Taxing Times – July 2018

Welcome to July’s edition of Taxing Times.  We hope you have been enjoying the summer and show season so far.  

Just a reminder that it isn’t too late to come and visit us at Penrith Show on 28th July! 

In this edition we have:

  • An update on the new (and somewhat misleadingly named) “tax free childcare” and a reminder about the old childcare voucher scheme
  • A round up of current PAYE matters
  • Dates & Deadlines for your diary
  • Tax news which has hit the headlines over the past few weeks

You will also be aware from the press that HMRC are strenuously pursuing taxes owed by people who have taken part in failed tax avoidance schemes (such as film partnerships and employer funded retirement benefits schemes). Regardless of your take on whether or not such schemes should have been used, HMRC’s pursuit of back taxes through the use of accelerated payment notices (APNs) can cause financial hardship and worry. Our Dodd Rescue team have prepared some advice and are here to help if you find yourself in receipt of an APN.  Please click here to read more.

Making Tax Digital (MTD)

If your business has a VAT registered turnover greater than £85,000 then you will be affected by MTD for VAT from April 2019.  We are prioritising those affected and we will work with you over the remainder of 2018 to help you become compliant in time.

Our dedicated MTD Team are working to keep up to date with the latest developments but there are still more questions than answers and we are still awaiting the release of the promised VAT notice from HMRC which is expected to provide clarity.

Tax free childcare

The new government sponsored childcare scheme has been touted since 2013. It was hit with a number of teething problems – first a lawsuit in 2015 by a cohort of childcare voucher providers who would be put out of business when the old CCV scheme closed, then software problems rolling out the accounts to the public in 2017 (see previous Taxing Times articles here and here).

But it is now back on track and available to be used if a person’s circumstances permit!

As a reminder, the tax free childcare scheme is open to families with children under twelve years of age.  It is rather misleadingly named as it has nothing whatsoever to do with tax; for every £8 a parent adds to the account the Government will put in £2, up to a maximum of £10k per child (£8k contributed by the parents and £2k contributed by the Government).  It is that simple….but nothing to do with whether the parent pays tax or not!

One of the best things about the new scheme is that the self employed can benefit from the Government’s contribution.  Recall that the childcare vouchers (CCV) scheme is only available through employers to employees. So self employed people missed out.  This anomaly is addressed under the new regime.  But on the down side, while CCVs can be used for children up to the September after their 15th birthday, the new accounts can only be used up to the child’s 12th birthday. Therefore, if a person is lucky enough to be in an employer CCV scheme then actually the CCV scheme still works better for them, and it will continue to be available until the earlier of the employer pulling the plug on it OR the person no longer meeting the qualifying criteria (such as the child getting too old) OR the employee changes employer. So although new entrants to the CCV scheme will not be accepted after a certain date (see below), once a person is in, they can continue to be in.  Employees will need to be mindful of this and wary of abandoning the CCV scheme for the new tax free childcare accounts.

CCVs – an update

CCVs were to be closed to new entrants when the new childcare accounts were up and running.  Delays to that meant the D-date for the end of CCVs was going to be 5 April 2018 but they have had a further reprieve as Labour asked for a review of various reliefs being removed, of which CCV happened to be one.  This means that CCVs are still available to new entrants until October 2018.  So if an employer is willing to set up a CCV scheme, and an employee can participate in  that for their qualifying child before October, they should seriously consider doing so! But time is of the essence!

PAYE update

Who or what is a worker?

The ongoing debate continues to rumble about employment status of individuals and their employment rights.  Whether it is the BBC who has had to reclassify many of its presenters as employees; or Deliveroo and Uber drivers fighting for better employment rights including sick pay, holiday pay and minimum wage; the classification of a worker is still very unclear.  The latest case to hit the news is Pimlico Plumbers v Gary Smith, who was claiming to be a worker and therefore was entitled to worker rights.

In response to the Matthew Taylor Review, HM Treasury, together with HM Revenue & Customs and the Department for Business, Energy & Industrial Strategy are currently considering, in an Employment Status Consultation, how the employment status framework can be improved upon to provide greater certainty to the modern workforce.  The consultation paper is focusing on the status of employees, workers and the self-employed in regard to their employment rights and for tax purposes.

A worker is defined as an individual who works under a contract, where they agree to perform personally any work or services for the contractor – but they are not in business in their own right.

Basically, all employees are workers, but not all workers are employees.  Workers have a limited number of statutory rights and protections when compared with the rights that an employee has including protection against:

  • unlawful deduction from wages
  • National Minimum Wage
  • paid holidays
  • to be accompanied at a grievance or disciplinary hearing
  • discrimination
  • equal treatment for part-time workers

Employees have further rights or protections either from day one or when they have worked for various eligibility periods and examples include the right to maternity/paternity and adoption leave.

Employment status for tax purposes has two main systems of tax collection. For employees this responsibility falls to the employer under the PAYE system and for the self-employed this is undertaken through self-assessment.

In conclusion, the labour market has changed significantly in recent years and many people enjoy greater flexibility in their working pattern but still need to have the security that traditional employment brings.  The consultation will hopefully address the growing concerns around modern employment including the gig economy, the use of zero-hours contracts, bogus self-employment, pay, job security and workers’ rights.

Thought of the month:

“Failure is simply the opportunity to begin again, this time more intelligently.” Henry Ford

Dates for your diary

What a busy month July is! Here are the July dates and deadlines to keep employers, companies and personal tax payers on their toes:

5 July 

PAYE: last date for agreeing PAYE settlement agreements for 2017/18 with HMRC

6 July

PAYE: deadline for filing forms P9D, P11d and P11D(b) for 2017/18 (and to give P9D and P11D to employees)

Employers: deadline to register an employee share scheme put in place during 2017/18 AND deadline to file returns of reportable unapproved and approved share scheme events for 2017/18

19 or 22 July

PAYE: deadline to pay P11D Class 1A NIC for 2017/18 tax year (19th for cheque payments and 22nd for electronic payments)

31 July

Income tax self assessment: deadline for second self assessment payment on account for year ended 5 April 2018

Tax credits: deadline to provide information to finalise 2017/18 awards and renew claims for 2018/19

Corporation tax: returns for accounting periods ended 31 July 2017 need to be with HMRC by 31 July 2018

Company accounts: private companies with 30 September 2017 year ends need to have filed accounts with Companies House by 31 July 2018

What’s new in the world of tax?

Has prosecco peaked?

Last year accounted for the smallest rise in sales of the drink since 2011. Is our love affair with prosecco on the wane? Surely not! Although those in the know say that posh cider is the new prosecco – wait and see.

HMRC fails to answer 4m calls a year

More than four million calls to HMRC are going unanswered, with the Revenue conceding the problem is almost twice as bad as previously disclosed. New figures show more than one in 10 callers to HMRC fails to get through to anyone, compared with just over one in 20 a year ago. The true scale of the problem may be even worse, as HMRC’s audit ignores taxpayers who get an engaged tone when they dial the tax advice helpline.

Fraudster jets off despite £65m bill

A convicted fraudster who owes taxpayers more than £65m has taken nearly 360 flights worldwide in the past five years… despite claiming to be too poor to pay back his criminal profits.

HMRC saves £2m in crackdown on fake sites

HMRC says it has saved the public a total of £2.4m by tackling fraudsters who direct callers to premium-rate phone numbers to access its services. Scammers create websites that look similar to HMRC’s official site and list phone numbers that are call forwarding services charging premium rates.

Jurassic pay out

HMRC refunded £22m in tax to Universal Pictures after they made the latest instalment of the Jurassic Park series at Pinewood Studios. The UK’s film tax relief scheme lets film makers claim back up to 25% of their production costs in Britain if at least 10% of the total was spent here.

Foul!

Former Aston Villa chief executive Keith Wyness has launched a legal action against the club, alleging constructive dismissal. Wyness was suspended after a disagreement with owner Tony Xia over Villa’s finances that came to a head when Villa missed a tax payment of more than £4m to HMRC.

Historian jailed for tax fraud

Howard Tuck, the military historian who presented BBC documentaries including Battle of Britain, has been jailed for 27 months after failing to pay tax on more than £1m over six years.

Brucie bonus

Sir Bruce Forysth left almost £11.5m to wife Wilnelia, while his son and five daughters will inherit nothing. By using the spousal IHT exemption, Sir Bruce’s estate will not pay any inheritance tax.

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