MTD Key Points

Here is a summary of the key points to remember for Making Tax Digital ( MTD ) for VAT purposes:

  1. MTD takes effect for VAT return periods beginning on or after 1st April 2019.
  2. A business that is voluntarily registered does not need to join MTD this year.
  3. Once a business has joined MTD it cannot subsequently leave, even if the turnover falls below the £85,000 threshold.
  4. A business can adopt either a full accounts software package, or use spread sheets with bridging software.
  5. Each invoice must be digitally recorded ( but this does not mean that invoices have to be raised electronically…….they could be handwritten ).
  6. Purchase invoices should be recorded showing the total value plus the input tax claimed.
  7. There is no need to digitally record transactions that are excluded from VAT returns such as wages and drawings.
  8. Sales invoices should record the net figures, and the rate of VAT.
  9. For both sales and purchases, the processing date will be the invoice date unless the business uses the cash accounting scheme, when the payment date is adopted.
  10. Each individual invoice must be recorded in digital format. It is not acceptable to batch invoices together and make one entry based on a payment or statement total.
  11. A transaction does not have to be recorded digitally if this would be ” impossible, impractical, or unduly onerous “. HMRC have confirmed that this would apply to employee expenses for example.
  12. Businesses involved with MTD must submit their returns through HMRC’s Application Programme Interface ( API ).

Making Tax Digital Update

Making Tax Digital ( MTD ) for VAT is almost upon us. It is effective from the first VAT return starting on or after 1st April 2019, for those VAT registered business with a turnover in excess of the £85,000 compulsory registration threshold. Businesses should now be planning to sign up with HMRC in order that they can comply with the new requirements.

Once signed up, HMRC will expect the next VAT return due to be submitted under MTD, so it is vital to sign up at the correct time.

Do not sign up to submit the current period VAT return until the previous period’s VAT return has been submitted.

The following assumes that previous VAT returns have been filed on time, and are up to date. The sign up process is set into 3 stagger dates, and it is assumed here for this notice purpose that the business does not want to sign up for the pilot submission of VAT returns. If you do want to sign up for the pilot submissions ( ie submitting the VAT return under MTD before it is necessary ) then please speak to our office.

  1. For the first mandated period covering the 1st April to 30th June 2019 VAT return, then only sign up once the March 2019 return has been submitted. If you do not have a direct debit set up, then you should sign up between 8th May and 4th August 2019. If you do have a direct debit set up, then you should sign up between 15th May and 17th July 2019.
  2. For the first mandated period covering the 1st May to 31st July 2019 VAT return, then only sign up once the April 2019 return has been submitted. If you do not have a direct debit set up, then you should sign up between 8th June and 4th September 2019. If you do have a direct debit set up, then you should sign up between 15th June and 15th August 2019.
  3. For the first mandated period covering 1st June to 31st August 2019 VAT return, then only sign up once the May 2019 VAT return has been submitted. If you do not have a direct debit set up, then you should sign up between 8th July and 4th October 2019. If you do have a direct debit set up, then you should sign up between 13th July and 16th September 2019.
  4. For monthly VAT returns, the first mandated period will be for the VAT return to 30th April 2019. Only sign up once the March 2019 VAT return has been submitted. If you do not have a direct debit set up, then you should sign up between 8th May and 4th June 2019. If you do have a direct debit set up then you can only sign up on either the 15th or 16th May 2019.

 

 

December 2018 Fuel Rates

HMRC have announced new fuel rates for journeys on or after 1st December 2018. For 1 month from this date, either the new rates or the old rates can be used. Hybrid cars, for this purpose, are treated as petrol or diesel cars. A fully electric car has a 4p per mile advisory fuel rate, even though electricity is not a fuel. These fuel rates can also be used for VAT purposes, but the employer must keep supporting receipts of the VAT claimed.

The new rates are :

Petrol   :  engine size 1,400cc or less 12p ; 1,401cc to 2,000cc 15p ; over 2,000cc 22p.

Diesel   :  engine size 1,600cc or less 10p ; 1,601cc to 2,000 cc 12p ; over 2,000cc 14p.

LPG     :  engine size 1,400cc or less 8p    ; 1,401cc to 2,000cc 10p ; over 2,000cc 15p.

Late Tax Returns

The 2018 self assessment tax return deadline of 31st January 2019 has now passed. If you have not yet submitted your tax return for that year, then you will receive an automatic late filing penalty of initially £100.

The penalties will continue to increase over time, the longer the delay in submission of the tax return continues.

In addition to the late filing penalties, there will also be additional interest charged on any tax paid late. Furthermore, there will be 5% penalty surcharges added to the amount payable, if the balancing payment for 2018 is not made by the 28th February 2019. Again, interest will continue to accrue on a daily basis, and the penalty surcharges will also continue to increase over time.

If you have not yet done so, then we strongly recommend that you bring your tax affairs up to date, and ensure that any outstanding tax returns are dealt with and submitted to HMRC as soon as possible.

Tax implications of Christmas Parties and Gifts

Staff Christmas parties are free of tax if the total cost per employee is £150 or less. Above this figure, even if only by £1, then the total amount becomes taxable on the employee, not just the excess. This cost is the total VAT inclusive cost, even if the employer can recover the VAT, and it also includes incidental costs such as travel and accommodation. The employer should simply divide the total cost by the number of attendees, and not the number of employees if this is more.

In addition to the £150 limit, the function should be primarily for entertaining staff, it must be open to all staff, and it should not be just for directors ( unless of course all staff are directors ).

The £150 limit applies to all of the company’s annual functions, so if there is a summer barbeque with a Christmas party, then the £150 limit is spread across both functions.

If you have exceeded these thresholds, then please speak to our office for further advice on reporting the amounts to HMRC.

Christmas Closure

Our office will be closed effectively from Thursday 20th December at 5:00pm. We are having our staff Christmas outing on Friday the 21st, and whilst there may be minimal skeleton staff in the office during the Christmas and New Year period, your usual point of contact may well be absent during this period until after New Year. Staff emails will also not be monitored during this break period.

If there is anything which is urgent, I would strongly recommend that you speak to the office no later than Thursday 20th December.

2018 Tax Returns

This is a reminder to all clients who have not yet sent on to us all the relevant information to prepare the 2017/18 self assessment tax returns.

The deadline for submission of this tax return is 31st January 2019. If a tax return is submitted after this date, then penalties will be incurred. These penalties initially start at £100, irrespective of whether a tax liability arises or not. These penalties increase over time, and from 1st May 2019 a daily penalty rate of £10 per day will be added.

If you have not yet done so, please send all relevant information on to us at the office, without further delay. During January, we will be preparing tax returns for clients on a strict basis of first in first out. If we are unable to prepare and submit the tax return for clients, due to insufficient time, then we have no responsibility whatsoever for any penalties that may be incurred.

Budget Summary 2019/20

Trick or Treat?

Philip Hammond joked that he had avoided giving his speech on Halloween night itself because it would have been simply too tempting for the caption writers, and had avoided Christmas because he did not want to appear in cartoons disguised as Santa Claus. Even so, he was determined to honour the Prime Minister’s recent declaration that austerity was over. He repeated again and again that ‘the British people’s hard work has paid off’ and the fiscal rigour of the past eight years has allowed him at last to share out some of the benefits.

Mrs May had already committed £20 billion of spending to the NHS, but Mr Hammond still managed to raise tax allowances to the level promised for 2020 in the election manifesto a year early, a tax ‘giveaway’ of nearly £3 billion next year. Other big figures include the freeze on fuel duty for the ninth successive year, help for the transition to Universal Credit, a temporary increase for tax allowances on plant and machinery, and extra relief from business rates for small retailers. Very few tax raising measures were announced, even in the small print of the mass of information that is released on the internet when the Chancellor sits down. There really has not been a Budget like this in recent years.

The great unknown, of course – not quite an elephant in the room, because the Chancellor did refer to it – is the outcome of the negotiations with the EU on the terms of our leaving. If we get a good trade deal, as the Chancellor confidently expects, there will be a ‘double dividend’ – an end of uncertainty, and no more need for the reserves he has been holding back in case we do not reach agreement. If ‘no deal’ is the outcome, he hinted that the outlook would then be so different that it might be necessary to upgrade the Spring Statement to a full ‘fiscal event’ – another Budget with a different plan.

An opposition MP shouted that Mr Hammond ‘won’t be here next year’. He affably responded that she had made the same interjection during his previous two Budgets as well. He clearly expects to implement the plans that are summarised in this booklet. In the meantime, we will be happy to discuss the impact of his proposals on you and your finances.

Significant points
  • Manifesto pledge to raise Personal Allowance to £12,500 and higher rate threshold to £50,000 fulfilled a year early, in 2019/20.
  • Off payroll working reforms to be extended to private sector engagers from April 2020.
  • No changes to pension relief apart from inflation uplift to Lifetime Allowance.
  • Tightening of CGT rules on Entrepreneurs’ Relief and Main Residence Exemption.
  • Annual Investment Allowance for plant and machinery increased to £1 million for two years from 1 January 2019.
  • New capital allowance for construction of commercial buildings introduced for expenditure from 29 October 2018.
  • First-time buyers’ relief from Stamp Duty Land Tax extended to shared ownership schemes.

 

New Advisory Fuel Rates

HMRC have announced new fuel rates for journeys on or after 1st September 2018. For the month of September, either the old rates or the new rates can be used. Hybrid cars are treated as petrol or diesel cars for this purpose. These rates can also be used for VAT purposes but receipts must be retained by the employer. In addition to these rates, the advisory rate for full electric cars is 4p per mile, and electricity is not a fuel for car fuel benefit purposes.

The new rates are :

Petrol           :          1,400cc or less 12p ; 1,401cc to 2,000cc 15p ; over 2,000cc 22p.

LPG             :          1,400cc or less 7p  ;  1,401cc to 2,000cc 9p   ; over 2,000cc 13p.

Diesel          :          1,600cc or less 10p ; 1,601cc to 2,000cc 12p ; over 2,000cc 13p.

Abolition of Class 2 NIC Halted

The proposed abolition of Class 2 National Insurance Contributions has been scrapped by the Government. The reasons behind the abolition is that it would hit the lowest earners in society most.

For those wanting to build up an entitlement to contributory benefits such as the state retirement pension would have to pay the higher rate of Class 3 National Insurance Contributions.

The reform was supposed to have taken effect in April, but the implementation had been delayed because of these same concerns.