Off Payroll Working Rules Amended

A slight amendment has recently been made to the off payroll working rules which will come into force from 6th April 2020, for the private sector.

The new rules will now only apply to payments made for services provided on or after 6th April 2020, rather than any payments made on or after that date.

Whilst not altering the new rules it clarifies which payments the new rules relate to.

Making Tax Digital

HMRC has confirmed that sole traders and UK resident landlords can sign up to making tax digital for income tax.

Compatible software would be needed to keep digital records, and send the income tax updates to HMRC.

These income tax updates would replace the need to submit self assessment tax returns.

Tax Impacts of Brexit

On 31st January the UK officially left the EU, and entered into a transitional period which the UK government has said they will not extend beyond 31st December 2020. During this transition period, EU law continues to apply to the UK as if it were still a member state. Therefore UK/EU operations will for the most part remain as they currently are.

During 2020 the UK and EU will negotiate the details of their future relationship, and the expectation is that the economic relationship will take the form of a free trade agreement ( FTA ). The ambition is for this to be comprehensive, to cover both goods and services.  If a FTA cannot be agreed, then a ” no deal ” scenario would result.

There are a number of tax areas that we know will change, irrespective of whether a FTA is agreed. Businesses should start to plan for this new era sooner rather than later.

Customs duties are expected to give us some of the more significant changes. Products will need to meet the rules of origin, and businesses will be required to submit customs declarations to prove origin.

VAT will also change, as the movement of goods between the UK and EU become imports and exports. Import VAT will become payable, which may potentially create cash flow costs, but the UK is expected to introduce postponed import VAT accounting for goods imported from both EU and non-EU countries. Supplies of services by UK businesses to EU customers is likely to be treated in the same way as supplies currently to non-EU recipients.

There will be changes to Corporate tax, as certain withholding taxes may become due on payments of royalties or dividends.

From a personal tax perspective, the change to immigration rules will be a key impact for many businesses. Also, the social security position will need to be considered for mobile employees. In the absence of any agreement, we could find ourselves with dual social security liabilities arising in both the UK and the EU state.

Finally, Northern Ireland ( NI ). Whilst NI will remain in the UK customs territory, EU customs rules will apply here. No border checks will take place on the island of Ireland, so these checks will take place elsewhere and may create additional administrative workloads. To further complicate matters, NI will remain subject to EU VAT rules for goods, but not services.

Our own advice is that whilst the situation is currently uncertain to say the least, that businesses should start to plan now for areas of change that may impact their own particular trade or industry sector.

Electric Cars

With the global move towards a greener planet, there has never been a better time than now to consider going green with your car. The number of electric cars hitting the market is getting bigger by the month. More new cars are expected during this year, and into next year. The range of electric vehicles covers the small cars, to funky Mini’s, to SUV’s, and now even to sports cars in the form of the Porsche Taycan.

To encourage us to consider going green, the tax system is being used to nudge us in that green direction.

If a business was to acquire a new fully electric car ( i.e. new + 100% electric ), then the capital allowances available are at a rate of 100%. Acquisition must be in the form of outright purchase, HP, lease purchase, business contract purchase etc, but not contract hire rentals. So, a car acquired with a capital cost of £50,000 will give tax relief on that £50,000 at the appropriate tax rate. If it is a company, then the current corporate tax rate is 19%, meaning a reduction in the company’s corporation tax payable of £9,500 ( £50,000 @ 19% ).

In addition to the full corporate tax relief, if the car is provided to an employee/director, then the taxable benefit in kind rates chargeable on the cost of the car is 0% from 6th April 2020, 1% from 6th April 2021, and 2% from 6th April 2022. In summary, no tax payable in 2020/21 as the benefit in kind is zero.

Of course, a car should not be acquired just for tax reasons, but if you are in the market for a new car, then serious consideration should be given to the electric cars now on the market.

Late Tax Return?

The last day for submission of your 2019 self assessment tax return was 31st January 2020. If the return was not submitted by last Friday, then you will receive an automatic late filing penalty of £100. This penalty will be imposed irrespective of the tax payable/repayable position.

According to our own registers, we had 4 clients who did not provide us with the information needed to prepare their tax return, in spite of our repeated requests and chasing.

The penalties will now increase with effect from 1st May 2020, if the tax return is still not submitted by that date. The penalties will be charged at £10 per day from 1st May. This daily penalty rate will continue for each day during May, June and July, thereby taking the total penalty to over £1,000 by summer.

If you know that your 2019 self assessment tax return has still to be submitted, then please gather all the relevant information for that year and deliver this to our offices, so that we can help to bring your tax affairs up to date.

In addition to financial penalties for late returns, it is also likely that you would not know how much tax is payable for the 2019 tax year, and therefore any late payment will be attracting interest charges already, and a further 5% late payment surcharge will be added by the end of February.