Agent Update February / March 2018

HMRC have issued the Agent Update for February/March 2018. We have summarised the key content for you with links to our detailed guidance on the topics covered.

HMRC Spotlights and disclosure opportunities

  • Taxpayers are reminded that the Requirement To Correct obliges them to disclose unpaid UK Income Tax, CGT or IHT on non-UK income and assets by 30 September 2018 or risk incurring much higher penalties.
  • HMRC have updated Spotlight 32 on Managed Service Companies (MSC) Tax Avoidance
    • Where a business mainly exists to supply labour and someone else manages the arrangements, they should check whether they are an MSC.
    • If an MSC, the business may be required to treat some payments such as dividends and loans as earnings and deduct PAYE and NIC.

Fulfilment House Due Diligence Scheme

  • From 1 April 2018, online applications for the Scheme open.
  • UK businesses storing goods imported from outside the EU will need to apply for approval by HMRC if those goods are offered for sale by 30 June 2018, and carry out checks and keep records from 1 April 2019.
  • See HMRC’s guidance and the EUs other proposed VAT Legislation affecting cross border supplies of goods and services.

Serial Tax Avoidance Regime (STAR)

  • HMRC have published new guidance on the Serial Tax Avoidance Regime:
    • STAR is designed to deter people from using tax avoidance schemes.
    • Penalties of 20% - 60% of understated tax apply depending on the number of failed schemes in the same warning period.
    • Access to direct tax reliefs will be denied after three defeated schemes.
  • The STAR will affect all avoidance arrangements entered into after 15 September 2016.
  • HMRC have also published new guidance for agents and advisors on Penalties for enablers of tax avoidance schemes which applies to arrangements entered into after 16 November 2017.

Corporation Tax

  • Companies must notify HMRC within three months of becoming active.
    • Agents can send information about active companies through the Online services for agents.
  • Corporation Tax must be paid electronically.
  • HMRC are phasing out repayments by payable order and replacing these with BACS Direct Credit:
    • Bank accounts and sort codes must be provided each time a CT Return is submitted.
  • HMRC have published a number of draft guidance documents relating to the reformed Corporation Tax loss relief which took effect from 1 April 2017:
  • Most losses arising post 1 April 2017 can be carried forwards and set against future total profits of the company or group relieved.
  • The amount of losses carried forwards that can be offset will be limited to 50%.
  • The deadline for R&D Tax relief claims for reimbursed employee expenses has been extended to 30 April 2018.

Apprenticeship Levy

  • From April 2018, the Department of Education plans to allow Apprenticeship levy paying employers to pass the funds to any other employer.
    • Up to 10% of the annual value of the levy paying employer’s funds will be able to be transferred.
    • The funds will have to be used for apprentices.

Tax equalisation

HMRC have amended the modified PAYE appendices advising how to deal with PAYE and NIC corrections:

  • Employers should not use Earlier Year Updates through RTI to correct the errors.
  • The employer should either:

PAYE

  • Improvements to the new real time Dynamic Coding is ongoing.
  • The National Minimum Wage and National Living Wage will increase from 1 April 2018.
  • Student loans:
    • From 6 April 2018, the FPS will include a new box for specifying the student loan plan type. This will ensure the correct amount is taxed.
    • Where the wrong plan type is used, a Generic Notification message (GNS) will be issued going forward.
    • The plan type will be included on the SL1 form.
  • HMRC have updated their Statutory Maternity Pay Calculators.

Termination payments

New rules affect Termination payments made on, or after 6 April 2018.

  • Payment in lieu of notice (PILONs) will be taxable in all cases.
  • If not specifically split, the payment will be separated into:
    • Post-employment notice pay (PENP), based on basic pay that would have been received had proper notice been given, which is subject to PAYE. This is calculated by applying a formula specified in legislation.
    • The remaining balance, is taxable to the extent it exceeds £30,000. None of this balance is subject to employee’s NIC. The balance is subject to employer’s NIC.
  • Foreign Service Relief is removed for termination payments on or after 6 April 2018.

Scottish Income Tax

The Scottish Budget announced changes to Scottish Income Tax for 2018/19:

  • New starter rate of 19% on first £2,000 over the Personal Allowance.
  • The Scottish basic rate threshold will be from £13,851 to £24,000 and the rate will be 20%.
  • A new intermediate tax band of £24,001 to £43,430, will be introduced and the rate will be 21%.

The Scottish higher and top rates will be 41% and 46% respectively.

Simplifying PAYE Settlement Agreements (PSA)

  • HMRC proposed to digitise PSAs from 6 April 2018. They have effectively postponed this and instead looked for other ways to simplify PSAs.
  • A Consultation recently concluded and is awaiting HMRCs response, about changes in legislation which simplify the PSA process:
    • PSAs will not need to be renewed annually.
    • The regulations would be ‘future proofed’ to enable digitisation.

Pension auto-enrolment

The minimum Auto-enrolment pension contributions for employers and their staff will increase from 2% to 5% from April 2018, and then to 8% from April 2019.

Annual Tax on Enveloped Dwellings (ATED)

  • From 1 April 2018 all online ATED returns must be filed using ATED Online Services.
  • This includes Relief Declaration Returns (RDRs).
  • The valuation date for the 2018/19 period will be the later of 1 April 2017 and the acquisition date of the property.

Construction Industry Scheme (CIS)

  • Where construction operations are carried out on the taxpayer’s own business property, they will not be caught by the deemed contractors rules for CIS.
  • This exemption does not apply to property that is let, up for sale, or held as an investment.
  • Incidental use of the property by another person will be allowed.

Self-Assessment Tax Returns

  • Paper returns will be posted by 30 April 2018 and must be submitted by 31 October 2018.
  • Notices to file will be sent by the end of May 2018 and online returns must be submitted by 31 January 2019.
  • Outstanding tax can be settled through the PAYE code if:
    • The paper return is filed by 31 October 2018 or online return by 31 December 2018, and
    • The tax due is less than £3,000, and
    • The individual already pays tax through PAYE.

VAT

  • The VAT Retail Export Scheme (RES) is being digitised. Under the RES:
    • Some customers can recover VAT paid on goods exported outside the EC.
    • Retailers can zero-rate goods to some customers who will be exporting those goods.
  • VAT Notices that have been updated:
    • 700/8: disclosure of VAT avoidance schemes
    • 700/56: insolvency
    • 700/60: payments on account

Consultations

HMRC service reminders

  • HMRC working with Tax Agents Blog.  This provides another channel to communicate about consultations, news and updates, and the rollout of new digital services for agents.
  • HMRC twitter account Twitter@HMRCgovuk.
  • Complain to HMRC. To make a complaint against HMRC on behalf of your client you must be appointed as their tax advisor.
  • Email alerts for employers. Agents should encourage employers to register for email alerts to be notified about coding changes and information published on Government Web pages.
  • Where’s my reply? This service provides an estimated date that HMRC will respond to queries.
  • Future online downtime. HMRC provide information about planned downtime which will affect the availability of online services.
  • Staying safe online. HMRC provides details and updates of scams that they are aware of together with information to help identify genuine and bogus contact.

Other content

  • HMRC are reminding customers that they changed their banking supplier to Barclays in 2016 and that the right bank details and payslips must be used to ensure the payments are not rejected.
  • Other recent publications:
  • Tax-free childcare is now open to parent’s of under 12’s.
  • Employer-supported childcare will cease to be available to new entrants from 6 April 2018.
  • In addition to the above, the update contains its usual mix of briefing notices and toolkits, and an update on Working Together as well as details of HMRC’s upcoming ‘Talking Points’ for agents and an update on the Agents Forum (AF).

A link to the full Agent Update can be found here or accessed via HMRC’s website, www.gov.uk.

 

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