News & Updates

Many businesses commence trading with just a few occasional sales, and only after the individual has convinced themselves they can effectively deliver the product or service will they enthusiastically launch their business. At that stage you may well seek out our professional help.

The difficulty here is deciding when the new business actually commenced. Is it when the first sale was made, or was it much later when a viable business seemed possible? The trading and miscellaneous income (TMIA) allowance can help us out here.

The TMIA came into effect on 6 April 2017, and covers up to £1,000 of trading or other sundry income per tax year. It doesn’t matter when the sales were made within the tax year, if the total is less than £1,000 the TMIA will cover them, and the allowance doesn’t have to be claimed on the tax return. See examples in HMRC’s Business Income Manual at BIM86070.

Example
Sally quit her job to launch her new business in July 2018, having made a few test sales in January to March 2018 which amounted to £700. The 2017/18 sales can be covered by the TMIA of £1,000, so the real business can be said to start in July 2018 within 2018/19. Sally is still within time to register as self-employed for 2018/19 without incurring a penalty, and she won’t have to complete a SA return for 2017/18 as her taxable income was fully reported under PAYE for that year.

Written by the Tax Advice Network

Repayments
Companies which are registered under the construction industry scheme (CIS) as sub-contractors, and who don’t have gross payment status, will have tax deducted from their invoices by their customers.

This tax can be set against the PAYE and NIC payable by that company, but in many cases the CIS deductions will exceed the PAYE and NIC payable. In this case the company can claim a refund of CIS deductions using the online form. We can do this on behalf of our clients.

It takes HMRC up to 40 working days to process each CIS refund claim, so don’t start chasing for the refund until after 6 weeks have passed.

Penalties
Two cases concerning CIS penalties should be kept for future reference, as the reasons the judges gave for accepting the appeals were based on HMRC’s flawed procedures, which are likely to apply in other cases.

On 8 June 2016 HMRC wrote to Ground Force Ltd to inform them that their supplier’s CIS status was changing from 8 June from CIS gross payment to net payment status. Ground Force claimed this letter was not received until 6 July 2016, and in the meantime it had made payments of £314,806 to that supplier without deduction of tax. HMRC imposed penalties for non-compliance with CIS regulations, but the FTT agreed that Ground Force had taken reasonable care to action HMRC’s instructions once they the letter was received on 6 July.

ESE Rendering Solutions Ltd received 34 penalties for failing to submit monthly CIS returns from August 2015 to January 2017. The company claimed it hadn’t received those penalties and HMRC couldn’t prove that it had issued any penalties to that company before 16 December 2016. The FTT thus cancelled all the penalties except for the last one.

Written by the Tax Advice Network

Diesel cars have had a lot of bad press in the last four years, but there are still a large number of diesel-powered company cars around as they tend to be more fuel efficient for long journeys.

When reporting the taxable benefit for diesel cars (which don’t comply with Euro 6d) the relevant percentage of the list price has four percentage points added on, up to the maximum of 37%. This means diesel cars with emissions of 160g/km or more are taxed at 37% of list price (for 2018/19), so it doesn’t matter what the CO2 emissions are above 160g/km as the car will still be taxed at 37% of list price.

The maximum list price percentage is reached for diesel cars with CO2 emissions of 145g/km in 2019/20.

New diesel cars are now being sold that meet the Euro standard 6d, which gives them two advantages:

• the 4% supplement doesn’t apply so the taxable benefit is calculated as per petrol cars; and
• the £12.50 daily charge in London’s ultra-low emissions zone does not apply.

Where an employee has been provided with a new diesel car, which meets Euro standard 6d, this should be reported as fuel type F on the form P46(car) for 2019/20. Where a Euro standard 6d diesel car was provided in 2018/19, it should be report on the 2018/19 P11d as “fuel type A”.

Written by the Tax Advice Network

A recent HMRC webinar for tax agents caused great hilarity and confusion when the presenter said a weekly bacon roll (cost £2) could not be classified as a tax-free trivial benefit. But in the same webinar it was implied that wine (cost £30) could be a trivial benefit.

The root of the confusion was a misunderstanding about the conditions for a trivial benefit. Most people focus on the cost per item, but all four of these conditions must be met:

1. the cost of providing the benefit does not exceed £50;
2. the benefit is not cash or a cash voucher;
3. the employee is not entitled to the benefit as part of any contractual obligation; and
4. the benefit is not provided in recognition of particular services performed by the employee as part of their employment duties.

If the employer promises to provide bacon rolls to those employees who turn up for an early training session every Friday, that amounts to a reward for performing duties connected with the employment contract (condition 4 is broken). Where the employer provides the bacon roll as an unexpected treat to employees, that can be classified as a trivial benefit as the employees don’t have to do anything in order to receive the bacon roll.

If all staff are provided with free or subsidised breakfast at the workplace, that is not a trivial benefit, but it would be tax free under the rules applying to a staff canteen (see EIM21671)

The number of trivial benefits provided to a particular member of staff in a single tax year is unlimited, but each item provided has to meet all of the four conditions above. Thus regular gifts, eg a bacon roll every Friday, may come to be expected as part of the reward for working for that employer. As soon as the benefit is expected by staff it ceases to qualify as a trivial benefit.

Where trivial benefits are provided to a director of a close company or to a member of their family or household, there is an annual cap of the value of items which can be treated as trivial benefits: £300 per year.

Written by the Tax Advice Network

A recent HMRC webinar for tax agents caused great hilarity and confusion when the presenter said a weekly bacon roll (cost £2) could not be classified as a tax-free trivial benefit. But in the same webinar it was implied that wine (cost £30) could be a trivial benefit.

The root of the confusion was a misunderstanding about the conditions for a trivial benefit. Most people focus on the cost per item, but all four of these conditions must be met:

1. the cost of providing the benefit does not exceed £50;
2. the benefit is not cash or a cash voucher;
3. the employee is not entitled to the benefit as part of any contractual obligation; and
4. the benefit is not provided in recognition of particular services performed by the employee as part of their employment duties.

If the employer promises to provide bacon rolls to those employees who turn up for an early training session every Friday, that amounts to a reward for performing duties connected with the employment contract (condition 4 is broken). Where the employer provides the bacon roll as an unexpected treat to employees, that can be classified as a trivial benefit as the employees don’t have to do anything in order to receive the bacon roll.

If all staff are provided with free or subsidised breakfast at the workplace, that is not a trivial benefit, but it would be tax free under the rules applying to a staff canteen (see EIM21671)

The number of trivial benefits provided to a particular member of staff in a single tax year is unlimited, but each item provided has to meet all of the four conditions above. Thus regular gifts, eg a bacon roll every Friday, may come to be expected as part of the reward for working for that employer. As soon as the benefit is expected by staff it ceases to qualify as a trivial benefit.

Where trivial benefits are provided to a director of a close company or to a member of their family or household, there is an annual cap of the value of items which can be treated as trivial benefits: £300 per year.

Written by the Tax Advice Network

Businesses which fail to submit VAT returns on time, or pay their VAT late, enter the VAT surcharge system. For small businesses with turnover of less than £150,000 this only applies if there is more than one failure in a 12-month period. For the first offence the small business should receive a help letter from HMRC.

HMRC should tell the business that it is within a surcharge period by issuing a surcharge liability notice (SLN). If the business repeatedly files VAT returns late or pays VAT late, the SLNs will carry on arriving and penalties will mount up. These start at 2% of the late paid VAT (minimum of £400), and increase each time a SLN is issued until the penalty is 15% of the late paid VAT.

The key to this process is the receipt of an SLN. If the business does not receive an SLN, any default surcharge (penalty) issued on the back of that SLN is invalid. Three recent FTT cases (see links below) have established that HMRC does not keep an accurate list of the address each SLN was sent to and when it was issued, or if it does, it cannot produce that evidence in court.

If our client receives a VAT default surcharge out of the blue, and we weren’t aware of an SLN being received, we need to appeal against that penalty. We can also ask for a review by an independent team within HMRC (VAT Notice 700/50, section 7). We have to make it clear that the SLN was not received and ask HMRC to produce evidence to prove it was sent.

Written by the Tax Advice Network