Election on 8 th June Snap Election = Short Finance Bill (just 180 - - PowerPoint PPT Presentation

• 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?

Election on 8th June

• 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)

Finance Act 2017 – What’s in, What’s Out?

'Worker' 'Intermediary'

Service company/partnership

'Client'

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.

Public sector workers “Off Payroll”

• 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

Limiting tax relief on Salary sacrifices

• 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)

Pensions – 25% charge on transfer to QROPS

• 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

Employee shareholder shares

• 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

Election Manifestos?

HMRC Announcements and other developments

12

• 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.

New “Tax Free” Childcare Accounts

• 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

• phthalmic and pharmaceutical services for the NHS

Public sector workers “Off Payroll”

• 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”,

False Self-Employment

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

Employee v Self employed v Own co. 16/17

• 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.

Employer Bulletin

• Class 2 NIC problems – not all payments by DD shown
• n 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

Working Together

interest

Borrower Lender Tax relief for interest Taxable at lower rate? Limited if > £2m p.a.

Interest relief restriction – 30% EBITDA

Parent UK Ltd Tax haven company

19

• 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.

Interest relief restriction

Recent tax cases

21

• 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

No Recovery of VAT on Repairs supplied to Third Party

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
• f mockery and jokes and, his public perception or his

celebrity “persona” would be damaged

• Appeal refused

Actor’s Cosmetic Surgery – Wholly and Exclusive? Case not anonymised

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!

Puppies not second hand goods for VAT

The End Any questions?

27