Individuals and organisations which receive income or gains from other countries, typically pensions or royalties, may have overseas tax deducted from those payments unless they can show they qualify for relief under a double taxation agreement (DTA).

Many DTAs require the taxpayer to prove they are resident for tax purposes in the UK before the payment can be made without deduction of tax, or in some cases with a lower rate of tax deducted. This proof is given as a certificate of residence, which in general must be issued by HMRC.

[Read more…] about 15/03/2018 – Certificates of residence

All registered employee share schemes must submit a report to HMRC for each tax year using the ERS online reporting system. If nothing has happened during the year a nil report must be submitted. If the scheme was closed during the year an annual report is still required for that year.

The deadline for submitting the annual share scheme reports for 2017/18 is 6 July 2018, although last year this deadline was extended to 24 August 2017, due to technical problems at HMRC’s end. An automatic £100 penalty is issued if the annual return is even one day late, with further £300 penalties issued if the annual return is not submitted by 7 October or the following 7 January.

HMRC publishes a quarterly ERS bulletin, which this month contains tips for submitting correct employee share scheme returns.

[Read more…] about 15/03/2018 – Share scheme reporting

Termination payments which are provided for in the employment contract are by definition paid under that contract, and are taxable. Payments in lieu of notice (PILON) which are not provided for in the employment contract are currently not taxable if the amount paid falls within the £30,000 exemption.

Where a PILON is paid on or after 6 April 2018, and the employment also ended on or after that date, the payment will be taxable and subject to employer’s NIC. The £30,000 exemption remains in force, but it can only apply to the elements of the termination payment which are not PILON. This may be a lump sum, benefits in kind, damages for loss of salary and other benefits, or statutory redundancy.

Currently, where the £30,000 exemption applies, the whole termination payment including the amount above the £30,000 limit, is free of employer’s NIC. For termination payments made on or after 6 April 2018, only the first £30,000 can be free of employer’s NIC.

Another little-known tax exemption for termination payments is for foreign service. The value of the termination payment escapes tax in proportion to the period the employee spent working overseas for that employer. This relief for foreign service is removed for UK resident employees on 6 April 2018, but remains in place for seafarers. The tax exemption for legal fees paid as part of a settlement agreement on termination remains in place.

Applying the correct tax treatment to termination payments can be quite tricky. Our employment tax experts are always happy to advise, but don’t leave it too late as 6 April 2018 is an absolute deadline.

 

Written by the Tax Advice Network

Tax-free childcare accounts can now be opened by all eligible parents who have children aged under 12, or under 17 if the child is disabled. For every £8 the parent deposits in the account the Government will contribute £2, up to a maximum of £2,000 of Government support per child per year. Those limits are doubled for disabled children.

There have been some technical problems which have held up applications for the tax free childcare accounts and prevented some parents from accessing the money held in their accounts. If you have been affected by those technical faults they may be eligible for compensation.

Parents who open a tax-free childcare account are not supposed to double-up their child care support by also receiving childcare vouchers or directly paid for childcare from their employer. The parent should tell their employer in writing, within 90 days of opening their tax-free child care account, that they have opened that account, and the employer should take that employee out of the childcare scheme.

All employer provided childcare voucher schemes must close to all new entrants from 6 April 2018. Where the youngest child is age over 11 but under school leaving age, the parent won’t qualify for a tax-free child care account, but will qualify for employer provided childcare vouchers if they join the scheme and receive their first voucher before 6 April 2018.

Childcare vouchers are often made available to employees using a salary sacrifice scheme. To take advantage of childcare vouchers through salary sacrifice the employee must first sign up to a new contract before the start of the pay period in which he or she becomes entitled to the new lower amount of salary. For employees paid for each calendar month the last day the new contract can be signed is 31 March 2018.

 

Written by the Tax Advice Network

Many employers may have forgotten that a workplace pension which complies with the auto-enrolment rules must receive a total minimum level of contributions on behalf of each employee who is enrolled in the scheme. This level of contributions is expressed as a percentage of the employee’s pensionable pay.

The workplace pension scheme rules will define what pensionable pay is for each employee, and this can vary from scheme to scheme. Some pension schemes define pensionable pay as “qualifying earnings”, which is the pay between the NIC lower earnings and upper earnings limits: £6,032 to £46,350 for 2018/19.

[Read more…] about 08/03/2018 – Pension contributions

MTD preparation

Further details about the implementation of MTD are emerging every day. In our newsletter on 8 February 2018 we outlined how a combination of spreadsheets and MTD-compatible software will meet the requirement for keeping digital records, if all the links between the various packages or spreadsheets are digital.

However, as there is very little time to get the various accounting packages talking to each other, HMRC will allow businesses to make non-digital transfers of data between software packages and spreadsheets during a “soft landing” period. HMRC expect this period to last no more than 12 months, and they will not impose penalties in that period for failing to comply with the digital records regulations.

[Read more…] about 01/03/2018 – MTD preparation