Welcome, to July's Tax Tips & News,
our newsletter designed to bring you tax tips and news to keep you one step
ahead of the taxman.
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July 2016
· Trivial benefits
· HMRC guidance on senior accounting officers
· Help-to-save consultation launched
· FRS 102 guidance on directors' loans
revised
· July 2016 Questions and Answers
Trivial benefits
Employers will be aware that various
changes have been made to the reporting requirements for employee benefits and
expenses from April 2016, which mean that some employers will no longer have to
complete annual return forms P11D. The three main changes are:
- The dispensations regime has been
replaced with an expenses exemption - broadly, where an employee would have
been entitled to tax relief in full for a benefit or expense, the employer does
not need to deduct tax or NICs, and they do not need to report it to HMRC;
- Employers can now account for tax on
certain benefits provided to employees through PAYE (known as 'voluntary
payrolling'), which dispenses with the need to report such benefits on forms
P11D. Benefits relating to accommodation, beneficial loans, credit tokens and
vouchers cannot be processed through voluntary payrolling. Note also that
employers wishing to use the scheme for 2016-17 had to register with HMRC prior
to 6 April 2016; and
- The introduction of a statutory
exemption for trivial benefits.
Until 5 April 2016, employers were
required to agree with HMRC whether benefits could be treated as 'trivial' but
legislation included in Finance Bill 2016 (inserting new ITEPA 2003, s 323A to
323C) will provide for an exemption for trivial benefits and, if enacted, this
will apply from 6 April 2016.
The proposals provide for an income tax
and national insurance contributions (NICs) exemption from 2016-17 for trivial
benefits where the following conditions are met:
- The cost of providing the benefit does
not exceed £50 (see below for definition of 'benefit cost');
- The benefit is not cash or a cash
voucher;
- The employee is not entitled to the
benefit as part of any contractual obligation (including under salary sacrifice
arrangements); and
- The benefit is not provided in
recognition of particular services performed by the employee as part of their
employment duties (or in anticipation of such services). The cost of the
benefit is defined in the legislation as:
- The cost of providing the benefit; or
- If the benefit is provided to more
than one person and the nature of the benefit or the scale of its provision
means it is impracticable to calculate the cost of providing it to each person
to whom it is provided, the average cost per person of providing the benefit.
Trivial benefits provided to directors
or other office holders of close companies (broadly, those with five or fewer
participators), or to members of their families or households, will be capped
at £300 per tax year.
Where an employee receives a benefit
exceeding £50, the whole amount becomes taxable, not just the excess, and it
must be accounted for accordingly.
The exemption applies equally to
benefits provided to an employee, or to a member of his or her family or
household, subject to the £50 limit.
The government will be monitoring the
use of the exemption, and if it believes it is being abused, adjustments to the
qualifying conditions and/or the annual cap are likely.
HMRC guidance on senior accounting
officers
HMRC have published Brief 12(2016),
which contains information on changes to their senior accounting officer
guidance (SAOG). The Brief aims to clarify HMRC practice and reflects
administrative changes to their operational procedures. These include:
- A change of practice allowing
submission of certificates by electronic means in addition to the currently
accepted methods;
- Extensive updates to reflect
organisational change within HMRC and the role of Wealthy and Mid-Size Business
Compliance (WMBC);
- New examples of how groups and
aggregation should be applied;
- Clarification of HMRC's view on the
inability to delegate the SAO role and their view of time limits for short or
long accounting periods;
- Clarification about when requests for
extensions to time limits for SAO notification or certificates will be
considered;
- Clarification of the SAO role where a
company is struck off; and
- Various updates throughout the
guidance to reflect the changes to how HMRC are organising their compliance
work.
Help-to-save consultation launched
HMRC have launched a consultation on the
government's proposed 'Help-to-Save' scheme, which is designed to encourage
people on low incomes to build up their savings.
Broadly, the scheme will be open to some
3.5 million adults in receipt of universal credit with minimum weekly household
earnings equivalent to 16 hours at the National Living Wage, or those in
receipt of working tax credit. It will work by providing a 50% government bonus
on up to £50 of monthly savings into a Help-to-Save account. The bonus will be
paid after two years with an option to save for a further two years, meaning
that people can save up to £2,400 and benefit from government bonuses worth up
to £1,200. Savers will be able to use the funds in any way they wish. HMRC say
that Help-to-Save accounts will be available 'no later than April 2018'.
The consultation document provides an
overview of how the new accounts will work, sets out core principles for
determining its approach to implementation, and considers options for the
provision of accounts. It also seeks views on detailed policy design issues
within the scheme parameters that have already been announced and options to
promote awareness and take-up of the scheme. The consultation will run until 21
July 2016. Further information can be found at
www.gov.uk/government/consultations/help-to-save-consultation-on-implementation/help-to-save-consultation-on-implementation.
FRS 102 guidance on directors' loans
revised
HMRC have recently updated their online
toolkit on directors' loan accounts to help tax advisers and agents preparing
2015/16 company tax returns. The update reflects the changes to reporting
requirements under UK GAAP, as taxing debt will now be largely driven by FRS
102 requirements for financial instruments.
If an entity makes loans to/from
directors/employees where there is no explicit interest rate or the interest
rate charged is not at a market rate, then the prescribed accounting treatment
will depend on which accounting framework the entity has adopted.
Where an entity applies either FRS 102:
The Financial Reporting Standard applicable in the UK and Republic of Ireland
or FRS 102: Section 1A Small Entities, then such loans are required to be
accounted for as if they were a loan with a market rate of interest. Where a
company applies FRS 105: The Financial Reporting Standard applicable to the
Micro-entities Regime (FRS 105), there is no requirement to account for such
loans as if they were a loan with a market rate of interest. Instead such loans
would initially be recorded at the amount borrowed/advanced.
The choice of accounting treatment does
not affect the amount chargeable under Corporation Tax Act 2010, Section 455.
That is charged on the full amount initially borrowed/advanced. Without this
piece of anti-avoidance legislation, owner managers could potentially avoid a
tax charge by arranging for 'their' company to lend them funds (as opposed to
paying a 'taxable' bonus or dividend).
July 2016 Questions and Answers
Q1. My mother died last year and left my
brother and me a commercial business unit. Probate is nearly complete now. If
we sell the property in the future, what are the capital gains tax implications
on the sale?
A: I
presume that you and your brother are inheriting equal shares in the property.
Your acquisition value, for future capital gains tax computation purposes, is
the market value at the date of death - known as the 'probate value'. Capital
gains tax will be calculated under the normal rules on any increase in value
from that date.
Q2. I have recently registered for VAT.
I am not very good when it comes to administration and I have heard that the
flat rate scheme might help me. How does the scheme work?
A: Broadly, the flat rate scheme for VAT
is designed to help small businesses with a turnover of no more than £150,000 a
year, excluding VAT, by taking some of the work out of recording VAT sales and
purchases.
With the flat rate scheme: - You pay a
fixed rate of VAT to HMRC; and
- You keep the difference between what
you charge your customers and pay to HMRC; but
- You can't reclaim the VAT on your
purchases - except for certain capital assets over £2,000.
The percentages applicable to this
scheme currently vary between 4% and 14.5%, depending on the nature of the
services provided. Full details of the scheme are included in the HMRC VAT
Notice 733: Flat rate scheme for small businesses, which you can download from
the HMRC web site.
In your first year of VAT registration
you get a 1% reduction in flat rate, which means that you can take 1% off the
flat rate you apply to your turnover, until the day before your first
anniversary of becoming VAT registered.
The scheme works well for some but not
others. On the positive side, the scheme may save you some admin because you
don't have to work out every item of input and output tax, but if your
customers are VAT registered, you do have to calculate the VAT and issue VAT
invoices in the normal way. Financially, the flat rates averages may work out
cheaper for you than normal accounting or you may find this scheme more
expensive.
Q3. I have a part time job and I earn
about £8,000 a year. As my earnings are less than the tax-free personal
allowance, can I transfer the unused amount to my husband?
A: Since April 2015, a spouse or civil
partner who is not liable to income tax or not liable above the basic rate for
a tax year may transfer part of their personal allowance to their spouse or
civil partner, provided that the recipient of the transfer is not liable to
income tax above the basic rate. The transferor's personal allowance will be
reduced by the same amount. For 2016/17 the amount that can be transferred is
£1,100 (£1,060 for 2015/16). The spouse or civil partner receiving the
transferred allowance will be entitled to a reduced income tax liability of up
to £220 for 2016/17 (£212 for 2015/16). Note, however, that married couples or
civil partnerships entitled to claim the married couple's allowance are not
entitled to make a transfer. For further information on this, see the gov.uk
website at www.gov.uk/marriage-allowance.
July 2016 Key Tax Dates
5 - Deadline for PAYE settlement
agreement for 2015/16
6 - Deadline for 2015/16 forms P11Db,
P11D and P9D to be submitted and copies of P11D and P9D to be issued to
relevant employees
Deadline for employers to report share
incentives for 2015/16 - form 42
14 - Return and Payment of CT61 tax due
for quarter to 30 June 2016
19/22 - PAYE/NIC, student loan and CIS
deductions due for month to 5/7/2016 or quarter 1 of 2016/17 for small
employers
Class 1A NIC due in respect of the tax
year 2015/16
31 - Second self assessment payment on
account due for 2015/16
Second 5% penalty surcharge on any
2014/15 outstanding tax due on 31 January 2016 still unpaid
Deadline for Tax Credits to finalise
claims for 2015/16 and renew claims for 2016/17
Penalty of 5% of tax due or £300,
whichever is greater for 2014/15 personal tax returns still not filed.
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