Agenda this Month Draft Finance Bill clauses published VAT Notice - - PowerPoint PPT Presentation

• Draft Finance Bill clauses published
• VAT Notice 700/22 – MTD for VAT
• HMRC announcements and other tax developments

Agenda this Month

Draft Finance Bill clauses 40 clauses 16 Schedules 226 pages

• 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

Cars and Vans provided by salary sacrifice

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

Employees charging own electric cars

• Drivers of emergency vehicles - exemption to include
• rdinary 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

Other employee tax changes

• 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

Returns and Tax on UK Property Disposals

• 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

Corporation Tax changes

• Current UK GAAP distinguishes finance leases and
• perating 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

• verride the accounts treatment
• Note that FRS 102 will retain the distinction between

finance lease and operating lease

• Applies to both lessor and lessee

Lease accounting 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”

Proposed “Rent a Room” changes

• 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

CGT entrepreneurs relief and share dilution

• 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

VAT changes in Finance Bill

• If you miss a deadline a point will be given.
• A penalty will only be charged when a specified number
• f 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 Tax Digital) 4 points Monthly 5 points

New Points-Based System of Penalties for Late returns

• 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

Offshore Assessment Time limits

Making Tax Digital 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

• f

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

VAT Notice 700/22 - MTD for VAT

• 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 – Digital Records

• 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 – Functional Compatible Software

• 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 – “Soft Landing” for First Year

MTD for VAT – Example 1

MTD for VAT – Example 3 - Spreadsheet

MTD for VAT – Example 6 – VAT Group

Recent HMRC Announcements

• 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.

Agent Update 66

EBT Loan Schemes – Settlement

COMPANY TRUST LOANS Sub Trusts Taxable

• 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

EBT Loan charge 2019

• 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?

Other Recent Announcements

Alexa – Call HMRC?