eNews – December 2016
- Autumn Statement update
- Seasonal gifts to employees – make sure they are tax free
- Advisory fuel rates for company cars
- ‘No excuses’ for auto enrolment mistakes say TPR
- Making Tax Digital update
- Recognising genuine contact from HMRC – spotting phishing
Autumn Statement update
On Wednesday 23 November the Chancellor Philip Hammond presented his first, and last, Autumn Statement along with the Spending Review.
His speech and the supporting documentation set out both tax and economic measures. Some of the pertinent tax and employee welfare measures announced were:
- the government reaffirming the objectives to raise the personal allowance to £12,500 and the higher rate threshold to £50,000 by the end of this Parliament
- a reduction of the Money Purchase Annual Allowance for pensions to £4,000
- a review of ways to build on Research and Development tax relief
- tax and National Insurance advantages of salary sacrifice schemes to be removed
- anti-avoidance measures for the VAT Flat Rate Scheme including the introduction of a higher 16.5% rate for some businesses
- autumn Budgets commencing in autumn 2017
- National Living Wage to rise from £7.20 an hour to £7.50 from April 2017
- Universal Credit taper rate to be cut from 65% to 63% from April 2017.
Internet link: GOV.UK autumn statement documents
Seasonal gifts to employees – make sure they are tax free
At this time of year some employers may wish to make small gifts to their employees.
For many years HMRC have been prepared to accept that trivial benefits were not taxable under certain circumstances. However a statutory exemption has been introduced from the start of the current tax year which should give employers certainty that the benefits provided are exempt and do not result in a reportable employee benefit in kind. In order for the benefit to be exempt it must satisfy the following conditions:
- the cost of providing the benefit does not exceed £50
- the benefit is not cash or a cash voucher
- the employee is not entitled to the voucher as part of a contractual arrangement (including salary sacrifice)
- the benefit is not provided in recognition of particular services performed by the employee as part of their employment duties
- where the employer is a ‘close’ company and the benefit is provided to an individual who is a director, an office holder or a member of their household or their family, then the exemption is capped at a total cost of £300 in a tax year.
If any of these conditions are not met then the benefit will be taxed in the normal way subject to any other exemptions or allowable deductions.
One of the main conditions is that the cost of the benefit does not exceed £50. If the cost is above £50 the full amount is taxable, not just the excess over £50.The cost of providing the benefit to each employee and not the overall cost to the employer determines whether the benefit can be treated as a trivial benefit. So, a benefit costing up to £50 per employee whether provided to one or more employees can be treated as trivial. Where the individual cost for each employee cannot be established, an average could be used. Some HMRC examples consider gifts of turkeys, a bottle of wine or alternative gift voucher.
Further details on how the exemption will work, including family member situations, are contained in HMRC manual.
However if you are unsure please do get in touch before assuming the trivial benefit you are about to provide is covered by the exemption.
Internet link: HMRC manual
Advisory fuel rates for company cars
New company car advisory fuel rates have been published which took effect from 1 December 2016. The guidance states: ‘You can use the previous rates for up to one month from the date the new rates apply’. The rates only apply to employees using a company car.
The advisory fuel rates for journeys undertaken on or after 1 December 2016 are:
|1400cc or less||11p|
|1401cc – 2000cc||14p|
|1400cc or less||7p|
|1401cc – 2000cc||9p|
|1600cc or less||9p|
|1601cc – 2000cc||11p|
HMRC guidance states that the rates only apply when you either:
- reimburse employees for business travel in their company cars
- require employees to repay the cost of fuel used for private travel
You must not use these rates in any other circumstances.
If you would like to discuss your car policy, please contact us.
Internet link: GOV.UK AFR
‘No excuses’ for auto enrolment mistakes say TPR
The Pensions Regulator is reminding employers and their advisers, that they need to comply with their auto enrolment duties or face penalties: ‘Being ill or short-staffed isn’t a good enough excuse for your clients failing to comply with their legal duties. Our latest compliance and enforcement report shows that the number of small and micro employers receiving fines has risen after tribunal judges rejected what the employers claimed were ‘reasonable excuses’. As with any other business activity, if an employer is too unwell to complete their AE duties, they’ll need to find someone else who can. Automatic enrolment is ultimately the employer’s legal responsibility, so whether it’s due to pension provider failings or illness, a judge won’t consider an excuse to be ‘reasonable’, if there’s something they or someone else could have done to remedy the situation in time.’
TPR’s latest ‘Compliance and enforcement Quarterly bulletin’ reports that instances of penalties have risen but so have the amount of employers who are ‘staging’ for auto enrolment.
They have also sent over 6,000 letters to employers reminding them that their deadline for compliance is 31 December 2016.
Please contact us if you would like any help with your duties.
Internet link: TPR bulletin
Making Tax Digital update
Over the summer HMRC published six consultation documents on Making Tax Digital. The six consultations set out detailed plans on how HMRC propose to fundamentally change the method by which taxpayers, particularly the self-employed and landlords, send information to HMRC. Two key changes proposed are:
- From April 2018, self-employed taxpayers and landlords will be required to keep their business records digitally and submit information to HMRC on a quarterly basis and submit an End of Year declaration within nine months of the end of an accounting period (accounting periods are typically 12 months long).
- HMRC will make better use of the information which they currently receive from third parties and will also require more up to date information from some third parties, such as details of bank interest. Employees and employers will see the updating of PAYE codes more regularly as HMRC use the data received from the third parties.
HMRC received over 3,000 responses to their consultations which are now closed.
The government has announced it will publish its response to the consultations in January 2017 together with provisions to implement the changes.
Meanwhile HMRC’s Tax Assurance Commissioner Jim Harra has written to the Financial Times stating HMRC’s point of view that ‘Digital tax should not be a burden to businesses’ in a move to allay the concerns that changes will place an additional burden on businesses and their agents.
We will keep you informed of developments.
Recognising genuine contact from HMRC – spotting phishing
HMRC have updated their guidance on how to spot genuine contact from HMRC, and how to tell when an email or text message is phishing or bogus.
Phishing is the fraudulent act of emailing a person in order to obtain their personal and financial information such as passwords and credit card or bank account details. These emails often include a link to a bogus website encouraging you to enter your personal details.
Internet link: Genuine HMRC contact
This material is published for the information of clients. It provides only an overview of the regulations in force at the date of publication, and no action should be taken without consulting the detailed legislation or seeking professional advice. Therefore no responsibility for loss occasioned by any person acting or refraining from action as a result of the material can be accepted by the authors or the firm. Please contact us for further information.