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HMRC recently published a list of helpful reminders regarding the submission of monthly returns to HMRC. This article lists some of the points highlighted.

Each month contractors must send HMRC a complete return of all payments made to subcontractors within the scheme in the preceding tax month. This is regardless of whether the subcontractors were paid:

• net of the standard deduction of 20%
• net of the higher deduction of 30% or
• gross (you still need to include gross payment status subcontractors on your monthly submission if you pay them in the month even though no deductions have been made from their payments).

This monthly return must reach HMRC within 14 days of the end of the tax month it is for.

You can make your monthly returns using either:

• the free HMRC CIS online service or
• commercial CIS software

Contractors who know they won’t be paying any subcontractors for several months should let HMRC know. You can do this by selecting the ‘Inactivity Request’ box under the declarations section of the return. HMRC will make your CIS record ‘inactive’ for 6 months which means you will not need to send any monthly returns (including nil returns) during this period of inactivity. If, however the situation changes during that time and you start to pay subcontractors again, you must tell HMRC.

If you stop using subcontractors within the Construction Industry Scheme permanently or stop using subcontractors but continue to have employees liable to PAYE deductions, you need to tell HMRC and they will update your records to show you are no longer a contractor. Once all the required contractor monthly returns have been received up to the requested date of cessation then no further monthly returns (including nil returns) should be submitted. If, however you start making payments to subcontractors under the Construction Industry Scheme again you will need to advise HMRC.

The childcare voucher and directly contracted childcare schemes closed 4 October 2018. In time, these schemes will be replaced by the roll-out of the new Tax-Free Childcare: this offers parents £2,000 per year per child towards approved childcare costs. (This is extended to £4,000 for disabled children.)

In a recent article HMRC confirmed the following instructions for employers:

• Employees who joined a scheme and had the necessary changes made to their salary on or before 4 October, will see no change. Both you and your employees will continue to benefit from any Income Tax exemption or National Insurance contributions (NICs) disregard.
• Applying to the scheme before the deadline is not sufficient and a new applicant needs to have had the necessary changes made to their salary by the deadline (4 October 2018) in order to benefit from the Income Tax exemption and NICs disregard.
• If you continue to offer a scheme for new entrants after 4 October, you’ll need to deduct Income Tax and NICs on any vouchers given and pay employer NICs after this date.
• Your employees need to tell you in writing (for example, by email) within 90 days if they start getting Tax-Free Childcare, so you can stop giving them vouchers and directly contracted childcare with Income Tax and NICs reliefs. If this means stopping or changing their salary sacrifice arrangement, you’ll need to update their contract and your payroll software. Employees won’t be able to return to your scheme once they’ve left.

Parents reading this post can check out what is available to their family under the new arrangements for child care support at https://www.childcarechoices.gov.uk/

The Treasury has confirmed that the £50 note will continue to be part of the UK’s currency, and further, that the Bank of England will reissue it as a new modern polymer note. According to Treasury sources this will help clamp down on crime.

The announcement follows a public consultation and the government has confirmed that the current mix of coins and notes will remain. The move will apparently give us more flexibility over how we spend and manage our money while making it harder for criminals to counterfeit the new note.

Originally introduced in 1981, there are currently 330 million £50 notes in circulation – with a combined value of £16.5 billion. According to the Bank of England, demand for the note is continuing to rise.

The Bank of England has also confirmed that the new £50 polymer note will be printed in the UK to accompany the existing £5, £10 and upcoming £20 notes. This will ensure that the UK’s currency continues to be secure.

1 November 2018 – Due date for Corporation Tax due for the year ended 31 January 2018.

19 November 2018 – PAYE and NIC deductions due for month ended 5 November 2018. (If you pay your tax electronically the due date is 22 November 2018.)

19 November 2018 – Filing deadline for the CIS300 monthly return for the month ended 5 November 2018.

19 November 2018 – CIS tax deducted for the month ended 5 November 2018 is payable by today.

1 December 2018 – Due date for Corporation Tax due for the year ended 29 February 2018.

19 December 2018 – PAYE and NIC deductions due for month ended 5 December 2018. (If you pay your tax electronically the due date is 22 December 2018)

19 December 2018 – Filing deadline for the CIS300 monthly return for the month ended 5 December 2018.

19 December 2018 – CIS tax deducted for the month ended 5 December 2018 is payable by today.

30 December 2018 – Deadline for filing 2017-18 self assessment tax returns online to include a claim for under payments to be collected via tax code in 2019-20.

When you buy a new commercial vehicle, you will pay 20% VAT on the purchase price and in most cases this VAT can be reclaimed. This assumes of course, that the motor trader selling you the vehicle is VAT registered.

If you purchase a second-hand commercial vehicle there are three VAT options:

1. The second-hand dealer is not registered for VAT and therefore, you will not be charged VAT.
2. The second-hand dealer is registered for VAT and only charges you VAT on the profit he is making on the sale under the VAT margin scheme, in which case you will not be provided with a VAT invoice and you cannot reclaim the VAT charged.
3. The second-hand dealer is registered for VAT and charges you VAT at 20% on the sale price. In this case you will get a VAT invoice and can reclaim the VAT charged.

Let’s say that Jerry is looking at a second-hand van at his local dealers that has a sales price of £20,000. Primed by his accountant, he asks if the VAT included is calculated under the margin scheme.

After a hasty conversation with their accounts department, the rather flustered sales person says “yes, it is,” and after more enquiries Jerry is advised that the VAT element is £700. Jerry switches on his phone accesses the calculator, taps in £700 divides by 20 and multiplies by 100. The number £3,500 emerges.

Jerry knows that he cannot recover this £700 and he also knows that the dealer will have to pay the £700 out of his profit margin. Armed with this information, Jerry asks if he can pay outside the margin scheme, and more importantly, could he and dealer split the £700 saved by dropping the sales price to £19,650 plus VAT at 20%.

In this way, the dealer will collect and pay the VAT added of £3,930 and will receive £19,650 for the van instead of £19,300 (£20,000 less the £700 margin scheme VAT).

Jerry will have to pay out £23,580 initially but will be able to claim back the full £3,950 of VAT and will have acquired the van for £19,650 instead of £20,000.

The dealer accepts. A classic win-win outcome.

Did you know that there is going to be a Small Business Saturday on 1 December 2018? We have reproduced below some of the help that will be available.

Access finance available to support small businesses

Are you and your business looking to start up, scale up or stay ahead? Start Up Loans of up to £25,000 can give you a much-needed boost if you’re just starting out. Or take a look at the Finance Hub and the British Business Bankfor more finance options for smaller businesses.

Call the Business Support Helpline

The free Business Support Helpline can help businesses of all sizes find the right advice and support at all stages of the business journey – whether you’re starting out, growing or looking to stay ahead.

You can email enquiries@businesssupporthelpline.org, live chat or call 0300 456 3565 Monday to Friday, 9:00am to 6:00pm.

Contact the Small Business Commissioner to resolve late payment disputes

If you’re having issues with not being paid on time, the Small Business Commissioner can provide advice on late and unfair payment, help you act and work to resolve disputes.

Put your business up for a Queen’s Award

Winning a prestigious award can give your small business a boost. The Queen’s Awards for Enterprise are recognised globally as a mark of quality for UK business and entrepreneurs. Almost any UK business can apply for free. The next round of applications opens in May 2019.

Apply for government contracts

Our Contracts Finder lets you search for information about government and agency contracts worth over £10,000 and explore information on previous tenders to see whether one might work for you.

See which large businesses pay their invoices on time

Large businesses have a duty to report on their payment practices. You can access this information to find out whether a business you’re intending to trade with is likely to pay on time.

Take advantage of support for innovation

If you’re a UK-based small business developing an innovative product, process or service, Innovate UK could help you get your idea off the ground.

Become more competitive by making a few simple changes

Be the Business can help small and medium sized companies across the UK supercharge productivity and earning power by making a few small but effective changes.

Get advice on selling overseas

If your small business sells overseas, UK Export Finance can help you access the right finance and insurance to help you win vital international contracts.

Get involved in Small Business Saturday

Visit the Small Business Saturday website to register and advertise your business for free on their Small Business Finder and find out how else you can get involved. Don’t forget to use local small businesses near you and encourage others to do the same this 1 December.

March 2017 was the date we declared we were going to exit from the EU. This set the deadline for our national drawbridge to be raised on the rest of Europe at the 29 March 2019. This is the first time we have separated ourselves from our largest trading partner since we joined the Common Market – the precursor to the EU – 1 January 1973.

It is useful, when considering the effective strategies we could employ to weather the changes that this process will likely create, to visualise the exit as running a marathon.

The comparison may seem to be a little left-field but bear with us.

If you have ever participated in a marathon you will have embarked on a fairly rigorous training program prior to running the race. In like manner, it may be prudent if you are running a business to get into shape before the Brexit transition starts next year. Whatever the outcome, a deal or no-deal conclusion, change will be upon us, and until we get used to the new paradigm, there will be a possible dip in economic activity.

We are all holding our breath, waiting for the politicians to reach an agreement, and hopeful that the outcome will lead to a positive increase in our international trading status with the rest of the world.

However, there is work we could engage in now that will prepare us in a positive way for whatever variety of Brexit is secured. In short, we could get into training, only this time to get financially fit, not race fit.

There are no downsides to this process. Even if there is a smooth Brexit you will be match fit and ready to hit the ground running, ready to take advantage of businesses opportunities as they become available.

At the very least businesses could:

• Create an impact assessment if they import or export goods from and to the EU, and
• Undertake a comprehensive balance sheet review. This would involve converting unused assets into cash and shortening the time it takes your business to transform sales into money in the bank.

We would request that all our readers seriously consider these options, unless they are already ahead of the game. We would be delighted to help.

The Chancellor picked out business investment as his preferred give-away to the business sector in his Autumn Budget 2018.

The Annual Investment Allowance is being increased from 1 January 2019, to £1m from the present base level set some years ago of £200,000. The increase is due to be available for two years, until 31 December 2020. At this later date the AIA will presumably return to the £200,000 limit.

The AIA allows for the 100% write down of qualifying asset purchases against business profits. For profitable companies, partnerships (excluding partnerships where one of the partners is a company or another partnership) and sole traders this is a generous tax break.

The AIA is available for most plant and equipment purchases. These include:

• items that you keep using in your business, including commercial vehicles and cars if they are working assets, for example taxi cabs or driving school, dual control vehicles;
• costs of demolishing plant and machinery;
• parts of a building considered integral, known as ‘integral features’;
• some fixtures e.g. fitted kitchens or bathroom suites;
• alterations to a building to install other plant and machinery – this doesn’t include repairs.

The AIA is not available for purchases of:

• cars that are not working assets;
• items you owned for another reason before you started using them in your business; and
• items given to you or your business.

Whether or not businesses will be encouraged to invest based on this additional tax break is another matter. It will not go unnoticed that the increases allowance is offered in the two years following our exit from the EU. It would be a brave, and perhaps rash business person that would make investment decisions in this transition period based purely on tax considerations.

If you are motivated to reconsider future investment in qualifying plant and equipment to take advantage of this £1m tax allowance can we suggest that you consider funding and return on investment considerations as well as possible reductions in your tax bill before signing on the dotted line. Please call if you would like our help.

In his Autumn Budget delivered 29 October 2018, Philip Hammond made a number of promises. One of these was measures to improve the lack-lustre retail sector in our city centre areas.

There is no doubt that the major online retailers, Amazon and the like, have caused a major shift in the way we shop. As faster broadband has become more commonplace, and the use of computers a regular home fixture, then this drift away from viewing and buying goods on the shelf to viewing pictures and click and buy on the internet, will likely continue.

Which is fine if you have established a thriving internet retail business, but not so good if you have committed to the use of expensive retail premises in city centre locations.

At present, online retailers have a massive competitive advantage over their High Street competitors. They don’t have to pay:

• business rates or rent for shop front property or
• salaries to sales staff.

And in the case of the mega online retailers, who can afford to exploit the use of tax havens to shelter their trading profits, they do not pay comparable tax on their trading profits.

Did Philip Hammond save these failing, High Street retail outlets when he delivered his budget speech on the 29th October?

Well, he made a start…

He offered a one-third reduction in business rates for retailers with shop premises with a rateable value below £51,000. Although this reduction is for a limited period, two years from April 2019.

He has committed what seems to be a modest sum, £675m, to rejuvenating city centre areas. This will support the cost of:

• improving traffic flows to shopping areas,
• the renovation of empty retail premises to provide residential accommodation, and
• the repurposing of older or historical property.

City centre shops depend on foot-fall, if shoppers don’t pass by, then it’s unlikely they will become customers. In this respect, the above investment should encourage an increase in foot-fall.

Mr Hammond also committed to start the process of increasing the UK tax take from online retailers, social media outlets and search engines, who sell goods and services to UK users. A new digital services tax will commence April 2020 and will levy a charge of 2% on the revenues generated by these concerns to customers in the UK.

Did Philip Hammond save the High Street? The above changes will have some impact, but whether this will slow or stop the movement away from window shopping to browsing the internet, remains to be seen.

Personal Tax and miscellaneous matters

 

Personal Tax allowance

The personal Income Tax allowance for 2019-20 will be increased to £12,500 (2018-19 £11,850). It will remain at this increased level for two years.

Changes to personal tax allowances will apply to the whole of the UK.

 

Income Tax bands, rates and the dividend allowance

 

The Income Tax bands for 2019-20 have been increased. They are:

• Basic rate band increased to £37,500 (2018-19 £34,500)
• Higher rate band £37,501 to £150,000 (2018-19 £34,501 to £150,000)
• Additional rate, no change, applies to income of more than £150,000.

 

As a result, the higher rate threshold will increase to £50,000 from April 2019. There is no change in Income Tax rates, and the tax rates applied to dividend income.

Changes to these Income Tax bands apply to England, Wales and Northern Ireland. The Scottish parliament now set their own Income Tax bandings.

 

Earlier payments of Capital Gains Tax (CGT)

UK residents will be required to make a payment on account for CGT due on a residential property sale. The new regulations will also affect disposals by non-UK residents.

The changes will apply from April 2019 for non-UK residents and April 2020 for UK residents.

 

Capital Gains Tax Private Residence Relief changes

From April 2020, the government intends to make two changes to the private residence relief:

1. The final exempt period will be reduced from 18 months to 9 months, with no change to the 36 months available for those who are disabled or in care homes, and
2. Lettings relief will be reformed so that it only applies in certain circumstances where the property owner is in shared occupancy with the tenant.

 

CGT Entrepreneurs’ relief

Two changes are coming into effect:

1. Claimants must have a 5% interest in the distributable profits and the net assets of the company to qualify, and separately
2. That the minimum period during which certain conditions must be met to qualify for the relief is being increased from one to two years.

The first measure will have effect for disposals on or after 29 October 2018.

The second measure will have effect for disposals on or after 6 April 2019, unless a business ceased before 29 October 2018.

 

Inheritance Tax: changes to the nil-rate band

From 29 October 2018, amendments to the residence nil-rate band will provide certainty as to when a person is treated as “inheriting” property and clarify the “downsizing” rules.

 

Rent-a-room relief change cancelled

The expected change to require shared occupancy to qualify for rent-a-room relief is not to be introduced.

 

ISAs

For 2019-20, the ISA limit will remain at £20,000. The limit for Junior ISAs and the Child Trust Fund is to be increased to £4,368.

 

Limit on pensions’ savings to be increased

The life time limit on pension savings is to be increased in line with inflation to £1,055,000 for the 2019-20 tax year.

 

Stamp duty first time buyers’ relief in England

This relief is being extended to cover the purchase of qualifying shared ownership property and will be effective for transactions on or after 29 October 2018 and will be backdated to 22 November 2017.

The first £300,000 of an initial share purchased will not be liable to SDLT based on the market value of the property. The remainder of the value over £300,000 will be charged at 5%. No SDLT will be chargeable on the associated lease. Relief is not extended to further shares purchased and will not apply to purchases of property valued at over £500,000.

 

Tobacco duty increases confirmed

The rates for duty for all tobacco products increased by inflation plus 2% from 6pm, 29 October 2018.

Hand-rolling tobacco also rose by an additional 1% above this increase, to 3% above the RPI from the same date.

 

Vehicle excise duty

The VED rates for cars, vans and motorcycles is due to increase by reference to the RPI from 1 April 2019.

 

Duties on beer, wine and spirits

There are to be no increases to the duty charged on beers, spirits or cider, except for certain ciders treated as high strength for duty purposes.

Wines and high strength sparkling cider drinks will see duty increased in line with inflation from 1 February 2019.

 

Fuel duty increase frozen

Duty increase is frozen for the ninth consecutive year.

 

Air passenger duty (APD) increases

Travellers should note that APD will increase in line with inflation for long-haul flight passengers only. The new rates will apply from 1 April 2020.

 

Business Tax changes

 

Corporation Tax

Corporation Tax rates to remain at 19% for the financial year beginning 1 April 2019.

 

Employment Allowance reform

From 2020, the government is to legislate to restrict access to the £3,000 NIC Employment Allowance, to employers with employer NIC liabilities of under £100,000 in the previous tax year. Connected employers will have their contributions aggregated for this purpose.

 

Annual Investment Allowance increased

The Annual Investment Allowance (AIA) is to be increased from the present £200,000 to £1m from 1 January 2019 to 31 December 2020. It is then presumed that this will return to the £200,000 limit. This should provide a welcome boost to business investment during the Brexit transition period.

Please note that not all capital purchases qualify for this relief. Please call for clarification of what is covered if you are considering a significant acquisition.

 

R&D tax credit claims to be restricted

From 1 April 2020, the amount of payable tax credit that can be claimed under the R&D SME tax relief scheme will be limited to three times the company’s total PAYE and NIC payments for the period. Any loss that cannot be surrendered can be carried forward and used against future profits.

The government will consult with interested parties on this issue.

 

IR35 changes

The changes recently made to IR35 arrangements in the public sector are to be rolled out to the private sector. The changes will come into effect from April 2020 and small firms will be exempt. Firms that have concerns that they may be affected should contact us for more details.

 

Car and van fuel benefit charge increases

For 2019-20, these will increase by reference to the September 2018 retail prices index.

 

A new 2% digital services tax

From April 2020, the major social media, search engine and online retailers will be subject to a 2% tax on revenues generated from UK users of their services. The Chancellor did indicate that if an internationally recognised levy was introduced, that the UK may fall into line in place of this 2% UK tax.

 

At last, rates relief for High Street retailers

In a much anticipated announcement, smaller retailers in England, occupying shop premises with rateable values under £51,000, should benefit from a cut of one-third in their business rates bills for 2 years from April 2019.

They should also benefit from £675m to be spent on improvements by councils to help transform high streets, the redevelopment of empty shops as homes and offices and the repurposing of old and historic buildings.

In a humorous exchange, the Chancellor also announced 100% business rates relief for public lavatories.

 

Plastics tax

For those readers who are concerned about the environment they will be pleased to note that the government is to consider introducing a tax on the production and importing of plastic packaging from April 2022.

The charge will apply to plastic packaging that does not contain at least 30% recycled plastic.

 

Changes to the apprentices’ levy

From April, larger employers will be able to invest up to 25% of their apprenticeship levy to support apprentices in their supply chain. Additionally, some smaller employers will pay half what they currently pay for apprenticeship training: a reduction from 10% to 5%. The government will fund the remaining 95%.

 

Charities small trading exemption increase

he limits that exempt small scale trading by charities from UK tax are to be increased from the current £5,000 – where turnover is under £20,000 – and £50,000 where turnover exceeds £200,000. These £5,000 and £50,000 exemptions are to be increased to £8,000 and £80,000 respectively.

The changes will apply from 6 April 2019 for unincorporated charities and from 1 April 2019 for incorporated charities.

 

A new structures and buildings allowance (SBA)

This will provide tax relief for qualifying capital expenditure on new non-residential buildings where all contracts for the physical construction works are entered into on or after 29 October 2018.

Relief will not include the cost of land or dwellings.

 

Tax relief for electric charge points to be extended

The present first year allowances available for the installation of electric charge points is to be extended for four years, until the end of the financial year 2022-23.

 

Reduction in tax writing down allowance

The special rate of writing down allowance is being reduced from 8% to 6% from April 2019.

Supposedly, this is intended to closer align tax depreciation with commercial depreciation rates.

 

Anti-avoidance measures

The Finance Bill will contain a number of measures that will continue to improve HMRC’s campaigns to reduce the impact of tax avoidance schemes.

 

Tax to be protected in insolvency

From 6 April 2020, the government will change the insolvency rules so that taxes collected on behalf of employees and customers, primarily employees PAYE and NIC and customers VAT, will be treated as a preferential creditor on winding up rather than distributed to other creditors.

 

Company loss relief loop-holes to be closed

Most of the changes will apply from April 2019 and will prevent relief for carried forward losses being claimed in excess of that intended by legislation.

The changes will include:

• the definition of “relevant profit”,
• the computation of life assurance and annuity business profits,
• the deductions allowance in group situations,
• the calculation of terminal relief,
• the cap on profits against which certain losses may be allowed,
• and other minor considerations.

 

VAT: reverse charge process to be extended to construction services

This change, to extend the reverse charge process to the building and construction industry is due to come into effect from 1 October 2019.

This will place the onus for dealing with the VAT charge due on subcontractors’ bills to the main contractor.

This will cause accounting rather than cash flow issues for main contractors as they will add entries to their VAT returns to pay the subcontractors VAT, but then deduct the same amount as input VAT on the same return.

The aim is to stop subcontractors adding VAT to their bills and then disappearing without remitting the VAT to HMRC.

 

VAT registration threshold – no change

The present VAT registration limit (£85,000) and deregistration limit (£83,000) will continue to apply for a further two years; until 31 March 2022.