Tax Newsletter March 2019

Our newsletter this month includes: a reminder of some of the tax issues if you make loans to employees; certain tax risks when you sell your own home; a call for VAT traders to adapt to new filing regulations and details of the new National Minimum Wage rates from 1 April 2019.

Our next newsletter will be published on Thursday, 4 April 2019.

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Newsletter March 2019


 

Spring Statement - 13 March 2019

The following comments were written on the 13th March 2019 immediately following Philip Hammond’s presentation of the 2019 Spring Statement to Parliament. In theory, the government uses the Spring Statement to respond to the most recent forecasts made by the Office of Budget Responsibility (OBR).

In a nut-shell, the OBR forecast that:

  • the UK economy will continue to grow, and 
  • government borrowing, and therefore interest payments, will continue to fall.

Unfortunately, the Brexit debate has compromised the Chancellor’s position and he has found himself in a three-legged race, bound to a Brexit process that delivers no certainty and which makes real forecasting of the UK’s future economic position almost impossible to predict.

If further votes on the Brexit debate take us into a no-deal situation on the 13th March, it looks as if we will see an emergency budget delivered next month, whereas a postponement of the 29 March 2019 deadline would provide breathing space: time to fully consider his options. Readers will no doubt have followed the Brexit votes in Parliament that followed the Spring Statement.

Whatever the outcome, Brexit is proving to be the glue that is holding back real planning – and perhaps real progress - on the part of the Treasury to manage the UK economy in our best interests.

However, what follows is a short summary of the points Philip Hammond did raise today.

Employment

  • Since 2010 there are more than 3.5m more people in work.
  • Employment is forecasted to increase by a further 600,000 by 2023.

Public finances

  • Debt fell last year and is forecast to fall continuously to 2023-24.

Tech and the new economy

  • In response to a government sponsored consultation, moves are afoot to update competition rules and increase competition in the digital economy.
  • The tech market place will be encouraged to allow smaller firms to participate.
  • Regulation may be introduced to make users’ personal data portable. For example, transfer lists of friends to new platforms and search engine histories to new search engines.

Border access

  • From June 2019, citizens of a number of non-EU countries will be able to use e-gates at UK airports and border crossing points.
  • The process of abolishing landing cards will also commence from June 2019.

Clean growth

  • Government is to explore schemes to encourage energy efficiencies for smaller businesses.
  • Developers will need to build in increases in biodiversity.
  • The decarbonisation of gas supplies is to be increased by using green gas suppliers.
  • From 2025 new homes will need to meet new low energy standards.

Housing and infrastructure

  • The government is on track to increase housing supply to its highest level since 1970 by the end of this parliament with an average of 300,000 properties a year.
  • A number of new steps were set out in the Spring Statement including the use of the Housing Infrastructure Fund and the Affordable Homes Guarantee Scheme to help the supply of more new homes across the country.

National Living and National Minimum Wage changes

  • The government has tasked the Low Pay Commission to make recommendations for changes to these rates to apply from April 2020. A response is required by October 2019.

Hampered by Brexit uncertainties, the Chancellor made no tax changes, his next round of changes will have to wait until the next Autumn Budget 2019, or April 2019 if we pursue a no-deal Brexit.

All eyes are now fixed on parliament and its attempts to achieve a workable Brexit solution that will have cross-party support. 


 

Limitations of tax relief when you sell your home

It is a commonly held point of view that when you sell your home you won’t pay any tax, and in particular, that you won’t pay any Capital Gains Tax on the difference between the purchase and sales prices.

Unfortunately, there are circumstances when this is not true. For example, you may have some tax to pay if you have let all or part of your house for part of your period of ownership.

There is also a restriction on the amount of land you can sell as part of your home/garden tax-free. Presently this is 5,000 square metres (just over one acre). And if you sell your home and retain part of the garden to sell at a later date, the subsequent sale of the land will attract a Capital Gains Tax charge.

You may also incur a tax cost when you sell your home if you have used part of the property exclusively for business purposes – this would not include non-exclusive use, such as using a spare bedroom or study as a part-time home office.

 

Issues may also occur if you sell your UK home while you are non-resident for UK tax.


Changes to Minimum Wage Rates

From April 2019, minimum pay rates will increase as set out below.

  • National Living Wage (NLW) rates for workers aged 25 and over - from £7.83 to £8.21 per hour.
  • National Minimum Wage rates:
    • workers aged 21–24 — from £7.38 to £7.70 per hour
    • workers aged 18–20 — from £5.90 to £6.15 per hour
    • workers aged 16–18 — from £4.20 to £4.35 per hour
    • apprentice rate — from £3.70 to £3.90 per hour.

The accommodation offset rate will rise to £7.55.

This should mean that a full-time worker aged 25 and over on the NLW will receive an annual pay increase of £690.

Employers are reminded that these rates are not optional. HMRC police the National Minimum Wage and NLW regulations and employers found to be in breach will be subject to penalties and have to repay any arrears to affected employees.


 

Last call for VAT traders to prepare for new filing regulations

As we have mentioned before in this newsletter, VAT returns filed for periods commencing on or after 1 April 2019, may need to be filed using the new Making Tax Digital (MTD) protocols. The new filing obligations will apply to VAT registered businesses with turnover above the current VAT registration limit, £85,000.

To comply with MTD firms will need to file their returns – for periods commencing on or after 1 April 2019 – using software that can link with HMRC’s MTD servers.

 Readers affected, and who have not yet considered their options, should take advice on what they need to do to ensure compliance. 


 

Loans to employees

A reminder that if your business makes a loan to your employees or their relatives this can create tax problems for both employees and employers. And please don’t forget that the term “employee” includes directors, and also that loans to family members may be caught.

For example, the employer will have an obligation to report a beneficial loan to HMRC (and pay Class 1A NIC) and the deemed benefit would be a taxable benefit in kind for the relevant employee. A beneficial loan is one that is interest free or the rate charged is below the “official rate” and the benefit is the difference between these interest rate charges.

Fortunately, not all loans create a tax problem, certain loans are exempt from this reporting obligation. These could include loans employers provided:

  • in the normal course of a domestic or family relationship as an individual (not as a company you control, even if you are the sole owner and employee),
  • with a combined outstanding balance due from an employee of less than £10,000 throughout the whole tax year,
  • to an employee for a fixed and never changing period, and at a fixed and constant rate that was equal to or higher than HMRC’s official interest rate when the loan was taken out – the official rate for 2018-19 is 2.5%,
  • under identical terms and conditions as those provided to the public (this mostly applies to commercial lenders),
  • that are ‘qualifying loans’, meaning all the interest charged to the loan account qualifies for tax relief.
    Loans written off also create a National Insurance Class 1 charge for the employee. They must be reported on a P11D and the employer has an obligation to deduct and pay Class 1 NIC from the employee’s salary, on the amount written off for tax purposes.

 

Calculating the taxable benefits for chargeable loans can be somewhat complex and readers are advised to take advice if they are unsure of their tax and NIC responsibilities. 


 

Tax Diary March/April  2019

1 March 2019 - Due date for Corporation Tax due for the year ended 31 May 2018.

2 March 2019 – Self assessment tax for 2017/18 paid after this date will incur a 5% surcharge.

19 March 2019 - PAYE and NIC deductions due for month ended 5 March 2019. (If you pay your tax electronically the due date is 22 March 2019)

19 March 2019 - Filing deadline for the CIS300 monthly return for the month ended 5 March 2019.

19 March 2019 - CIS tax deducted for the month ended 5 March 2019 is payable by today.

1 April 2019 - Due date for Corporation Tax due for the year ended 30 June 2018.

19 April 2019 - PAYE and NIC deductions due for month ended 5 April 2019. (If you pay your tax electronically the due date is 22 April 2019)

19 April 2019 - Filing deadline for the CIS300 monthly return for the month ended 5 April 2019.

19 April 2019 - CIS tax deducted for the month ended 5 April 2019 is payable by today.

 

30 April 2019 – 2017-18 tax returns filed after this date will be subject to an additional £10 per day late filing penalty.

 

 


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