Agenda this Month • Draft Finance Bill clauses published • VAT Notice 700/22 – MTD for VAT • HMRC announcements and other tax developments
Draft Finance Bill clauses 40 clauses 16 Schedules 226 pages
Cars and Vans provided by salary sacrifice • Currently where car or van provided via OpRA, the salary foregone by the employee is compared to the cash equivalent of the car or van – the greater value is the value of the benefit for tax and NICs purposes. • Since 2003 connected costs were regarded as part of the car benefit charge • When FA 2017introduced the OpRA provisions no provision was made to ensure the calculation of the amount foregone should be the total amount foregone, including any connected costs • To be amended from 6 April 2019
Employees charging own electric cars No BiK 100% FYA
Employees charging own electric cars • From 6 April 2018 charging facilities for all-electric and plug-in hybrid cars and vans exempt. • Charging must be available to either: • all the employer’s employees generally • all the employer’s employees generally at a particular location • The charging facilities must be provided at premises under the control of the employer • NB exemption does not apply where the charging facilities are at the employee’s home
Other employee tax changes • Drivers of emergency vehicles - exemption to include ordinary commuting in the vehicle when not on-call. • Employee expenses simplification: • Overseas subsistence scale rates to be statutory • Employers no longer required to check receipts where scale rates paid • Merely need to check that qualifying business travel
Returns and Tax on UK Property Disposals • Non UK residents to pay CGT on disposal of all UK land and buildings from 6 April 2019 • (Applied to UK residential property from 6 April 2015) • 30-day return and CGT payment for residential property disposals by UK residents from April 2020 • SDLT filing and payment window to be reduced from 30 days to 14 days from 1 March 2019
Corporation Tax changes • Non resident companies to pay CT on UK rental profits from April 2020 (currently pay income tax) • Minor changes to corporate loss relief rules • carry back unused carried-forward trading losses and set these against profits of last 3 years on cessation • Changes to corporate interest relief restriction • Anti-avoidance to counteract profit fragmentation • Where profits diverted to tax haven and entity does not have the substance to generate the profits there
Lease accounting changes • Current UK GAAP distinguishes finance leases and operating leases • Tax rules generally follow A/c rules: • Operating lease – deduction in lessee P&L for lease rentals (note for motor cars 15% disallowed if CO2 >110g/km and 50% VAT disallowance) • Finance lease – interest element and depreciation of capital element charged to P&L • New IFRS 16 lease standard effectively treats all leases as finance leases – APs commencing 1 January 2019
Lease accounting changes • New IFRS 16 lease standard effectively treats all leases as finance leases – APs commencing 1 January 2019 • Recorded as “right of use asset” and lease liability on Balance Sheet • Govt. has decided to maintain the current system of lease taxation – legislation will be required to override the accounts treatment • Note that FRS 102 will retain the distinction between finance lease and operating lease • Applies to both lessor and lessee
Proposed “Rent a Room” changes • Currently £7,500 a year tax free • Where taxpayer rents out part of main residence • New rules will deny relief where property is rented out whilst taxpayer is absent from the property • Currently relief available to those in SW19 who rent out houses during Wimbledon fortnight • Taxpayer must be present at some time when property is rented out from 6 April 2019 • Intention of relief is to cover “lodgers”
CGT entrepreneurs relief and share dilution • John owns 6% OSC of Growbig Ltd, • The directors decide to issue further shares • John’s shareholding is diluted to just 4%. • Under current rules John’s shareholding would not qualify for entrepreneurs’ relief • Elect to sell and reacquire @MV = gain for ER • Draft Finance Bill – gain deferred until shares sold
VAT changes in Finance Bill • New VAT rules to make the tax treatment of vouchers consistent , especially where they can be used either in the UK or more widely in the EU • Prevents either non-taxation or double taxation of the goods or services relating to the vouchers. • Will affect only vouchers, such as gift cards, for which a payment has been made and which will be used to buy something. • Group VAT registration extended to non-corporate entities e.g. partnerships under common control
New Points-Based System of Penalties for Late returns • If you miss a deadline a point will be given. • A penalty will only be charged when a specified number of points are accrued – see Table • The number of points required for a penalty to be levied depends on the filing frequency of the return. • Points cleared after 24 months
New Points-Based System of Penalties for Late returns Submission frequency Penalty threshold Annual 2 points Quarterly (including Making 4 points Tax Digital) Monthly 5 points
Offshore Assessment Time limits • Proposed 12-year time limit for offshore cases where there has been a non-deliberate error. • 20-year time limit, for deliberate non-compliance, to remain for both onshore and offshore cases
Making Tax Digital for VAT
VAT Notice 700/22 - MTD for VAT • Draft VAT Notice issued in December 2017 • Now updated following consultation • Sets out which records must be kept digitally • Starts April 2019 but “soft landing” for first year • Includes examples of how the business account records might link with the HMRC computer in order to comply with MTD for VAT • Can use spreadsheet if digitally linked? See examples
MTD for VAT – Digital Records • Under MTD for VAT some records must now be kept digitally within “functional compatible software”. Any records that are not listed in the notice do not need to be kept in a set way. • Functional compatible software will be used to maintain the mandatory digital records, calculate the return and submit it to HMRC via an Application Programme Interface (API) • HMRC has a list of software to use to submit VAT Returns via an API • The complete set of digital records to meet MTDfB requirements do not all have to be in one piece of software. “If a set of compatible software programs is used there must be a digital link between the pieces of software.”
MTD for VAT – Functional Compatible Software • Is a software program or set of compatible software programs that must be able to: • Record and preserve electronic records in an electronic form; • Provide information and returns to HMRC from the electronic records in an electronic form and by using the API platform; and • Receive information from HMRC
MTD for VAT – “Soft Landing” for First Year • For VAT periods commencing between 1 April 2019 and 31 March 2020 • Businesses will not be required to have digital links between software programs. • The one exception to this is where data is transferred, following preparation of the information required for the VAT Return, to another product (for example, a bridging product) that is API-enabled solely for the purpose of submitting the 9 Box VAT Return data to HMRC. • The transfer of data to this product must be digital.
MTD for VAT – “Soft Landing” for First Year • For VAT periods commencing between 1 April 2019 and 31 March 2020 businesses will not be required to have digital links between software programs. • For VAT periods starting on or after 1 April 2020, there must be a digital link for any transfer or exchange of data between software programs, products or applications used as functional compatible software.
MTD for VAT – Example 1
MTD for VAT – Example 3 - Spreadsheet
MTD for VAT – Example 6 – VAT Group
Recent HMRC Announcements
Agent Update 66 • Alerts agents to guidance on the trading and property income allowances, which were introduced in 2017 • £1,000 a year tax free • From 6 April 2019, the Welsh Government will be able to set and vary the rate of Income Tax paid by Taxpayers who live in Wales • Taxpayers resident in Wales employed or in receipt of a taxable pension will have the letter “C” as a pre -fix to their tax code.
EBT Loan Schemes – Settlement COMPANY TRUST LOANS Taxable Sub Trusts
EBT Loan charge 2019 • Charge on any outstanding loans resulting from disguised remuneration tax avoidance schemes • Applies to any loans that were taken out under a disguised remuneration scheme since 6 April 1999 . • Charge can be passed to the individual beneficiary of the scheme by HMRC. • Taxpayers should contact HMRC by 30 Sept to obtain certainty of their liability and arrange payment • New spreading provision will allow taxpayers with total income < £50,000 in 2018/19 to spread over 5 years
Other Recent Announcements • OTS review of Capital Allowances • Proposal to allow relief for depreciation not proceeding • Venture Capital Changes receive State Aid Approval • Use Amazon Alexa to contact HMRC?
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