Agent Update April / May 2018

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

Compliance

Fulfilment House Due Diligence Scheme

  • Under the scheme UK businesses that store goods imported from outside EU for non-EU suppliers need HMRC approval and from 1 April 2019 must carry out certain checks.
  • Deadline for applications for existing fulfilment businesses is 30 June 2018.
  • Businesses starting to trade on or after 1 April 2018 need to apply by 30 September 2018.
  • See HMRC’s guidance and the EUs other proposed VAT Legislation affecting cross border supplies of goods and services.

Advertising Standards Authority (ASA) ruling

  • SDLT scheme:
    • Promoter must remove adverts regarding an SDLT scheme following the decision of the ASA considering them to be misleading.
    • The scheme allegedly relies on the security interest exemption for mortgage providers and HMRC believe the scheme doesn’t work.
    • See Spotlight 43: SDLT avoidance: misleading advertising.
  • Contractor loan scheme:
  • HMRCs view is that these individual cases are not nearly as important as the message that it sends out to other promoters with similar advertising who should also change the way they advertise or risk facing ASA sanctions.

Disguised remuneration

Corporation Tax loss relief

The Corporation Tax loss relief reform applied from 1 April 2017. This included restrictions on the use of carried forward losses:

  • Companies with profits in excess of the deductions allowance (max. £5m), will not be able to reduce taxable profits to nil using brought forward losses.
  • The deductions allowance is reduced for periods straddling 1 April 2017 and is shared between group members.
  • For groups a nominated company will need to submit a group allowance allocation statement.
  • See Losses: trading and other losses.

Scottish Income Tax

  • The Scottish Budget was passed by Scottish Parliament on 21 February 2018 and affects tax rates for 2018/19.
  • See Scottish Income Tax Rates.

PAYE

Apprenticeship levy

  • From 6 April 2017, employers with an annual pay bill of more than £3m must pay the levy.
  • From April 2018, employers who pay the levy can transfer up to 10% of the annual funds to one another employer. The number of employers that they can transfer to will increase over time.
  • See Apprenticeship levy (employers’ briefing).

Optional remuneration schemes and salary sacrifice

  • If an employee forgoes any amount of earnings in return for a benefit in kind since 6 April 2017, the taxable value is the higher of the amount foregone or the taxable value of the benefit calculated in the normal way.
  • Pensions, childcare, cycle to work, and cars with less CO2 emissions under 75g/km are not caught.
  • Cars and accommodation move into the new rules on renewal or, for existing cases, from April 2021. School fees have special transitional rules but also move into the new rules from April 2021.
  • All other existing arrangements received a 12 month transitional period and moved into the new rules from 6 April 2018.
  • P11Ds for 2017/18:
    • Pre 6 April 2017 arrangements are reported using traditional rules.
    • Post 6 April 2017 arrangements, including contractual renewals and variations, must be reported under the new rules.
    • If someone moves from the old rules into the new rules part way through the year you can report the benefit as a combined figure or as two separate figures.
  • See Optional Remuneration scheme & Salary sacrifice and P11D: reporting benefits and expenses.

End of year returns

  • HMRC are reminding agents to ensure that all information regarding company cars is reported correctly on P11Ds.
    • Incorrect information can lead to payment of the wrong employer’s NI or income tax.
    • The employer will need to complete amended P11Ds.
    • Common mistakes include the wrong CO2 emissions, excluding accessories, and incorrectly recording capital contributions and private use payments.
    • See Company cars.
  • Late submissions of FPS under RTI or late P11Ds and P11D(b)s can result in incorrect amounts of NI or tax being paid.
  • 2017/18 P11Ds and P11D(b)s are due by 6 July 2018. Any employer who has supplied employees with benefits in kind or reimbursed expenses that are not covered by the Exemption, will need to file a P11D(b).

PAYE Settlement Agreements (PSA)

  • PSAs have been simplified from 6 April 2018:
    • A PSA will be agreed between HMRC and the employer and will remain in place for subsequent years unless varied or cancelled by either party.
    • This means no more annual renewals are required.
  • See PAYE & Settlement Agreements.

Diesel supplement increase

  • From 6 April 2018, the diesel supplement increases from 3% to 4% for all diesels not certified to RDE2 standard (Euro 6d compliant).
  • Diesels that are RDE2 compliant will not be subject to the supplement.
  • It is not expected that any cars on the market will meet the RDE2 requirements before 2019/20, however, if there are, the 2018/19 P11D should be completed on the basis that ‘Fuel Type A – All other cars’ applies.
  • See Company cars.

Net of Foreign Tax Credit Relief Scheme

  • In some cases, where employees are sent to work abroad and have to pay foreign tax on the salary as well as UK PAYE, the Net of Foreign Tax Credit Relief Scheme can be used:
    • The foreign tax is taken into account when calculating the UK PAYE due.
    • If applicable the foreign tax credit can be deducted from the UK PAYE.
    • An end of year statement must be submitted to HMRC as well as the normal FPS.
  • See Employer Bulletin: April 2018 for more detail on the statement.

Termination payments

Student Loans

  • From 6 April 2018, the student loan thresholds are:
    • Plan 1 £18,330
    • Plan 2 £25,000.
  • FPS submissions now include a new mandatory box for specifying the student loan plan type. This will ensure the correct amount is taxed.
  • Generic Notification message (GNS) will be issued regarding student loans in the following circumstances:
    • To confirm that student loan deductions should commence for a particular employee on the next FPS.
    • To advise that the incorrect student loan plan type has been selected in the FPS.

Annual Tax on Enveloped Dwellings (ATED)

  • ATED returns, where required, must be submitted by 30 April 2018 to avoid penalties.
  • ATED Online Services is not currently linked to the Agent Services so the Agent Reference Number cannot be used. ATED Online Services is currently standalone.
  • If using an Agent to file the return, an authorisation number will need to be generated before the Agent can submit the return.
  • See Annual Tax on Enveloped Dwellings (ATED).

Non-resident CGT

Landfill Tax

  • From 1 April 2018, extended to disposals at landfill sites without an environmental disposal permit.
  • The tax also applies to material still standing on unauthorised sites. HMRC must be contacted by 1 May 2018 in relation to these disposals to avoid penalties on top of the tax.

Soft Drinks Levy

  • From 6 April 2018, the quarterly Soft Drinks Levy return must be submitted to HMRC.
  • The returns cover the periods ending June, September, December and March.

Foreign pension

  • From 6 April 2017, individuals became liable to tax on 100% of their foreign pension arising I in the tax year, regardless of when they started to receive this.
  • The 10% foreign pension allowance no longer exists.

Venture Capital Schemes

For investments made on or after 15 March 2018, under EIS, SEIS an VCT:

LLPs and Self-Assessment

  • When an LLP is setup at Companies House, HMRC are notified and will create a Self-Assessment record.
  • HMRC do not put the individual partners into Self-Assessment automatically.
  • All partners will need to submit a registration for to HMRC:
    • SA401 for individuals
    • SA402 for non-individuals

VAT

Community Interest Companies (CICs)

  • CICs are limited companies for people who want to setup a business as a social enterprise.
  • The business trades with a social purpose for the benefit of the community and profits and assets must be used for the benefit of the community (the asset lock).
  • They are not necessarily non-profit making businesses, but returns to investors must be balanced and reasonable and not detract from the main purpose of benefitting the community.
  • A CIC must adopt articles that comply with the CAICE Act and CIC Regulations.
  • The company name must end ‘CIC’ or ‘community interest company’.
  • CICs report to the Office of the CIC Regulator.
  • The CIC Regulator is working with Companies House to develop online accounts and annual returns filing for CICs.

Consultations

  • Open consultations:

HMRC contact and service

  • 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. You can also make use of the Agent Account Managers (AAMs) where normal communication channels have broken down as an alternative to formal complaints.
  • 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 and information on malware.

Other content

  • Other recent publications:
  • Pension countdown bulletin 32
  • Pension schemes newsletter 97: March 2018
  • HMRC are reminding Agents of the various recent changes affecting non-domiciled individuals:
  • Agent Services Accounts are required if Agents:
    • Want to register a trust using the Trust Registration Service
    • Want to voluntarily participate in Making Tax Digital for Business
    • Are taking part in the Agents for Individuals pilot service.
  • MTD pilot:
    • The Pilot for Income Tax for sole traders with income from one business opened in March.
    • The VAT pilot entered its private beta phase in early April.
  • 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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