Reporting company cars

Company directors who want to drive an electric or low emissions car are now seriously considering whether their company should buy the car, and claim the 100% capital allowance available for new cars with CO2 emissions not exceeding 50g/km.

As we explained on 28 November 2019 this first year allowance is only available until April 2021, so directors have to get a move on. The lower benefit in kind charge for all low emissions cars from April 2020 will also provide an incentive to “go green”.

Where a company car is made available to the director for the first time it must be reported on the form P46(car). Where the new car has zero emissions “fuel type A” should be chosen on the current version of that form, and on the P11D for 2019/20.

A new version of P46(car) will be released in April 2020 to allow you to report the zero-emissions mileage for hybrid cars which have CO2 emissions figures of up to 50g/km. This figure may be found on the certificate of conformity, but check whether it is expressed in miles or kilometres, and convert to miles if necessary.

Diesel cars which meet the Euro 6D standard and hence are exempt from the 4% diesel supplement for benefits in kind, are now available. It is important to distinguish between diesel cars which do meet the Euro 6D standard, and those that don’t, on the P11d form for 2019/20.

• Use fuel letter F for diesel cars that meet the Euro 6D standard
• Use fuel letter D for diesel cars that don’t meet the Euro 6D standard

 

If the car benefit has been payrolled there is no need to complete a P11D to report the car. However, for low emissions cars provided in 2020/21, the zero-emissions mileage figure will have to be provided in a new field on the first FPS submitted for the year.

 

Written by the Tax Advice Network

NMW compliance

The National Minimum Wage (NMW) and the National Living Wage (NLW) rates will rise for pay periods starting on or after 1 April 2020, but this year the increase is quite steep as each rate rises by over 6% (see table).

The current and new NMW rates are:

Employers need to be prepared for this increase in wage costs and budget accordingly, as the increases will have a knock-on effect for employer’s class 1 NIC and the amounts of pension contributions required for work-place pension schemes under auto-enrolment.

There are also new rules for salaried workers who are paid a set annual amount, but in varying amounts each week or month, according to the hours worked. The employer will be permitted to choose the “calculation year” to monitor whether these workers have been paid at least the NMW for the hours they worked.

The “name and shame” threshold for underpayment of the NMW will be raised to £500 from £100. This will allow businesses which make errors that don’t exceed £100 across their payroll, to correct those errors without the risk of adverse publicity. However, the lower threshold of £100 will continue to apply where the business has found to have broken the NMW rules in the last six years.

Written by the Tax Advice Network

Employment allowance

The employment allowance is currently worth up to £3,000 pa per employer (or group of connected employers), although the Conservative Party promised to increase this cap to £4,000 pa, so watch out for a Budget announcement.

However, we do know that the scope of the allowance will be restricted from 6 April 2020 to employers who had class 1 NIC liability in 2019/20 of less than £100,000. This only applies to the employer’s (secondary) liability not to any employee’s NIC paid over by the employer to HMRC, or to class 1 NIC on deemed employments such as under the off-payroll working rules. The £100,000 limit applies to the sum of all class 1 NIC liabilities across a group of companies. Similarly, where the employer runs a number of payrolls the £100,000 applies to the sum total of class 1 NIC paid across all those payrolls.

Where our client has an employer’s NIC bill around that threshold it would be worthwhile reviewing whether it could be kept under £100,000 by delaying some bonuses to 6 April 2020 or later.

Remember the employment allowance can not be claimed by one-person companies, where the only employee is the director.

A further complication from April 2020 is that the employment allowance will count as de-minimis State aid, which has an upper limit permitted per business. This limit varies from €20,000 to €200,000 for two year period, depending on the sector the business operates in.

Claims for the employment allowance for 2020/21 will not automatically roll-over from the previous year. Each eligible employer (or their payroll agent) will have to make a specific claim on the EPS, for which they will need to know:

• Which trade sector the business operates in, out of:
  – agriculture
  – fisheries and aquaculture
  – road freight transport
  – industrial/other
• The amount of State aid received, or anticipated to be received, in the years 2018/19 to 2020/21
• Whether the amount of class 1 employers’ NIC paid for 2019/20 was £100,000 or more.

Payroll software should be updated to include fields for this extra information on the EPS. To avoid a delay making a claim for the employment allowance this information should be collected well before 6 April 2020.

Written by the Tax Advice Network

Change to off-payroll working rules

The off-payroll working rules are due to be rolled-out to private sector contracts from 6 April 2020, but it seems that neither the Government, HMRC, engagers or the contractors themselves are ready.

This is hardly surprising since the legislation to introduce these rules is still in draft, there are two on-going reviews into how the law will work, and a key aspect of the implementation was changed only last week.

As we explained on 29 August and 7 November 2019, the off-payroll working rules are a fresh application of IR35, with the responsibility for compliance switched 180 degrees to the engaging organisation. Those contractors who work for “small” clients (generally those which don’t require an audit), are not affected.

As originally proposed the off-payroll working rules were to apply to private sector contracts where payment for the services was made on or after 6 April 2020. This would have meant that work performed in February and March 2020 would be drawn into the new regime, as contractors regularly have to wait 30 days or 60 days for their payments.

Fortunately, common sense has prevailed. Now the off-payroll working rules will only apply in the private sector where the service is performed on or after 6 April 2020 and payment for those services is also made on or after that date.

HMRC has published detailed guidance in its Employment Status Manual at ESM 10000 onwards, but all the guidance relating to the rules from April 2020 is marked: “This is a draft and may be subject to change”.

Written by the Tax Advice Network

Loan charge

We outlined the changes for those affected by the loan charge in our newsletter on 9 January 2020. Since then HMRC has updated its guidance and published draft legislation to bring those changes into effect from 5 April 2019.

To help your clients make the correct disclosures, and pay the right amount of tax in respect of the loan charge you need to know exactly when each loan was advanced to them and if it was repaid by 5 April 2019.

The following loans are now not subject to the loan charge:

• those repaid before 5 April 2019
• advanced before 9 December 2010
• advanced before 6 April 2016 and fully disclosed to HMRC, and HMRC did not take action to demand tax due in respect of the loan before 5 April 2019 – this is then an “unprotected year”.

Where the taxpayer received regular loans in the tax year 2010/11, HMRC will permit you to apportion the total amount lent in the year as 2/3 prior to 9 December 2010 (escapes loan charge), and 1/3 post 9 December 2010 (subject to loan charge).

HMRC has clarified that the disclosure requirement will be met where the DOTAS number for the tax avoidance scheme used was provided on the relevant tax return, or if there was no DOTAS number to declare, the loan arrangement was described elsewhere on the return. That description must have contained sufficient information to show that a tax liability may have arisen from the loan. You may need to review the 2010/11 tax return very carefully.

Taxpayers can now spread the declaration of their outstanding loans which are subject to the loan charge over the tax returns for: 2018/19 to 2020/21, which spreads the tax due under the loan charge over those years.

To do this the taxpayer must elect on the “additional information form” before 30 September 2020, but that form won’t be available from HMRC until April 2020. If it makes sense for the taxpayer to spread the loan charge (and it won’t in every case), you should complete the 2018/19 tax return on the basis that this election has been made.

Where the 2018/19 tax return has already been submitted it may need to be amended to the reflect the above changes to the loan charge liability.

If the 2018/19 tax return has not been filed you can either include estimated figures of the tax due, or file and pay by 30 September 2020, in which case the late filing and late payment penalties will be waived.

 

Written by the Tax Advice Network

 

VAT and Brexit

The UK is leaving the European Union at 11pm on 31 January 2020, and most people think that nothing will change until the end of the transition period on 31 December 2020, but that is not the case.

As the UK will no longer be an EU member state the VAT rules for UK businesses automatically switch to those applicable to non-EU member states, unless special arrangements are made.

VAT refunds

Currently UK businesses can reclaim VAT incurred on business expenses incurred in other EU states using the HMRC online portal. The deadline for reclaiming VAT incurred in a calendar year is 30 September following that year.

For expenses incurred 2019 the deadline will remain as 30 September 2020, but the HMRC online portal will close on 31 March 2021 for claims due for VAT incurred in 2020.

VAT MOSS

A similar lengthy transition period will not apply for VAT MOSS reporting, as far as we know. The HMRC portal for reporting and paying VAT due under VAT MOSS will close in May 2020.

VAT MOSS is the simplified method to report VAT due on digital services sold to non-business customers in other EU member states. The current HMRC advice is that the VAT MOSS return for sales made in January 2020 will have to be submitted by 20 April 2020, and the HMRC online VAT MOSS portal will stay open for such returns to be amended before 15 May 2020.

UK businesses currently enjoy an exemption for reporting under VAT MOSS if the total value of all digital services supplied to non-business customers in other EU countries is less than £8,818 for the calendar year, and that threshold was not breached in the previous year. This VAT MOSS turnover threshold will revert to nil at 11pm on 31 January.

Where UK businesses make any sales of digital services to non-business customers in the EU on or after 1 February 2020, that UK business will have to registered for VAT MOSS as a non-union supplier in an EU member state (ie not the UK), or alternatively register for VAT in an EU member state.

The best EU states to pick as a VAT base will be the republic of Ireland or Malta, as both those countries use English as the main language for commerce.

Written by the Tax Advice Network