U-Turn On Self Employed Class 4 NIC Increases

The Chancellor has announced on 15 March that he would not be going ahead with his Budget proposal to increase the National Insurance Contribution rates for self-employed people. 

In the Budget of 8 March 2017, he announced that Class 4 NIC rate for the self-employed would rise by 1% to 10% in 2018/19 and by a further 1% in 2019/20. The proposed increases provoked a widespread outcry, not least because the Conservatives 2015 election manifesto stated “we can commit to no increases in VAT, Income Tax or National Insurance.”

A week later, perhaps appropriately on the Ides of March, the Chancellor issued a letter to MPs saying that there would be no increase to Class 4 NICs “in this Parliament”. However, the abolition of Class 2 NICs will still go ahead from April 2018, meaning that the self-employed will generally see their NICs bill fall from 2018/19.

At Prime Minister’s Questions, Mrs May has said that the government would review areas of difference in the treatment of the employed and self-employed following a forthcoming report of modern working practices being prepared by Martin Taylor.  Mrs May’s comments reiterated a point made by the Chancellor, who also wrote in his letter that “The cost of the changes … will be funded by measures to be announced in the Autumn Budget.”

Making tax digital

At the March 2015 Budget, the Government set out the vision for a transparent and accessible tax system fit for the digital age – putting an end to the tax return for good.

Millions of small businesses are already using HMRC digital accounts. In 2016, every individual and small business will have access to their own secure digital tax account – like an online bank account – that enables them to interact with HMRC digitally.

By 2020, HMRC will have moved to a fully digital tax system where:

  • Businesses have access to digital accounts enabling them to register, file, pay and update their information at any time
  • The tax system operates more closely to ‘real time’ keeping the business up to date and stopping tax due or repayments owed from building up
  • Businesses will no longer have to wait until the end of each tax year before knowing how much tax they should pay, avoiding any nasty surprises
  • For the vast majority there will be no need to fill in an annual tax return – most businesses will keep their records using digital tools and send that information quarterly to HMRC.

Quarterly in-year updates

Under the new Making Tax Digital for Business changes, businesses will only need to report summary information produced direct from the software, on a quarterly basis. This will exclude transaction data.

The software will help the business to categorise and summarise the information, so the process of providing the quarterly update will be a straight forward process.

The business will finalise its taxable profit after the end of the period of account as part of the end of year process and be able to make amendments at any time it chooses up to the final declaration.

These quarterly submissions are for summary information only and there will be no requirement for businesses to submit four tax returns over a twelve month period.

HMRC will begin piloting digital record keeping and quarterly updates for a full year from April 2017 with some businesses, but the full implementation is not expected until April 2018 at the earliest.

 

 

Apprenticeship Levy

The Apprenticeship Levy is being introduced from 6 April 2017 and will be payable by large employers. The Levy will be 0.5% of the employer’s pay bill, which is explained later in this article, but there is an annual allowance of £15,000.The allowance will be given on a pro-rata basis throughout the tax year.

The recent HMRC guidance confirms employers will need to report their Apprenticeship Levy liability each month:

  • from the start of the tax year if:
    • their annual pay bill (including any connected companies or charities) in the previous tax year was more than £3 million
    • they believe their annual pay bill (including any connected companies or charities) for the tax year will be more than £3 million
  • if an employer’s annual pay bill (including any connected companies or charities) unexpectedly increases to more than £3 million. In which case the employer will need to start reporting when this happens.

An employer’s annual pay bill is all payments to employees that are subject to employer Class 1 secondary NICs. Broadly wages but excluding benefits and expenses. HMRC have confirmed that employers must include payments to employees for whom there are no employer NICs including:

  • all employees earning below the NIC lower earnings and secondary thresholds
  • employees under the age of 21
  • apprentices under the age of 25

The Apprenticeship Levy will need to be reported each month on the Employer Payment Summary (known as the EPS) and should include the following:

  • the amount of the annual Apprenticeship Levy allowance which has been allocated to that PAYE scheme
  • the amount of Apprenticeship Levy you owe to date in the current tax year

HMRC have confirmed that it is not necessary to report Apprenticeship Levy if the employer has not had to pay it in the current tax year.

If you would like advice on the Apprenticeship Levy or other payroll matters please contact us.

Internet Link: GOV.UK apprenticeship levy

Grandparents could be eligible for parental leave from 2018

It’s a long way off but the time does fly!

 

Shared parental leave (SPL) and pay is to be extended to working grandparents, Chancellor George Osborne has announced.

 

A consultation is scheduled for 2016 where the policy, intended to give parents more flexibility during a child’s first year, is expected to be implemented in 2018.

 

The policy aims to benefit single parents and families where one parent is self-employed and cannot take SPL.

Pay & Benefits Magazine reported that recent research conducted amongst new mothers showed that they are reliant on grandparents for childcare on their return to work, enabling older workers to stay in employment longer. Almost two million people had given up work, reduced their hours or taken time off work to help family members who could not afford childcare.

 

Source:

Payandbenefitsmagazine.co.uk – November 2015

Making the most of the Annual Investment Allowance

If you are considering investing a considerable amount in plant and machinery, it’s worth considering the tax implications first.

The annual investment allowance (the amount of capital expenditure you can write off against your tax able profits in the period they are purchased) is set to reduce from £500,000 to £200,000 per annum on 1 January 2016.

Although this is still a significant allowance, where your accounting period spans this date, the transitional rules mean that if you time your spend incorrectly you could be losing out on valuable relief.

For example, if your accounting period ends on 31 March 2016, the amount of relief you would be entitled to would equal the time apportioned allowance of £500,000 for the period to 31 December 2015 ie 500,000 x  9/12 = 375,000 plus the time apportioned allowance of £200,000 for the period to 31 March 2016 ie 3/12 x 200,000 = 50,000, giving a total allowance of £425,000 for the whole accounting period.

However the relief available for any expenditure incurred in the period 1 January – 31 March 2016 is limited to the apportioned amount for that period ie £50,000.

Office refit needn’t be taxing

Organising and managing an office refit out comes with a long list of ‘to-dos’ and one thing to take into consideration is the tax relief opportunities that may be available.  If there’s an opportunity to offset these costs, you are likely to want to do as much as you can to benefit from it.

 

What should you consider?

A large amount of your office fit refit costs could be eligible for 100% tax relief against your taxable profits in the year they were incurred. It is prudent to seek advice prior to any spending to ascertain where you could benefit from tax relief. This will ensure that tax relief is maximised by structuring the fit out in the most tax advantageous way. Keeping detailed costings from your office fit out also means that every potential £1 of tax relief can be identified.

For example, if you are considering partitioning off separate offices within your building space, tax relief can be created simply by ensuring that the partitioning is movable and not fixed in place.

 

What’s available for tax relief?

Tax relief isn’t just available on the items you would expect, such as office furniture, but also on electrical and air conditioning systems under the relatively new integral features rules.

It may be that you are considering an office refit on a property that you have recently purchased, in which case there may be further tax reliefs available, which are often overlooked.

 

What are ‘integral features’?

It’s likely that on purchasing a building, you will have purchased along with it ‘integral features’. These are items such as water and electrical systems.

The rules concerning this are complex but, dependent on the facts of each case, it’s likely that some tax relief, and potentially a lot, will be available for the cost of the integral features that would have been included in the cost price of the building, along with any other fixtures and fittings that may have been included in the sale.

If this type of relief has not been identified and claimed at the time of a property purchase, all is not lost, there is no time limit for claiming the relief.

 

How can I make it as easy as possible?

The process can be complicated and confusing, so it’s always best to use the knowledge and expertise of an accountancy firm such as ourselves as we know what elements you can gain tax relief on. With help and advice, you can make the right decisions that will not only result in an impressive office design but also get the most out of your tax planning and any budget you have allocated to complete the project.

 

 

Do you pay professional fees and subscriptions?

When paying any professional fees or subscriptions to professional bodies on behalf of your employees, check that your organisation is among those which receive tax relief from HMRC.

 

This can be checked on the approved professional organisations and learned societies list found on HMRC’s website as follows:

https://www.gov.uk/government/publications/professional-organisations-approval-for-tax-relief-application

 

Form P356 should be used to apply for inclusion on the list of professional bodies and learned societies approved for tax relief (list 3).

 

This will indicate whether a tax exemption can be applied.

 

The basis of taxation will depend on whether the invoice is made out to the employee or the employer. Taxation of expenses relating to professional subscriptions and fees is covered under the Income Tax (Earnings and Pensions) Act 2003.

 

Should your business type not be included in HMRC’s list 3, the payment must be included in the gross pay and subject to both PAYE Income Tax and Class 1 NI.

If the employee pays directly to an organisation which is included in the list on HMRC’s website as earlier indicated and you have no dispensation to exempt you from reporting the payment, the cost needs to be added to your employee’s earnings, it needs to be included in the gross earning and PAYE income tax will need to be deducted. This type of payment is subject to Class 1A P11D (employer’s NI only).

 

Sources:

Pay & Benefits magazine

HMRC

Childcare changes on the horizon

There are many changes on the horizon concerning childcare, including:

  • Childcare allowance being increased from 15 to 30 hours a week;
  • Salary sacrifice Childcare Vouchers (CCVs) are due to be abolished;
  • Tax credits are being revised; and
  • Tax-Free Childcare (TFC) is due to be introduced.

 

CCVs and TFC

Employers may see lower productivity and higher absenteeism as employees may be affected by worries about the change in expensive childcare.

The changeover from CCVs to TFC means that salary sacrifice arrangements with the employer will cease and that the employee will be in control of the new system and will need to update their eligibility information every three months.

If you are an employer you may think that you will have less hassle in the long term and yes, you will. However, you have a duty of care to your staff to ensure that they understand the difference between the two schemes.

 

Tax credits

Tax credits will be limited to the first two children for families claiming after April 2017 and will affect families planning a third child.

 

Flexible working

You may find that when these changes come into place, that your employees may make requests for flexible working to accommodate how they manage childcare.

£12.5m to help businesses make the most of superfast broadband

Deputy Minister for Skills and Technology, Julie James, has today announced a new £12.5m programme to ensure businesses across Wales maximise the benefits of superfast broadband.

 

Wales already leads the way among the UK’s devolved nations with the availability of superfast broadband, with 79 per cent of premises now able to access it.

 

As well as the commercial roll out to a number of business parks and industrial estates across Wales,  superfast broadband will be made available across Wales in 2016.

 

£12.5m will be provided for a five-year programme to ensure businesses take full advantage of the benefits.

 

The project will support primarily small and medium sized businesses to understand, adopt and exploit the superfast infrastructure

 

The main features of the programme will include:

  • Direct business support and advice through Business Wales. Superfast business workshops, clinics and one-to-one sessions at a local level
  • Research and intelligence, including the tracking and of adoption and exploitation of superfast broadband by businesses and providing insight into emerging technologies to ensure new opportunities are included.
  • Training and accreditation for business advisors who are delivering support on the ground.
  • Business Wales have appointed ‘Champions’ for each local authority who will help lead engagement with their authority and local business community.

 

Further details about the superfast broadband programme are available from the Business Wales website: www.business.wales.gov.uk/superfastbusinesswales

 

Sources:

Business Wales

 

Keeping your money safe – avoid identity theft

Experian’s expertise and insight on data security, in a report published recently, has highlighted a gender imbalance. Men are now victims in two out of three ID thefts (63%) across all financial product applications. The report tells us that criminals making bogus current account applications have been targeting men aged between 50 and 59 (up 3.4%), most during the first six months of 2015. This age group now accounts for nearly one in five (17.6%) current account ID thefts attempted against men.

Nick Mothershaw, UK&I Director of Identity and Fraud at Experian, comments:

“Fraudsters are widening their net and we are seeing a growing number of cases involving older members of society. Older individuals in this category often have a good credit rating and have lived at the same address for a long time. Individuals need to be careful of websites and emails asking for personal information, such as confirmation of their date of birth. This information is then used by criminals to apply for new financial products.”

Ten tips from Experian are included in their latest report:

1. Always shred or destroy documents that contain personal information before throwing them away.

2. Never respond to cold phone calls or emails asking for account details, PINs, passwords or personal information.

3. Don’t give too much away on networking websites. For example, pets’ names or children’s names could be used as passwords.

4. Register to vote at your current address. If you don’t, thieves could use your previous address details to open new credit accounts, and run up debts in your name.

5. Monitor your post regularly so you know when to expect important documents — and when to act if they don’t arrive.

6. Redirect your mail via the Post Office if you move house.

7. Always use secure, unique passwords for as many online accounts as possible, and ideally all of them. At the very least have a unique password for each type of service provider such as financial services, retail services and email.

8. Don’t store account names and passwords on your smartphone, either in email, as a note, or to ‘autocomplete’ when you open a website or app. It will be a goldmine for fraudsters if your device is lost or stolen.

9. Read all bank and card statements regularly to check for suspicious transactions.

10. Check your credit report, because it lists your credit accounts and what you owe, so you can spot applications and spending that are nothing to do with you.


Sources: www.experian.co.uk (Published report 2015/09/28)