SPREADING THE 2019 LOAN CHARGE

There was a requirement to register with HMRC by 30 September 2018 in order to settle on preferential terms before the outstanding loan charge arises on 5 April 2019.

This new tax charge applies to any outstanding loans that exist as a result of a disguised remuneration tax avoidance scheme used by your employer such as those involving Employee Benefit Trusts (EBTs).

HMRC since announced a spreading provision that will allow individual taxpayers with total income of no more than £50,000 in 2018/19 to spread the charge over 5 years.

RULES FOR “RENT A ROOM” RELIEF TO BE TIGHTENED UP FROM 6 APRIL 2019

HMRC propose to restrict the availability of “rent a room” relief to situations where the taxpayer is living in the let property for at least some of the time that the accommodation is let. Hence renting out a house during Wimbledon fortnight while the owners are absent would not qualify from 6 April 2019!

Rent-a-room relief was introduced in 1992 to encourage individuals to make spare capacity in their homes available for rent. The government intended this to increase the quantity and variety of low-cost rented accommodation, giving more choice to tenants and making it easier for people to move around the country for work.

Currently rent-a-room relief gives relief from income tax for up to £7,500 of gross rental income to individuals who let furnished accommodation in their only or main residence.

USE OF SPREADSHEETS IN PREPARING VAT RETURNS

Example 3 in the VAT Notice describes a business that uses a spreadsheet and bridging software from April 2019, which allows the information to be transferred to HMRC via an API.  It uses a spreadsheet to record all sales, purchases, and expenses in a digital format. The VAT Return is then prepared within the spreadsheet, using formulae already written into the spreadsheet.

The VAT Return information is then sent via a mandatory digital link to bridging software, which digitally submits the information directly to HMRC.  Example 6 shows how a spreadsheet would be acceptable in order to consolidate VAT information prior to submit a Group VAT return.

“SOFT LANDING” FOR MTD FOR VAT FOR THE FIRST YEAR

For the first year of MTD for VAT (VAT periods commencing between 1 April 2019 and 31 March 2020) businesses will not be required to have digital links between software programs. The one exception to this is where data is transferred, following preparation of the information required for the VAT Return, to another product (for example, a bridging product) that is Application Programme Interface (API) – enabled solely for the purpose of submitting the 9 Box VAT Return data to HMRC. The transfer of data to this product must be digital.

For the first year of MTD for VAT (VAT periods commencing between 1 April 2019 and 31 March 2020), where a digital link has not been established between software programs, HMRC will accept the use of cut and paste as being a digital link for these VAT periods.

However, for VAT periods starting on or after 1 April 2020, there must be a digital link for any transfer or exchange of data between software programs, products or applications used as functional compatible software.

MAKING TAX DIGITAL FOR VAT GUIDANCE

MAKING TAX DIGITAL FOR VAT GUIDANCE

HMRC issued their detailed guidance on the digital record keeping and return requirements for Making Tax Digital (MTD) for VAT.

VAT Notice 700/22 clarifies that spreadsheets may still be used to keep business records provided that there is bridging software that links to the Government gateway.

There will however be a one year “grace” period during the first year of MTD when businesses will not be required to have digital links between software programs, referred to in the VAT Notice as a “soft landing”.

The VAT notice includes a number of helpful examples illustrating different accounting systems and the digital links required to comply with MTD for VAT.

The VAT notice is essential reading for all VAT registered businesses.

WHEN DOES MTD FOR VAT START?

The Making Tax Digital rules apply from your first VAT period starting on or after 1 April 2019. A ‘VAT period’ is the inclusive dates covered by your VAT Return.

For example, where a business submits quarterly returns covering the periods to 28 February, 31 May, 31 August and 30 November, the business will need to comply with Making Tax Digital rules for the VAT quarter starting 1 June 2019 and ending on 31 August.

DO NOT FORGET THERE MAY BE TAX TO PAY ON YOUR DIVIDENDS IN JANUARY

The rules for taxing dividends changed radically from 6 April 2016 with the removal of the 10% notional tax credit and the introduction of new rates of tax on dividends. For many taxpayers that meant more tax to pay on those dividends on 31 January 2018. The same will also apply on 31 January 2019.

If you are a higher rate taxpayer and received £30,000 of dividends in 2017/18 £25,000 of those dividends would be taxed at 32.5% meaning £8,125 due on 31 January 2019.

If you can let us have all of your tax documents as soon as possible we can let you know how much tax you need to pay next January so that you can set aside sufficient funds.

TAX EFFICIENT CHILDCARE SCHEMES

Earlier this year the Government announced that no new childcare voucher schemes could be set up after 5 October 2018. This was a six month extension from the previous 5 April 2018 end date. If those employers offering such schemes at 5 October are prepared to keep administering their scheme then they will continue to be available but will eventually be phased out.

The current scheme allows employers to provide vouchers to employees to pay for care of their children up to age 16. Vouchers to the value of £55 a week can be provided tax free to basic rate taxpayers with differing tax free amounts for higher rate and additional rate taxpayers.

The replacement scheme is the Government’s “tax free” childcare account which started this year for children up to age 12. Under this scheme the Government tops up the savings in the childcare account by 25% up to £2,000 per child per year (£4,000 for a disabled child).  Thus, savings of £8,000 would be topped up by the Government to £10,000 and the £10,000 could then be used to pay Ofsted registered childcare providers such as nursery fees, childminders, after school clubs and summer camps.  Unlike childcare vouchers, the new childcare accounts will be available to both employees and the self-employed.

For those already in childcare voucher schemes it may be beneficial to switch to the new childcare account and we can help you calculate whether or not that would be beneficial.

AND FOOTBALL REFEREES ARE SELF-EMPLOYED

The degree of control was also held to be a critical factor in determining that football referees in charge of matches in the Championship and lower leagues were self-employed. HMRC were arguing that the referees should be taxed as employees and subject to PAYE. Interestingly, those refereeing Premier League matches are employees of the Premier League and HMRC are expected to appeal the decision of the First Tier Tribunal.

IT CONSULTANT WINS IR35 PERSONAL SERVICE COMPANY CASE

The Government have been consulting on extending the personal service company rules that currently apply to public sector workers to those in the private sector, but in the meantime tax tribunal decisions are still being decided against HMRC.

In a recent case involving an IT consultant working on various projects to implement the new Universal Credit system the First Tier Tax Tribunal decided that the consultant would not have been an employee if directly engaged. A key factor was that the the level of control over the consultant fell far below the sufficient degree required to demonstrate a contract of service.