Staying pension wise
Looking at how individuals can protect their pension pots from pension scammers.
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The dangers of pension scams are currently being highlighted by a high-profile media campaign. Adverts, both on television and online, warn pension savers not to let a scammer 'enjoy their retirement'. The perils of cashing in a pension pot without the proper advice and protection under the freedoms introduced in 2015 are spelt out by the ads.
So, it is vital that pension savers are educated to spot a potential scam and avoid it. Access to regulated, impartial advice is a crucial part of helping people make wise decisions with their retirement savings.
Scam victims losing pension pots in 24 hours
The Pensions Regulator (TPR) and the Financial Conduct Authority (FCA) have joined forces to highlight the scale of pensions scamming. In a joint report from the two organisations, the FCA suggested that it could take up to 22 years for a saver to build a pension pot of £82,000 – the average amount individuals lost to pension scams in 2018.
But despite this, many savers could be at risk of falling for scammers' tactics, as research reveals that almost a quarter of people surveyed admitted to taking 24 hours or less to decide on a pension offer.
Worryingly, overconfidence could also lead to savers missing the signs of a scam. Two-thirds of savers say they are confident enough to make an independent decision about their pension. The same proportion would trust someone offering pensions advice out of the blue – one of the main warning signs of a scam.
Recognising scam warning signs
It is vital that pension savers are aware of the common tactics used by scammers, so they can spot the warning signs.
Pension scam artists are often articulate and financially knowledgeable. They can often point to credible websites, testimonials and materials that are hard to distinguish from the real thing. They will design attractive offers to persuade the transfer of a pension pot, or the release of funds from it. It is then invested in unusual and high-risk investments like overseas property, renewable energy bonds, forestry, storage units, or is simply stolen outright.
Scam tactics include:
- contact out of the blue
- promises of high and/or guaranteed returns
- free pension reviews
- access to a pension before age 55 – with no mention of potential tax liabilities
- complicated investment structures, or unusual, high-risk investments
- high-pressure sales tactics, or pressure to act quickly.
Protecting your pension
Although a ban on cold calling in the UK, including emails and texts, was introduced at the beginning of 2019, the problem continues. Cold calls are a major red flag for scams and unsolicited offers should be ignored or rejected. Cold callers will often offer a free pension review. Professional advice on pensions is not free – a free offer out of the blue is probably a scam.
It is crucial that pension savers know who they are dealing with so checking the FCA Register is imperative. Dealing with an authorised firm gives access to the Financial Ombudsman Service or the Financial Services Compensation Scheme (FSCS), which can hold firms to account and give financial protection.
A common scam is to pretend to be a genuine FCA-authorised firm (called a 'clone firm'). The contact details on the FCA Register should always be used, not the details the firm gives out.
Pension savers should never allow themselves to be rushed or pressured into making a decision. They should not be afraid to miss out on an 'amazing deal' because of artificial deadlines, and if promised returns sound too good to be true, they probably are.
Impartial information, financial guidance and advice are all key to making a good decision before changing pension arrangements.
Looking for advice
Free, independent and impartial information and guidance is available from The Pensions Advisory Service, while for those over 50 with a defined contribution (DC) pension, Pension Wise offers pre-booked appointments to talk through retirement options. Those opting for the services of a financial adviser must be sure to use one that is regulated by the FCA.
Planning for your retirement in advance is vital. We would be only too pleased to provide any further assistance you may need. Please contact us.
Getting payroll right
Considering the UK's employment rights and looking at how employers must meet them.
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Chancellor Sajid Javid's pledge to raise the National Living Wage (NLW) over the next few years was one of a series of recent reminders to employers that they must be increasingly careful to meet the employment rights of their employees. The government's 'Good Work Plan' consultation ended in October and may mean changes to the enforcement of employment laws. So, complying with payroll issues from salary to holiday entitlements, payslips to pensions is increasingly important for employers.
The National Minimum Wage and the National Living Wage
Since the establishment of the National Minimum Wage (NMW) in 1999, there have been constant changes to both rates and regulations, with perhaps the biggest being the introduction of the National Living Wage (NLW) in 2016.
The minimum wage is paid at an hourly rate, with payment bands depending on age, and special provisions applying to apprentices. The NLW is the minimum wage for those aged 25 and over, whilst the NMW applies to those above school leaving age and individuals aged under 25. For convenience, we refer to 'minimum wage' to cover both the NMW and the NLW.
Current minimum wage rates
|Minimum wage rate||Hourly rate from 1 April 2019|
|21-24 year-old rate||£7.70|
|18-20 year-old rate||£6.15|
|16-17 year-old rate||£4.35|
Recently, Chancellor Javid pledged to raise the NLW to £10.50 within the next five years and lower the qualifying age for the NLW from 25 to 21. Getting minimum wage obligations right can be challenging for employers, and failure to pay the minimum wage correctly can lead to penalties. A notice of underpayment will calculate the arrears of pay to be paid and the penalty set at 100% of the total underpayment, which can be doubled to 200%, unless the arrears are paid within 14 days. The maximum fine for non-payment is £20,000 per worker, and employers who fail to pay will be banned from being a company director for up to 15 years.
Payslips and holidays
Employees are legally entitled to receive a payslip showing their earnings before and after deductions. However, one in ten workers are not currently receiving a payslip, according to research from think tank the Resolution Foundation. This makes it hard for them to calculate whether they are receiving the right level of pay, pension and holiday entitlement, and check Pay as You Earn (PAYE) deductions.
The research also showed that around one in 20 workers receive no paid holiday entitlement, despite being legally entitled to at least 28 days' paid holiday a year. In addition, failure to offer staff workplace pensions under auto-enrolment rules can end in prosecution, with up to two years' imprisonment and unlimited fines possible.
The 'Good Work Plan'
The government's recent 'Good Work Plan' consultation examined a proposal to create a new single enforcement agency to regulate employment law. This should leave it better placed to tackle labour market violations than the multiple bodies currently operating.
The government is being encouraged to target investigations into labour market violations into sectors like hotels and restaurants, along with firms who make large use of atypical employment contracts, as that's where abuse is most prevalent.
Getting payroll right
Administering payroll and complying with the Real Time Information (RTI) regulations can be burdensome for businesses. The creation of customised payslips and the effective administration of PAYE, national insurance, Statutory Sick Pay and Statutory Maternity Pay is a time-consuming process. Many small and medium-sized enterprises (SMEs) may not have the resources or expertise to handle this themselves, but professional payroll services are available.
Employment law and the minimum wage are complex areas, and we have only been able to touch on key points here. We would be only too pleased to provide any further assistance you may need. Please contact us.
Fighting business crime
Highlighting some key steps to take in order to combat business crime.
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Business crime is a major problem for UK businesses facing threats ranging from theft and property damage to fraud and cyber-attacks. The costs suffered by firms as a result of these crimes run into the billions every year. Here we take a look at some of the most common risks and ask what businesses can do to protect themselves.
Counting the cost
The financial cost of crime incurred by UK businesses on an annual basis is exorbitant.
Traditional crime, including robbery and criminal damage, costs nearly £17 billion a year, a number that rises even higher when indirect costs such as store closures and staff absences are factored in. In addition, cybercrime is a major risk to modern, connected businesses. Small businesses alone suffer an average of almost 10,000 attacks a day, at an annual cost of £4.5 billion, according to the Federation of Small Businesses (FSB). Phishing attempts are the most frequent type of attack, followed by malware, fraudulent payment requests and ransomware.
However, both the numbers for physical and cybercrime pale beside the estimated £130 billion in losses incurred annually as a result of fraud, according to the Centre for Counter Fraud Studies (CCFS) at the University of Portsmouth.
Tackling business crime
Traditional methods remain the best way of tackling traditional business crimes, according to the FSB. The business group recently urged the government to increase police numbers, as a 'critical step' in helping to prevent and investigate business crime. The FSB also called for the Home Office to link funding to the 'proper resourcing of business crime'.
Businesses can play their part be ensuring crimes are reported to the police. They should also review their physical security measures and business processes to make sure they are robust.
The implementation of stringent new data laws, which form the General Data Protection Regulation (GDPR), have helped to reduce cyber security breaches. However, the government is still urging business leaders to 'do more' in order to protect their firms from cyber-attacks and cybercrime. Businesses are being encouraged to follow the 'ten steps to cyber security' guidance, which can be found on the National Cyber Security Centre (NCSC) website.
Although it is impossible to eliminate the threat completely, there are steps all businesses can take to defend themselves. It is vital to ensure anti-virus software is up-to-date, and that passwords are strong and regularly updated. Also, firms should have clear policies on the usage of both personal and business devices. Despite the frequency of attacks, over a third of small firms have not yet installed security software, and almost half do not regularly update their software.
Although the costs of fraud are enormous, it is possible for businesses to significantly reduce them. Collectively, reducing fraud losses by 40% would 'free up more than £76 billion each year', says the CCFS.
At present, organisations adopt a reactive approach to fraud, and only look to tackle it once it has taken place, and losses have already occurred, the CCFS found. Instead, firms should view fraud as a business cost – by understanding the nature and scale of the cost, they can help to reduce its extent.
In addition, the CCFS says working to measure losses is highly cost-effective. Data shows that organisations which re-measure the same area of expenditure have consistently lower loss rates. The NHS, for example, reduced its fraud losses by 60% over a seven-year period by measuring them and gathering information on their nature.
Businesses should stay up-to-date on crime-related issues and protect themselves wherever possible.
Taking a look at HMRC's Loan Charge
Analysing HMRC's controversial Loan Charge and its impacts.
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HMRC's Loan Charge has united MPs from across the political spectrum in condemning it and calling for its cancellation. The controversial measure, which has been applied retrospectively to around 50,000 self-employed workers, has seen many handed crippling tax bills. It has also been blamed for bankruptcies and the loss of homes. Here, we take a look at the Loan Charge.
What is the Loan Charge?
Former Chancellor George Osborne announced the Loan Charge in the 2016 Budget in order to target users of tax avoidance loan schemes for outstanding taxes. The schemes saw self-employed workers receive earnings as non-repayable loans instead of income, so they avoided paying income tax and national insurance (NI). HMRC says the loans count as income and should therefore be taxed.
The Loan Charge applies to loans made since 6 April 1999 if they were still outstanding on 5 April 2019, and the tax due had not been settled. Scheme users who filed their information with HMRC, or settled the outstanding tax, are not subject to the Loan Charge. However, those who did not meet the deadline have to pay the Loan Charge. It takes the total of all outstanding loans on 5 April 2019 and treats them as income received on that date, or profits arising in the tax year 2018/19. Those who have not settled must give details of outstanding loans to HMRC before the 31 January 2020 self-assessment deadline.
The impact of the Charge
The typical sum owing, according to the Loan Charge Action Group (LCAG), is around £120,000. However, HMRC disputes this figure, claiming the average figure is nearer to £13,000. Many of the contractors were IT professionals, although there are agency nurses, NHS workers and social workers caught up in the schemes. Most were assured by their employers when they entered new pay arrangements in the late 1990s or early 2000s that they were perfectly legal.
The charge has been accused of causing 'bankruptcies, damage to livelihoods and the loss of homes'. Now, the LCAG has launched a campaign for a judicial review into the charge. Commenting on the issue, Bob Neill, Chair of the Select Committee on Justice, said: 'I have seen first-hand examples of how this approach is pushing people into real financial hardship and even bankruptcy, impacting on people's health and tearing families apart under the strain.'
A spokesperson for HMRC stated: 'The Loan Charge is designed to tackle tax avoidance and ensure everyone pays their fair share. It builds on more than two decades of HMRC action to challenge these schemes. The Prime Minister will be setting out more details on the government's policy agendas over the next few months.'
HMRC also warned people about using 'loan busting schemes', which claim they can help people avoid having to pay the loan charge. HMRC says that these schemes do not work, and users may end up paying more, as they will still be subject to the loan charge as well as paying the promoter's fees.
Will the Prime Minister step in?
Prime Minister Boris Johnson promised a review of the Charge when he was on the campaign trail earlier this year, but so far he has not acted since entering 10 Downing Street. Now Mr Johnson is coming under pressure from MPs on all sides, including many in his own party.
According to MPs, HMRC has failed the test of 'fairness' in how it has dealt with affected workers. Mr Neill commented: 'That is why scores of MPs and Lords, from across the political spectrum, have called for the operation of the Loan Charge to be immediately suspended for a full and, crucially, independent, inquiry to take place. Once unfairness is confirmed, the Charge should be scrapped.' Those MPs calling for a review have been joined by the Federation of Small Businesses (FSB) and other groups representing the self-employed and contractors.
If you are unsure about anything to do with this charge or would like to discuss the matter further, please do not hesitate to contact us.
Reviewing the changes to off-payroll working
Reviewing the changes to off-payroll working as HMRC prepares to extend the initiative to the private sector.
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Next April will see HMRC apply changes to the way off-payroll workers of medium and large organisations in the private sector are taxed. This move is an extension of the changes to off-payroll working rules that were applied to the public sector in 2017. Here, we take a look at the regulations.
The 'Intermediaries Regulations', also known as IR35
The Intermediaries Regulations, also known as IR35, apply to individuals who provide their personal services via an 'intermediary'. An intermediary may be another individual, a partnership, an unincorporated association or a company; however, the most common structure is a worker providing their services via their own company – known as 'personal service companies' (PSCs).
The rules are specifically designed to prevent the avoidance of tax and national insurance contributions (NICs) by those using PSCs and partnerships. The rules do not stop individuals selling their services through either their own PSC or a partnership. However, they do seek to remove any possible tax advantages from doing so. Instead of allowing contractors to extract taxable profits as dividends, thereby avoiding income tax and NICs, they would need to be paid as if the payment is a salary.
Introduction to public sector contractors
In 2017, HMRC took aim at 20,000 public sector contractors with the intention of raising £400 million by requiring some workers to pay income tax and NICs.
Those changes saw some contractors' net income cut significantly. HMRC also shifted the responsibility for compliance from the individual contractor to a public body or recruitment agency. The effect of these rules, if they apply, will be:
- the medium or large business (or an agency paying the PSC) will calculate a 'deemed payment' based on the fees the PSC has charged for the services of the individual
- generally, the entity that pays the PSC for the services must deduct Pay as You Earn (PAYE) and employee NICs as if the deemed payment is a salary paid to an employee
- the paying entity will have to pay to HMRC not only the PAYE and NICs deducted from the deemed payment, but also employer NICs on the deemed payment
- the net amount received by the PSC can be passed on to the individual without the company deducting any further PAYE and NICs.
The IR35 rules apply to individuals who would be classed as employees, rather than self-employed, if they supplied their services as an individual rather than through their PSC. So, an individual operating through a PSC but with only one customer for whom he/she effectively works full-time is likely to be caught by the rules. On the other hand, an individual providing similar services to many customers is far less likely to get caught in the net.
HMRC has made a tool known as the 'check employment status for tax' (CEST) tool. This is available for organisations that need to determine who IR35 applies to.
Extension to the private sector
HMRC intends to extend the off-payroll working changes to private sector contractors in April 2020, but the path to this deadline has proved to be a rocky one.
Following two consultations, the government has finally published draft legislation, which will, subject to further consultation, be included in the next Finance Bill. HMRC has also promised to keep working on the CEST tool, which has been heavily criticised for not being fit for purpose.
Next year's reforms will use the off-payroll working rules in the public sector as a starting point. The onus will be on organisations to make a determination of a worker's employment status and communicate the decision in a Status Determination Statement (SDS). The PSC worker may request for the reasons for the determination, and if they disagree with the decision, the CEST tool can be used to check whether it was correct. However, the efficacy of the CEST tool is being questioned by many who consider that the law on status is too complicated to allow a simple yes/no checklist to provide the right answer in all cases.
The government will introduce a 'client-led status disagreement process' where the worker can make a representation to the medium or large business if they believe that the conclusion mentioned in the SDS is incorrect. The medium or large business has 45 days, from when the representation is received, to review the decision and either confirm the decision or give the worker a new SDS with a different conclusion. If the business confirms the decision, it must give its reasons for deciding that the conclusion is correct.
We are always on hand to answer any questions you may have about off-payroll working – simply contact us for more information.
Gifting and inheritance tax: considering the rules
Considering the rules surrounding gifting and inheritance tax.
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Research published recently by the Institute for Fiscal Studies (IFS) and the National Centre for Social Research (NCSR) suggested that just 45% of individuals seeking to make a financial gift are aware of the inheritance tax (IHT) rules and exemptions. Here, we take a look at these in more detail.
An individual is entitled to give gifts of up to £3,000 per annum without incurring an IHT charge. An unused annual exemption may be carried forward for one year only – this may only be used in the tax year that immediately follows.
Individuals are also able to give as many gifts as they'd like, up to £250 per person, per tax year. Gifts between spouses/civil partners are exempt from IHT, and, on death, a spouse is able to pass on their unused nil-rate band. The nil-rate band currently stands at £325,000.
Gifts to children in consideration of marriage of up to £5,000 are exempt, as long as they are made by parents. Meanwhile, wedding gifts of up to £2,500 given to grandchildren or great-grandchildren are exempt from IHT, and £1,000 is exempt if the wedding gift is given to an alternative relative or friend.
Gifts to registered charities are exempt from IHT, as long as the gift becomes the property of the charity or is held for charitable purposes. Meanwhile, gifts made to political parties are also exempt, under certain conditions.
A gift given in order to assist with family maintenance does not give rise to an IHT charge. Such gifts may be given as a transfer of property upon divorce; gifts given to children aged under 18 or those in full-time education; and gifts towards a dependent's living costs.
IHT and lifetime gifts
There are three categories that 'lifetime gifts' can fall into:
- a transfer made to a company or a trust (excluding a disabled trust) is immediately chargeable
- exempt gifts which are ignored when they are made and on the death of the donor (such as gifts to charity)
- transfers that don't fall into the first two categories are Potentially Exempt Transfers (PETs), and IHT will only be due if the donor dies within seven years of making the gift. The amount of IHT due will be determined on the number of years that have passed since the gift was given and the donor's death.
In regard to PETs, gifts made within three to seven years before a donor's death are taxed using 'taper relief'. Therefore, the IHT rate for three to four years between gifting and death currently stands at 32%; for four to five years it's 24%; for five to six years it's 16%; and between six and seven years it is 8%. No IHT is due on the gift after seven years.
A look at the nil-rate band
The rate of tax on death is 40%, and 20% on lifetime transfers, where chargeable. For 2019/20, the first £325,000 chargeable to IHT is at 0% - this is called the 'nil-rate band'. An additional Residence Nil-Rate Band (RNRB) is available where an interest in a qualifying residence passes to direct descendants. The amount of relief is £150,000 for 2019/20: this is set to rise to £175,000 for 2020/21.
Here, we have provided just a brief outline of some of the issues to consider when giving gifts. There may be scope for additional savings when factoring giving gifts into your estate planning – please get in touch for more information.
Getting to grips with PAYE
Taking a look at the current PAYE scheme.
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The Office of Tax Simplification (OTS) recently called for a comprehensive review of the Pay as You Earn (PAYE) system, to ensure tax agents can 'see relevant client information' and 'access a number of key services'. Here, we take a look at the PAYE system and how it operates.
How does the system work?
PAYE is the system through which employers deduct an amount of income tax, national insurance contributions (NICs) and student loan repayments from employees' wages, in accordance with the relevant PAYE codes and HMRC procedures.
Employers must normally operate PAYE as part of their payroll process: however, if none of the employees are paid £118 or more per week, receive expenses and benefits, have an additional job or receive a pension, employers do not have to register for PAYE. However, they must still keep payroll records.
A look at Real Time Information (RTI)
Employers are required to report using the PAYE system in real time. Under RTI, employers or agents must make regular payroll submissions for each pay period during the year. These must detail payments and deductions made from employees each time they are paid. Employers must make two main returns: a Full Payment Submission (FPS) and an Employer Payment Summary (EPS).
Employers must send the FPS to HMRC on or before the date employees are paid. All employees must be included, even if they earn less than £118 per week.
Certain situations require employers to submit an EPS. These include:
- instances where no employees were paid in the tax month
- instances where an employer received advance funding to account for statutory payments
- cases where statutory payments (such as Shared Parental Pay) are recoverable, alongside a National Insurance Compensation Payment
- cases where Construction Industry Scheme (CIS) deductions are suffered, which could be offset (please note that this applies to companies only).
The amounts recoverable are offset against the amount due from the FPS. This helps to calculate the amount payable. An employer's EPS must be with HMRC by the 19th of the month for it to be offset against the previous tax month's payment. At the end of the year, employers must make a final FPS or EPS return to inform HMRC that all payments and deductions have been reported.
PAYE and new businesses
As soon as a new employer takes on employees, they must contact HMRC. A PAYE scheme must be set up for the business. HMRC provides new employers with guidance, including a variety of forms, and online 'basic PAYE tools'. These help employers to calculate the amount of tax and NICs due.
It is vital that employers understand the requirements: HMRC often carries out compliance visits, and these may occur at any time. Employers will be held liable for any under-deductions HMRC finds.
HMRC issues penalties to employers who fail to meet their PAYE reporting requirements. You could be liable for a penalty if your FPS was late; if you failed to send the correct number of FPSs; or if you failed to send an EPS when you didn't pay any employees in a tax month. Fines range from £100 for firms with one to nine employees, to £400 for businesses with 250 employees or more.
Managing a PAYE scheme can be challenging: that is where we can help. Please contact us for more information.
Making Tax Digital for VAT: answering the key questions
Providing answers to a handful of your key MTD for VAT questions.
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Making Tax Digital for VAT (MTD for VAT) is now live. Firms with a taxable turnover above the VAT registration threshold (currently £85,000) must comply with the new rules. Below, we answer some of your key MTD for VAT questions.
Q: What information needs to be kept digitally?
A: Under MTD for VAT, firms must keep specific records digitally. Additionally, all future VAT returns must be filed directly from digital records via an Application Programming Interface (API).
Submission of the return can be from API-enabled spreadsheets, software or bridging software. Businesses using more than one software program are required to have 'digital links' in place between the products.
Q: Does HMRC provide MTD for VAT software?
A: HMRC does not provide firms with MTD for VAT software. It does, however, list recognised products on the gov.uk site. Businesses are encouraged to contact their software provider to ascertain whether MTD for VAT products are available.
Q: Am I required to sign up to MTD for VAT, or is my business enrolled automatically?
A: Businesses are required to sign up to the MTD for VAT initiative. Business owners will need their firm's Government Gateway user ID and password, alongside its VAT number, to sign up. Once the process has been completed, HMRC will confirm via email that your sign-up has been successful.
Q: Do all businesses have the same start date?
A: Each firm has its own date to start using the MTD for VAT system. Your start date is dependent on your VAT quarters. If your taxable turnover is above £85,000, the MTD for VAT rules are compulsory for your first VAT return period starting on or after 1 April 2019. Those businesses with turnover below the VAT registration threshold are not required to use MTD for VAT. However, they may wish to join the scheme voluntarily.
Some businesses are exempt from MTD for VAT. These include:
- businesses run by practising members of a religious society or order with beliefs incompatible with MTD for VAT requirements
- businesses subject to an insolvency procedure
- those satisfying HMRC that, for reasons of age, disability, remoteness of location or for any other reason, it is not reasonably feasible for them to use digital tools to keep records and submit returns.
A significant deferral of MTD for VAT applies for a small group of taxpayers with 'more complex' requirements. These firms have been given an additional six months to prepare for the initiative.
For more information on which types of business are affected by the deferral, please see below. Firms subject to the deferral adopt MTD for VAT rules for their first VAT return period starting on or after 1 October 2019.
Q: Which firms are affected by the deferral?
A: The deferral applies to not-for-profit organisations not set up as a company; trusts; VAT divisions; VAT groups; local authorities; public corporations; and traders based overseas. Public sector entities required to provide additional information on their VAT return, those who must make payments on account, and annual accounting scheme users are also covered by the deferral.
Q: If my turnover falls, can my business leave MTD for VAT?
A: The MTD for VAT regulations specify that, once a business is in MTD for VAT because its taxable turnover exceeds the VAT registration threshold, it must remain in the scheme, even if turnover subsequently falls below the threshold.
MTD for VAT rules only cease to apply if a business qualifies for exemption, or if it deregisters from VAT.
Q: Do penalties apply for incorrect filing under MTD for VAT?
A: For the first year, HMRC intends to take a more lenient approach to issuing MTD for VAT penalties. HMRC has termed this the 'soft-landing' period. For VAT return periods beginning between 1 April 2019 and 31 March 2020, penalties won't be charged if businesses don't have digital links between software programs in place. Cut-and-paste will continue to be an acceptable way to transfer data to HMRC. The soft-landing period has been adapted for those businesses affected by the deferral, permitting them 12 months to put digital links into place.
However, where information is transferred from the accounting records into a separate program for submission to HMRC via the API, transfer must be digital.
In addition, the VAT default surcharge regime will operate until 'at least' 2021. From this time, HMRC intends to implement a new penalty 'points' scheme for late submission of VAT returns and late VAT payments.
Ensuring you are compliant with the MTD for VAT rules is crucial. We are always on hand to answer any questions you may have - simply contact us for more information.
Taking a look at the measures coming into effect in 2019/20
Reviewing the changes to tax and business legislation taking effect from April 2019.
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The beginning of the 2019/20 tax year ushers in a handful of changes to tax and business legislation. Here, we outline some of the key measures to take note of.
Rising minimum wage
From 1 April 2019, the National Minimum Wage (NMW) and the National Living Wage (NLW) rates will rise.
The new hourly rates of pay applying from this date are as follows:
|Age||National Minimum Wage||National Living Wage|
|16 and 17||£4.35||-|
|18 - 20||£6.15||-|
|21 - 24||£7.70||-|
|25 and over||-||£8.21|
*Under 19, or 19 and over in the first year of their apprenticeship.
Additionally, in the 2019 Spring Statement, Chancellor Philip Hammond announced that Professor Arindrajit Dube will undertake a review of the latest international evidence on the impact of minimum wages, to inform future NLW policy after 2020.
Alterations to income tax
In 2019/20, the income tax basic rate band will rise to £37,500. Consequently, the threshold at which the 40% band applies is £50,000 for taxpayers who are entitled to the full personal allowance (PA). Individuals pay tax at 45% on their income over £150,000.
From April 2019, the PA will rise from £11,850 to £12,500. Where an individual's 'adjusted net income' exceeds £125,000 in 2019/20, no PA is available.
The tax on income for taxpayers resident in Scotland is different to income tax paid elsewhere in the UK. In 2019/20, there are five income tax rates, which range between 19% and 46%. The two higher rates are 41% and 46%, as opposed to the 40% and 45% rates that apply to such income for other UK residents. For 2019/20, the threshold at which the 41% band applies is £43,430 for those who are entitled to the full PA.
Meanwhile, from April 2019, the Welsh government has the power to vary the rates of income tax payable by Welsh taxpayers. The Welsh rate of income tax has been set at 10p by the Welsh government: this will be added to the reduced rates. As a result, the tax payable by Welsh taxpayers continues to be the same as that payable by English and Northern Irish taxpayers.
Changes to employer-provided cars
The scale of charges for working out the taxable benefit for an employee who has use of an employer-provided car is normally announced well in advance. Most cars are taxed by reference to bands of CO2 emissions, multiplied by the original list price of the vehicle. The maximum charge is capped at 37% of the list price of the car.
For 2018/19 there was generally a 2% increase in the percentage applied by each band. For 2019/20 the rates will increase by a further 3%.
Rising Residence Nil-Rate Band
The inheritance tax Residence Nil-Rate Band (RNRB), which was introduced in April 2017, will rise from £125,000 in 2018/19 to £150,000 for the 2019/20 tax year. The RNRB is designed to enable a 'family home' to be passed wholly or partially tax-free on death to direct descendants, such as children or grandchildren. It will increase to £175,000 in 2020/21. Thereafter it will rise in line with the Consumer Price Index.
Increase in compulsory employer pension contributions
As part of the pensions auto-enrolment scheme, employers are currently required to contribute at least 2% on the qualifying pensionable earnings for eligible jobholders. From 6 April 2019, this figure will increase to 3%.
Alterations to the Gift Aid Small Donations Scheme
Where small charitable donations are made, and it is impractical to obtain a Gift Aid declaration, individuals may choose to make use of the Gift Aid Small Donations Scheme (GASDS). The scheme currently applies to donations of £20 or less made by individuals in cash or contactless payments. From 6 April 2019, this limit will rise to £30.
As your accountants, we can advise you on how the measures taking effect from April 2019 could affect your business or personal finances. Please get in touch with us for more information.
Considering the rise in popularity of flexible working
Taking a look at the flexible working application process.
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A study recently suggested that being given the option to work flexibly is amongst the most popular work benefits desired by UK employees. Meanwhile, separate research also revealed that 56% of professionals believe that working the traditional nine to five is 'outdated', whilst a further 39% have urged employers to abandon 'dated' working traditions. Here, we take a look at how employees can request to work flexibly, and how employers should respond.
Making a statutory application
All employees have the right to request flexible working, whether that be choosing to work from home or having flexible start and finish times. However, in order to be eligible, employees must have worked continuously for the same employer for at least 26 weeks.
Employees seeking to work flexibly must make a statutory application. Employees are required to write to their employer, outlining their request. Take note: only one application can be made per year.
The employer is obliged to consider the request, and reach a decision within three months (however, this may be longer, if agreed with the employee).
Approving the application
In the event that the employer agrees to the request, the terms and conditions of the employee's contract must be changed. The employer should write to the employee, giving them a statement of the agreed changes, and a start date for flexible working. This should be done no later than 28 days after the request was approved.
Rejecting the application
If the employer disagrees with the request, they are required to write to the employee, outlining the business reasons for the refusal. Many reasons exist for an employer to reject an application:
- extra costs associated with flexible working will damage the business
- work cannot be reorganized amongst other members of staff
- individuals cannot be recruited to do the work
- the quality of work and performance will be affected by flexible working
- the business will struggle to meet customer demand
- a lack of work exists during the proposed working times
- the business plans to make changes to its workforce.
Making an appeal
Employees do not have the statutory right to appeal a decision. However, an employer may choose to provide an appeals system, in order to help demonstrate that they are dealing with requests reasonably.
Employees may take the matter to an employment tribunal in cases where the employer:
- failed to handle the employee's request in a 'reasonable manner'
- incorrectly treated the employee's application as withdrawn
- dismissed the employee or treated them unfairly as a result of their request to work flexibly
- rejected the application based on false information.
Employees are not permitted to appeal simply because their flexible working request was rejected. Those employees that do appeal must do so within three months of:
- hearing their employer's decision
- hearing their request was treated as withdrawn
- the date the employer was required to respond to the request, but failed to do so.
Individuals unsure of their rights are advised to obtain legal advice.
Flexible working is likely to become more and more popular. Both employees and employers should ensure that they stay up-to-date on the rules regarding making an application to work flexibly.