HMRC have issued the Agent Update for August/September 2019. We have summarised the key content for you with links to our detailed guidance on the topics covered.
Class 1A National Insurance Contributions (NICs) payable on Termination Awards and Sporting Testimonial Payments
From April 2020:
- The NICs (Termination Awards and Sporting Testimonials) Bill 2019 introduces a Class 1A NICs liability on non-contractual “cash” (or cash equivalent) taxable termination payments over £30,000 which have not already incurred a Class 1 NICs liability.
- The employer will pay this at the same annual Class 1A percentage rate that applies to existing Class 1A liabilities. but the annual P11D(b) process will not apply, instead, these liabilities must be paid/reported “in-year” through RTI.
- The P11D(b) process will apply to Class 1A liabilities arising on benefits-in-kind provided to an employee before and after their employment has been terminated.
- Any non-contractual non-customary sporting testimonial payment over £100,000, paid to a sportsperson by a testimonial committee, will incur a Class 1A NICs liability, to be paid and reported through RTI.
- If a sportsperson donates some or all of their testimonial payment to charity, provided the it is donated through a registered payroll giving scheme the tax & Class 1A NICs (but not class 1 NICs) will be reduced accordingly.
See Termination, redundancy and leaving payments (from 6 April 2018)
Are your donations eligible for Gift Aid?
- Gift Aid can be claimed on donations made by eligible taxpayers if they make a Gift Aid Declaration. Charities should ask donors to fill in a declaration form when they make a donation if they are eligible.
- A donor must be a current UK taxpayer and have paid at least as much in Income Tax or Capital Gains Tax as the charity wants to claim in Gift Aid.
- There are special rules for claiming Gift Aid on certain donations, such as church collections, charity auctions or selling goods on behalf of individuals, for example through a charity shop.
- Gift Aid cannot be claimed on donations made in return for something or on behalf of someone else.
- With the Gift Aid Small Donations Scheme, charities can also claim 25% on donations of £30 or less without a GAD form.
See Gift Aid
Student Loans Starter Checklist
- The new starter checklist for 2019-20 can be used by all employers for all new employees.
- The checklist includes:
- a new section for Postgraduate Loans (PGL)
- a section asking employees if they have both Plan 1 and Plan 2 student loans (If the employee ticks both, the employer should default to Plan 1 and check the SL1 start notice when HMRC sends this).
- Employers note: an employee can be repaying a Plan 1 or Plan 2 loan at the same time as a PGL.
See PAYE: starter checklist - new employee
Help your clients understand the High Income Child Benefit Charge (HICBC)
People who receive Child Benefit and earn over £50,000 may have to pay the High Income Child Benefit Charge.
Telling your clients about the HICBC may help avoid facing a penalty.
- Check their annual income, either on their P60 or personal tax account.
- If their pay was just below £50,000, check what taxable benefits they have received as they count as income and could take it over the £50,000 threshold.
- If they are affected by the tax charge notify HMRC and register for SA by 5 October then complete a SA tax return by 31 January and pay what they owe.
- It is important for people to fill in the Child Benefit claim form to ensure that they do not miss out on National Insurance credits. They can opt out of receiving Child Benefit payments so they will not have to pay the charge but will still accrue credits towards their pension.
See High Income Child Benefit charge
Self Assessment (SA) Returns
When completing the student loan repayment section of your clients SA return and the Student Loans Company have said repayments were due to start on or before 6 April of the year in question, you need to;
- complete section 2 “Tell us about you” or “Box 1” of a paper return by selecting ‘Yes’, or adding an ‘X’ to the paper return then, the correct plan type.
- check if your client has had student loan deductions taken through PAYE and if so complete section 4 “Fill in your return” or “Box 2” of a paper return, by entering the total student loan amounts that have been deducted through their employments.
Temporary Increase in the Annual Investment Allowance (AIA)
- From January 2019 businesses investing in qualifying plant and machinery can benefit from a temporary increase in the AIA from £200,000 to £1,000,000 until 1 January 2021 when it will return to £200,000.
See Annual Investment Allowance (AIA) and AIA & WDA: rules where there is a change of rate
VAT Reverse Charge on construction and building services
The reverse charge on construction and building services measure comes into effect on 1 October 2019. UDPATE: on 6 September 2019 the start was delayed to 1 October 2020.
The key aspects are:
- it will apply to standard and reduced-rated supplies of building and construction services made to VAT registered business, who make onward supplies of those services.
- the scope of supplies affected is closely aligned to the supplies required to be reported under the Construction Industry Scheme, but does not include supplies of staff or workers
- a new concept of “end users” and “intermediary suppliers”. This covers businesses or groups of associated businesses that do not make supplies of building and construction services to third parties and are excluded from the scope of the reverse charge if they receive such supplies.
See Construction Industry reverse charge
Disguised Remuneration Loan Charge
- If any of your clients used a disguised remuneration tax avoidance scheme and are in the process of settling with HMRC, please make sure they take the required actions by the dates specified in their letter.
- If all actions are carried out in time, your clients will benefit from the November 2017 settlement terms and the loan charge requirements will not apply.
- If any of your clients do not reach settlement within the agreed timeframes, or have chosen not to settle, they will have to report any outstanding loans and pay the loan charge.
See Disguised remuneration loan charge (subscriber guide)
Loan Busting Schemes
- HMRC has always stated that loan busting schemes do not work and users of these schemes may end up paying more, as they will still be subject to the loan charge as well as paying the promoter’s fees.
See When the tax inspector calls and Spotlights 36, 39, 49, and 50 for more information.
Corporate Interest Restriction (CIR)
The guidance on CIR has now been uploaded into the Corporate Finance Manual.
- Should you have a specific query not answered by the guidance, contact the Customer Compliance Manager (CCM). If your client does not have a CCM, email the query to: msbcorporateinterest.
This email address is being protected from spambots. You need JavaScript enabled to view it. . - Any reporting company appointments and Interest Restriction Returns (IRRs) should be submitted through the online form and not to the mailbox.
- Elections should be submitted to the CCM, or posted to HMRC, mentioning ‘Corporate Interest Restriction’ on the letter to: Corporation Tax Services, HMRC, BX9 1AX.
See Corporate Interest Restriction
Self Assessment (SA) and Class 2 NICs
HMRC has received feedback from agents that they are encountering problems where Class 2 NICs is not included in the SA calculation when they are expecting it to.
- The reason is primarily where you have registered your client for SA but not fully registered them as self-employed.
- It is important that you get the registration process right for your clients; SA registration form SA1 and/or your client’s SA return do not create a self-employment record on HMRC’s NICs systems and unless a NICs record is created Class 2 NICs will not be included in the SA calculation.
- Form CWF1 will register your client for SA tax, Class 4 NICs and Class 2 NICs; if you do not complete this form when your client is registering for self-employment they will be unable to pay Class 2 NICs through SA and:
- you may have to contact HMRC to arrange a separate bill
- there may be interest and penalties for late payment
- they may be adverse impacts to entitlement to benefits and State Pension
See New business: sole trader compliance checklist
Reporting PAYE in real time
HMRC have published an article in the August 2019 Employer Bulletin confirming that following a review of the effectiveness of the risk-based approach to PAYE late filing and late payment penalties they have decided to continue this approach throughout the 2019-20 tax year.
See Penalties: RTI (Real Time Information) for PAYE
Welsh Rates of Income Tax (WRIT)
WRIT came into operation from 6 April 2019.
- Tax codes for PAYE taxpayers living in Wales are now prefixed with the letter ‘C’.
- If you have clients with employees living in Wales they should have received a P9 to advise them of the change to the tax codes.
- They may have also received a P6 notification at the end of June because the tax code they are operating is incorrect.
- If your clients have not received an updated notification, they should log onto their Business Tax Account to check the ‘C’ code is operating for all employees living in Wales and ensure that they enter the correct tax code on their next FPS submission.
Seasonal Workers
- Like other employees, seasonal workers have to be assessed to see if they qualify for automatic enrolment into a workplace pension.
- Employers who know their staff will be working for them for less than three months can use postponement to postpone the legal duty to assess staff for three months. During this period, employers do not need to put staff into a pension unless they ask to be put into one.
See Auto-enrolment: workplace pensions (subscriber guide)
Corporation Tax - Repayments Made Easier
- HMRC is replacing payable orders with BACS.
- Clients must provide a UK bank account and sort code in the company’s or an authorised nominee’s name when they submit a return or amended return, even if they have already provided HMRC with bank details to set up a direct debit.
- If clients do not have a UK bank account HMRC will continue to issue repayments in the same way as they currently do.
Off-payroll working rules from April 2020
The responsibility for applying the off-payroll working rules is changing from April 2020.
- The change makes medium and large organisations, and agencies, responsible for ensuring their contractors pay the right tax and NICs, as it has been for public sector organisations since 2017.
- Online guidance will be available this summer with more detailed technical guidance following before the end of the year.
- HMRC are enhancing the Check Employment Status for Tax (CEST) in response to stakeholders’ concerns.
- Businesses can prepare for the changes by:
- looking at their workforce (including those engaged through agencies and other intermediaries) to identify individuals who are supplying their services through personal service companies.
- determining if the off-payroll rules apply for any contracts that will extend beyond April 2020.
- talking to their contractors about whether the off-payroll rules apply to their roles.
- putting processes in place to determine if the off-payroll rules will apply to future engagements.
See Off-payroll working: At a glance
Trust Registration Service (TRS)
HMRC have recently deployed the first feature for the Trust Registration Micro Service that allows users to register a will trust that contains:
- a lead trustee (can include multiple UK-based trustees)
- multiple named individual beneficiaries (will only require name, DOB, National Insurance number or address)
- classes of beneficiary
- assets (money, property and land).
Further features will be delivered between now and the end of the year.
Protecting your data - Authorising an agency to act on behalf of a trust for the Register
Later this year HMRC will be releasing more functionality to the TRS to allow amendments to be made.
- Agents and their clients will need to complete additional steps to ensure only those with a legitimate reason can access and update details on TRS. This will not replace the existing 64-8 process, so agents must ensure the appropriate authorisation is in place where needed.
- The process will be:
- Agent logs into agent services account and enters trust UTR.
- The agent relationship with the trust is checked. If there is none a link is created for the agent to email an invitation to their client which the client must accept via their government gateway account to allow the agent to act on the trust’s behalf.
- The trustee must answer a random fact about the trust to be able to accept the invite.
- Once accepted a relationship is established and the agent can access data on the register for the trust client and amend it accordingly.
See UK trusts
Making Tax Digital (MTD) Update
- Around 10,000 businesses were registering for MTD every day during July.
- More than 770,000 businesses have signed up (as at 23 July) with 480,000 submissions already successfully made using software
- Businesses in the agriculture sector (e.g. farmers) have been one of the fastest groups to sign up with 50% already registered.
- The financial sector has been one of the slowest to sign up with nearly 75% yet to sign up.
- During the first year, filing or record-keeping penalties will not be issued to businesses doing their best to comply.
VAT Certificate
Most customers that have signed up to MTD for VAT are now able to view their VAT Certificate in their Business Tax Account. The functionality for agents to access this information will be delivered in August, in the meantime they should call the VAT helpline to request VAT Certificate information.
See Making Tax Digital: VAT (subscriber guide)
Agent Services Account (ASA)
Authorising new clients
- Agents are now able to track the status of any requests that they have made to authorise new clients in the last 30 days in the agent services account.
See our Blog: Trying to sign up to Making Tax Digital for VAT
Anti Money Laundering requirements
It has been a requirement since 2009 for accounting service providers to register for Anti Money Laundering Supervision (AMLS). Agents must enter their AMLS details when they create an ASA.
- An ASA can be created on the basis of a pending AMLS application; if your application is refused your agent services access will be withdrawn.
- Agents should only sign businesses up using their agent credentials and only those acting as paid agents should create an ASA to file on behalf of clients.
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.
- 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? Find out when you can expect to get a reply from HMRC to a query or request you have made.
- You can check the latest updates to HMRC manuals or subscribe to automatic notification of change.
- 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 they are aware of.
- Phishing emails and bogus contact: A new type of phishing scam regarding ‘Tax Returns’, which is being circulated in high volumes, has been added.
- Online training material and useful resources for tax agents and advisers: HMRC videos on YouTube, online learning modules, and live and pre-recorded webinars are available for tax agents and advisers providing you with free help, learning and support on topical subjects.
Other content
Other recent publications
- Agent Toolkits: The following toolkits have recently been updated for 2019:
- Company Losses
- Capital v Revenue Expenditure
- Business Profits
- Inheritance Tax
- Expenses and benefits from employment
- Spotlights: HMRC have recently published Spotlights 50-52 on tax avoidance.
- Employer Bulletins
- Trust and Estates newsletters
- National Insurance Services to Pensions Industry: countdown bulletins
- Pension schemes newsletter
- Revenue and Customs briefs
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