Agent update August/September 2018

HMRC have issued the Agent Update for August/September 2018. We have summarised the key content for you with links to our detailed guidance on the topics covered. We've kept to HMRC's order of contents, it's not very 'SME' at first, but read on, it warms up.

 

Compliance

Fulfilment House Due Diligence scheme (FHDDS)

  • Under the scheme UK businesses that store goods imported from outside EU for non-EU suppliers need HMRC approval.
  • The 30 June 2018 deadline has passed for existing businesses to apply for the FHDDS. Businesses that have missed the deadline should apply as soon as possible; HMRC may charge escalating penalties for late applications.The new deadline for businesses that started trading on or after 1 April 2018 is 30 September 2018.
  • If a business meets the scheme criteria but does not have HMRC approval, they will:
    • not be allowed to trade as a fulfilment business from 1 April 2019 and
    • risk a £10,000 penalty and a criminal conviction.
  • More information, including how to register, in HMRC's guidance.

Preparing for the Customs Declaration Service (CDS)

  • If a client makes customs declarations for goods imported from and exported outside the EU through Customs Handling of Import and Export Freight (CHIEF) system or a software provider you will need to prepare for the transition to the new CDS system.
  • HMRC will contact your client if they are in the group of importers who will be using CDS from August 2018. You do not need to do anything if HMRC does not make contact.
  • Find out more about preparing for CDS here

Class 2 National Insurance Contributions (NICs) amount omitted/incorrect on Self-Assessment  calculation

  • If the Class 2 NICs amount shows ‘Not Available, check help’ on the online SA tax return, this may be because:
    • the client has not registered to pay Class 2 NICs.
    • you are trying to complete the return between 2am - 5am (when this facility is unavailable).
  • If the Class 2 NICs amount shows as ‘£0.00’ this may be because your client:
    • has not registered to pay Class 2 NICs.
    • may have paid the maximum Class 2 NICs due
    • may have received certain benefits resulting in no Class 2 NICs liabilities
    • may be paying Class 2 NICs in a different way e.g. if they were abroad.
  • If the client has not registered you can register them here 
  • If you think the Class 2 NICs amount is incorrect this maybe because:
    • your client started working for themselves after 6 April or stopped before 5 April  of the tax year. They will need to update their self-employment details; allow 72hrs for this to be displayed.
    • If your client has stopped trading as a sole trader you can notify HMRC here

Postgraduate Loans (PGL)

The Department for Education have launched a new Student Loan product known as PGL.

  • The earliest individuals can start repayment of PGL is April 2019 through Pay As You Earn (PAYE) or April 2020 through SA.
  • If your client has a PGL:
    • HMRC will send their employer a new Postgraduate start notice (PGL1) to ask them to start taking PGL deductions or a new Postgraduate stop notice (PGL2) to ask them to stop taking PGL deductions.
    • Individuals may also be liable to repay a Student Loan Plan Type 1 or 2 concurrently with PGL. HMRC will let their employer know this by continuing to send the appropriate notices.

Settlement Agreement (PSA) and Scottish Income Tax

  • The PSA1 form that employers complete to submit a PSA will be changing for the 2018/2019 tax year. This is to incorporate the rates and threshold changes for Scottish Income Tax .
  • When completing a 2018 to 2019 PSA1 form, you must confirm whether any expenses or benefits are for a Rest of the UK (rUK) taxpayer or a Scottish taxpayer.
  • See PAYE & settlement agreements 

Changes in how National Minimum Wage (NMW)  penalties apply to employers who have staff transferred under Transfer of Undertakings (Protection of Employment) (TUPE) rules

  • HMRC has changed its approach to charging penalties when enforcing NMW where there has been a transfer of staff from one employer to another under TUPE.
  • Since 2 July 2018, where TUPE applies, all NMW liabilities, including penalties are applied to the new employer. HMRC previously charged the former employers all, or part of the penalties where they related to arrears accrued before workers were transferred.

Completing an Earlier Year Update (EYU) in respect of Employee’s National Insurance Contributions (NICs)

  • HMRC have recently amended the guidance on GOV.UK to Fix problems with running payroll. This makes it easier to understand when completing an EYU which includes a negative amount of Employee National Insurance.
  • If the difference is negative (because you deducted or reported too much National Insurance), you need to set the ‘NIC refund indicator’ to:
    • ‘Yes’ if you have refunded an employee or no refund was due
    • ‘No’ if an employee is still owed a refund

PAYE

Information about P800s:

  • The P800 tells an individual:
    • what income they have earned
    • any reliefs they are entitled to receive
    • the tax they have paid.
  • If there is a shortfall of tax, HMRC will normally collect it through the PAYE code, if a refund is due, individuals will normally be invited to claim it online.
  • HMRC do not send P800s to individuals who have paid the right tax.
  • Most of the individuals who need a P800:
    • have had a change of circumstances during the year or
    • need to claim additional relief on job expenses, over-and-above the figure in their tax code or
    • have left work and not claimed in-year for a refund or have had complex changes in income which not picked up during the year in time to correct their tax code.

Woodlands: tax planning

Reliefs/exemptions from IHT for owners of woodlands include:

  • Business Property Relief: 100% relief from IHT against the value of the timber and the land on which it stands.
    • There are no ongoing conditions to meet after the date of transfer/death.
    • Only available to owners of commercially managed woodland who can demonstrate there was a business in place to exploit the woodland at the date of transfer/death and for at least 2 years before.
  • Woodlands Relief: available to all woodland owners regardless of whether they commercially exploit the woodlands or not.
    • If claimed, no IHT is charged on the timber (it still is on the underlying land) until the new owner sells or transfers it; may be an IHT charge at that point .
  • Conditional Exemption Tax Incentive Scheme  may also be available to all woodland owners
    • For successful claims no IHT is due on the timber and underlying land.
    • Owners have to demonstrate that the woodland is of historic, scenic or scientific importance.
    • The new owner has to keep the woodland in good order and allow the general public a reasonable degree of access.

Disguised remuneration: Settling disguised remuneration tax avoidance schemes before the 2019 loan charge arises

HMRC have updated the payment terms for settling disguised remuneration avoidance schemes before the loan charge arises in 2019.

  • Individuals with current year expected income of less than £50,000, who are no longer engaging in avoidance, can agree an instalment plan of up to 5 years without having to provide detailed supporting information when they settle with us before the loan charge.
  • Clients with higher incomes, or who need a longer period can still agree instalment plans but will need to provide more detailed supporting information.
  • You can still register your clients for settlement but you need to provide all of the information required by HMRC by 30 September 2018.
  • See Disguised remuneration final settlement opportunity 

Who will pay Welsh rates of Income Tax?

  • HMRC will identify Welsh taxpayers  based on information within their systems.
  • A taxpayer who is resident in the UK for tax purposes and has their sole or main place of residence in Wales for more of the tax year, than in any other part of the UK, will be a Welsh Taxpayer and will pay the Welsh rates of Income Tax .
  • Individuals in PAYE will have the letter ‘C’ (Cymru) as a pre-fix on their PAYE coding notice.
  • Welsh taxpayer status will apply for the whole tax year.
  • Individuals should inform HMRC of any changes to their address by accessing the Personal Tax Account.

Upcoming registration deadline for some trusts with new liabilities

  • If your client has a trust with a new liability for Capital Gains Tax or Income Tax for the tax year 2017 to 2018 and it is not already registered on the Trust Registration Service, then it must be registered by 5 October 2018.
  • See UK trusts 

Corporation Tax

Requesting a copy of your client’s Unique Taxpayer Reference (UTR)

  • For security reasons HMRC are unable to provide company UTRs over the telephone.
  • In future, if your clients register at Companies House using the Set up a private limited company webpage on GOV.UK, they will be able to see their UTR online; it will be available once the registration details have been passed to HMRC.
  • If a client loses their UTR and they have registered for online services. they can find it in their Business Tax Account or through the Ask for a copy of your Corporation Tax UTR webpage on GOV.UK. HMRC will post a copy of the UTR to the company’s registered office address.

Indexation Allowance for disposals of assets after December 2017

  • From December 2017, the indexation allowance that can be deducted when calculating a chargeable gain on the disposal of an asset by a company has been frozen.
  • Expenditure on the acquisition or improvement of assets incurred on or after 1 January 2018 will no longer attract any indexation allowance. For expenditure incurred before December 2017, the amount of any allowance on assets disposed of after that date is only calculated up to December 2017.
  • See Finance Act 2018: tax update and rolling planner

Spotlights

VAT Notices

  • The following notices have been issued since the last Agent Update was published:
  • VAT Notice 700/22: Making Tax Digital for VAT This notice explains the rules for Making Tax Digital for VAT and about the digital information you must keep if they apply to you.

Updated Requirement to Correct (RTC) guidance published

  • Under RTC individuals are obliged to disclose unpaid tax on:
    • assets, income and activities in other countries
    • transfers from the UK to other countries.
  • RTC applies to non-compliance committed before 6 April 2017 for Income Tax, Capital Gains Tax and Inheritance Tax. Anyone with undeclared UK tax liabilities for offshore matters or transfers must disclose them by 30 September 2018 or face higher ‘failure to correct’ (FTC) penalties.
  • In limited circumstances HMRC will allow some information to be provided after 30 September 2018 without incurring Failure to Correct (FTC) penalties. These are:
    • HMRC has been notified of the intention to make a disclosure by registering through the Digital Disclosure Service (DDS) for the Worldwide Disclosure Facility (WDF) before midnight 30 September 2018 and the disclosure process is then completed fully and accurately within 90 days.
    • where behaviour that led to the inaccuracy was deliberate, CDF1 is emailed to HMRC before midnight 30 September 2018 to declare the intention to disclose offshore tax non-compliance through HMRC’s Contractual Disclosure Facility (CDF) , the outline disclosure is submitted within 60 days and the CDF process complied with.
    • Where there is an open HMRC enquiry into the individual’s tax affairs, they inform the enquiry officer of the intention to make a disclosure on or before midnight 30 September 2018, and the outline disclosure is submitted by midnight 29 November 2018, provided they continue to co-operate with the enquiry.

Providing The Pensions Regulator (TPR) with false information

  • TPR will target employers across the UK suspected of providing false or misleading information about how they are meeting their automatic enrolment duties, with short notice inspections.
  • It is an offence for employers to provide TPR with false information on their declaration of compliance.
  • The latest round of spot checks begins this summer and continues into the autumn and exercise will target employers who are still non-compliant, despite penalty action.

Improving content ‘findability’

  • HMRC’s GOV.UK team is working to improve the ‘findability’ of over 7,100 pages of guidance published  and Customs Information Papers and VAT Notices on GOV.UK.
  • The page titles, summaries (the bit that appears in search results) and format of the pages are being transformed to make them easier to find.

Consultations open

  • Draft legislation: oil and gas taxation - investment and cluster area allowances. 
  • Changes to the frequency of oil and gas official statistics.
  • Amending HMRC’s civil information powers: on the relevance of some of the information powers enacted by schedule 36 of the Finance Act 2008, and on potential improvements. This consultation closes on 2 October 2018.

Consultation outcomes

Rent a room relief

Allowing Entrepreneurs’ Relief on gains made before dilution

Zero emission capable taxis: Vehicle Excise Duty rates

Taxing gains made by non-residents on UK immovable property  

Simplifying the Gift Aid donor benefits rules: further consultation 

Corporate interest restriction - consultation on leases

Plant and machinery lease accounting changes

Making Tax Digital: interest harmonisation and sanctions for late payment 

VAT and Vouchers Extension of offshore time limits 

Extension of security deposit legislation 

Gaming Duty - review of accounting periods

Tax avoidance involving profit fragmentation

Capital Gains Tax: Payment window for residential property gains

Contact & HMRC 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.
  • 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.
  • You can check the latest updates to HMRC manuals or subscribe to automatic notification of change here
  • Future online downtime. HMRC provide information about planned downtime which will affect the availability of online services.
  • Staying safe online. HMRC continuously monitors systems and customer records to guard against fraudulent activity, providing regular updates on scams we are aware of. If you have any concerns regarding the authenticity of any emails received from HMRC, see the online security pages for agents.
  • Phishing emails and bogus contact: HMRC examples A new type of phishing scam regarding ‘Tax Returns’, which is being circulated in high volumes, has been added.

Other content

Other recent publications

Updates to Agent Toolkits

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