controllers are responsible for fulfilling these rights.

Access to personal data

You have a right to access any personal data held by us as a data controller. This right may be exercised by emailing us at melanie@churchillfca.co.uk. In accordance with applicable law we may charge for a request for information. We will respond to any requests for information within the legally required time limits.

Amendment of personal data

To update personal data submitted to us, you may email us at melanie@churchillfca.co.uk. When practically possible, once we are informed that any personal data processed by us is no longer accurate we will make corrections.

Withdrawal of consent

Where we process personal data based on consent, individuals have the right to withdraw consent. We do not generally process personal data based on consent as we can usually rely on another legal basis. To withdraw consent to our processing of your personal data please email melanie@churchillfca.co.uk.

Other data subject rights

As well as the rights of access and amendment individuals may have other rights in relation to the personal data we hold, for example the right to erasure, to restrict or object to our processing of personal data and the right to data portability. If you wish to exercise any of these rights please send an email to melanie@churchillfca.co.uk.

 

Complaints

We hope you won’t ever need to but if you do want to complain about our use of personal data please send an email to melanie@churchillfca.co.uk. We will look into and respond to any complaints we receive. You also have the right to lodge a complaint with the Information Commissioner’s Office.

Autumn Budget 2018

Autumn Budget statement Budget Summary
 

 

 

The Prime Minister announced at the Conservative Party conference that the end of austerity was in sight. Recent tax revenues have exceeded expectations, and although there was an expectation that these declarations and indicators would herald a relaxation of fiscal policy, the Chancellor is mindful of the potential fallout next year when we leave the EU, with or without a deal. The Chancellor mentioned he would consider a Spring Budget in the event of a ‘no deal’ Brexit.

 

And so, prudence seems to have directed his thinking.

 

The remainder of this update confirms tax and other changes announced that will affect businesses and other taxpayers from next year.

 

Personal Tax and miscellaneous matters

 

Personal Tax allowance

 

The personal Income Tax allowance for 2019-20 will be increased to £12,500 (2018-19 £11,850). It will remain at this increased level for two years.

 

Changes to personal tax allowances will apply to the whole of the UK.

 

Income Tax bands, rates and the dividend allowance

 

The Income Tax bands for 2019-20 have been increased. They are:

  • Basic rate band increased to £37,500 (2018-19 £34,500)
  • Higher rate band £37,501 to £150,000 (2018-19 £34,501 to £150,000)
  • Additional rate, no change, applies to income of more than £150,000.

As a result, the higher rate threshold will increase to £50,000 from April 2019. There is no change in Income Tax rates and the tax rates applied to dividend income.

 

Changes to these Income Tax bands apply to England, Wales and Northern Ireland. The Scottish parliament now set their own Income Tax bandings.

 

Earlier payments of Capital Gains Tax (CGT)

 

UK residents will be required to make a payment on account for CGT due on a residential property sale. The new regulations will also affect disposals by non-UK residents.

 

The changes will apply from April 2019 for non-UK residents and April 2020 for UK residents.

 

Capital Gains Tax Private Residence Relief changes

 

From April 2020, the government intends to make two changes to the Private Residence Relief:

  1. The final exempt period will be reduced from 18 months to 9 months, with no change to the 36 months available for those who are disabled or in care homes, and
  2. Lettings relief will be reformed so that it only applies in certain circumstances where the property owner is in shared occupancy with the tenant.

CGT Entrepreneurs’ relief

 

Two changes are coming into effect:

  1. Claimants must have a 5% interest in the distributable profits and the net assets of the company to qualify, and separately
  2. That the minimum period, during which certain conditions must be met to qualify for the relief, is being increased from one to two years.

The first measure will have effect for disposals on or after 29 October 2018.

 

The second measure will have effect for disposals on or after 6 April 2019, unless a business ceased before 29 October 2018.

 

Inheritance Tax: changes to the nil-rate band

 

From 29 October 2018, amendments to the residence nil-rate band will provide certainty as to when a person is treated as “inheriting” property and clarify the “downsizing” rules.

 

Rent-a-room relief change cancelled

 

The expected change to require shared occupancy to qualify for rent-a-room relief is not to be introduced.

 

ISAs

 

For 2019-20, the ISA limit will remain at £20,000. The limit for Junior ISAs and the Child Trust Fund is to be increased to £4,368.

 

Limit on pensions’ savings to be increased

 

The life time limit on pension savings is to be increased in line with inflation to £1,055,000 for the 2019-20 tax year.

 

Stamp duty first time buyers’ relief in England

 

This relief is being extended to cover the purchase of qualifying shared ownership property and will be effective for transactions on or after 29 October 2018 and will be backdated to 22 November 2017.

 

The first £300,000 of an initial share purchased will not be liable to SDLT based on the market value of the property. The remainder of the value over £300,000 will be charged at 5%. No SDLT will be chargeable on the associated lease. Relief is not extended to further shares purchased and will not apply to purchases of property valued at over £500,000.

 

Tobacco duty increases confirmed

 

The rates for duty for all tobacco products increased by inflation plus 2% from 6pm, 29 October 2018.

 

Hand-rolling tobacco also rose by an additional 1% above this increase, to 3% above the RPI from the same date.

 

Duties on beer, wine and spirits

 

There are to be no increases to the duty charged on beers, spirits or cider, except for certain ciders treated as high strength for duty purposes.

 

Wines and high strength sparkling cider drinks will see duty increased in line with inflation from 1 February 2019.

 

Vehicle excise duty

 

The VED rates for cars, vans and motorcycles is due to increase by reference to the RPI from 1 April 2019.

 

Fuel duty increase frozen

 

Duty increase is frozen for the ninth consecutive year.

 

Air passenger duty (APD) increases

 

Travellers should note that APD will increase in line with inflation for long-haul flight passengers only. The new rates will apply from 1 April 2020.

Business Tax changes

 

Corporation Tax

 

Corporation Tax rates to remain at 19% for the financial year beginning 1 April 2019.

 

Employment Allowance reform

 

From 2020, the government will legislate to restrict access to the £3,000 NIC Employment Allowance, to employers with employer NIC liabilities of under £100,000 in the previous tax year. Connected employers will have their contributions aggregated for this purpose.

 

Annual Investment Allowance increased

 

The Annual Investment Allowance (AIA) is to be increased from the present £200,000 to £1m from 1 January 2019 to 31 December 2020. It is then presumed that this will return to the £200,000 limit. This should provide a welcome boost to business investment during the Brexit transition period.

 

Please note that not all capital purchases qualify for this relief. Please call for clarification of what is covered if you are considering a significant acquisition.

 

R&D tax credit claims to be restricted

 

From 1 April 2020, the amount of payable tax credit that can be claimed under the R&D SME tax relief scheme will be limited to three times the company’s total PAYE and NIC payments for the period. Any loss that cannot be surrendered can be carried forward and used against future profits.

 

The government will consult with interested parties on this issue.

 

IR35 changes

 

The changes recently made to IR35 arrangements in the public sector are to be rolled out to the private sector. The changes will come into effect from April 2020 and small firms will be exempt. Firms that have concerns that they may be affected should contact us for more details.

 

Car and van fuel benefit charge increases

 

For 2019-20, these will increase by reference to the September 2018 Retail Prices Index.

 

A new 2% digital services tax

 

From April 2020, the major social media, search engine and online retailers will be subject to a 2% tax on revenues generated from UK users of their services. The Chancellor did indicate that if an internationally recognised levy was introduced, that the UK may fall into line in place of this 2% UK tax.

 

At last, rates relief for High Street retailers

 

In a much anticipated announcement, smaller retailers in England, occupying shop premises with rateable values under £51,000, should benefit from a cut of one-third in their business rates bills for 2 years from April 2019.

 

They should also benefit from £675m to be spent on improvements by councils to help transform high streets, the redevelopment of empty shops as homes and offices and the repurposing of old and historic buildings.

 

In a humorous exchange, the Chancellor also announced 100% business rates relief for public lavatories.

 

Plastics tax

 

For those readers who are concerned about the environment they will be pleased to note that the government is to consider introducing a tax on the production and importing of plastic packaging from April 2022.

 

The charge will apply to plastic packaging that does not contain at least 30% recycled plastic.

 

Changes to the apprentices’ levy

 

From April, larger employers will be able to invest up to 25% of their apprenticeship levy to support apprentices in their supply chain. Additionally, some smaller employers will pay half what they currently pay for apprenticeship training: a reduction from 10% to 5%. The government will fund the remaining 95%.

 

Charities small trading exemption increase

 

The limits that exempt small scale trading by charities from UK tax are to be increased from the current £5,000 – where turnover is under £20,000 – and £50,000 where turnover exceeds £200,000. These £5,000 and £50,000 exemptions are to be increased to £8,000 and £80,000 respectively.

 

The changes will apply from 6 April 2019 for unincorporated charities and from 1 April 2019
for incorporated charities.

 

A new structures and buildings allowance (SBA)

 

This will provide tax relief for qualifying capital expenditure on new non-residential buildings where all contracts for the physical construction works are entered into on or after 29 October 2018.

 

Relief will not include the cost of land or dwellings.

 

Tax relief for electric charge points to be extended

 

The present first year allowances available for the installation of electric charge points is to be extended for four years, until the end of the financial year 2022-23.

 

Reduction in tax writing down allowance

 

The special rate of writing down allowance is being reduced from 8% to 6% from April 2019.

 

Supposedly, this is intended to closer align tax depreciation with commercial depreciation rates.

 

Anti-avoidance measures

 

The Finance Bill will contain a number of measures that will continue to improve HMRC’s campaigns to reduce the impact of tax avoidance schemes.

 

Tax to be protected in insolvency

 

From 6 April 2020, the government will change the insolvency rules so that taxes collected on behalf of employees and customers, primarily employees PAYE and NIC and customers VAT, will be treated as a preferential creditor on winding up rather than distributed to other creditors.

 

Company loss relief loop-holes to be closed

 

Most of the changes will apply from April 2019 and will prevent relief for carried forward losses being claimed in excess of that intended by legislation.

 

The changes will include:

  • the definition of “relevant profit”,
  • the computation of life assurance and annuity business profits,
  • the deductions allowance in group situations,
  • the calculation of terminal relief,
  • the cap on profits against which certain losses may be allowed,
  • and other minor considerations.

VAT: reverse charge process to be extended to construction services

 

This change, to extend the reverse charge process to the building and construction industry is due to come into effect from 1 October 2019.

 

This will place the onus for dealing with the VAT charge due on subcontractors’ bills to the main contractor.

 

This will cause accounting rather than cash flow issues for main contractors as they will add entries to their VAT returns to pay the subcontractors VAT, but then deduct the same amount as input VAT on the same return.

 

The aim is to stop subcontractors adding VAT to their bills and then disappearing without remitting the VAT to HMRC.

 

VAT registration threshold – no change

 

The present VAT registration limit (£85,000) and deregistration limit (£83,000) will continue to apply for a further two years; until 31 March 2022.

 

Paper Self-Assessment return deadline INCOME TAX

The 2017-18 tax return deadline for taxpayers who continue to submit paper Self-Assessment returns, is 31 October 2018. Late submission of a Self-Assessment return will become liable to a £100 late filing penalty. The penalty usually applies even if there is no liability or if any tax due is paid in full by 31 January 2019.
We would recommend that anyone still submitting paper tax returns, consider the benefits of submitting the returns electronically and benefit from an additional three months (until 31 January 2019) in which to submit a return.
Taxpayers with certain underpayments in the 2017-18 tax year can elect to have this amount collected via their tax code (in 2019-20), provided they are in employment or in receipt of a UK-based pension. The coding applies to certain debts, and the amount of debt that can be coded out ranges from £3,000 to £17,000 based on a graduated scale. The maximum coding out allowance only applies to taxpayers with earnings exceeding £90,000.
Daily penalties of £10 per day will also take effect if the tax return is still outstanding three months after the filing date up to a maximum of £900. If the return still remains outstanding further higher penalties will be charged from six months and twelve months late.
Taxpayers that received a letter informing them that they have to submit a paper return after 30 July 2018, have an extended deadline which runs for three months from the date they received the letter to submit a paper return.

The maternity allowance

The maternity allowance is a financial benefit for pregnant women who are self-employed, who are working but do not qualify for statutory maternity pay (SMP) or who have recently stopped working. The maternity allowance is paid directly by the Department for Work and Pensions for up to 39 weeks for qualifying applicants. An application must be made for the maternity allowance using the Department for Work and Pensions - Maternity Allowance claim form (MA1).

The amount of maternity allowance payable (if any) depends on eligibility. It can range from £145.18 a week or 90% of your average weekly earnings (whichever is less) for 39 weeks, £27 a week for 39 weeks or £27 a week for 14 weeks.

If you are self-employed you must have paid Class 2 National Insurance for at least 13 of the 66 weeks before your baby is due in order to get the full amount of maternity allowance. If you haven't paid Class 2 National Insurance, you will receive just £27 a week for 39 weeks assuming all the other eligibility conditions are met. You may be able to make extra National Insurance payments to qualify for the higher rate.

If you are an employee (and don’t qualify for the SMP) you may be able to get the maternity allowance if in the 66 weeks before your baby is due you were:

  • employed for at least 26 weeks
  • earning £30 or more a week for at least 13 of those weeks – they don’t have to be together

SMP on the other hand is a weekly payment payable to qualifying employees by their employer at:

  • 90% of the employee's average weekly earnings (AWE) for the first 6 weeks with no upper limit
  • £145.18 (for 2018-19) or 90% of their AWE (whichever is lower) for the remaining 33 weeks

Your employer may also offer further additional benefits which includes higher maternity payments, however this is at their discretion and is not legally required.

GDPR and Data Protection Act 2018 now in force

General
The EU General Data Protection Regulation (GDPR) came into force on 25 May 2018, along with most of the provisions in a new Data Protection Act 2018 (including those provisions relevant to processing in the employment relationship). The previous Data Protection Act 1998 has now been repealed. The new data protection laws give people more control about how their personal data is used, shared and stored and they require organisations to be more accountable and transparent about how they use such data.

As well as producing a wide range of new and updated guidance for organisations to assist them with their GDPR compliance, which is all available on its website, the Information Commissioner’s Office (ICO) has launched a long-term campaign, “Your Data Matters”, to help people understand why their personal data matters and how they can take back control.

The ICO’s resources for organisations include:

  • Guide to the GDPR
  • More detailed guidance on specific GDPR areas, covering: determining what is personal data; the right to be informed; legitimate interests; consent; documentation; automated decision-making and profiling; data protection impact assessments (DPIAs); and children and the GDPR
  • Data protection self-assessment toolkit
  • GDPR FAQs
  • GDPR myth-busting blogs
  • Lawful basis interactive guidance tool
  • Personal data breach reporting resources
  • Guide to the data protection fee (see below).

The Data Protection (Charges and Information) Regulations 2018 also came into force on 25 May 2018 and they have introduced a new data protection charging structure for data controllers. There is no longer a requirement to pay the ICO a notification fee. Instead, there are three tiers of charges which apply unless all processing undertaken by the data controller is exempt. For very small organisations with no more than ten members of staff or which have a maximum turnover of £632,000, the fee is £40, organisations with no more than 250 members of staff or which have a maximum turnover of £36 million must pay £40 and larger organisations must pay £2,900. The fee is reduced by £5 for paying by direct debit.

The GDPR is coming

  General
 

There are now just 3 weeks to go until the new data protection regulations become law on 25 May 2018. The new provisions known as the General Data Protection Regulation (GDPR) represent a step change in data protection regulation, that will impose much stricter controls over the way that businesses collect, store and manage the personal data of customers, suppliers, staff and other contacts. For many businesses, the new rules are more onerous than the current Data Protection Act (DPA) rules.

New requirements, not in the present Data Protection Act 1998, include:

  • Reporting data breaches.
  • Cross-border considerations.
  • New rights for contacts: need to inform contacts how you are using their personal data and their rights under the GDPR to request that personal data is deleted.
  • Need to demonstrate that your firm is mitigating against risks of misuse of clients’ personal data.

The GDPR is an EU-wide initiative and as the UK will continue to be part of the EU when the new rules enter into force, the provisions will apply in the UK as elsewhere in the EU. It is expected that the GDPR will remain UK law after Brexit. However, there may be changes to ensure there are no gaps in the UK’s data protection regime.

If you have not already begun to prepare for the GDPR, we would strongly recommend that you make a start. The Information Commissioner's Office (ICO) has published a number of documents to help businesses prepare for the changes.

Nominating a home for tax purposes CAPITAL GAINS TAX

 

As a general rule there is no CGT payable on the disposal of a property which has been used as the main family residence. Conversely, an investment property which has never been used will not qualify for relief. This relief from CGT is commonly known as private residence relief (PRR).
It is increasingly common for taxpayers to own more than one home and there are a number of issues that home owners should be aware. An individual, married couple or civil partnership can only benefit from CGT PRR on one property at a time. However, it is possible to choose which property benefits from a CGT exemption when it comes to be sold by making an election.
This must be done by nominating one property as your main home by writing to HMRC and specifying (with the full address) which home you want to nominate. All owners of the property must sign the letter. If you want to nominate a home you must do this within 2 years on every occassion your combination of homes changes. You must have also lived in the house as your main or only residence at some point in the past.
Planning notes
There are special rules for overseas property and for non-UK residents. It is important to carefully consider the timing and frequency of changing an election. We would be happy to help you consider your position and ensure the optimum tax structure for your needs.
If a property has been occupied at any time as an individual’s private residence, the last 18 months of ownership are disregarded for CGT purposes – even if the individual was not living in the property when it was sold.

Relief if you let and then sell your home

   
 

One of the most often used and valuable of the capital gains tax (CGT) exemptions concerns the sale of the family home. As a general rule there is no CGT on a property which has been used as the main family residence. An investment property which has never been used will not qualify. This relief from CGT is commonly known as private residence relief.

Taxpayers are usually entitled to full relief from CGT where all the following conditions are met:

  1. The family home has been the taxpayer's only or main residence throughout the period of ownership.
  2. The taxpayer has not been absent from the home other than for an allowed period of absence or because they have been living in job-related accommodation, during the period of ownership.
  3. The garden or grounds including the buildings on them are not greater than the permitted area.
  4. No part of the family home has been used exclusively for business purposes.

The last 18 months of ownership are disregarded for CGT purposes – even if the individual was not living in the property when it was sold. This means that a qualifying property that is rented out for up to 18 months before being sold will remain eligible for full private residence relief. If the property has been let for more than 18 months the seller will be entitled to private residence relief for the time they lived in the property in addition to the last 18 months of ownership. Any further gain will be liable to CGT.

 

Autumn Budget 2017

  Budget Summary
 

Prospects for growth, especially for productivity have been downgraded, but the Chancellor was bullish in his forecasts for investment and the Government’s intention to sort out the slow pace of house building in the UK. A few non-tax comments of note were:

  • Unemployment at its lowest rate since 1975.
  • Chancellor is providing an extra £3bn to prepare for Brexit over the next two years.
  • Government to create 5 new garden towns, make better use of land and aim to be building 300,000 new homes a year by the mid-2020s.
  • Devolved administrations will have more money to spend. An increase of £2bn for Scotland, £1.2bn for the Welsh Government and £660m for the Northern Ireland Executive.

Our summary of a selection of specific tax changes and other budget announcements for 2018-19 and future years follow.

Personal Tax and miscellaneous matters

Personal Tax allowance

The personal allowances for 2018-19 is £11,850 (2017-18 £11,500). According to HMRC, this means that an average taxpayer will pay £1,075 less tax than in 2010-11.

Income Tax bands, rates and the dividend allowance

The Income Tax bands for 2018-19 have been increased. They are:

  • Basic rate band increased to £34,500 (2017-18 £33,500)
  • Higher rate band £34,501 to £150,000 (2017-18 £33,501 to £150,000)
  • Additional rate, no change, applies to income of more than £150,000.

There is no change in Income Tax rates, and the tax rates applied to dividend income. Readers should note that the present £5,000 tax-free dividend allowance will, as previously announced, be reducing to £2,000 from April 2018.

The Scottish parliament sets the basic rate limit for Scotland meaning that higher rate taxpayers may pay more tax in 2018-19.

Marriage Allowance extended

There is a small increase in this allowance to £1,185 from April 2018. This is the amount of unused personal tax allowance that can be transferred between spouses, or civil partners, if the person receiving the transfer is not a higher rate tax payer.

From 29 November 2017, the Government will also allow Marriage Allowance claims on behalf of deceased spouses and civil partners, and for the claim to be back dated four years in appropriate cases.

Offshore trusts

Changes will be made to ensure that payments from an offshore trust intended for a UK resident individual do not escape tax when they are made via an overseas beneficiary or a remittance basis user. This will take effect from April 2018.

Abolishing Stamp Duty Land Tax for certain first-time buyers

With immediate effect, first-time buyers will pay no stamp duty on homes costing no more than £300,000.

First-time buyers of homes worth between £300,000 and £500,000 will not pay stamp duty on the first £300,000. They will pay the normal rates of stamp duty on the price above that. This will save £1,660‎ on the average first-time buyer property.

80% of people buying their first home will pay no stamp duty, but there will be no relief for those buying properties over £500,000.

National Living Wage (NLW) and National Minimum Wage (NMW) increases

From April 2018, the NLW will increase from the present £7.50 per hour to £7.83 per hour.

From the same date, the NMW rates will also increase to:

  • £7.38 per hour for 21 – 24 year olds
  • £5.90 per hour for 18 - 20 year olds
  • £4.20 per hour for 16 and 17 year olds
  • £3.70 per hour for apprentices

Fuel duty no change

For 2018, the fuel duty will remain frozen, for the eighth consecutive year.

New railcard for the 26 to 30 age group

No doubt to win back the support of the younger generation, the government will work with the rail industry to introduce a new railcard from Spring 2018.

Duty frozen for most alcoholic drinks

The duty on beer, wine, cider and spirits to be frozen. However, cheap, high strength cider will be subject to a new band of duty from 1 February 2019.

Duty on tobacco products to increase

The duty on cigarettes will increase by 2% above inflation and hand-rolling tobacco by 3% above inflation, with effect from 6pm, 22 November 2017.

Universal Credit (UC) changes

In response to recent adverse publicity the Government has agreed to various changes that are intended to ease the financial hardship for new claimants. They include:

  • Households in need, who qualify for UC will be able to access a month’s worth of support within 5 days. This will be funded by an interest free loan that can be repaid over a 12-month period.
  • Claimants will be eligible for UC from the day they apply, the present 7-day rule will be scrapped.
  • Low-income households affected by areas with higher rent increases will receive an extra £280 on average to meet these higher costs.

Pension lifetime allowance increased

The lifetime allowance will increase to £1,030,000 from April 2018.

Diesel Vehicle Excise Duty (VED) change

From April 2018, the first year VED (car tax) rate for diesel cars that don't meet the latest standards will go up by one band. The Chancellor emphasises this is cars only, and that the money will go to a new Clean Air Fund.

Business Tax changes

Corporation Tax changes

Although there is no change to the rate of Corporation Tax, maintained at 19%, HMRC is to freeze indexation allowance on corporate capital gains for disposals after 1 January 2018.

£64m for construction and digital training courses

The new funding will be split as to:

  • £34m to teaching construction skills, and
  • £30m towards digital courses using Artificial Intelligence.

Partnership tax

Legislation has been revised to be more compatible with commercial arrangements for allocating shares of profit, and to avoid additional administrative burdens for taxpayers. The changes will have effect for the tax year 2018-19 and subsequent tax years.

Business rates changes

From April 2018, business rates will rise by any increase in the Consumer Price Index (CPI) rather than the Retail Prices Index (RPI). The change has been brought forward two years. Historically, the RPI has tended to be higher than the CPI.

Rates revaluations will now be undertaken every 3 years rather than the present 5 years. This will start after the next rates revaluation due during 2022.

Pubs with a rateable value up to £100,000 will continue to receive a £1,000 discount next year.

Venture Capital Schemes

Changes are to be made to the Enterprise Investments Scheme, the Seed EIS and Venture Capital Trusts. The aim is to target Venture Capital Schemes on companies where there is a real risk to the capital being invested, and will exclude companies and arrangements intended to provide ‘capital preservation’.

Incentives to encourage VCTs towards higher risk investments will include:

  • removing certain ‘grandfathering’ provisions that enable VCTs to invest in companies under rules in place at the time funds were raised, with effect on and after 6 April 2018;
  • requiring 30% of funds raised in an accounting period to be invested in qualifying holdings within 12 months after the end of the accounting period, with effect on and after 6 April 2018;
  • increasing the proportion of VCT funds that must be held in qualifying holdings to 80%, with effect for accounting periods beginning on and after 6 April 2019;
  • increasing the time to reinvest the proceeds on disposal of qualifying holdings from six months to 12 months for disposals on or after 6 April 2019;
  • introducing a new anti-abuse rule to prevent loans being used to preserve and return equity capital to investors, with effect on and after Royal Assent of Finance Bill 2017-18.

EIS and VCTs will also see increased limits for investments in knowledge-intensive companies:

The Government will legislate to:

  • double the limit on the amount an individual may invest under the EIS in a tax year to £2 million from the current limit of £1 million, provided any amount over £1 million is invested in one or more knowledge-intensive companies;
  • raise the annual investment limit for knowledge-intensive companies receiving investments under the EIS and from VCTs to £10 million from the current limit of £5 million. The lifetime limit will remain the same at £20 million;
  • allow knowledge-intensive companies to use the date when their annual turnover first exceeds £200,000 in determining the start of the initial investing period under the permitted maximum age rules, instead of the date of first commercial sale.

The changes will have effect on and after 6 April 2018. This measure is subject to normal state aid rules.

R & D expenditure credit increase

The Government will legislate to increase the rate of the R&D expenditure credit from 11% to 12%, to support business investment in R&D.

This change will have effect on and after 1 January 2018.

Diesel car supplement increase

The diesel car supplement is to be increased from 3% to 4% from 6 April 2018. This will increase the company car tax and car fuel benefit charge (for company cars provided with an element of private use).

This change will apply to all diesel cars registered on or after 1 January 1998 that do not meet the Real Driving Emissions (Step 2) standards.

Self-assessment e-filing deadline

Income Tax
 

As existing self-assessment tax filers will be aware, the deadline for online submission of your 2016-17 self-assessment tax return is 31 January 2018. This is also the date that the payment is due for the balance of any self-assessment liability for 2016-17, and the due date for any payment on account due for the current 2017-18 tax year.

There are penalties for late self-assessment returns including an automatic £100 penalty for submitting a late return even if there was no tax to pay or the tax due was paid on time.

The following additional penalties apply to self-assessment returns that are filed late:

  • From 3 months late: taxpayers will be charged an automatic daily penalty of £10 per day up to a £900 maximum.
  • From 6 months late: taxpayers will be charged additional penalties which are the greater of 5% of tax due or £300.
  • Over 12 months late: there are additional penalties based on greater of 5% of tax due or £300. In serious cases this penalty may be increased up to 100% of tax due.

If you are struggling to meet the 31 January 2018 filing deadline we can help.

Planning note

The filing deadline for taxpayers with certain underpayments in the 2016-17 tax year, and who want to apply to have tax collected through their tax code (in 2018-19), is even earlier - 30 December 2017.

Completing your 2017 tax return will also ensure that you know how much you will need to pay HMRC at the end of January 2018.

Date announced for Autumn Budget 2017

General
 

The Chancellor has announced that the Autumn Budget 2017 will be held on Wednesday, 22 November 2017. The announcement was made on the GOV.UK website and included a video message from the Chancellor, Philip Hammond. In the video, the Chancellor said that the budget will 'set out our thinking on how to keep the economy strong and resilient and fair. An economy that works for everyone'.

This will be the first Budget to take place in November following the government’s decision to switch to a new cycle with the annual Budget taking place in the autumn. In order to commence the new schedule we have the unusual scenario of two Budget dates in 2017.

The Budget cycle will then continue annually from autumn 2018. Each spring also starting in 2018 there will be a Spring Statement. The government retains the option to make changes to fiscal policy at the Spring Statement if the economic circumstances require it.

Details of all the Budget announcements will be made on a special section of the GOV.UK website which will be updated following completion of the Chancellor’s speech in November.

This Budget is likely to bring a number of important announcements as the government negotiates Britain’s exit from the EU, deals with rising inflation and an uncertain economic outlook.

What is Form 17?

  Income Tax
 

As a general rule, the fall-back position for couples who live together with their spouse or civil partners is that property income held in joint names is divided 50:50. This is regardless of the actual ownership structure. However, where there is unequal ownership and the couple want the income taxed on that basis a notification must be sent to HMRC together with proof that the beneficial interests in the property are unequal. This is done using Form 17 published by HMRC.

A Form 17 declaration can only be made by spouses or civil partners that are living together and who own property in unequal shares and who wish to be taxed on income arising in the same proportion. Couples that are separated or in some other type of union cannot make a Form 17 declaration. The declaration is only valid if both partners agree. If one spouse / partner does not agree then the income will continue to be treated on a 50:50 basis even if the ownership structure is different.

A Form 17 declaration stays in place until there is either a change in the status of the couple, i.e. separation or divorce or a change in the ownership structure. If either of these occur the 50:50 income split will reapply.

There are a number of scenarios where a form 17 cannot be used. These include where a husband and wife or civil partners own property as beneficial joint tenants, if the property is let as furnished holiday accommodation and for partnership income.

Planning note:

Where property is held in unequal shares, making a form 17 declaration can be advantageous if the majority owner of the property pays tax at a lower marginal rate than their partner. We would be happy to review any jointly owned property holdings of readers to see if any tax savings are possible using this planning option.

Making Tax Digital – common sense prevails

General
 

A new timetable for the introduction of Making Tax Digital (MTD) has been announced. The new regime was due to start from April 2018, but was delayed by the snap general election earlier this year. The government now appears to have listened to concerns that the roll-out of the MTD was moving too fast. The original proposals would have required most businesses to upload quarterly figures to HMRC.

Under the new implementation plan these obligations have been substantially changed. They are:

  • Only businesses with a turnover above the VAT threshold (currently £85,000) will have to keep digital records and only for VAT purposes. These businesses will only be required to use MTD compliant upload software from April 2019.
  • Other businesses will not be asked to keep digital records, or to update HMRC quarterly, for other taxes (Income Tax and Corporation Tax) until ‘at least’ April 2020, and only if their annual turnover is above the VAT registration threshold.
  • HMRC has also confirmed that the use of MTD by smaller businesses and for other taxes will be voluntary. This means that businesses and landlords with a turnover below the VAT threshold will be able to choose when to move to the new digital system.

As VAT returns are already submitted on a quarterly basis, the change of pace of MTD implementation means that all businesses and landlords will have at least two years to adapt to the changes before being asked to keep digital records for other taxes.

HMRC’s MTD pilot tests will be extended to pilot MTD/VAT for businesses later this year, with a more extensive testing phase starting in the Spring of 2018. This means that there will be far more time to test the system and iron out any issues before the system goes live.

 

What is the best way to extract funds from your company?

 

Director shareholders are wont to ensure that they pay the lowest amount of tax and NIC consistent with their obligations under the relevant legislation. For many years, director shareholders have followed a high dividend, low salary extraction strategy. This tended to reduce Income Tax and NIC contributions. The dividend changes that came into effect in April 2016, took some of the shine off this strategy, but taking dividends in preference to salary is still effective. Presently, there is an annual tax-free limit of £5,000 and dividends drawn in excess of this amount are taxed at 7.5%, 32.5% or 38.1%, it all dependent on where the dividend income slots into the basic, higher or additional rate Income Tax bands. Also, dividends continue to be exempt from a National Insurance Contributions (NIC) charge.

Planning note: It is important to remember that dividends can only be taken from retained profits, if your company has no retained profits you cannot take dividends. There are also other profit extraction options: paying interest on any funds directors may have loaned their company is one, or re-examining tax-free benefits. Further, director shareholders looking at implementing the high dividend, low salary strategy should ensure that they take at least a minimum salary to ensure that they maintain sufficient contributions for State Pension purposes. This is currently, 2017-18, a minimum of £157 per week or £8,164 per year.

We can help you examine your options and advise you on a suitable strategy to fit your circumstances. Please call to discuss.

 

Employer P11D, P11D(b) and P9D deadline

   
 

Employers are reminded that the deadline for submitting the 2016-17 forms P11D, P11D(b) and P9D is 6 July 2017. P11D forms are used to provide information to HMRC on certain benefits and expenses that employees and directors receive during the tax year such as company cars, loans and private medical insurance.

Since 6 April 2016, employers may register on a voluntary basis to report and account for tax on certain benefits and expenses via the RTI system rather than by submitting Form P11D at the tax year end. This is known as payrolling and removes the requirement to complete a P11D for the selected benefits. However, a P11D(b) is still required for Class 1A National Insurance payments. Employers making online submissions will need to correct any problems with the forms before being able to file electronically. Employers who submit paper forms with errors will receive the forms back to be corrected and re-submitted.

Where no benefits have been provided from 6 April 2016 to 5 April 2017 and a form P11D(b) or P11D(b) reminder is received, employers can either submit a 'nil' return or complete the '2016 to 2017 Employer - No return of Class 1A' form. A 'no return to make' form is available online. Employers are also required to provide, for each employee for whom a form P11D is due, a statement of the information shown on the employee’s form. The statement should also be provided by 6 July 2017.

2017 Spring Budget

Spring 2017 Budget Budget Summary
 

Budget Statement 8 March 2017

Pundits are mixed in their interpretation of the prospects for the UK economy as we approach the formal Brexit disengagement. They are keen to see encouragement for industry to invest and export rather than more of the same debt fuelled consumer expenditure. Has Philip Hammond succeeded in meeting these demands, and will he be able to bank any hard-won savings for this financial year?

Our summary of a selection of specific tax changes and other budget announcements for 2017-18 and future years follow.

Personal Tax and miscellaneous matters

Personal Tax allowance

The personal allowances for 2017-18 is £11,500 (2016-17: £11,000).

Transferrable allowances

The maximum amount of free personal allowance that can be transferred between spouses is increased to £1,150 in 2017-18. Couples can only make a claim if one partner has spare personal tax allowance and the other is a basic rate tax payer.

Income Tax rate bands

The levels for 2017-18 are:

  • For 2017-18 - £45,000 (the UK apart from Scotland)
  • For 2017-18 - £43,000 (Scotland)

If your income before allowances exceeds these amounts you will be paying 40% Income Tax on the excess (this assumes that you are only entitled to the basic personal allowance).

The threshold at which the 45% rate starts is unchanged at £150,000.

For yet another year there were no changes to the basic Income Tax rate (20%), the higher rate (40%) and the additional rate (45%).

Dividend allowance to be reduced

From 6 April 2018, the tax-free dividend allowance of £5,000 is to be reduced to £2,000. Director shareholders of small companies that have adopted the strategy of minimising salary and maximising dividends will likely pay more Income Tax on their dividend income because of this change.

Capital Gains Tax (CGT)

There are no changes to the basic CGT rates for 2017-18. The CGT on the disposal of chargeable assets, apart from residential property, remains at:

  • 10% on disposals that form part of the basic rate band.
  • 20% on disposals that form part of the higher rate band.

The higher rates (18% and 28%) will continue to apply to disposals of residential property subject to this tax and carried interest. Gains on a disposal of your home will continue to be exempt. The annual exempt amount for 2017-18 is £11,300 (2016-17: £11,100).

Money Purchase Allowance reduced to £4,000 from £10,000

This will restrict the amount of tax relieved contributions that can be made by an individual, into a money purchase arrangement, who has accessed their pension savings from April 2017.

Reminder for non-doms to be bought into the IHT net

A reminder, that from April 2017, Inheritance Tax will be charged on all UK residential property even when indirectly held by a non-domiciled person through an off-shore structure.

Excise duties

Duty on wine, beer, spirits and alcohol will increase in line with the Retail Prices Index from 13 March 2017. These measures will typically add 2p to the price of a pint of beer, 1p to the price of a pint of cider, 36p to a bottle of whisky and 10p to a bottle of wine.

Tobacco duty rates

Changes to excise duties mean that a pack of twenty cigarettes will increase by an average of 35p, an additional 17p per 10 grams of cigars, and a 35-gram pouch of tobacco by 42p.

Fuel duty

There will be no increase in fuel duties. At the end of 2017-18 this will be the 7th year fuel duty has been frozen.

New National Savings investment clarified

From April 2017, individuals aged 16 years or older will be able to invest in the new NS & I Investment Bond. It will be available for one year from April 2017. Minimum deposit is £100, maximum deposit allowed £3,000. The rate of interest applied is 2.2%.

Lifetime ISA previously announced

From April 2017, any person aged from 18 to 40 will be able to save into a new Lifetime ISA until the age of 50.

Up to £4,000 can be saved each year and savers will receive a government bonus of 25% – that is a bonus of up to £1,000 a year.

Some or all of the money can be used to buy a first home, or it can be kept until age 60.

Accounts will be limited to one per person rather than one per home, so two first time buyers can both receive a bonus when buying together. If a saver has a Help to Buy ISA it can be transferred into the Lifetime ISA in 2017, or savers can continue saving into both, but it will only be possible to use the bonus from one to buy a house.

After your 60th birthday you can take out all the savings tax-free. You can withdraw the money at any time before you turn 60, but you will lose the government bonus (and any interest or growth on this). You will also have to pay a 25% charge.

ISA limit from April 2017

The ISA savings limit for 2017-18 is confirmed as £20,000.

Business tax changes

Corporation Tax rate

The main rate of Corporation Tax from 1 April 2017 will be reduced to 19%. A further reduction has been announced to 17% from 1 April 2020.

NIC increases for the self-employed

To narrow the perceived imbalance in NIC charges for the employed and self-employed, Philip Hammond announced increases in the self-employed Class 4 NIC contributions.

The increases are:

  • From April 2018, an increase from 9% to 10%, and
  • From April 2019, a further increase from 10% to 11%.

The earlier increase is timed to coincide with the cessation of Class 2 contributions.

Business rates increases

In response to the negative publicity regarding increases in business rates in England, particularly for retailers, the Chancellor has stepped in with help for smaller businesses.

There are three areas of relief announced:

1.     Small businesses that find they are losing Small Business Rates Relief from April 2017, will have any annual rates increase capped at the higher of £600 or the transitional relief cap.

2.     Local authorities will be funded to provide an element of discretionary relief, and

3.     Public houses with a rateable value of up to £100,000 will benefit from a fixed £1,000 business rate discount – subject to State Aid limits if multiple properties are owned. This discount is available for one year from April 2017.

Local authorities will be fully compensated for any loss of income because of these measures.

Making Tax Digital

The Chancellor announced a one year deferral from Making Tax Digital for Business for unincorporated businesses and landlords with turnovers below the VAT threshold. This means that businesses, self-employed people and landlords with income of less than the VAT threshold will not have to start quarterly reporting until 2019.

Changes to trading and property income allowances

The two previously announced £1,000 tax-free allowances for small scale trading or letting will still be introduced from April 2017, but will now include restrictions if the income or rents are generated by dealings with companies or partnerships of which the recipient is a participator or partner.

Loss relief reform

Legislation is to be introduced to reform the rules governing corporate losses carried forward from earlier periods. The changes will:

  • Allow more flexibility by relaxing the way companies can use carried forward losses from 1 April 2017.
  • Restrict the set-off of losses such that profits cannot be reduced by more than 50%. This restriction will apply to companies or groups with profits of more than £5m.

Corporation Tax relief for museums and galleries

Rates for 2017-18, already announced, are 25% for touring exhibitions and 20% for non-touring exhibitions. Following consultation, the draft legislation is to be amended to allow for exhibitions that have a performance element, but where the live performance is not the main focus of the exhibition.

VAT registration and deregistration limits

From 1 April 2017:

  • Registration threshold increases to £85,000
  • Deregistration threshold increases to £83,000

Avoidance and evasion

The government will continue to challenge and seek to overturn artificial arrangements whose sole purpose seems to be a reduction of tax.

Making Tax Digital

  General
 

Making Tax Digital (MTD) is likely to be the most wide ranging change to the UK tax system since the introduction of Self Assessment many years ago and will fundamentally change the way businesses, the self-employed and landlords interact with HMRC. The introduction of MTD over the coming years will see HMRC move towards a fully digital tax system by 2020. The introduction of MTD was first announced as part of the March 2015 Budget measures.

A number of consultations were launched in the summer of 2016 and HMRC has now published its responses to the consultation documents together with draft legislation.

HMRC has confirmed that under MTD:

  • Businesses will be allowed to use spreadsheets to record receipts and expenditure and then submit them electronically to HMRC. This measure was requested by a wide range of stakeholders, particularly small businesses and the Treasury Select Committee.
  • Free software will be available to the majority of the smallest businesses.
  • Businesses that cannot go digital will not be required to do so.
  • Self-employed businesses and landlords with a turnover under £10,000 a year will not have to make quarterly updates or keep records electronically.
  • The cash basis scheme for sole traders and other unincorporated businesses will be extended to allow for a simpler way of managing financial affairs.
  • Charities will not have to keep their records digitally or make quarterly updates.
  • There will be a 12 month initial period where HMRC will be lenient in issuing late submission penalties. A consultation on this measure will be published in the spring.
  • There will be an extensive trial period beginning in April 2017 for testing the MTD reporting system before any full scale rollout.

HMRC is still reviewing a number of areas including the exemption threshold and deferring changes for some small businesses with final decisions to be announced before legislation is introduced later this year. There has been a lot of pressure on HMRC to increase the exemption threshold to a more reasonable figure such as the VAT threshold.

Claiming the employment allowance

National Insurance
 

In April 2016, the eligibility to claim the employment allowance was removed from limited companies with a single director and no other employees. This measure was put in place to ensure that companies with a single director and no employees do not benefit from an allowance designed to help small businesses take on additional staff.

We wanted to remind anyone still receiving the employment allowance, that is no longer entitled to do so, should ensure that they stop claiming the allowance. This can be done by selecting 'No' in the ‘Employment Allowance indicator’ field when submitting an Employment Payment Summary (EPS) to HMRC. HMRC can charge interest and penalties on any overpaid employment allowance and is likely to take a stronger stance in enforcing this over the coming months.

There are a number of excluded employers who cannot claim the employment allowance. For example, persons employed for personal, household or domestic work, such as a nanny or au pair and employment that is either wholly or mainly of a public nature. No allowance is available for deemed payments of employment income.

The employment allowance (currently £3,000 per year) is available to most businesses and charities to be offset against their employers Class 1 NIC bill. The allowance can be claimed as part of the normal payroll process. An employer can claim less than the maximum if this will cover their total Class 1 NIC bill. Eligible employers that have not yet done so can still claim for the current 2016-17 tax year (as well as make a backdated claim for one further tax year).

Finance Bill 2017 – draft legislation

General

The Finance Bill 2017 draft legislation was published on 5 December 2016. The Bill contains the legislation for many of the tax measures that have been announced by the government. The Bill is open for comment until 1 February 2017 with the final details being confirmed in the spring Budget 2017.

The majority of the measures in the Bill were announced as part of the Autumn Statement on 23 November 2016 as well as changes announced at Budget 2016 which have not already been enacted. The Bill is likely to receive Royal Assent in the summer of 2017 with most measures taking retrospective effect from the start of the new tax year on 6 April 2017.

The March 2017 Budget will be the last to be held during springtime with a second Budget taking place next year in autumn 2017. The Budget cycle will continue from autumn 2018 and beyond. There will be some transitional changes as the new timetable is introduced.

From April 2017, the personal tax allowance is due to increase from the present £11,000 to £11,500. From the same date, the amount you can earn at the basic rate of tax will rise from £43,000 to £45,000. The Chancellor also committed to increasing the basic personal allowance to £12,500, and the higher rate tax threshold to £50,000, by 2020-21.

Other measures include the retention of the starting rate of savings Income Tax band at its current level of £5,000 for 2017-18, indexing the personal allowance in line with the Consumer Price Index once the £12,500 figure has been reached and increases to the ISA, Junior ISA and Child Trust Fund subscription.

There will also be changes to business tax, non-domicile rules, National Insurance thresholds alignment from April 2017 as well as the abolition of Class 2 NICs from April 2018.

Self Assessment deadline reminder

Income Tax

The deadline for submitting 2015-16 Self Assessment tax returns online is 31 January 2017. Taxpayers should also be aware that payment of any tax due should also be made by this date. This includes both the payment of any balance of Self Assessment liability for the 2015-16, plus any payment on account due for the current 2016-17 tax year.

Any taxpayers that are filing online for the first time should ensure that they register to use HMRC's Self Assessment online service as soon as possible. Once registered it can take up to seven working days for an activation code to be sent by mail. All filings should now be made online as the deadline for submitting paper returns for 2015-16 has expired. There are penalties for late Self Assessment returns including an automatic £100 penalty for submitting a late return even if there was no tax to pay or the tax due was paid on time.

Last year 2,044 taxpayers took the time to file their tax return online on Christmas Day and a record-breaking 24,546 taxpayers filed their tax returns on New Year's Eve. There were even 600 taxpayers up and down the country who took the time to submit their return between midnight and 10am on New Year's Day! Plan early and try to avoid working during this holiday period!

Taxpayers with certain underpayments in the 2015-16 tax year can elect to have this amount collected via their tax code (in 2017-18), provided they are in employment or in receipt of a UK-based pension. The deadline to apply to have tax collected through your tax code is 30 December 2016.

Autumn Statement

Budget Summary

The new incumbent at number 11 Downing Street, Philip Hammond, had his first opportunity to show us what he had in mind for the UK economy when he presented his Autumn Statement on the 23 November.

The usual rash of speculation pointed to easing the predicament of the "just managing", encouragement for businesses to invest, and an easing of the previous Chancellor's aims of reducing our national debt mountain. And of course, his comments need to be considered in the light of our impending withdrawal from the EU.

One announcement that did surprise MPs was the switch to an Autumn Budget and a Spring Statement. This will mean that after the March 2017 budget and Finance Bill future budgets will be delivered in the autumn, the first taking place in autumn 2017 with the first Spring Statement the following March.

The notes set out below point to the tax and other business issues Mr Hammond has disclosed.

Announcements for businesses

£23bn National Productivity Investment Fund (NPIF)

This will provide additional spending in areas that are aimed to increase productivity. For example, transport, digital communication, housing and R & D.

There are also a number of additional funding schemes being floated to support:

The development of the next generation of driverless cars and other renewable fuel technologies Investment in transport infrastructure The trial of 5G networks and full fibre broadband initiatives Increases in R & D support

Employer shareholder schemes &ndash tax benefits withdrawn

Legislation will be enacted to remove the Income Tax reliefs on the receipt or buy-back of shares issued to an employee under an employee shareholder agreement made on or after 1 December 2016. It also removes the Capital Gains Tax (CGT) exemption relating to shares received as consideration for entering into an employee shareholder agreement on or after the same date. Shares received under agreements made before that date are not affected. Corporation Tax reliefs for employer companies are not affected.

Corporation Tax changes reaffirmed

The reduction to 17% will go ahead as previously announced by 2020.

Rural rate relief doubled

Businesses in rural areas with a population under 3,000 will benefit from a doubling of rate relief from 50% to 100% from April 2017. Businesses that will benefit are:

A village shop or post office with a rateable value of less than £8,500, and A public house or petrol station with a rateable value up to £12,500.

VAT flat rate scheme changes

HMRC are to introduce an additional test that will determine the flat rate percentage used by traders. It would seem that HMRC presently considers the benefits obtained by certain businesses to be excessive and not in accord with the intentions of Parliament.

Traders that meet the new definition of a "limited cost trader" will be required to use a fixed rate of 16.5%. This will include traders who are already using the FRS scheme, and many at rates lower than 16.5%.

For some businesses - for example, those who purchase no goods, or who make significant purchases of goods &ndash the outcome of the test will be self-evident. Other businesses will need to complete a simple test, using information they already hold, to work out whether they should use the new 16.5% rate.

Businesses using the FRS will be expected to ensure that, for each accounting period, they use the appropriate flat rate percentage.

100% tax allowance for provision of electric vehicle charging points

This new capital allowance will have effect for expenditure incurred on or after 23 November 2016. It will expire on 31 March 2019 for Corporation Tax and 5 April 2019 for Income Tax purposes.

It will provide a 100% first-year allowance (FYA) for expenditure incurred on electric charge-point equipment.

National Living Wage

From April 2017, the National Living Wage (NLW) for the over 25s is being increased to £7.50 per hour. This is an increase from the current NLW rate set in October 2016 of £7.20 an hour. For the over 25s, this will represent a wage increase of just over 4%.

The National Minimum Wage (NMW) will also increase from the same date to:

For 21 to 24 year olds &ndash from £6.95 to £7.05 per hour For 18 to 20 year olds &ndash from £5.55 to £5.60 per hour For 16 to 17 year olds &ndash from £4.00 to £4.05 per hour For apprentices &ndash from £3.40 to £3.50 per hour

The government will also be spending an additional £4.3m to ensure that employers are complying with their legal obligation to pay the NMW.

National Insurance thresholds

From April 2017, the National Insurance thresholds for employees and employers will be aligned at £157 per week. There will be no cost to employees and the maximum cost to business will be an annual £7.18 per employee.

Announcements for property owners

New home builds

Funding of £1.4bn is being provided to build up to 40,000 affordable homes by 2020-21. These will include properties for rent or shared ownership. The government are also allocating £1.7bn to speed up the construction of homes on public sector land.

Additionally, funding of £2.3bn will support infrastructure projects &ndash new roads and water connections - to provide services for up to 100,000 new homes in areas with the most need.

Agent's letting fees

In a welcome move for tenants, not so good for landlords, upfront renters' fees charged in England are to be banned. At present tenants are being charged an average of £223 for these fees.

The government will be consulting with interested parties.

Tax increase enveloped dwellings

The Annual Tax on Enveloped Dwelling will increase in line with inflation from April 2017.

Announcements for individuals

Personal tax allowance

From April 2017, the personal tax allowance is due to increase from the present £11,000 to £11,500. From the same date, the amount you can earn at the basic rate of tax will rise from £43,000 to £45,000.

The Chancellor also committed to increasing the basic personal allowance to £12,500, and the higher rate tax threshold to £50,000, by 2020-21.

Salary sacrifice schemes to be taxed more fairly

From April 2017, most salary sacrifice schemes will be taxed as if cash income. There were some notable exceptions:

Pension payments, pensions advice, childcare, cycle to work and ultra-low emission cars will be exempt. Schemes in place before April 2017 will be protected for one year, and Schemes for cars, accommodation and school fees will be protected for up to 4 years.

These three points do offer opportunities to benefit from this strategy if implemented before the end of the current tax year.

Reimbursing employers for benefits in kind

It has been confirmed that the promised legislation to allow employees to reimburse their employers for benefits provided, and thereby avoiding a tax charge, will be included in the Finance Bill 2017. Employees will need to make the reimbursement before 6 July following the end of the tax year.

Money purchase annual allowance (MPAA)

The MPAA that can be saved into a pension is to be reduced from £10,000 to £4,000 from April 2017. This measure has been put in place to prevent inappropriate 'double tax relief' by those aged 55 and over who have already taken money from their pension pots. The government will consult on the details of the change.

Changes to in-work benefits

To lessen the impact of benefit reductions, changes are proposed to Universal Credits that reduce the rate at which benefits are lowered when claimants start work. This should allow claimants to retain an extra 2p for every £1 they earn.

At present, the Universal Credit taper reduces benefits received by 65p for every £1 earned above an income threshold. This will be reduced to 63p from April 2017.

Car insurance premiums to drop?

The crack down on spurious whiplash claims is to continue. It is hoped that this will reduce premiums by up to £40 a year.

Insurance premium tax (IPT) increase

IPT will increase from 10% to 12% from 1 June 2017. Undoubtedly this will increase insurance premiums although it is up to insurance companies to determine if they pass on the increase.

Fuel duty frozen

For the seventh year, fuel duty is not to be increased. This could, on average, save drivers £130 a year.

New National Savings Bond

From spring 2017, the NS&I will be offering a new three-year investment bond with an indicated rate of 2.2% gross. The bond will be available to the over 16s with investments available from £100 to £3,000.

Pension scams under the microscope

Interested parties will be invited to consult on ways to deal with pension scams, including cold-calling about pension issues.

Bank fines given to charities

More than £102m of LIBOR banking fines are to be given to various projects that support armed services personnel and their families. Charities that support children's hospitals, air ambulances, museums and memorials will also benefit.

Help to Buy sales update

The latest statistics on the uptake of the Government's flagship Help to Buy schemes were published on 29 September 2016. The figures show that over 185,000 homes have been bought since the schemes were first launched in October 2013.

Some of the headline figures include:

81% of scheme completions have been made by first-time buyers the average house price was £191,000, this is significantly below the national average 95% of Help to Buy completions took place outside of London

The average house price to income multiple under the mortgage guarantee scheme is capped at a 4.5x ratio to ensure responsible lending. The London Help to Buy scheme was launched in February 2016 and is helping London residents to buy a new home with a 5% deposit and a mortgage as low as 55% for first time buyers as well as homeowners looking to move to a newly built home with a price tag of up to £600,000. There were 935 completions in London between 1 February 2016 and 30 June 2016.

The press release from HM Treasury also highlighted the success of the Help to Buy: ISA scheme launched in December 2015. The scheme allows savers to claim a government bonus of 25% on monthly savings of up to £200 on savings towards their first home. The bonus translates to an extra £50 added to every £200 saved up to a maximum governmental contribution of £3,000 on £12,000 worth of savings. More than 650,000 accounts have been opened since the scheme was launched.

Economic Secretary to the Treasury, Simon Kirby, said:

'Through the Help to Buy schemes, we have helped 185,000 people buy a house. And hundreds of thousands have taken advantage of the ISA, with its generous government bonus, to move towards their dream of owning their own home.'

Legal challenges to workers' employment status

Employment Law

Uber, the company which enables users to book and pay for a cab using a smartphone app, has appeared before an employment tribunal following claims by two of its drivers that it is acting unlawfully by not offering them employment rights such as holiday pay and the National Minimum Wage. Uber categorises its drivers as self-employed contractors and therefore it does not provide them with employment rights and benefits. However, a case against Uber has been taken by 19 drivers who argue that they are, in reality, workers and not self-employed contractors. Two test cases, backed by the GMB union, have now been heard at the Central London employment tribunal. The tribunal's judgment is likely to have an impact for the thousands of Uber drivers in the UK.

Uber's legal position is that the drivers can pick their own hours and work completely flexibly and that it is a technology company, not a taxi company, which simply puts customers in contact with drivers. Passengers pay Uber directly for the journey through the app and then a percentage of that payment is passed on to the driver. Lawyers for the GMB argue that Uber exerts significant control over its drivers, in respect of the hours they work and what they earn, and the terms and conditions of their work mean that they are not self-employed rather, they are "workers".

UK employment law currently recognises three general categories of employment status: employees, workers and the self-employed. Workers have fewer rights than employees but they are still entitled to a number of key rights, including the National Minimum Wage, holiday pay, working time rights (e.g. rest breaks and maximum weekly working hours), pension auto-enrolment, protection from discrimination and the right not to have unauthorised deductions made from their wages. In relation to wage deductions, the drivers have also alleged that Uber frequently deducts sums from their pay, including when customers make complaints, and that these deductions are unlawful. The employment tribunal will now need to consider whether the drivers factually satisfy the legal definition of worker as set out in the various pieces of applicable legislation &ndash how a relationship is labelled is not decisive of its real legal status.

Although not a stranger to litigation elsewhere, this is the first time that Uber has faced legal action in the UK over the issue of whether its drivers are self-employed or workers. If the drivers' claims succeed, and subject to any appeal, it means they will potentially be entitled to the range of employment rights and benefits available to workers.

Successful claims against Uber are also likely to open the floodgates to similar claims against other companies that categorise their workforce as self-employed, such as some courier and delivery companies. Indeed, Deliveroo has apparently amended its contracts with its cyclists in order to try and deter claims by inserting a clause to the effect that the cyclists agree they will not present a claim to the employment tribunal or any civil court in which they contend that they are either an employee or a worker and, if they do so, they will indemnify Deliveroo against any costs and expenses that it incurs in defending its position. However, whilst such a clause might prove to be a useful deterrent, it is highly unlikely to be legally enforceable.

BREXIT and the implications for employment law

Employment Law

Now that the UK has voted to leave the European Union by 52% to 48%, the government will, in due course, inform the European Council of its intention to leave the EU in accordance with Article 50 of the Treaty on European Union. This notification then triggers a two-year period for the negotiation of the terms of a member state's withdrawal. It seems that this will not happen before October 2016, when the current prime minister, David Cameron, says he will step down and leave it to his successor to invoke Article 50 and negotiate the UK's withdrawal terms. Unless an agreement is reached by all of the EU member states to extend the two-year period for negotiation, the UK will cease to be a member state of the EU at the end of that two-year period, even if withdrawal terms have still not been agreed.

As far as employment law is concerned, the position can be summarised as follows:

As long as the UK is still an EU member, it remains bound by EU treaties, directives, regulations and case law and therefore it is "business as usual" for employment law for now. Once the UK has left the EU, which will not be for at least two years, the extent to which the UK government can then amend or repeal EU-derived employment legislation will depend on which trade model with the EU is eventually agreed and what its future relationship with the EU is going to consist of &ndash that position will not start to become clear for some considerable time yet. EU-derived employment laws include discrimination, certain family-friendly rights, working time, agency workers, collective redundancy consultation and acquired rights under TUPE. If no agreement is reached on its future relationship with the EU, there will be no obligation for the UK to adopt or apply new EU directives and regulations once it has left the EU. If, however, the UK instead joins the European Economic Area (EEA), it is likely to have to maintain most EU-derived employment legislation and implement new EU directives and regulations. The extent to which any EU-derived legislation can be amended or repealed will therefore be dependent on what is achievable in the context of whatever new relationship with the EU is negotiated. In any event, EU employment law has been implemented into UK legislation, so the government would have to take a positive decision to amend or repeal its own legislation &ndash this process will not happen automatically. Brexit has no impact at all on entirely domestic legislation that has not come from the EU, such as the right to claim unfair dismissal and the national minimum wage. It seems likely that, at least in the short to medium term, most of the statutory provisions will be retained and indeed some of them are unlikely to ever be repealed, such as substantive discrimination laws and family-friendly rights, particularly as many of the UK provisions in those areas either pre-date or gold-plate the relevant EU directives. As far as EU case law is concerned, the UK would no longer remain bound by decisions of the Court of Justice of the European Union (CJEU) once it leaves the EU, but it remains to be seen whether the UK courts and tribunals will continue to regard those decisions as being of persuasive authority to the extent that the UK ends having to maintain the EU-derived employment legislation that they relate to. In addition, many of those decisions have been relied on by UK courts and tribunals in making their own decisions and the UK now has its own binding case law on many of the issues. So, the UK courts and tribunals would then need to take a decision on whether to follow existing UK case law or overturn it. There is also the possibility that new legislation could be passed by the UK government to reverse some of the earlier case law. Even if some EU-derived employment laws are eventually amended or abolished, to the extent that employers have incorporated those provisions into employees' employment contracts, they would remain contractual entitlements and so would still be valid, unless and until the employer can vary them, which will normally require employee agreement.

Late filing of Self Assessment tax returns

Income Tax

The Low Income Tax Reform Group (LITRG) aims to improve the policy and processes of the tax, tax credits and associated welfare systems for the benefit of those on low incomes. The LITRG has recently published a press release urging anyone who has not yet filed their online Self Assessment tax return with HMRC for the year ended 5 April 2015, to do so as soon as possible.

Taxpayers that have not yet filed their 2014-15 Self Assessment returns will have been charged an automatic £100 penalty for late submission. The penalty applied from 1 February 2016 even if no tax was due or the tax due was paid on time.

However, taxpayers who were meant to file online by 31 January 2016, and have still not filed their 2014-15 return, are reminded that they will face far greater penalties. A daily penalty of £10 per day, up to a maximum of £900 (90 days) is being charged from 1 May 2016.

Further penalties then apply if the return is still outstanding for more than 6 months after the 31 January 2016 filing deadline. From 1 August 2016 taxpayers will be charged the greater of £300 or 5% of the tax due. If the return is outstanding one year after the filing deadline, further penalties will be charged from 1 February 2017.

We echo the comments of Anthony Thomas, LITRG Chairman who said:

'We would strongly urge anyone with an overdue return to submit it as soon as possible and to do so online as a paper return for 2014/15 will already attract the maximum £1,000 penalty. You can then appeal against the fines by writing to HMRC to explain why the return has been filed late.'

HMRC has been taking a more pragmatic approach in respect of taxpayers that file a late return. This approach may apply to those that have a reasonable excuse for filing a Self Assessment return late. However, taxpayers must have had a good reason for sending in a late return.

 

Claiming the marriage allowance

Income Tax

The marriage allowance came into force on 6 April 2015 and allows lower earning married individuals to share part of their personal tax-free allowance. The marriage allowance is available to married couples and those in a civil partnership where a spouse or civil partner doesn't pay tax or doesn't pay tax above the basic rate threshold for Income Tax (i.e. one of the couple earns less than £11,000 in 2016-17). There is a different marriage allowance for those born before 6 April 1935.

The allowance allows the lower earning partner to transfer up to £1,100 (2015-16: £1,060) of their personal tax-free allowance to a spouse or civil partner. The marriage allowance can only be used when the recipient of the transfer doesn't pay more than the basic 20% rate of Income Tax. This could result in a saving of up to £220 for the recipient (20% of £1,100) or around £18.33 a month.

The take-up of the allowance was less than expected in the last tax-year. However, couples that were also eligible for the allowance last year can backdate their claim to 6 April 2015. An application for the marriage allowance can be made online or by telephone. The application must be made by the non-taxpayer who is transferring their allowance.

The National Living Wage

Payroll

The new National Living Wage was introduced 1 April 2016. From that date the National Living Wage premium will replace the National Minimum Wage (NMW) for those aged 25 or over. The National Living Wage has been set at £7.20 per hour. This represents an increase of 50p over the current NMW rate. The NMW will continue to apply for those aged under 25. The current NMW rates are apprentices £3.30 per hour, under 18s £3.87 per hour, 18 &ndash 20 £5.30 per hour over 20s £6.70 per hour.

Over a million workers in the UK are set to benefit from the increase. Many employees will see their pay packets rise by up to £900 a year. According to government statistics, this will be the largest annual increase in a minimum wage rate across any G7country since 2009 in cash and real terms. Employees that are eligible should see their pay increase automatically from next month.

Businesses must also be prepared for this change and a new four-step guide has been published on the living wage website (livingwage.gov.uk) reminding employers to carry out the following steps:

Check you know who is eligible in your organisation. Take the appropriate payroll action. Let your staff know about their new pay rate. Check your staff under 25 are earning at least the right rate of National Minimum Wage.

The change will represent an increase of some 7.5% in the wage bill for employers with significant numbers of workers aged over 24 earning the NMW.

Budget Statement - 16 March 2016

Budget Summary

A few surprises in the latest budget announcements that include: tax allowances for micro-business owners, a levy on soft drinks manufacturers, a reduction in the rates of Capital Gains Tax and a doubling of business rates relief for smaller concerns.

Our summary of these and other tax changes for 2016-17 and future years follows.

Personal Tax and miscellaneous matters

Personal Tax allowance

From 2016-17, there will be one Income Tax personal allowance regardless of an individual's date of birth.

For 2016-17 the allowance is set at £11,000, and For 2017-18 at £11,500

Income Tax rate bands

The Chancellor confirmed his intention to remove taxpayers from the higher rate of Income Tax by increasing the levels at which taxpayers start to pay higher or additional rate taxes. The levels for the next two years are:

For 2016-17 - £43,000 For 2017-18 - £45,000

If your income before allowances exceeds these amounts you will be paying 40% Income Tax on the excess (this assumes that you are only entitled to the basic personal allowance).

The threshold at which the 45% rate starts is unchanged at £150,000.

For yet another year there were no changes to the basic Income Tax rate (20%), the higher rate (40%) and the additional rate (45%).

Capital Gains Tax (CGT) reduction

From April 2016, CGT on the disposal of chargeable assets, apart from residential property, is reduced to:

10% from 18% on disposals that form part of the basic rate band. 20% from 28% on disposals that form part of the higher rate band.

The existing rates (18% and 28%) will continue to apply to disposals of residential property subject to this tax and carried interest. Gains on a disposal of your home will continue to be exempt.

Entrepreneurs' relief extended to include investors

Entrepreneurs' relief (ER) will be extended to external investors in unlisted trading companies. This new investors' relief will apply a 10% rate of CGT to gains accruing on the disposal of ordinary shares in an unlisted trading company held by individuals, that were newly issued to the claimant and acquired for new consideration on or after 17 March 2016, and have been held for a period of at least three years starting from 6 April 2016. A person's qualifying gains for this investors' relief will be subject to a lifetime cap of £10 million.

Entrepreneurs' relief on disposal of goodwill relaxed

Legislation will be introduced in Finance Bill 2016 to allow ER to be claimed in respect of gains on goodwill where the claimant holds less than 5% of the shares, and less than 5% of the voting power, in the acquiring company. This 'holding condition' will replace a previous requirement that the claimant must not be a 'related party' in relation to the company.

Relief will also be due where the claimant holds 5% or more of the shares or voting power if the transfer of the business to the company is part of arrangements for the company to be sold to a new, independent owner.

Miscellaneous pension changes

A number of minor changes are being included to the pension's tax rules to ensure that they operate as intended following the introduction of pension flexibility in April 2015. The changes will:

remove the requirement that a serious ill-health lump sum can only be paid from an arrangement that has never been accessed replace the 45% tax charge on serious ill-health lump sums paid to individuals who have reached age 75 with tax at the individual's marginal rate enable dependents with drawdown or flexi-access drawdown pension who would currently have to use all of this fund before age 23 or pay tax charges of up to 70% on any lump sum payment, to continue to access their funds as they wish after their 23rd birthday remove the rule on paying a charity lump sum death benefit out of drawdown pension funds and flexi-access drawdown funds where the member dies under the age of 75 because the equivalent tax-free payment may be made as another type of lump sum death benefit enable money purchase pensions in payment to be paid as a trivial commutation lump sum enable the full amount of dependent's benefits to be paid as authorised payments where there are insufficient funds in a cash balance arrangement when the member dies

These changes will apply from the day after the Finance Bill 2016 receives Royal Assent later this year.

Excise duties

The duty on beers, spirits and most ciders will be frozen this year. The duty rates on wine will increase by RPI inflation from 21 March 2016.

Tobacco duty rates

Duty rates on all tobacco products will increase by 2% above the retail price index with a further 3% increase on hand-rolling tobacco, which will rise by 5% above RPI.
The changes to tobacco duty took effect from 6pm, 16 March 2016.

Fuel duty

There will be no increase in fuel duties. At the end of 2016-17 this will be the 6th year fuel duty has been frozen.

Transferrable allowances

The maximum amount of free personal allowance that can be transferred between spouses is increased to £1,100 in 2016-17 and £1,150 in 2017-18.

Lifetime ISA

From April 2017, any person under 40 will be able to save into a new Lifetime ISA.

Up to £4,000 can be saved each year and savers will receive a government bonus of 25% &ndash that is a bonus of up to £1,000 a year.

Some or all of the money can be used to buy a first home, or it can be kept until age 60.

Accounts will be limited to one per person rather than one per home, so two first time buyers can both receive a bonus when buying together. If a saver has a Help to Buy ISA it can be transferred into the Lifetime ISA in 2017, or savers can continue saving into both, but it will only be possible to use the bonus from one to buy a house.

After your 60th birthday you can take out all the savings tax-free. You can withdraw the money at any time before you turn 60, but you will lose the government bonus (and any interest or growth on this). You will also have to pay a 5% charge.

ISA limit to rise April 2017

The present ISA savings limit of £15,240 will rise to £20,000 from April 2017.

Small business tax changes

Corporation Tax rate

The main rate of Corporation Tax from 1 April 2016 remains at 20%.

From 1 April 2017 the rate is set to reduce to 19% From 1 April 2020 to 17%.

New stamp duty rates for commercial property acquisitions

From 17 March 2016, the way in which stamp duty is calculated on commercial property acquisitions will be changed. Instead of higher rates being applied to the total cost on a slab basis, the following rates will apply on a graduated basis.

The rates are:

Up to £150,000 no stamp duty is due From £150,001 to £250,000 the rate is 2% Above £250,000 the rate is 5%

Buyers of commercial property worth up to £1.05m will pay less stamp duty as a result of this change.

Business rates reductions

A 100% relief is currently available if a business occupies a property with a rateable value of £6,000 or less.

From April 2017, small businesses will be able to claim a similar 100% relief if they occupy property with a rateable value up to £12,000. Taper relief will apply for properties valued between £12,000 and £15,000.

It is estimated that this will mean 600,000 small businesses will no longer pay business rates.

Non-monetary transactions are taxable

From budget day, 16 March 2016, any trading or property income received in non-monetary form have to be included as income for tax purposes. This confirms previous tax cases on this issue.

Insurance premiums to rise?

The standard rate of Insurance Premium Tax is being increased from 9.5% to 10% from 1 October 2016. This will likely result in increased premiums.

The increase in the tax will be used to fund new flood defences.

Employer's NIC on termination payments

From April 2018, certain employee payoffs, for example termination payments in excess of the tax free £30,000 where Income Tax is also due, will be subject to an employers' National Insurance charge.

For employees, payments up to £30,000 will remain tax free and they will not suffer an additional National Insurance charge.

Class 2 NIC to be abolished

The Class 2 NIC charge is to be abolished from April 2018. The self-employed will continue to pay the existing Class 4 contributions from this date. Class 4 contributions will be reformed such that the self-employed can continue to build entitlement to the State pension and other contributory benefits.

Two new tax allowances

The Chancellor has introduced two new tax allowances for micro-business owners. The £1,000 exemption from tax will apply to:

People who make up to £1,000 from occasional jobs such as selling goods they have made, and The first £1,000 of miscellaneous income from property, for example renting a driveway.

Incorporated property businesses to pay increased stamp duty

In an attempt to create a level playing field, the Chancellor has clarified, by amending legislation, that individuals are subject to the 3% SDLT supplement if they purchase more than one property, and companies on all residential property purchases even the first such purchase. Here's what the Budget notes say on this issue:

"If, at the end of the day of the transaction, an individual owns 2 or more properties and has not replaced their main residence, the higher rates will apply. Purchasers will have 36 months to either claim a refund from the higher rates, or before the higher rates will apply, in the event that there is a period of overlap or a gap in ownership of a main residence. Companies purchasing residential property will be subject to the higher rates, including the first purchase of a residential property. Properties purchased for under £40,000, caravans, mobile homes and houseboats will be excluded from the higher rates. Furthermore, small shares in recently inherited properties will not be considered when determining if the higher rates apply."

Zero-emission van's benefit change deferred

Existing legislation, that applies the level of the van benefit charge for zero-emissions vans at 20% of the charge for conventionally fueled vans has been extended to the tax years 2016-17 and 2017-18.

This defers the planned increase to 40% of the van benefit charge for conventionally-fueled vans to 2018-19.

The van benefit charge for zero emission vans will be 60% of the van benefit charge for conventionally fueled vans in 2019-20, 80% in 2020-21 and 90% in 2021-22.

From 2022-23, the van benefit charge for zero emission vans is 100% of the van benefit charge for conventionally-fueled vans.

Diesel fuelled company cars' 3% supplement retained

The 3% supplement that is added to the benefit in kind calculation for drivers of diesel fuelled company cars was due to expire 5 April 2016. The Finance Bill 2016 will now include a provision that retains this supplement indefinitely.

Trivial benefits in kind

Where the cost of providing a qualifying, "trivial benefit" for an employee is less than £50, it will no longer be required to disclose this as a benefit in kind from 6 April 2016.

There is an annual cap of £300 if the payments are made to directors or other office holders of a small company, or their employees who are relatives or members of their household.

Travel expense claims

From 6 April 2016, it will no longer be possible for workers engaged through an employment intermediary to claim for home to work travel expenses.

This regularises the established principal in the UK tax system that such regular commute costs between home and work cannot be claimed for tax purposes.

EIS, SEIS and VCTs: exclusion of energy generation

Investments in companies that engage in energy generation activities will be excluded from the tax advantaged Enterprise Investment Schemes, Seed Enterprise Scheme and Venture Capital Trusts. This will affect shares or holdings issued on or after 6 April 2016.

Use of home for business purposes by partners

The simplified expenses regime has been fully extended to include partnerships from April 2016. Where more than one property is used by partnerships for business and as a home then any claim for the simplified expense deduction for all such properties will be allowed.

VAT registration and deregistration limits

From 1 April 2016:

Registration threshold increased to £83,000 Deregistration threshold increased to £81,000

Larger company measures

Closing tax avoidance loopholes

In response to increasing demands from a number of directions the Chancellor has endeavoured to close a number of loopholes used by multinationals to avoid paying tax in the UK, on profits earned in the UK. They include:

Rules to prevent multinationals avoid paying tax in any of the countries they do business, an avoidance technique called hybrid mismatches. Introducing rules to increase the tax take when companies make outbound royalty payments. Generally, these are fees paid for using intellectual property such as patents and copyrights. Ensuring that offshore property developers are taxed on their UK profits.

The oil and gas industry

A £1bn tax support package has been announced that will effectively abolish Petroleum Revenue Tax &ndash a tax on profits from oil fields approved before 1993 &ndash and by dramatically reducing the supplementary charge on oil and gas extraction.

Soft drinks levy

From April 2018, manufacturers of soft drinks will be subject to a levy based on the sugar content of their products.

The basic rate will apply to drink with a sugar content in excess of 5 grams per 100 millilitres, with a higher rate for drinks on more than 8 grams per millilitre.

The levy will not apply to milk-based drinks or fruit juices.

The Treasury will use the proceeds of the levy to double the primary PE and sport premium. They will increase money provided to schools for this purpose to £320m per annum.

Dividend taxation changes

Income Tax

As part of the Summer Budget measures, the government announced the introduction of a new dividend allowance from April 2016. The new allowance will replace the current non-refundable dividend tax credit of 10% and will mean significant changes to the way dividends are taxed. The new dividend allowance means that no tax will be due on the first £5,000 of dividend income received regardless of the amount of non-dividend income.

However, dividends in excess of the £5,000 allowance will be taxed at the following new rates based on which band of taxation the recipient's dividend income fits within:

7.5% for basic rate tax payers 32.5% for higher rate tax payers, and 38.1% for additional rate tax payers.

These changes leave 2015-16 as the last tax year to benefit from the current tax treatment on dividends that has been in place for many years. A standard rate taxpayer receiving a dividend in 2015-16 would not have any further tax to pay as any dividend income within the standard rate band is taxed at 10% with a corresponding 10% tax credit. For higher rate taxpayers an additional 22.5% is due when the non-refundable 10% tax credit is taken into account and for additional rate taxpayers 27.5% is due after the tax credit.

There are a number of planning opportunities that should be considered as the current tax year draws to an end. This includes ensuring that the maximum tax efficient dividend is paid in 2015-16. This is the last opportunity for dividends to be withdrawn as part of the basic rate band with no additional Income Tax charge. Family run companies should also look at how they are structured to ensure optimum use of the £5,000 allowance from 2016-17.

Taxes due on dividends for 2016-17 will be collected on 31 January 2018 as well as a payment on account for 2017-18.

Employment Allowance update

National Insurance

The Employment Allowance was launched in April 2014 for all eligible businesses and charities. The allowance is offset against the employer's Class 1 secondary National Insurance Contributions (NICs) and can be claimed through the regular payroll processes.

The Employment Allowance will rise to £3,000 (from £2,000) in April of this year. This means that businesses will be able to employ 4 people earning the new National Living Wage without having to pay any employer's Class 1 secondary NICs. The move will also remove some 90,000 employers from paying NICs.

HMRC has also recently published a policy paper confirming that from 6 April 2016 eligibility to claim the Employment Allowance will be removed from limited companies with a single director, and no other employees. This measure could affect up to 150,000 limited companies and has been put in place to ensure that companies with a single director and no employees do not benefit from an allowance designed to help small businesses take on additional staff.

Self Assessment deadline approaches

Income Tax

HMRC has issued a news release reminding taxpayers to file their online Self Assessment returns before the 31 January 2016. More than 85% of taxpayers submitted their returns online last year and the figure is expected to grow again this year. The deadline for submitting paper returns expired at the end of October.

The 31 January is also the payment due date for both the payment of any balance of Self Assessment liability for 2014-15 plus any payment on account due for the current 2015-16 tax year. There are penalties for late filings and late payment.

Taxpayers that are filing online for the first time should ensure that they register to use HMRC's Self Assessment online service. Once registered it can take up to seven working days for an activation code to be sent by mail.

Ruth Owen, Director General, Personal Tax, HMRC said:

'The 31 January deadline will soon be here. And while it's tempting to put completion of your tax return to the bottom of the 'to do' list at this time of year, it's not something I would recommend, if you want to avoid a last minute rush in January. We have improved our online services again this year to help our customers get their tax right quickly, simply and securely.'

Date announced for Budget 2016

Hot on the heels of the Autumn Statement, the Chancellor has announced that the 2016 Budget will be held on Wednesday, 16 March 2016. This will be the Chancellor's eighth Budget address. Following the Conservative election victory a Summer Budget was held in July 2015.

However, this will be the first full Budget for the Tories and is expected to build on announcements made as part of the emergency Budget and Autumn Statement in a bid to run an overall budget surplus by 2020. The Budget includes economic and fiscal forecasts as well as tax changes for the coming and future years.

Details of all the Budget announcements will be made on a special section of the GOV.UK website which will be updated following completion of the Chancellor's speech next March.

Autumn Statement 2015

General

Autumn Statement 25 November 2015

The autumn statement is an opportunity for the government to review and declare it's spending for the next year. Most of the press commentary, prior to the Chancellor's comments today, involved speculation on which areas of government would suffer the biggest cuts. Now we know...

Major opposition to cuts in tax credits and the police budget seem to have paid off as the previously announced cuts in tax credits have been abandoned and there are to be no cuts in the police budget.

The major changes that affect individuals and businesses are set out below:

Announcements for businesses

Support for smaller businesses

The Chancellor reported that the UK's Small and Medium sized Enterprises now employ 15.6 million people, up from 13.7 million in 2010. Over the last two years the number of small businesses employing someone other than the owner has grown by 100,000.

The government understands that small businesses need tailored support. Already, Start-Up Loans have provided £180 million of funding to 33,600 entrepreneurs and in the last Parliament, the government cut the cumulative burden of regulation by over £10 billion.

Other support for smaller businesses that have previously been announced include:

From April 2016 the Employment Allowance will rise to £3,000, benefiting over 1 million employers, and helping many businesses take on their first employee. The cancellation of the planned September 2015 fuel duty increase means a small business with a van will have saved £1,357 by the end of 2015-16 compared to plans inherited by the government at the start of the last Parliament. The government will meet its commitment to 75,000 Start-Up Loans by the end of this Parliament.

Apprenticeship levy

Earlier this year it was announced that three million new apprenticeships would be created by 2020. To fund this target a levy is to be made on large employers.

The details of this levy have now been quantified.

The apprenticeship levy will commence in April 2017 at a rate of 0.5% of the employers' pay bill. To exclude smaller employers a £15,000 allowance can be claimed. In this way only employers with a pay bill in excess of £3 million will contribute to the levy.

In some cases this levy may cancel out the intended reductions in Corporation Tax for larger employers.

Small business rate relief

English firms can claim the small business rates relief if they only use one property and its rateable value is less than £12,000. This relief was due to end on 31 March 2016.

The Chancellor has announced today that the relief will be extended for a further year. Businesses will now get 100% relief until 31 March 2017 for properties with a rateable value of £6,000 or less. This means you won't pay business rates on properties with a rateable value of £6,000 or less.

The rate of relief will gradually decrease from 100% to 0% for properties with a rateable value between £6,001 and £12,000.

Car benefit diesel supplement

The 3% supplement added to the benefit in kind charge for drivers of diesel powered company cars is to continue beyond April 2016 and will now cease to apply from April 2021.

Announcements for home owners

London help to buy loan scheme

The present help to buy loan scheme that applies across the UK, provides a 20% contribution from government, requires a 5% deposit from the buyer, with the balance funded by a 75% mortgage.

As house prices are running at much higher levels in London, from early 2016 qualifying buyers in London will still need to find a 5% deposit, but government will contribute up to 40% with the required mortgage funding dropped to 55%.

These government equity loans will now be available until 2021.

Help to buy shared ownership scheme to be extended

Shared ownership allows families in England, on lower incomes, to buy an interest in their home and rent the rest. People can buy between 25% and 75% of a home in this way.

The rent charge won't be more than 3% of the non-purchased part of the property.

The qualifying income limits are to be changed. Current restrictions will be lifted from April 2016. Anyone who has a household income of less than £80,000 outside London, or less than £90,000 inside London, will be able to participate.

First time buyers' starter homes discount

200,000 new homes are to be designated starter homes and developers will be able to offer them to first time buyers aged under 40 at a 20% discount.

Stamp duty increase for second homes and buy-to-lets

From 1 April 2016, individuals buying a second home or a buy-to-let property will face an extra 3% stamp duty charge above the current stamp duty land tax rates.

Housing Association tenants

Rights to buy to be extended to Housing Association tenants during 2016. Potentially, this could give 1.3 million households the opportunity to buy their own home.

Capital Gains Tax (CGT) on sale of residential property

From 2019, the government intends to require a payment on account, within 30 days of a sale, of any CGT due on the disposal of a residential property.

This will not apply where no CGT is payable, for example if covered by Private Residence Relief.

Announcements for individuals

Tax credits

As announced in the introduction to this statement the intended reduction in tax credits next year has been withdrawn. For 2016-17:

The rate at which a claimant's award is reduced over the income threshold, will remain at 41% of gross income. The income threshold will remain at £6,420. The income threshold for child tax only claimants will remain at £16,105. The income disregard will reduce from £5,000 to £2,500.

As the other elements that make up the payment of tax credits are also unchanged claimants should find their benefits from this source unchanged from April 2016, unless their personal circumstances or income levels have changed.

The Chancellor did comment that tax credits are being phased out in any event and replaced by universal credits.

Basic State Pension increase announced

From April 2016, the basic weekly State Pension will increase to £119.30, an increase of £3.35.

Part-time rail season tickets and money back...

Two new features to be introduced:

Commuters will be able to buy part-time season tickets on selected routes, and Commuters will be able to claim money back if a train is more than 15 minutes late.

VAT raised on sales of women's sanitary products

The UK is unable to zero rate VAT on these products under existing EU rules. Whilst representations are being made the Chancellor is to redirect the VAT revenue raised to selected women's charities.

George Osborne said:

"300,000 people have signed a petition arguing that no VAT should be charged on sanitary products. We already charge the lowest 5% rate allowable under European law and we're committed to getting the EU rules changed.

Until that happens, I'm going to use the £15 million a year raised from the Tampon Tax to fund women's health and support charities. The first £5 million will be distributed between the Eve Appeal, SafeLives, Women's Aid, and The Haven &ndash and I invite bids from other such good causes."

Warm home discount scheme extended

The present £140 discount from electricity bills for certain low income households is to be extended and can be claimed from suppliers to 2020-21.

Minor whiplash claims to be curtailed

In an attempt to curtail exaggerated whiplash claims the government is ending the right to claim cash compensation.

More injuries will be able to go to the small claims court as the upper limit is to be increased from £1,000 to £5,000.

This may reduce the cost of insurance for motorists &ndash estimated falls of £40 to £50 a year can be expected.

New rights for working grandparents

Employee Benefits

Earlier this month, a major extension to the shared parental leave and pay rules was announced when the Chancellor said he will extend shared parental leave and pay to working grandparents.

The planned changes will increase flexibility and choice in parental leave arrangements and support working parents with the costs of childcare during the first year of a child's life. The new rules are set to come into force in 2018 with a consultation on the changes being launched in the first half of 2016.

It is thought that around 2 million grandparents have given up work, reduced their hours or have taken time off work to help families who cannot afford childcare costs. The new system would allow grandparents to help care for their grandchildren without fear of losing their jobs.

Under the current rules (since April 2015) working parents have significant choice as to how they share the care of their child and take time off work during the first year of their child's life, known as shared parental leave. The rules apply equally for children that have been adopted.

Mothers must take at least two weeks of maternity leave immediately after birth, but after that working couples can share up to 50 weeks of shared parental leave and up to 37 weeks of statutory shared parental pay. The changes could significantly help parents, especially single mothers who don't have a partner to share leave with.

Paper Self Assessment return deadline

Taxpayers that continue to submit paper Self Assessment returns are reminded that the deadline for submitting the 2014-15 return is 31 October 2015. Late submission of a Self Assessment return will become liable to a £100 late filing penalty. The penalty will apply even if there is no liability or if any tax due is paid in full by 31 January 2016.

We would recommend that anyone still submitting paper tax returns consider the benefits of submitting the returns electronically and benefit from an additional three months (until 31 January 2016) in which to submit a return.

Taxpayers with certain underpayments in the 2014-15 tax year can elect to have this amount collected via their tax code (in 2016-17), provided they are in employment or in receipt of a UK-based pension. The coding applies to certain debts and the amount of debt that can be coded out ranges from £3,000 to £17,000 based on a graduated scale. The maximum coding out allowance only applies to taxpayers with earnings exceeding £90,000. The deadline to apply to have tax collected through your tax code is 31 October 2015 for a paper return and 30 December 2015 for electronic submissions.

Taxpayers that receive a letter informing them that they have to submit a paper return after 30 July 2015 have an extended deadline which runs for three months from the date they received a letter to submit the paper return.

20-year disqualifications for company directors

A mother and son have both been disqualified from acting as company directors for a combined period of 20 years for submitting annual financial accounts containing false information. They also submitted false VAT returns to HMRC.

An investigation by the Insolvency Service found that the mother and son, Mr & Mrs Hawkes, who were both directors of F G Hawkes (Western) Limited signed annual accounts for the period ended 31 July 2009 and the year ended 31 July 2010 on 30 April 2010 and 28 April 2011 respectively. They signed the annual accounts knowing that they contained false information. The Company went into administration on 3 October 2011 with an estimated deficiency of £26,705,170.

A disqualification order has the effect that without specific permission of a court, a person with a disqualification cannot:

act as a director of a company take part, directly or indirectly, in the promotion, formation or management of a company or limited liability partnership be a receiver of a company's property.

Investigators also discovered that Mr and Mrs Hawkes caused the company to submit false VAT returns to HMRC for the quarters ending between April 2010 and April 2011 leading to an under declaration of VAT owed of at least £1.5m.

Commenting on the disqualification, Sue MacLeod, Chief Investigator at The Insolvency Service, said:

'The signing of documents knowing they contain misleading information which may be relied upon by third parties, and submitting false VAT returns is serious misconduct, which the Insolvency Service will investigate with a view to removing you from the market place.'

Annual Investment Allowance

The Chancellor will have pleased many businesses with his announcement that the Annual Investment Allowance (AIA) is to be set permanently at £200,000 for all qualifying expenditure on or after 1 January 2016. The limit is currently £500,000 but was set to revert to its original limit of £25,000 from 1 January 2016. Legislation will be introduced in the Summer Finance Bill 2016 to institute this change.

The AIA was first introduced in 2008 and is designed to give 100% first year tax relief for qualifying expenditure on plant and machinery. It can be claimed by an individual, partnership or company carrying on a trade, profession or vocation, a UK non-residential property business or a furnished holiday let. Partnerships or trusts with individuals and companies in the business structure do not qualify for the AIA.

Businesses thinking of incurring large items of capital expenditure over the coming months should ensure that any purchase is properly timed to take advantage of the current £500,000 AIA limit. However the £200,000 limit is a very generous allowance and will cover the annual capital expenditure spend of many small and medium sized businesses.

The Chancellor said that this is 'a major, permanent boost to the incentives for long-term investment by small and medium sized firms in Britain.'

Summer Budget date announced

The Chancellor has confirmed that there will be a second Budget this year. The new Tory Government are anxious to start implementing many of the policies that were included in their manifesto. The Summer Budget will take place on Wednesday, 8 July and the Chancellor has stressed that it will be a Budget for working people.

Unusually, the date for the Budget was announced on a Saturday and the main commentary was provided by the Chancellor writing a piece in the Sun newspaper. He said: 'On the 8th of July I am going to take the unusual step of having a second Budget of the year &mdash because I don't want to wait to turn the promises we made in the election into a reality.'

As part of the Summer Budget, new forecasts for the economy and public finances will be published and we will get more information on the Government's proposed £12 billion in spending cuts. The Government is also expected to legislate for their manifesto promise not to increase Income Tax, VAT or National Insurance this Parliament. The Budget could also include some unexpected bad news as historically Governments have tended to batten down the hatches at the start of a parliamentary term and leave the big giveaways for later.

However, we do expect the Chancellor to keep the Tory's promise to increase the personal allowance to £12,500 by 2020-21 and the 40p Income Tax threshold is also set to hit £50,000, both, by the end of the current parliament. We may also see increases in the Inheritance Tax thresholds.

Tax avoidance will be a further target for action. The Chancellor commented 'We'll crack down hard on tax avoidance and aggressive tax planning by the rich &ndash because everyone should pay their fair share.'

The Government will be keen to ensure that the new Finance Act receives Royal Assent before the summer parliamentary recess which is expected to begin towards the end of July.

PAYE Filing Penalties

Employers will not incur automatic PAYE filing penalties for delays of up to three days with effect from March 2015. HMRC has said that going forward late payment penalties will continue to be reviewed on a risk-assessed basis rather than being issued automatically. However, there is no change in the filing deadlines and PAYE filings should still be made on or before the relevant payment date.

In addition, to prevent unnecessary penalties being issued, HMRC will close around 15,000 PAYE schemes that have not made a PAYE report since April 2013 and which appear to have ceased. The affected schemes will be notified about the planned closure and what to do if they are, or should be, operating PAYE.

Employers who have received an in-year late filing penalty for the period 6 October 2014 to 5 January 2015, and were three days late or less should appeal online by completing the 'Other' box and add 'Return filed within 3 days'. HMRC has also published a discussion document examining other potential improvements to the way in which penalties apply and for failing to pay what is owed or to meet deadlines for returns or registration. The consultation is open for comment until 11 May.

Submitting VAT Returns Online

Nearly all VAT registered businesses must submit VAT returns online and make any payments due electronically. VAT registered businesses can file VAT returns using either HMRC's free online software or using commercially produced software. In either case, businesses must have already registered and enrolled for the VAT Online service in order to submit a VAT Return online. HMRC has recently updated the list of commercial software providers that have been successfully tested with HMRC and can be used to submit VAT returns online.

HMRC guidance includes information on what figures should be included in each of the boxes 1 to 9 on a VAT return. The guidance also confirms which boxes within an online VAT return are calculated automatically. Businesses that submit VAT returns should ensure that no box is left blank. For online VAT returns a minus sign should be entered before the figure for negative amounts and 0.00 in boxes were 'none' or 'not applicable' would have been entered on a paper VAT return. Businesses should ensure that they keep a copy of the submission receipt reference number when a return is filed.

HMRC recently agreed to relax the rules that allow businesses to file by telephone if they can satisfy HMRC that it is not practical to file returns electronically due to their age, disability, computer illiteracy, remoteness of location, or any other reason. If telephone filing is similarly impracticable, affected VAT registered businesses may submit paper returns.

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New Marriage Allowance

The new marriage allowance came into force on 6 April 2015 and allows some couples to share part of their personal tax-free allowance. The marriage allowance is available to married couples and those in a civil partnership where a spouse or civil partner doesn't pay tax or doesn't pay tax above the basic rate threshold for Income Tax.

The new allowance will allow the lower earning partner to transfer up to £1,060 of their personal tax-free allowance to a spouse or civil partner. The marriage allowance can be used when the recipient of the transfer doesn't pay more than the basic rate of Income Tax. This could result in a saving of up to £212 for the recipient (20% of £1,060) or around £17.66 a month.

There is a webpage on GOV.UK where one person in a couple can register their interest to receive the new marriage allowance. The registration details can only be completed online and it should take no more than three minutes to enter all the required details. Once submitted, HMRC will then confirm the expression of interest by email.

The next step will be receiving a further email from HMRC inviting couples who have registered an interest to apply. HMRC began sending the emails on 20 April and will continue to do so until 29 May 2015. Taxpayers will be asked to use the new GOV.UK Verify service before applying. There will also be an option to contact HMRC by phone. HMRC will only be sending emails to those that had registered their interest in the scheme.

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