Election on 8 th June • Snap Election = Short Finance Bill (just 180 pages) • Lots of legislation deferred =>Next Bill? • Making Tax Digital • Corporate tax changes • Non-Dom changes • Will tax lock be removed? • Will Class 4 NIC increase now take place 2018/19?
Finance Act 2017 – What’s in, What’s Out? • See Appendix for Overview of what was included • Changes to rates and limits enacted, Also: • IR35 – public sector workers “off payroll” • Changes to salary sacrifice arrangements • Offshore Pensions • Employee shareholder shares • Soft drinks levy (sugar tax)
Public sector workers “Off payroll” 'Client' 'Intermediary' Service company/partnership 'Worker'
Public sector workers “Off Payroll” • Government departments, legislative bodies, armed forces • Local government • NHS ( but not GPs) • Schools and further and higher education institutions • Police forces • Other public bodies (such as BBC, Channel 4)
Public sector workers “Off Payroll” • From April 2017 , individuals working through a personal service company (“PSC”) in the public sector will no longer be responsible for deciding whether the intermediaries legislation applies • The public sector employer/agency will have to decide if the rules apply to a contract and, if so, account for and pay the liabilities through RTI and deduct the relevant tax and NICs.
Limiting tax relief on Salary sacrifices • Where a BiK is provided through salary sacrifice, it will be chargeable to income tax and Class 1A employer NICs, even if it is normally exempt from tax and Class 1A NICs • The greater of: • the amount of salary sacrificed; and • the cash equivalent set out in statute (if any) • Note transitional rules – if in place at 5 April 2017 • 5 Exceptions…
Limiting tax relief on Salary sacrifices • 5 Exceptions: • employer pension contributions; • employer-provided pension advice; • employer-supported childcare and provision of workplace nurseries; and • cycles and cyclist's safety equipment • Ultra – Low (< 75g) CO2 emission cars
Pensions – 25% charge on transfer to QROPS • UK pension savings have benefited from tax relief • If transfer to foreign scheme that is neither • registered pension scheme; nor • QROPS • Then unauthorised payment charge 40%+ • New 25% overseas transfer charge on transfer to QROPS after 9 March 2017 • Does not apply if pension fund and individual are in EEA (further exclusions)
Employee shareholder shares • Flagship policy 2013 - “Employee shareholder” shares • minimum £2,000 worth of shares if give up certain employment rights – tax free • Unfair dismissal, working time directive • Gains on £50,000 of shares (at issue) exempt CGT • So if subsequently receive £5m tax free!! • Being abused by some employers • Tax free gain was limited to £100,000 where shares acquired after 16 March 2016 • Tax advantages now abolished from 1 December 2016
Election Manifestos? • Draft Labour Party Manifesto Leaks: • 26% Corporate Tax rate • Increase in CGT Rate • Repeal IHT Main Residence Nil Band • Top 5% will may most tax – 50%+? Wealth Tax? • Liberal Democrats • 20% Corporate Tax rate • Repeal transfer of Married Couples Allowance
HMRC Announcements and other developments 12
New “Tax Free” Childcare Accounts • New scheme designed for working families, including the self-employed • For every £8 you pay in, the government will add an extra £2, up to £2,000 per child under 12 years old, • £4,000 per year for disabled children under 17 • Use account to pay for nursery provision, after school care, childminder • Parents of children who will be under 4 on 31st August, and parents of disabled children, can apply now.
Public sector workers “Off Payroll” • Updated HMRC guidance • Sets out responsibilities for public sector bodies, agencies, intermediaries • Employment status tool - on HMRC website • Does not apply to retail businesses providing ophthalmic and pharmaceutical services for the NHS
False Self-Employment • House of Commons Work and Pensions Committee • Call for the Government to close the loopholes that allow “bogus” self -employment practices, which burden the welfare state but reduce the tax contributions needed to sustain it. • Follows an inquiry into companies such as Uber, Amazon, Hermes and Deliveroo. • The Committee recommends a default assumption of “worker” status , rather than “self - employed”,
Employee v Self employed v Own co. 16/17 Employee Self-employed Own company Salary/ fees £40,000 £40,000 £40,000 Income tax 20% 5,800 5,800 NIC 3,833 3,020 350 NIC – ERs 4,401 (398) Corporation tax 5,721 Dividend tax 1,341 Total taxes 14,034 8,820 7,810 NET for worker £30,367 £31,180 £32,190
Employer Bulletin • HMRC to use Real Time information to update PAYE codings from 31 May 2017 • Reminder of S codes for Scottish taxpayers • Student Loans threshold for plan 1 loans increased to £17,775. The plan 2 threshold will remain at £21,000 • If you don't pay someone in a tax month, send an EPS by the 19th day of the month, telling HMRC there are no payments in the tax month.
Working Together • Class 2 NIC problems – not all payments by DD shown on 2015/16 tax calculations • Also problems with voluntary Class 2 payments and NIC payments by GPs • New 2 Step Verification (2SV) to Access Government Gateway • HMRC will send 6 digit authorisation code to phone/ mobile
Interest relief restriction – 30% EBITDA Parent UK Ltd Tax haven company interest Borrower Lender Tax relief for interest Taxable at lower rate? Limited if > £2m p.a. 19
Interest relief restriction • Interest relief restricted to 30% EBITDA • 30% limit applies to UK entity and worldwide group • Group limit based on net group borrowings • Excess interest carried forward (indefinitely) • Interest allowance (capacity) carried forward 5 years • £2 million interest expense de-minimis – net interest expense for those entities within CT charge.
Recent tax cases 21
No Recovery of VAT on Repairs supplied to Third Party • U-Drive Ltd v HMRC [2017] UKUTT • Car hire company with captive insurance company • Paid bills for repairs to third parties cars • VAT input tax recoverable? • No contract between repairer and third party car owner • Held: No recovery of input VAT by U Drive Ltd as no supply by repairer to them
Actor’s Cosmetic Surgery – Wholly and Exclusive? Case not anonymised
Actor’s Cosmetic Surgery – Wholly and Exclusive? Case not anonymised • Clunes v HMRC [2017] UKFTT • C paid for cosmetic surgery and sought to claim relief for that expense under s34 ITTOIA 2005 • HMRC disallowed the claim as “not incurred wholly and exclusively for the purposes of the trade” • C wanted case anonymised - might become the target of mockery and jokes and, his public perception or his celebrity “persona” would be damaged • Appeal refused
Puppies not second hand goods for VAT
Puppies not second hand goods for VAT • Little Rascals v HMRC [2017] UKFTT • LR breeds puppies and sells them to the public as pets. LR also buys some puppies from other breeders and sells them on. • LR sought to account for VAT on the margin only in the case of puppies bought from non-VAT-registered breeders • “'second -hand goods' means tangible movable property that is suitable for further use” • Appeal dismissed!
The End Any questions? 27
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