Tax Diary February/March 2018

1 February 2018 – Due date for corporation tax payable for the year ended 30 April 2017.

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

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

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

1 March 2018 – Due date for corporation tax due for the year ended 31 May 2017.

2 March 2018 – Self assessment tax for 2016/17 paid after this date will incur a 5% surcharge.

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

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

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

Statutory payment rates for tax year 2018/19 confirmed

Following the written ministerial statement published in November 2017 announcing the proposed new rates for statutory maternity pay (SMP), statutory adoption pay (SAP), statutory paternity pay (SPP), statutory shared parental pay (ShPP) and statutory sick pay (SSP) for tax year 2018/19, the government has now published the draft Social Security Benefits Up-rating Order 2018 which confirms the figures.

 

The standard weekly rates of SMP, SAP, SPP and ShPP will increase from £140.98 to £145.18 from 1 April 2018 and the weekly rate of SSP will increase from £89.35 to £92.05 from 6 April 2018.

 

The draft Social Security (Contributions) (Rates, Limits and Thresholds Amendments and National Insurance Funds Payments) Regulations 2018 confirms that the lower earnings limit, below which employees are not entitled to SMP, SAP, SPP, ShPP and SSP, will increase from £113.00 to £116.00 per week from 6 April 2018.

New DBS basic disclosure service goes live

From 17 January 2018, individuals who need to obtain a basic disclosure check for a job in England and Wales should apply to the Disclosure and Barring Service (DBS), not to Disclosure Scotland. The DBS now provides the service for England and Wales. Individuals who wish to apply for their own basic check can use the new online service provided by the DBS.

 

Individuals who need a basic disclosure check for a job in Scotland should still apply to Disclosure Scotland.

 

If anyone wants a check for personal reasons rather than work purposes, they should apply to the relevant organisation for the area where they live, i.e. DBS if they live in England or Wales or Disclosure Scotland if they live in Scotland.

 

It is important that individuals apply to the right organisation for their basic disclosure check, so that the correct Rehabilitation of Offenders Act rules are applied.

What is the herd basis?

There are special rules which can apply to farmers and market gardeners that prepare their accounts on an accruals basis. This includes special rules for farmers’ averaging relief, dealing with losses and the treatment of compensation for compulsory slaughter.

The special rules also refer to the use of the herd basis. The herd basis is a special method of working out profits or losses which may be used by people who keep production livestock. Usually, farm animals are treated as trading stock. However, under the herd basis a herd or flock of production animals is excluded from trading stock and treated, in most but not all circumstances, like a capital asset.

Any farmer that wishes to use the herd basis must elect to do so. Where a herd basis election is in force, the treatment for the purpose of calculating farming profits of the herd or herds covered by the election is governed by special rules. The herd basis rule can also apply where animals are jointly owned, for example, in some share-farming arrangements.

Planning note

These special rules do not apply to farmers and market gardeners who work out their profits using the cash basis of accounting rather than the accruals basis. If you would like more information about this scheme, and how it may benefit your tax position, please call for a consultation. 

What to consider when employing family, young people and volunteers

When a new employee is added to the payroll it is the employers’ responsibility to ensure they meet the employees’ rights and deduct the correct amount of tax from their salary. This includes any employees who are family members.

HMRC’s guidance is clear that if you hire family members you must:

  • avoid special treatment in terms of pay, promotion and working conditions
  • make sure tax and National Insurance contributions are still paid
  • follow working time regulations for younger family members
  • have employer’s liability insurance that covers any young family members
  • check if you need to provide them with a workplace pension scheme

Planning notes

It is possible to employ young people if they are 13 or over but there are special rules about how long they can work and what jobs they can undertake. Young workers and apprentices have different rates from adult workers for the National Minimum Wage.

The rules are different if you take on volunteers or voluntary staff, but the employer is still responsible for health and safety and must give inductions and training in the tasks they’re instructed to do.

Salary sacrifice examples of tax consequences

The tax and NIC advantages of certain benefits provided as part of a salary sacrifice arrangement were removed from 6 April 2017. The new rules effectively remove the Income Tax and employer NIC advantages of certain benefits provided as part of salary sacrifice arrangements such as mobile phones and workplace parking.

When the changes were introduced it was confirmed that all arrangements in place before April 2017 will be protected for up to a year. This means that current contracts that remain under the pre-2017 rules will fall under the new rules from April 2018. The April 2018 deadline is extended until April 2021 for cars with CO2 emissions above 75g/km, accommodation and school fees.

The changes to the salary sacrifice rules are complex. We have reproduced below three examples of typical consequences published on the HMRC website:

Salary Salary sacrificed Non cash benefit received Consequence
£350 per week £50 of that salary Childcare voucher to the same value  Only £300 is subject to tax and NICs, childcare vouchers are exempt from both tax and Class 1 NICs up to a limit of £55 per week.
£350 per week  £100 of that salary Childcare vouchers to the same value £295 is subject to tax and NICs – PAYE is operated on the £250 cash component, childcare vouchers are exempt from both tax and Class 1 NICs up to a limit of £55 per week, £45 is reported as a non-cash benefit at the end of the tax year using forms P11D or P9D.
£5,000 bonus £5,000 £5,000 employer contribution to registered pension scheme  No employment Income Tax or NICs charge to the employee – the full amount is invested in the pension fund.

Planning note

The following benefits are not currently affected by the new rules:

  • Employer provided pensions and pensions advice;
  • Childcare vouchers;
  • Employer provided childcare or workplace nurseries;
  • Bicycles and cyclist safety equipment including cycle to work schemes, and
  • Ultra-low emission cars, below 75g/km.

Projects that count as R & D for tax purposes

Research and development (R&D) tax credits were introduced for small and medium sized enterprises (SMEs) in 2000 and for large companies in 2002. R&D credits are a corporation tax relief to encourage innovation and enterprise within the UK economy.

Small and medium-sized enterprises (SME) can claim SME R&D tax deductions totalling 230% of any qualifying R&D expenditure (from 1 April 2015). It is also possible to claim a tax credit if the company is loss making.

It is important to be aware that the rules for claiming R&D tax relief are very generous and that from a tax point of view many business activities can qualify for relief rather than just those involved in very specific scientific type research.

To qualify for R&D relief you need to explain to HMRC how a project:

  • looked for an advance in science and technology;
  • had to overcome uncertainty;
  • tried to overcome this uncertainty;
  • couldn’t be easily worked out by a professional in the field.

R&D tax relief can be used by companies that are developing new or improved systems, processes, services or products in the areas of technology or science. The R&D project in question must relate to the company’s trade and can be used by an existing company or by new start-ups.

Planning note

Small companies that haven’t claimed R&D before and have an annual turnover of less than £2 million and less than 50 employees can apply for Advance Assurance. This allows small companies to be able to be sure they can claim R&D tax credits before embarking on significant expenditure. Once accepted, HMRC will allow claims without further enquiries for the first 3 accounting periods of claiming R&D relief.

If you undertaking R&D and have not claimed this relief in the past, please call for more information.

Buying a rental property?

The removal of the 10% wear and tear allowance that allowed landlords to reduce the tax they paid on furnished property lets (after the end of the 2015-16 tax year) was a significant loss for many landlords. The 10% deduction was available to landlords regardless of whether furnishings in their property were replaced or not.

The wear and tear allowance was replaced by the replacement of domestic Item relief. The relief only allows landlords the ability to claim tax relief when they actually replace furniture, furnishings, appliances and kitchenware.

Landlords must also ensure they keep a record of any capital expenditure which has been incurred on an investment property.

This is important to remember when purchasing a new investment property that care is taken to ensure that any domestic items that are bought with the property are listed and valued in the contract. This would then mean that relief would be available when these items are replaced. In addition, it may be possible to reduce the stamp duty payable.

Planning note

The replacement of domestic item relief is available for the cost of domestic items such as movable furniture, household appliances, kitchenware and furnishings such as curtains and carpets. There is also an important distinction between deciding whether or not a new item represents a replacement or an improvement. Where the new item is an improvement of the old item the allowable deduction is limited to the cost of purchasing an equivalent of the original item. To be clear, there is no relief available for the initial cost of domestic items purchased for a new or existing rental property.

For more information regarding this relief please call.

A reminder of ways you can pay tax due

Last week we confirmed that as from 13 January 2018, HMRC will not accept personal credit cards for payment of tax or penalties. We have listed below the payment options you still have available to you:

  • Electronic payment. HMRC’s preferred method of payment is by electronic bank transfer using Faster Payments, CHAPS or BACS. In order to make a payment electronically you will need your 11-character payment reference when you pay. This reference is made up of your 10-digit Unique Taxpayer Reference (UTR) followed by the letter ‘K’. This should not be confused with your National Insurance number or other ID numbers as payments with the wrong reference number can be delayed. The correct number can be found on your HMRC online account. You can also pay by direct debit but you will need to make a separate payment each time to HMRC
  • Pay at your bank. This option is only possible if you still receive paper statements from HRMC and have the paying-in slip HMRC sent you. If you do you can pay by cash or cheque (including your reference number) at your bank or building society. HMRC will accept your payment on the date you make it, and not the date it reaches their account (as long as you pay from Monday to Friday).
  • Debit or credit card online. It is still possible to pay with a personal debit card online or to use a company credit card which must be linked to a business bank account. However, when it comes to making personal tax payments care should be taken where an employer pays a debt that an employee owes to a third party. 
  • Cheque payments. HMRC accepts cheques made payable to ‘HM Revenue and Customs only’ followed by your UTR number. You should allow 3 working days for your payment to reach HMRC.
  • Budget payment plan. There is also an option to set up a budget payment plan if you prefer to make regular payments in advance.
  • Post office. HMRC removed the option of making a payment through a Post Office on 15 December 2017.

Planning note

Taxpayers that make payments on account should be aware that the first payment on account for 2017-18 is due on 31 January 2018 together with any balancing payments due for 2016-17. There are penalties for late payment of tax due and we would strongly advise all our clients to ensure they meet these payment deadlines and leave sufficient time for the payment to reach HMRC by the close of play on 31 January 2018.