NIC Act 2019 receives Royal Assent

The National Insurance Contributions (Termination Awards and Sporting Testimonials) Bill has received Royal Assent, to become the National Insurance Contributions (Termination Awards and Sporting Testimonials) Act 2019.

The Act aligns the employer NICs treatment of termination awards in excess of £30,000, received in connection with the termination of an individual’s employment, with the Income Tax treatment for such payments, by introducing a new 13.8% Class 1A employer NIC charge to any part of a termination award that is already Income Tax liable. Termination awards will remain exempt from employee NICs. The provisions are expected to take effect from 6 April 2020.

Changes at HM Treasury

Within hours of entering 10 Downing Street for the first time as Prime Minister, Boris Johnson had filled most of the senior cabinet roles by undertaking a major overhaul of cabinet members.

After three years in the job, the previous Chancellor of the Exchequer, Philip Hammond resigned his position to the outgoing Prime Minister, Theresa May rather than face the sack. He has been replaced in the job of Chancellor by Sajid Javid who was already in the cabinet as Britain’s foreign secretary. The new Chancellor is a leading Brexiteer and has already vowed to release significant extra funding to ensure Britain leaves the EU on 31 October 2019 with or without a deal.

The holder of the role of Chief Secretary at the Treasury has also changed with Rishi Sunak replacing Liz Truss who has been appointed the new Secretary of State for International Trade. There was also one further new appointment to the ministerial team at the Treasury with Simon Clarke appointed Exchequer Secretary. Jesse Norman, Financial Secretary and John Glen, Economic Secretary have been reappointed to their previous roles by the new Prime Minister.

Earlier payment dates for Capital Gains Tax

Currently, the due date for paying any Capital Gains Tax (CGT) owed to HMRC is the 31 January, following the end of the tax year in which a Capital Gain was made. This deadline will change for UK residents from April 2020. Clients should be advised that this change will mean that any CGT due on the sale of a residential property will need to be reported earlier than is current the case. In addition, a payment on account of any CGT due (an advance payment towards their tax bill) will need to be made within 30 days of the completion of the transaction.

In practice, this change will apply to the sale of any residential property that does not qualify for Private Residence Relief (PRR). The PRR relief applies to qualifying residential properly used wholly as a main family residence. The new deadline will mainly apply to clients who are disposing of a second / holiday home, an investment rental property or a home that does not qualify or only partially qualifies for PRR.

There are also changes to the PRR rules which will see the final exempt period for CGT purposes being reduced from 18 months to 9 months from April 2020. This time period can be extended to 36 months under certain limited circumstances such as the owner having to move into care. This relief applies even if the homeowner was not living in the property when it was sold.

These CGT changes have already come into effect (from April 2019) for non-UK residents. If your client lives abroad and sells a UK residential property, they must inform HMRC within 30 days of the sale. The notification must be made whether or not there is any non-resident CGT to be paid. Any non-resident CGT that is due must be paid within 30 days of the sale.

Changes to Structures and Buildings Allowance

The new structures and buildings allowance (SBA) allows for tax relief on qualifying capital expenditure on new non-residential structures and buildings. The relief applies to the qualifying costs of building and renovating commercial structures.

The relief was introduced with effect from 29 October 2018 and applies where all contracts for the physical construction works are entered into on or after that date. The legislation to provide for this new relief was laid before Parliament and came into force on 5 July 2019 with retrospective effect.

As a result of the consultation process, some features have been amended, including those relating to short-term leaseholds, eligible pre-trading costs, periods of disuse, and reducing claimants’ administrative burdens.

The relief is available at an annual rate of 2% on a straight-line basis (over 50 years). No relief is available where parts of the structure qualify for other allowances, such as Plant & Machinery allowances.

The SBA is intended to support business investment in constructing new buildings, including necessary preparatory costs, and the improvement of existing ones, as well as improving the international competitiveness of the UK’s capital allowances system.

VAT accounting after prices are changed

New rules that make changes to the issuing of credit notes under certain circumstances will come into effect from 1 September 2019. The changes have been put in place to target certain businesses who seek to create a tax advantage by making VAT adjustments for reductions in price without refunding their customers. The change will ensure that customers benefit from reductions in the price paid and the new rules will also affect businesses that issue credit notes as a matter of course.

The rules will also target businesses that incorrectly attempt to treat errors as price adjustments for the purpose of avoiding the relevant time limits. Whilst HMRC is clear that Regulation 38 cannot be used in these circumstances, the new legislation will put this beyond doubt. Regulation 38 applies to cases where the price change occurs after the supplier has already accounted for the output tax on the original supply in a VAT Return. Under the new rules, Regulation 38 may only be used to reduce the amount of VAT paid to HMRC when a refund is actually made.

The new rules will ensure that:

  • the time an increase in price occurs is when the change is agreed by both the supplier and the customer – a debit note must be issued no later than 14 days after the price increase – the supplier must account for the increase in VAT in the VAT period in which the change occurs.
  • a decrease in price occurs when a supplier makes a refund to a customer, or other person entitled to receive the payment – a supplier has 14 days to issue a credit note from the time the decrease occurs – a supplier must account for the decrease in the VAT period in which it takes place – a VAT-registered customer must reduce the amount of VAT it has claimed by the same amount. This does not prevent a supplier issuing credit notes in advance of refunds being made, but ensures that it is issued no later than 14 days after the payment.

How to claim a personal tax refund

HMRC’s annual reconciliation of PAYE for the tax year 2018-19 is well under way. HMRC use salary and pension information to calculate if you have paid the correct amount of tax. The calculation is usually generated automatically by HMRC’s computer systems on what is known as a P800 form. If you are due a tax refund for 2018-19, you should receive a P800 by the end of September, and if you owe additional tax you will usually receive the form by the end of October following the tax year in question.

If you are due a refund, the P800 form will usually tell you that you can claim a refund online. Once you complete the claim online, the refund will be paid within 5 working days and will be in your UK account once your bank has processed the payment. If you do not claim the refund online within 45 days, HMRC will send you payment by cheque. 

If your P800 tells you that you will be repaid by cheque, then you do not need to take any further action and you should receive a cheque within 14 days of the date on the P800 Tax Calculation.

If you have not received a P800 form but think that you have overpaid tax, then you can contact HMRC to inform them. If HMRC agree that you are due a tax refund they will send you a P800 form.

You may be able to claim a refund if you:

  • are employed and had too much tax taken from your pay;
  • have stopped work;
  • sent a tax return and paid too much tax;
  • have paid too much tax on pension payments;
  • bought a life annuity.

We would be happy to assist you in making a tax refund claim.

Keeping records if self-employed

If you are self-employed as a sole trader or as a partner in a business partnership, then you must keep suitable business records as well as separate personal records of your income.

For tax purposes, the business records must be held for at least 5 years from the 31 January submission deadline for the relevant tax year. For example, for the 2017-18 tax year where online filing was due by 31 January 2019 you must keep your records until at least the end of January 2024. In certain situations, such as when a return is submitted late, the records must be held for longer.

If you are self-employed you should also keep a record of:

  • all sales and income
  • all business expenses
  • VAT records if you’re registered for VAT
  • PAYE records if you employ people
  • records about your personal income

You don't need to keep the vast majority of your records in their original form. If you prefer, you can keep a copy of most of them in an alternative format, as long as they can be recovered in a readable and uncorrupted format. For example, a scanned PDF document.

If your records are no longer available for any reason, you must try and recreate them letting HMRC know if the figures are estimated or provisional. There are penalties for failing to keep proper records or for keeping inaccurate records.

VAT for business if there’s a no-deal exit from the EU

With the new Prime Minister, Boris Johnson appearing to take an increasingly hard-line, the chances of Britain leaving the EU without any working agreement, known as a 'no deal' Brexit is looking increasing likely and certainly cannot be ignored.

If the UK leaves the EU on 31 October 2019, without a deal, there would be immediate changes to the procedures that apply to businesses trading with the EU. It would be timely to repeat a summary of the VAT guidance published by HMRC reminding businesses how to prepare.

Listed below are some of the main VAT issues that will affect UK businesses trading with the EU in goods and services if the UK leaves the EU without an agreement.

Imports

Businesses that are importing goods from the EU would be required to follow customs procedures in the same way that they currently do when importing goods from a country outside the EU. This means that an import declaration would be required, customs checks and any customs duties due must be paid.

There would also be multiple VAT issues including the requirement to account for import VAT on goods coming from the EU. The Government has already confirmed that postponed accounting for import VAT on goods brought into the UK will be introduced if the UK leaves the EU without an agreement.

Exports

Any agreement in place businesses exporting goods to the EU, will be required to follow customs procedures in the same way that they currently do when exporting goods to a non-EU country.

VAT registered UK businesses will continue to zero-rate sales of goods to EU businesses and will no longer be required to complete EC sales lists. However, EU member states will treat goods entering the EU from the UK in the same way as goods entering from other non-EU countries with associated import VAT and customs duties due when the goods arrive into the EU.

A 'no deal' Brexit would also mean the end of special VAT 'distance selling' rules for the zero-rated sale of goods to EU consumers, as well as changes to the UK VAT Mini One Stop Shop rules.

We would advise any UK businesses trading with the EU to seriously consider what action will be required in the event of a 'no deal' Brexit and to prepare a carefully thought-out risk assessment.

Payments on account system glitch

The due date for making your second payment on account for 2018-19 was the 31 July 2019. The amount that was due for payment is usually the same as that for your first payment on account made on or before 31 January 2019. If you are late making a payment on account, you will likely be required to pay interest and penalties.

Issues with HMRC’s handling of payments on account have been reported by a number of taxpayers. This is an ongoing problem that also affected the first payment on account, due in January 2019. If the first payment on account was missing, the second payment on account may also be affected. This is because HMRC did not correctly process all the payments on account information for 2018-19.

The glitch could have resulted in you not receiving the usual statement of account from HMRC telling you how much tax you needed to pay by 31 July 2019. HMRC has said that if you are affected 'any liability for 2018-19 will be payable in full in January 2020. Any payment intended for the 2018-19 POA will be allocated against any 2018-19 balancing payment due on 31 January 2020'.

This could result in those affected having to pay a far larger amount than expected as a final payment for 2018-19 in January 2020. If you are affected by this glitch, please contact us and we can help you understand your available options as making a 'voluntary' payment could result in further issues. 

Duty free limits if you are travelling abroad

Here is a reminder for our readers of their duty and tax free allowances if travelling abroad this summer.

Travelling to an EU country

Where tobacco or alcohol is brought in from another EU country no duties or tax will be payable as long as you can demonstrate that the goods are for your own use and that you paid the relevant taxes and duties on the purchase.

However, HMRC provide the following guidelines as to an acceptable maximum for personal use. If you exceed these limits, you are more likely to be subject to further questioning.

  • 800 cigarettes
  • 200 cigars
  • 400 cigarillos
  • 1kg of tobacco
  • 110 litres of beer
  • 90 litres of wine
  • 10 litres of spirits
  • 20 litres of fortified wine (for example port or sherry)

Travelling to a non-EU country

If you are travelling outside the EU you are allowed to bring the following back to the UK for your own use without any UK tax or duty liabilities.

  • 200 cigarettes or 100 cigarillos or 50 cigars or 250g of tobacco
  • 4 litres of still table wine
  • 16 litres of beer
  • 1 litre of spirits or strong liqueurs over 22 per cent volume; or 2 litres of fortified wine (such as port or sherry), sparkling wine or other alcoholic beverages of less than 22 per cent volume.
  • £390 limit for of all other goods including perfume and souvenirs. If you are lucky enough to be arriving by private plane or boat for pleasure purposes, you can bring in goods up to the value of £270 tax free.