This edition includes articles on the new rules for capital gains tax on property and the shake-up to IR35 rules.
The Summer edition leads on changes to VAT for the construction sector and an article on the potential advantages of deferring your state pension.
The May edition details the changes to Entrepreneurs' Relief and the potential pitfalls when claiming Capital Allowances on some assets.
The Spring edition of the newsletter highlights changes to IR35 and capital allowances
This edition looks at VAT in the food sector and features an article on Inheritance Tax.
Making Tax Digital is on the horizon and this edition gives an overview of the changes.
The government has announced a 6.2% increase in the National Living Wage (NLW), which applies to workers aged 25 and over. From 1 April 2020 the NLW will rise from the current rate of £8.21 to £8.72 an hour, in the largest raise since it was introduced two decades ago.
The government has confirmed that the new rate will start on 1 April 2020 and will result in an increase of £930 annually for 2.8 million full-time workers earning the NLW.
Workers aged under 25 earning the National Minimum Wage (NMW) will also see increases of between 4.6% and 6.5%, depending on their age.
Bryan Sanderson, Chair of the Low Pay Commission (LPC), said:
'The NLW has been an ambitious long-term intervention in the labour market. The rate has increased faster than inflation, faster than average earnings and faster than most international comparators.
'This has raised pay for millions without costing jobs, although employers have had to make a variety of other adjustments to deal with the increases.'
Internet link: GOV.UK news
The government has announced it will make a number of changes to the loan charge rules, in response to Sir Amyas Morse's independent review of the loan charge policy and its implementation.
The government has announced the following key changes to the loan charge:
Please contact us for advice with this issue.
Internet link: GOV.UK independent loan charge review
The Chancellor of the Exchequer, Sajid Javid has announced that the major review of all aspects of self-employment, promised in the Conservatives' manifesto, will include the proposed extension of the Off-Payroll working rules to the private sector from April 2020.
Speaking on Radio 4's Money Box Election Special, Sajid Javid said that, as part of the review, he wanted in particular to look again at the proposed changes to the IR35 rules. He said:
'I value the work of consultants and I want to make sure that the proposed changes are right to take forward.'
Internet link: economia news
The Secretary of State has confirmed that the commitments being entered into, to make payments to clinicians affected by annual allowance pension tax, will be honoured when clinicians retire.
In a written statement Matt Hancock, Secretary of State for Health and Social Care stated:
'I have agreed to support this proposal from NHS England and NHS Improvement for reasons of urgent operational necessity….
'The scheme involves employers making binding contractual commitments to be given to every affected NHS clinician so as to ensure that this commitment is honoured. Full details of the terms of the payment arrangements are set out in letters that are being sent to each affected clinician by their employer including the terms and conditions of the offer.
'Clinicians are therefore now immediately able to take on additional shifts or sessions without worrying about an annual allowance charge on their pensions.'
Internet link: GOV.UK statement
The latest HMRC Agent Update includes guidance on the Structures and Buildings Allowance (SBA). This capital allowance is designed to provide tax relief for businesses and to support investment in constructing new structures and buildings and improving existing ones.
The SBA relieves the construction costs for new structures and buildings used for qualifying purposes and the improvement of existing structures and buildings, including the cost of converting existing premises for use in a qualifying activity.
The SBA is available at a flat rate of 2% a year, for up to 50 years, on the eligible costs of building, converting or renovating non-residential structures or buildings that have been brought into qualifying use. Certain costs are specifically excluded such as those costs that qualify for plant and machinery allowances, planning permission, landscaping, cost of land and integral features and fixtures.
For a claim to be valid the date of the earliest contract for construction of the structure or building must be on or after 29 October 2018. The first use of the structure or building must be non-residential.
The Agent Update confirms claims for the allowance must be made on a tax return. However for tax returns up to April 2020 there is no specific box for SBA claims. HMRC advise affected taxpayers to follow the guidance contained in the notes to the returns.
Internet link: GOV.UK Agent Update 75
The Low Incomes Tax Reform Group (LITRG) is calling on the government to address issues with the High Income Child Benefit Charge (HICBC).
The HICBC is designed to claw back child benefit where the claimant or their partner earns in excess of £50,000. According to LITRG some households think making a child benefit claim is not worthwhile if it will be clawed back in full via the tax charge, with the added administrative burden of needing to complete a tax return. LITRG warns that this trend will have unforeseen consequences for the lower-earning partner and for the child.
LITRG is calling for the Government to reconsider the £50,000 threshold at which the HICBC starts to apply, if it is retained in its current form.
Victoria Todd, Head of LITRG Team, said:
'Despite its name, the high income child benefit charge can have consequences for the lower earner in a couple even though the liability to the tax charge falls to the higher earner. This is because where the tax charge applies a household may decide, quite understandably, not to claim child benefit at all. But this means that the lower earning individual may miss out on National Insurance credits, due for the first 12 years, which help to build entitlement towards a state pension.
'The Government's solution is to allow couples to claim child benefit regardless and, if they wish to avoid the charge, they can choose not to receive payments – but this is not widely known and to many, claiming and receiving a benefit are the same thing.
'This is a problem which is affecting an increasing number of families because the £50,000 threshold has remained static since the charge was introduced in 2013. At that time, the HICBC was intended to affect only the top 10 percent of earners, but each year the proportion of those affected increases as wages rise. LITRG recommends that the next Government considers uprating the £50,000 threshold, just like some other tax thresholds and allowances, to minimise the adverse consequences for those families it affects and ensure the policy works in the way originally intended.'
Please contact us for help and advice on HICBC.
Internet link: LITRG press release
The deadline for submitting your 2018/19 self assessment return is 31 January 2020. The deadline applies to taxpayers who need to complete a tax return and make direct payments to HMRC in respect of their income tax, Classes 2 and 4 National Insurance Contributions (NIC), capital gains tax and High Income Child Benefit Charge liabilities.
There is a penalty of £100 if a taxpayer's return is not submitted on time, even if there is no tax due or the return shows that they are due a tax refund.
The balance of any outstanding income tax, Classes 2 and 4 NIC, capital gains tax and High Income Child Benefit Charge for the year ended 5th April 2019 is also due for payment by 31 January 2020. Where the payment is made late interest will be charged.
The first payment on account for 2019/20 in respect of income tax and any Class 4 NIC or High Income Child Benefit Charge is also due for payment by 31st January 2020.
HMRC revealed that more than 3000 taxpayers filed their return on Christmas Day. If you would like help with your return or agreeing your tax liability, please contact us.
HMRC publishes details of deliberate tax defaulters, those people who have received penalties either for:
Internet link: GOV.UK deliberate defaulters
The Welsh government has published its Draft Budget, setting out revenue raising and capital spending plans for 2020/21.
The Draft Budget confirms no changes are proposed to Welsh income tax rates, or Land Transaction Tax rates and bands. The Draft Welsh spending plans for the longer term will depend on the next UK Budget and comprehensive spending review scheduled for 2020.
Internet link: GOV.WALES Budget
From 6 April 2020, a change to the off-payroll (IR35) rules is expected. Draft legislation has already been published and further HMRC guidance is expected.
The new rules will affect you if you work via your own personal service company (PSC), and off-payroll workers should be aware that their clients are likely to investigate the profile of the contractor workforce more closely than before, as part of a review of compliance, strategy and spend. But the changes could be felt more widely: anyone supplying personal services via an 'intermediary' could be within scope of the IR35 rules. An intermediary can be an individual, a partnership, an unincorporated association or a company.
The change could impact you if you supply personal services to large and medium organisations in the private and voluntary sector. If the client is a 'small' business, the rules are unchanged. A 'small' company meets two of these criteria: its annual turnover is not more than £10.2 million: it has not more than £5.1 million on its balance sheet: it has 50 or fewer employees. If you contract with an unincorporated organisation, the new rules only apply if its annual turnover is more than £10.2 million.
Under the new rules, responsibility for making the decision as to whether IR35 rules apply passes to the business you contract for. The key question is whether, if your services were provided directly to that business, you would then be regarded as an employee. You may be used to this if you undertake contracts in the public sector, where similar provisions already exist. If you or your client use CEST, HMRC's online check employment status for tax tool, HMRC undertakes to stand by the results if information provided is accurate, and given in good faith. At present, however, HMRC considers CEST is unable to determine status in 15% of cases, and many commentators consider the failure rate much higher. HMRC is working to improve CEST with the forthcoming changes in mind.
In future, your client will have to provide you with the reasons for its status decision in a 'Status Determination Statement' (SDS). If you disagree, you can challenge the status determination with the business, and it should respond within 45 days, either withdrawing or upholding the decision, again supplying reasons.
Significant tax implications arise. If IR35 applies, the business or agency paying you will calculate a 'deemed payment' based on the fees charged by your PSC. Broadly, this means you are taxed like an employee, receiving payment after deduction of PAYE and employee National Insurance Contributions (NICs). If you operate via a PSC, the PSC will receive the net amount, which you can then receive without further payment of PAYE or NICs. The potential tax advantages of working under such a contract, especially for PSCs, are much reduced.
This is a good time to take stock of your options. Are clients likely to query your employment status? Should you consider restructured work arrangements, or renegotiating fees? If working via a PSC, is it still the best business model? With clients checking that contracts comply with the new rules, employment status for contractors is likely to come under increasing scrutiny. Please contact us for specific advice on your options and the tax consequences.