Monthly Archives: October 2019

HMRC trialling self-assessment checks to help local authorities to recover council tax

HM Revenue & Customs (HMRC) has announced that it is entering into data-sharing arrangements with local authorities to help clamp down on council tax debt.

In the 2017/18 tax year, councils in England had an £818 million deficit for council tax arrears, which has prompted HMRC to work with local authorities by sharing information about taxpayers.

The information-sharing agreement with 29 English councils began as a one-year trial in June and allows local authorities to seek information from the tax authority about employment and self-assessment records for a sample of residents who had not paid their council tax and received a magistrates’ court liability.

HMRC said: “The purpose of the pilot is to measure the potential yield the local authorities could have if they were to use HMRC data for an attachment of earnings order.”

The trial will see non-paying residents with an income contacted and told to start paying their debts or have their debts deducted directly from earnings via their employer.

A number of councils are participating in the scheme and are, on average, sharing around 4,000 data records.

The councils involved include Birmingham, Bradford, Brighton, Coventry, Ealing, Islington, Kensington and Chelsea, Manchester, Medway, Newham, Southwark and Tower Hamlets.

It is hoped that the pilot schemes will test whether debts can be managed and recovered using HMRC data. It will end in May 2020 and will be followed by a review to assess whether the data exchange is an effective way to increase debt collection rates.

Link: Pilot scheme launched to help recover millions in unpaid Council Tax

Overseas employees potentially face double NICs liability following a no-deal Brexit

Employees working overseas on secondment could face paying twice as much in National Insurance Contributions in the event of a no-deal Brexit, HM Revenue & Customs (HMRC) has warned.

If the UK leaves the EU without a withdrawal agreement then current agreements to avoid double payment of the equivalent of National Insurance Contributions (NICs) in member states will be voided.

The EU Social Security Coordination Regulations ensures employers and their workers only need to pay social security contributions such as National Insurance contributions (NICs) in one country at a time.

Employees of UK companies working in the EU member states, European Economic Area (EEA) or Switzerland would, therefore, be expected to pay social security contributions in both the UK and the country where they are seconded.

According to the Chartered Institute of Taxation (CIOT), tens of thousands of employees could be affected. However, those hardest hit are likely to be in the financial services sector, where secondment is more common.

HMRC is advising businesses to make sure they are prepared for any eventuality.

The Government has also issued a draft statutory instrument on social security, which can be found here.

Link: Social security contributions for UK and EU, EEA or Swiss workers in a no-deal Brexit

New figures show a sharp increase in Inheritance Tax (IHT) receipts

New figures published by HM Revenue & Customs (HMRC) have revealed a significant increase in the number and value of Inheritance Tax (IHT) receipts.

The figures, which relate to the 2016/17 tax year, show a 15 per cent increase in the number of estates paying IHT in comparison with the previous year, rising from 24,500 to 28,100.

At the same time, there was a three per cent increase in IHT receipts from £5.2 billion to £5.4 billion.

The average IHT bill in 2016/17 was £179,000, with 72 per cent coming from estates worth more than £1 million.

The increase follows a trend that has continued since 2009 and which has been widely attributed to the freezing of the £325,000 IHT threshold.

The new figures predate the introduction of the Residence Nil-Rate Band (RNRB) in 2017/18, which provides an additional tax-free threshold to people who leave their main residence to a direct descendant, such as a child or grandchild.

Link: Inheritance tax hits more estates in record receipts of £5.4 bn

Non-VAT-registered businesses need EORI number to trade with EU customers and suppliers post-Brexit

Any business that is VAT-registered and currently trades with the EU will have automatically been issued with an EORI number allowing it to trade with customers and suppliers in EU member states following the UK’s withdrawal from the EU.

However, businesses that are not registered for VAT will need to register for an EORI number that will enable them to be identified by customs authorities.

Some VAT-registered businesses that do not currently trade with the EU, but have intentions to in the future, may not receive an EORI number automatically. They should acquire an EORI number to assist with their trade plans.

On receipt of an EORI number, businesses must determine whether to instruct a customs agent to complete customs declarations on their behalf or to do so themselves. Those choosing to handle declarations themselves may need to invest in specific software.

Link: Not VAT registered? Don’t forget to apply for your EORI number post Brexit

25,000 companies receive penalties for the late filing of accounts in just one month

The latest data from Companies House shows that thousands of penalties were handed out for the late filing of company accounts, with more than 25,000 companies missing a deadline on 30 September.

This date marks a common deadline for companies, according to Companies House, with a further 643 companies narrowly avoiding a penalty by filing their accounts in the final hours.

The penalties issued in September are on top of the 223,640 late filing penalties issued in 2018 (the most recent year for which data is held). This includes all corporate bodies to which late filing penalties apply, such as private limited companies and limited liability partnerships.

Limited companies are required to file annual statutory accounts with Companies House. The deadline for this filing depends on when a company incorporated. A company will automatically be assigned a date for the company’s ‘end of financial year’ and this date is the last day in the month that the limited company was incorporated.

Companies House Senior Enforcement Manager, Ian Gronland said: “September can be a busy time for many people. However, if you are a company director you should be aware of your responsibilities to file annual accounts with Companies House on time. Failure to do so will result in a late filing penalty.

“Filing electronically is easier and faster, and our digital services have in-built checks to ensure that any necessary information is provided before accounts can be submitted.”

Link: Thousands of companies missed crucial accounts deadline last year

HM Revenue & Customs has started carrying out PAYE tax investigations remotely

It has been reported that HM Revenue & Customs (HMRC) has begun carrying out PAYE investigations remotely.

The investigation begins with a phone call, inviting the employer to complete a survey sent by email. There is a concern amongst accountants that the wording of some of these questions could trip up unwary employers and prompt full-scale tax enquiries.

If you receive a call relating to a PAYE tax investigation, please contact us for professional advice before you return any information to HMRC.

Wages rise at the fastest rate in a decade

According to the Office for National Statistics (ONS), averages wages in the UK are growing at their fastest rate since 2008.

The ONS has revealed that average earnings, including bonuses, grew by four per cent in the four months between May and July. This is the highest rate in a decade and means that wages in the UK have been rising above the rate of inflation for 18 consecutive months.

Even with bonuses removed, average wages in the UK grew by 3.8 per cent during the same period. Pay has been boosted in recent years for many employees thanks to higher rates of employment and the Government’s increases to the National Minimum Wage and National Living Wage.

David Freeman, Head of Labour Market statistics at the ONS, said: “Including bonuses, wages are now growing at four per cent a year in cash terms for the first time since 2008. Once adjusted for inflation, they have now gone above two per cent for the first time in nearly four years.”

Tej Parikh, Chief Economist at the Institute of Directors, added: “At a testing time, the labour market is surpassing expectations, though there are early signs the jobs boom could be cooling down. As so many people have entered work, there has been an uplift to household incomes which has helped to keep consumers ticking.

“For a long time, businesses have been eager to expand their workforce despite difficult economic conditions. With the supply of available workers shrinking and uncertainty lingering, firms are now beginning to dial down their recruitment ambitions.”

Link: Earnings and working hours

Renovated homes that have been empty for two years can qualify for a reduced rate of VAT

Although a key VAT-saving measure for listed dwellings was abolished in October 2012, there are still circumstances in which a renovation project can be subject to a reduced rate of VAT of five per cent.

There are two circumstances in which this can apply. The first is where a dwelling has been empty for the whole of the two years before work starting on the renovation of a property.

The second is where a property becomes occupied while the renovation work is still underway. In these circumstances, the property must have been empty for the whole of the two years immediately before it was purchased.

Earlier this year, the Federation of Master Builders (FMB) called on the Government to cut VAT on all home improvement to five per cent, following a cut in construction output in the first quarter of 2019.

Brian Berry, the Chief Executive of the FMB, said: “It’s not at all surprising that construction output has dropped at the end of the first quarter of this year, given the unprecedented political uncertainty we’ve been facing. To get us through these turbulent times, the Government must be bold in its thinking when it comes to supporting the economy bucking any downward turn. One course of action would be to cut VAT on work in the home improvement and private domestic sectors from 20 per cent to five per cent.

“A cut in VAT would help stimulate demand from homeowners resulting in more work for the thousands of small to medium-sized construction companies which would help support local economies and increase training opportunities. This is all the more important, given that the FMB’s State of the Trade Survey for Q1 2019 saw the first dip in workloads for small builders in six years.

“Cutting VAT would also be an important step to help encourage more retrofits of our existing buildings to make them more energy-efficient and deliver a cut in carbon emissions.”

Link: Empty Dwelling Renovation