Tax Newsletter May2019

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Newsletter May 2019


 

Getting tax relief sooner for charitable donations

If you are a higher rate or additional rate taxpayer, you are eligible to claim relief on the difference between the basic rate and your highest rate of tax. The charity you donate to can reclaim the basic rate of tax from donations made by taxpayers.

For example:

If you donated £5,000 to charity, the total value of the donation to the charity is £6,250. You can claim back additional tax back of:

  • £1,250 if you pay tax at the higher rate of 40% (£6,250 × 20%),
  • £1,562.50 if you pay tax at the additional rate of 45% (£6,250 × 20%) plus (£6,250 × 5%).

 

Carry back gifts to speed up tax benefits

If you have made a gift to a charity in the 2018-19 tax year, you can carry back the gift to the previous tax year as long as you do this before filing the 2018-19 return. This can accelerate repayment of any tax associated with your charitable giving. This can also be a useful strategy if you are not a higher rate tax payer in the current year, but you were in the previous year.

You can only claim if your donations qualify for gift aid. This means that your donations from both tax years together must not be more than 4 times what you paid in tax in the previous year. If you do not complete a tax return you need to use a P810 form to make a claim.


 Early birds get time to pay

The 2018-19 tax year ended on 5 April 2019 and the new 2019-20 tax year started on 6 April 2019. Many taxpayers will be tempted to delay dealing with their 2018-19 tax returns until late this year or January 2020.

The 31 January 2020 is not just the final date for submission of the 2018-19 Self Assessment tax return, but also an important date for payment of tax due. This is the final payment deadline for any remaining tax due for the 2018-19 tax year. In addition, the 31 January 2020 is also the payment date for any Capital Gains Tax due in relation to the 2018-19 tax year and the first payment on account for 2019-20.

We would recommend that you consider gathering together the information to file your return as soon as you can after 6 April 2019.

Why rush?

In this way you can calculate any payments you will need to make by 31 January 2020 and give yourself time to save the required funds to settle any taxes due. Of course, if you are due a repayment of tax then it is a useful strategy to file your tax return as soon as possible.

Your accountant will also appreciate the extra time to prepare your tax return and you will avoid the eleventh-hour rush.


 

When do you have to register to submit a tax return?

There are a number of reasons why you may need to register with HMRC to submit a tax return. This includes if you:

 are self-employed and earning more than £1,000, 

  • are a company director,
  • have an annual income over £100,000 and / or if you have certain income from savings, investment or property.

If you need to complete a tax return for the first time, you should inform HMRC as soon as possible. The latest date that HMRC should be notified is by 5 October following the end of the tax year for which a return needs to be filed.

So, if you had income that necessitated you registering for Self Assessment in the 2018-19 tax year, you will need to notify HMRC by 5 October 2019.

HMRC publishes a list of taxpayers who would usually be required to submit a Self Assessment return. The list includes:

 The self-employed;

  • Taxpayers who had £2,500 or more in untaxed income;
  • Those with savings or investment income of £10,000 or more before tax;
  • Taxpayers who made profits from selling things like shares, a second home or other chargeable assets and need to pay Capital Gains Tax;
  • Company directors - unless it was for a non-profit organisation (such as a charity) and you didn’t get any pay or benefits, like a company car;
  • Taxpayers whose income (or that of their partner’s) was over £50,000 and one of you claimed Child Benefit;
  • Taxpayers who had income from abroad that they needed to pay tax on;
  • Taxpayers who lived abroad and had a UK income;
  • Those whose income was over £100,000.

In certain limited circumstances HMRC can also ask you to complete tax returns for other reasons.

Need help registering for Self-Assessment?

If you are unsure if you need to register, or would like assistance with the formal registration process, please call.

 


 

Minimum wage increases come into effect

The new National Minimum Wage (NMW) and National Living Wage (NLW) rates came into effect on 1 April 2019. The NLW was introduced on 1 April 2016 and is the minimum hourly rate that must be paid to those aged 25 or over. The NLW increase is the biggest single increase since the rate was introduced. The new rate is £8.21 which is a 38p or almost 5% increase. This means that some 1.8 million employees earning the NLW will see an extra £690 a year in their pay packet.

The hourly rate of the NMW (for 21-24 year olds) increased to £7.70 (a rise of 32p). The rates for 18-20 year olds increased to £6.15 (a rise of 25p) and the rate for workers above the school leaving age but under 18 increased to £4.35 (a rise of 15p). The NMW rate for apprentices increased by 20p to £3.90.

The new rates mirror the recommendations made by the Low Pay Commission (LPC) which were accepted in full by the Government. The independent Low Pay Commission (LPC) was established following the National Minimum Wage Act 1998 to advise the government on the NMW. It is made up of representatives from all sides of industry.

There are significant penalties for employers who are found to have paid workers less than they are entitled by the legislation.

 


 

Job related expenses you can claim against your tax

If you are an employee and use your own money to buy things that you need for your job, you may be able to claim tax relief for the associated costs. It is usually only possible to claim tax relief for the cost of items that are used solely for your work.

There is no tax relief available if your employer pays you back in full for an item you have bought for work. In addition, you cannot claim tax relief if your employer has provided you with a suitable item, but you want a different or upgraded model. For example, you are provided with a mobile phone for your work, but you want to buy a newer and more advanced model and pay for this yourself.

A claim for valid purchases can be made against receipts or as a 'flat rate deduction'. The flat rate deductions are set amounts that HMRC has agreed are typically spent each year by employees in different occupations. They range from £60 to £140 depending on listed occupations. If your occupation isn’t listed, you may still be able to claim a standard annual amount of £60 in tax relief. If you work in certain listed occupations, you could claim back even more.

Expenses where you may also be able to claim tax relief include:

if you use your own vehicle for work,

  • travel and overnight expenses,
  • professional fees,
  • costs associated with work from home and
  • buying certain equipment to use as part of your employment.

The rules can be complex. If you pay out for costs that you feel you should be able to claim against your tax, but are unsure if you can make a claim, or how to do this, we can help. Please call.

 


 

Maternity pay explained

How much maternity leave can you take?

If you work as an employee and become pregnant you are eligible to take up to 52 weeks of statutory maternity leave. This is made up of 26 weeks of ordinary maternity leave plus an extra 26 weeks of additional maternity leave. If you give the correct notice period to your employer this means you are entitled to take a full year's leave.

Statutory maternity leave is available to all employees and it doesn’t matter how many hours you work or how long you have worked for your employer.

When are you entitled to Statutory Maternity Pay? 

There are additional criteria that must be fulfilled if you want to claim statutory maternity pay (SMP). SMP is a weekly payment from your employer made over a 39-week period.

SMP is payable at

  • 90% of the employee’s average weekly earnings (AWE) for the first 6 weeks with no upper limit;
  • £148.68 (for 2019-20) or 90% of their AWE (whichever is lower) for the remaining 33 weeks.

The SMP is available to employees if:

  • They are on the payroll in the 'qualifying week' - the 15th week before the expected week of childbirth.
  • Provide the correct notice period to their employer.
  • Provide proof they are pregnant.
  • They have been working continuously for the same employer for at least 26 weeks up to any day in the qualifying week.
  • They earned at least £118 a week (gross) in the 'relevant period'. The relevant period is usually the 8-week period preceding the 15th week before the baby is due, known as the qualifying week.

The maternity allowance is a financial benefit for pregnant women who are self-employed, who are working but do not qualify for the SMP or who have recently stopped working. Your employer is free to offer you additional benefits which includes higher maternity payments, however this is at their discretion and not legally required.

 


 

Latest advice from government if we leave the EU

Although the EU have now extended the deadline to agree the withdrawal agreement - to 31 October 2019 - there is still a chance we will exit with a no-deal outcome. 

In a pamphlet recently published by the government we are provided with some important areas to consider if we leave the EU without a deal. For example, any UK business that imports or exports goods will be responsible for making customs declarations and businesses that trade with the EU should ensure they register for a UK Economic Operator Registration and Identification (EORI) number as soon as possible. This identification number will be required even if the business appoints a customs agent to assist in making customs declarations. 

Some other areas that should also be considered as we prepare to leave the EU are also highlighted in the pamphlet, these include:

  • Possible changes to the way in which personal data is handled if you transfer information into the UK.
  • The possibility of new rules to be complied with if you provide services or operate in the EU. 
  • Manufacturers will need to be aware of regulatory requirements for UK and EU markets, including labelling, approvals and testing.
  • No immediate action will be required if you employ EU citizens. 
  • The government has guaranteed any funding secured through EU programmes until the end of 2020.
  • If you hold intellectual property, there may be changes that affect copyright, patents, designs and trade marks.

 

Right to work checks for EU nationals after Brexit

The government has published new guidance which confirms that, once the UK leaves the EU and whether this is with a deal or not, there will be no change to the way EU, EEA and Swiss citizens prove their right to work until 1 January 2021. Irish citizens will continue to have the right to work in the UK and prove their right to work as they do now, for example by using their passport.

This means that:

Employers should continue to conduct right to work checks on all prospective employees, regardless of their nationality, to establish the statutory excuse against payment of a civil penalty for employing illegal workers

  • when carrying out such checks, employers will not need to distinguish between EU, EEA and Swiss citizens and their family members who were resident in the UK before or after the UK leaves the EU
  • until 1 January 2021, EU, EEA and Swiss citizens will continue to be able to prove their right to work in the UK as they do now, for example by showing a passport or national identity card. Alternatively, they may choose to use the Home Office online checking service if they have been granted status under the EU Settlement Scheme, but employers cannot require them to do so. Employers can view the prospective employee’s status through the Home Office online checking service once the individual has provided their date of birth and unique share code
  • employers do not have to check whether existing employees have been granted status under the EU Settlement Scheme
  • as is currently the case, in order for an employer to establish the statutory excuse when employing the non-EU, EEA or Swiss family member of an EU, EEA or Swiss citizen, the prospective employee will need to show Home Office issued documentation. They may choose to use the Home Office online checking service if they hold a biometric residence card or have been granted status under the EU Settlement Scheme.

From 1 January 2021, new guidance will apply for right to work checks and this will be issued by the government in due course.

 


 

New guidance on the impact of Brexit on workplaces

Acas has published new general guidance to assist employers and employees in understanding the impact that Brexit may have in their workplace and it gives advice regarding the steps they may want to take before the UK leaves the EU. 

It advises that EU membership can impact workplaces in several ways, such as:

  • providing goods and services to other members of the EU
  • using goods and services provided by other members of the EU
  • employing EU citizens
  • having UK employees work in the EU.

Many UK employment rights also come from EU directives and court decisions about some employment disputes can be made in the EU courts.

The new guidance explains the potential changes to employment law as a result of the UK leaving the EU and it provides links to the government’s technical guidance. It also explains the impact of Brexit on EU citizens working in the UK and it again provides links to government guidance on their rights. Finally, it offers advice to employers when talking to their staff about how they may be affected by Brexit.


 

Debt Relief Orders

It is over 10 years since Debt Relief Orders (DROs) were first introduced in April 2009. We have fleshed out the details of who can claim and some of the restrictions that apply.

What is a DRO?

A DRO is a special way of dealing with debts available to those with minimal assets and low income. If an application for a DRO is accepted, you will make payments over a specified period (usually 12 months) after which any remaining debts will be written off.

There are special rules that exclude any debts that were fraudulently obtained, continue to be repayable, and if your circumstances change (for the better) the DRO can be revoked.

To be eligible for a DRO, you must meet these criteria:

  • you owe £20,000 or less
  • you have less than £50 to spend each month, after paying tax, National Insurance and normal household expenses
  • you've lived or worked in England or Wales in the last 3 years
  • your assets aren’t worth more than £1000 in total
  • you've not had a DRO in the last 6 years

When you can't apply for a DRO

Eligibility may also be affected if you are involved in bankruptcy proceedings or any other formal insolvency procedure. An application for a DRO must be made using an authorised debt adviser. There are also minimal costs you would have to meet when making an application.

There are certain debts that are not covered by a DRO and there are also restrictions on what you can do during the specified DRO period: for example, restrictions on obtaining credit of more than £500 without informing the lender about your DRO. A DRO will usually stay on your credit reference file for 6 years from the date it was granted.


 

Tax Diary May/June  2019

1 May 2019 - Due date for Corporation Tax due for the year ended 30 July 2018.

 

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

 

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

 

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

 

31 May 2019 - Ensure all employees have been given their P60s for the 2018-19 tax year.

 

1 June 2019 - Due date for Corporation Tax due for the year ended 31 August 2018.

 

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

 

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

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

 


DISCLAIMER - PLEASE NOTE: The ideas shared with you in this email are intended to inform rather than advise. Taxpayers circumstances do vary and if you feel that tax strategies we have outlined may be beneficial it is important that you contact us before implementation. If you do or do not take action as a result of reading this newsletter, before receiving our written endorsement, we will accept no responsibility for any financial loss incurred.