Taxing Times – June 2017

Hello and welcome to the start of summer! In this edition we will have the usual…

  • Money target 12174708_mlDates and deadlines for your diary
  • PAYE update
  • What’s new in the world of tax 

We also have…

  • All change! A whistle stop tour of some new tax changes which have come in for 2017
  • Sleep yourself better – a quick guide to how good sleep can lead to even better effectiveness
  • A couple of short articles keeping you up to date on what’s going on in the very uncertain tax world at the minute

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All change! A short summary of some tax measures which have come into force for 2017

Family - 10137351_xlTax-Free Childcare

Working parents can now start applying for two new government childcare schemes launching this year – Tax-Free Childcare which begins immediately and 30 hours free childcare which starts in September.  This means that working parents of children, who will be aged under 4 on 31 August 2017, can now apply through the new digital childcare service for Tax-Free Childcare and receive a government top-up of £2 for every £8 that they pay into their Tax-Free Childcare account. All parents of disabled children (under 17 years old) are now also able to apply for Tax-Free Childcare.  In addition, parents of 2-3 year olds, who will be eligible for a 30 hours free childcare place in September, can apply through the childcare service and start arranging a place with their childcare provider.

The Childcare Choices website provides information on the government’s childcare schemes and explains how parents can pre-register or apply. It also includes a childcare calculator to show eligible families how much they could receive.

For parents across the UK, Tax-Free Childcare will cut childcare costs by up to £2,000 per year for each child under 12 years old, or £4,000 per year for disabled children under 17 years old. The programme will be rolled out through the year, with all eligible parents able to receive it by the end of 2017.

From September, working parents of three and four-year-olds living in England will also be entitled to the new 30 hours free childcare offer, worth around £5,000 per child.  Parents will only need to make a single application for both schemes when their children become eligible.

Changes affecting companies

Stickman £15431411_lThe new 19% corporation tax rate is now in place.

The rules on how losses can be used has also changed (well sort of….it was dropped from the Finance Act so technically it is not law but we are being told by HMRC we should follow the new rules anyway… interesting times to live in!) Losses arising after 1 April 2017 can now be used flexibly against the company’s income from any source.

Employment tax changes

The public sector has seen a huge change with responsibility for operating the personal service company (PSC) tax rules shifting to the public sector company (or agency or third party) paying the PSC.  A very specific shakeup but with wide ranging repercussions!

Changes to the way salary sacrifice operates for most benefits in kind has now changed significantly, with the tax and NIC benefits of salary sacrifice significantly restricted.  New arrangements using salary sacrifice will see the benefit provided being subjected to the same tax as the cash income sacrifice for all but a very few select exclusions.

blue-lineThe changeable world of tax

Election causes tax chaos: Planned cut to pension savings limit dropped

finances-38073981_mlChancellor Philip Hammond’s planned cut to the amount pensioners can save into their pensions, from £10,000 to £4,000 a year for those who have already made use of the pension freedoms, was delayed as the Government rushed to pass the Finance Bill ahead of the election.

Making Tax Digital – In, out? (shake it all about?)

After the general election it was announced that Making Tax Digital (MTD) was dropped from the 2017 Finance Bill amid concerns that it could not be scrutinised properly in time to be enacted before the election.  The CIOT said that this was only sensible, as MTD remains controversial and needs more scrutiny rather than rushing something through without proper debate. However just because the reforms were dropped from the Finance Bill this does not mean that the plans have been dropped altogether.  It seems as if MTD is still firmly on the horizon – with the same implementation dates as before – but with testing and the pilot pushed back until after the election so giving even less time to respond. Honestly, it’s like doing the hokey cokey – but not as much fun!

So with that in mind, here is a refresher on the MTD timetable and requirements: 

48482327_m

  • MTD requires quarterly in-year reporting of business figures – plus a final adjusted report after the year end (either by the 10th month after the year end, or by 31 January after the year end, whichever is earlier) to make any accounting/technical adjustments (work in progress, capital allowances etc).
  • It applies from April 2018 for unincorporated businesses with turnover over the VAT threshold.
  • So for example, a sole trader with a YE 30th April 2019, whose turnover is above the VAT threshold, will be in MTD from April 2018 (which is very nearly here!!)  It will have to make its first report in-year for the quarter to July 2018, then for each of the three quarters afterwards, with its final report (adjusted for all tax and accounting technicalities) by 31 January 2020 (as January falls earlier than 10 months after the year end in this case).
  • Smaller businesses get a 1 year “grace” period until April 2019.
  • Limited companies and very large partnerships (income over £10m) will be brought into MTD from April 2020.
  • There is a planned deminimus of £10k, and businesses with income under that level will not have to comply with MTD (but that is still to be confirmed).
  • Penalties will be imposed for non compliance but we have been promised a “soft landing” (softly softly) approach on penalties – though details are not yet forthcoming.

cat-image-01As Washington Irving (author of The Legend of Sleepy Hollow) said: “There is a certain relief in change, even though it be from bad to worse! As I have often found in travelling in a stagecoach, that it is often a comfort to shift one’s position, and be bruised in a new place.”  The reference to a stagecoach is a bit out of date but otherwise it is spot on – we’re quite certain that MTD could bring a rough and bumpy ride for those who are unprepared!

But not to worry, Dodds are working with our clients on transitioning to cloud accounting to get you MTD ready in advance.  Adopting the cloud really will lessen the pain of adhering to HMRC’s MTD requirements and we have a dedicated CAT (cloud accounting team) who can talk you through it, help you set it up and generally make things as painless as possible.  Please contact Kristina Gash or Stu Bell for more information.

Changes to probate fees – AGAIN!

Probate fees were set to increase significantly (and we mean SIGNIFICANTLY!) in May, from the current £215 level all the way up to a potential £20,000 for an estate worth over £2 million (with a sliding scale in between).

The increases were severely criticised by the House of Commons Joint Committee on Statutory Instruments, casting doubt on the legality of the increases.

Now with the General Election looming, the increase in fees has been delayed.  But it is not clear whether this means the changes are scrapped forever or merely delayed. However, should they appear on the horizon again after the election, no doubt there will be some severe backlash and further challenges to the increases.

Motivational thought of the monthIf you want something you’ve never had then you’ve got to do something you’ve never done…

orange-lineGreat sleep = even better advice!

Office worker jump - 8616637_ml

We may sound like an ad by the lovely Lenny Henry for a certain well known hotel chain, but a good night’s sleep really does give you a bit of extra get up and go.

Dr Guy Meadows, Clinical Director of The Sleep Clinic, agrees: “Sleep gives you the edge at work because it’s the starting block of all other cognitive function. It helps you retain information, solves problems, it improves concentration, motivation, reaction times, mood and memory.” So getting a good night’s sleep can mean that you are in a position to be sharper, more focussed and give even better advice or client service than usual.  With that in mind here are a few top tips to help improve your sleep this month:

  • Ban the Tech! Non stop technical stimulation causes havoc when you are trying to fall asleep. So ditch the tablet/laptop/x-box AND phone a couple of hours before bedtime to give your brain time to wind down.
  • Create good sleep karma by ensuring the bedroom is properly dark (buy blackout curtains or even a sleep mask), and that it isn’t too hot or too cold.
  • Insist on some “me” time before bed – again to help you wind down and relax – a nice warm bath, some yoga, chilling out to some soothing music or meditation sounds a bit new age but it can really help to slow down busy brain activity.

green-lineDates and deadlines for your diary

30 June 2017

Corporation Tax: company tax returns for accounting periods ending 30 June 2016 should reach HMRC.

Accounts: Private companies with 30 September 2016 year ends must file their accounts with Companies House.

5 July 2017

PAYE: last day for agreeing PAYE settlement agreements with HMRC for 2016/17.

Non resident landlords: deadline for 2016/17 returns of rent paid by agents to non resident landlords.

Payroll Web Image6 July 2017

PAYE: deadline for completing forms P11d, P9D and P11D(b) for the year ended 5 April 2017 (and providing forms P9D and P11D to employees).

Share schemes: deadline to register an employee share scheme which was in place during 2016/17.  Also deadline to file returns for 2016/17 for any share scheme “events” (e.g. grants and exercises of options).

19/22 July 2017

PAYE: deadline to pay Class 1A NIC on P11Ds for the year ended 5 April 2017 (19th for postal payments and 22nd for BACS).

31 July 2017

Income tax: deadline for 2nd self assessment payment on account  for the 2016/17 tax year.

Tax credits: renewal deadline to provide information to finalise 2016/17 awards and renew claims for 2017/18.

Corporation Tax: company tax returns for accounting periods ending 31 July 2016 should reach HMRC.

Accounts: Private companies with 31 October 2016 year ends must file their accounts with Companies House.

What a busy few months!

 green-linePAYE Update

Manifesto Mania

As the date of the general election draws nearer then the main parties have all announced changes in their manifesto’s which would affect employers.

The Conservative party has pledged to simplify the tax system, though they have not said exactly how they will go about this.  The party also appears to be giving the Pensions Regulator new powers to issue fines for those found to have mismanaged pension schemes and powers to disqualify the relevant company directors. The Conservatives also want to improve the participation of shared parental leave and help companies provide more flexible work environments that help mothers and fathers to share parenting.

Money tree 11408465_LThe Labour party pledges include an increase in income tax for those earning over £80,000, bringing the threshold for the 45p rate of income tax down from £150,000 to £80,000 and a new 50p tax affecting all those earning over £123,000.  They would introduce an equal pay audit requirement on large employers, remove zero hours contracts and look to increase the minimum wage to £10 by 2020.  Paternity leave would be doubled to four weeks and paternity pay increased.  Extra protections are to be given to women on maternity leave.  Labour would also introduce four new public holidays to mark patron saints’ days.

The Liberal Democrats have stated they would put a penny in the pound on Income Tax to give the NHS and social care services the cash injection they need.  They would look to extend free childcare to all two-year-olds and to the children of working families from the end of paid parental leave and encourage new fathers to take time off with an additional month’s paid paternity leave.

There is no doubt that the main parties are making big claims about their employment law proposals and each manifesto marks significant changes so watch this space for whoever wins the general election on 8 June.

What Happens if I Don’t Comply?

In a recent case, Johnsons Shoes Company had an automatic enrolment staging date of 1 May 2014 and were due to complete their declaration of compliance by 30 September 2014, but failed to meet the deadline.  The Pensions Regulator (TPR) had regularly attempted to communicate with Johnsons to educate and enable them to meet their duties, but their lack of action led TPR to use a number of their enforcement powers.

Money 18419289_xlFirstly a Fixed Penalty Notice (FPN) of £400 was issued. Johnsons refused to pay this and asked TPR to carry out a review of the FPN saying that pressures of work were to blame for not meeting their duties.  TPR do not consider this to be a reasonable excuse, as they had sent Johnsons several reminders in the 12 months before the date their duties began to apply and they’d had significant time to prepare.

An Escalating Penalty Notice (EPN) was issued and based on employee numbers of 70, a £2,500 daily fine was issued. This eventually amounted to £40,000.

Johnsons also failed to pay the EPN, so TPR lodged a money claim in the County Court to recover the debt.  The end result being that Johnsons had to pay the fine in full, including the £2,000 court fee TPR had to pay to start the claim.

Johnsons are now compliant with their automatic enrolment duties and the staff in their pension scheme are in the same position as they would have been had Johnsons automatically enrolled them on the staging date.

Johnsons’ initial lack of action led to further delays in complying with their duties, and as a result the intervention escalated from a focus on remedial action to one of sanction and actions to rectify the position.  Had Johnsons acted quickly, a £40,000 fine, court action and a £2,000 court fee could have been avoided.

The Pension Regulator has increased the number of inspections of business premises to check for compliance and the increases are in line with the number of employers who have automatic enrolment responsibilities now.

New Employers Duties

piggy-bank-38867862_mlNew businesses which start up from October this year are being warned they will have instant pension duties as soon as they become employers.

Those who become employers for the first time on or after 1 October 2017 will immediately have legal duties for their new member of staff. These duties apply from the first day the first member of staff started working for them. This is known as their duties start date.

The Pensions Regulator will write to new employers to tell them what they need to do and by when.  There is also a new section on their website for new employers to guide them through their duties.

No PAYE scheme

If staff earn £113 per week (£490 a month) or below, then HMRC may not require the employer to set up a PAYE scheme. However, the employer does still have certain duties, and must start to complete them as soon as they employ their first member of staff:

  • they must write to their staff to tell them how automatic enrolment applies to them
  • if their staff then ask in writing to be put into a pension scheme, the employer must set this up for them but they do not have to pay into it.

blue-lineWhat’s new in the world of tax?

Caine believes in income tax

Actor Sir Michael Caine has described himself as a socialist who “wouldn’t live in a country that didn’t pay income tax”, despite having been caught up in the Liberty investment scheme tax scandal. “I’m a socialist, basically. I want as much money as possible for poor people, to help whoever’s in trouble….You can’t say, ‘We hate these rich people, we’re going to tax them to smithereens’. You’ve got to have them stay in your country and pay the tax.”

Shady man 15059865_sNot so much fun in the sun! Greek tax inspectors ordered to blend in with tourists

With Greece suffering €16bn in tax avoidance losses each year, the finance ministry is expanding its surveillance of tourist spots with undercover inspectors. Local media have dubbed the crack-down “Mission Summer Shorts”, but inspectors face hostility and sometimes violence from locals. One team of undercover tax inspectors were attacked after trying to arrest the owner of a taverna who allegedly failed to give customers receipts.

Do what I say not what I do….

The children of Jeremy Corbyn’s ex-Communist party aide, John McDonnell, had their mother’s £1.7m house transferred into their names – saving them more than £500,000 in inheritance tax. Interestingly, Corbyn and McDonnell both criticised IHT rules when David Cameron paid no tax on a £300,000 inheritance from his father and a £200,000 gift from his mother.

Lib Dems vow to legalise cannabis

The Liberal Democrats have pledged to legalise cannabis and allow it to be sold on the high street, stating the move could raise up to £1bn in taxes. They say tax revenues from sales would also be invested in education about cannabis and treatment.

So – raising money from cannabis only to spend it on…..treatment and rehab for cannabis users?

May considers salary sacrifice care scheme

The Prime Minister is considering new tax breaks to help workers cover the cost of care for their parents using a voucher scheme similar to one already used for childcare. Also under consideration is a proposal to allow young workers to sacrifice some of their salary to save for their own care costs in old age. Elsewhere, Dia Chakravarty, Political Director at the TaxPayers’ Alliance, calls for a simplification of the tax code. “Our hugely complex tax system simply isn’t fit for the 21st century,” she states.

Speaking of which……

Self assessment calculations now too complicated even for the tax man! Tax calculators can’t keep up with changes

HMRC’s tax software could not be updated to cope with recent changes to tax allowances in time to deal with tax returns due for the 2016/17 tax year, which means that the system cannot correctly work out how the dividend allowance, the personal savings allowance and the tax-free personal allowance all fit together for particular groups of people.  18853284_mThis means that some individuals will be overcharged. The problem affects two groups of people who have certain combinations of savings and other income. The first is people who earn less than £16,000 a year and who exceed the personal savings allowance. The second is those who have total taxable income of between £27,000 and £32,000 a year, and who also receive enough income in the form of dividends to take them over the additional-rate tax threshold of £150,000. HMRC has admitted that its online systems can’t cope with these two groups, and advises people affected to file paper returns (!) It will therefore be important that people in these groups don’t leave their tax return until the last minute as, if it has been calculated correctly, it will (ironically) be rejected by HMRC’s (incorrect) systems and will bounce back.  So taxpayers need to leave enough time to make sure they can get it to HMRC in the post by 31 January.

Luckily at Dodds we have been aware of this for a while and know how to calculate the right amount (even if HMRC’s software doesn’t).  So if you need any assistance with your 2016/17 tax return please get in touch!

Thin Green Line

A quick VAT case update

Blue Chip Hotels Limited has just lost its case at the Upper Tribunal concerning whether or not the VAT should be charged on the hire of a room for a wedding.  The Tribunal held that the hire of a room, which was licensed for civil-wedding ceremonies, was a separate and standard-rated supply, not an exempt supply of land so VAT should be charged. The taxpayer lost its case.

 orange-lineNew scam to watch out for

15056961 - scam computer keys showing swindles and fraud

HMRC have released details of a new phishing scam. If you get an email with the subject, “Your 2016 Tax Report”, with an attachment, do NOT open it. You can forward it to phishing@hmrc.gsi.gov.uk and then delete it.

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