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18-07-2018
Low emission lorries to pay lower levies

The government has confirmed plans to introduce a lower rate of the HGV road user levy for lorries that meet the latest Euro VI emissions standards. This measure is intended to incentivize vehicle operators to move towards newer, cleaner vehicles and to reduce emissions from HGVs and improve air quality. Lorries which meet the Euro VI standard produce 80% less nitrogen oxide emissions than many older vehicles.

Lorries that do not meet the latest emissions standard will pay a higher rate of the HGV road user levy. The changes are set to come into force on 1 February 2019. The levy was first introduced in 2014 to help ensure that those using heavy lorries on UK roads bore some responsibility for the wear and tear caused as well as the environmental impact.

The HGV levy is currently up to £10 a day or £1,000 a year and must be paid by all HGVs with a revenue weight of 12 tonnes and over before they use UK roads. The new measure will reduce the levy for Euro VI compliant HGVs by 10%. The levy will be increased for other vehicles by 20% except in cases where the levy is already set at its maximum rate allowable under European legislation.

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18-07-2018
New points-based late filing penalties

The Finance Bill 2018-19 draft legislation includes a new measure to introduce a points-based penalty system for certain regular (e.g. monthly, quarterly and annual) returns that are filed late. The introduction of a points system was first announced at Autumn Budget 2017 and will operate in conjunction with HMRC's Making Tax Digital (MTD) initiative.

The changes will initially apply to regular VAT and Income Tax self-assessment obligations. Corporation Tax late filing penalties are not included within the scope of the current proposed legislation. However, it is the government's intention to extend the new points-based penalty system to the Corporation Tax regime in due course. The government plans to roll-out the implementation of the new regime starting with VAT filing obligations from 1 April 2020. No timetable has yet been announced in relation to the introduction of the new penalties regime for Income Tax self-assessment.

Under the new system, a defined number of penalty points will be given where a regular tax filing is made late. The amount of penalty points will depend on several factors. When a taxpayer is given penalty points this will not mean an automatic penalty will be levied. A penalty will only be levied when a pre-defined points threshold has been reached. The points issued will be set to expire after a fixed period of compliance by the taxpayer. There will also be a new process under which penalties and points can be appealed and reviewed. HMRC will publish further details in due course. Presently, no penalty rates have been published.

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18-07-2018
HMRC security deposit regime to be extended

The security deposit legislation is to be extended to both Corporation Tax and Construction Industry Scheme (CIS) deductions from April 2019. The security deposit regime allows HMRC to require security from high-risk businesses where there is a serious risk that taxes owed will not be paid.

At present HMRC’s security deposit powers only apply to VAT, PAYE and National Insurance Contributions, Insurance Premium Tax (IPT) and some environmental and gambling taxes. This measure will give HMRC the power to require securities in relation to Corporation Tax and CIS deductions.

There are many reasons for non-payment of tax to HMRC including phoenixism where businesses evade tax by becoming repeatedly insolvent and a new company being set-up. These measures also target businesses that build up large debts to HMRC. The extension of these powers to Corporation Tax and Construction Industry Scheme (CIS) deductions will help target businesses that seek to fail to comply with their tax obligations.

The required security will usually be payable by electronic payment to a specified HMRC bank account, by cheque, by banker’s draft, a specified bank guarantee or by way of a payment into a joint HMRC/taxpayer bank account. The amount of security required is calculated on a case by case basis. If the business does not meet HMRC’s security deposit requirement they will have committed an offence and will be subject to a fine. Businesses required to pay a security deposit will have the option to appeal any decision by HMRC.

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18-07-2018
Change to penalties for late payment of tax

Plans to introduce a new two tiered penalty system for individuals and businesses that do not pay their tax bills on time have been included in the draft Finance Bill 2018-19. The government has said that the new late payment penalty regime will help to ensure that those who pay their tax on time are not disadvantaged by those who do not and to incentivise payment on time where possible. There will also be measures put in place to ensure that taxpayers who have a reasonable excuse for not making a payment on time are not disadvantaged.

The new regime will initially apply to regular VAT, CT and Income Tax Self Assessment obligations. The penalties will consist of two separate penalty charges. The first charge will be based upon payments and agreements to pay in the first 30 days after the payment due date. If a payment is made within 15 days of the due date no penalty will be payable, a reduced penalty will be payable if payment is made between 16-30 days. After 30 days a full penalty will be charged. A second charge based upon how long the debt remains outstanding will start to be levied after 30 days and will continue until the debt is repaid in full.

HMRC will publish further details including the rates of the penalties in due course. A staged implementation of the measure is expected to start with VAT from 1 April 2020.

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18-07-2018
VAT and gift vouchers

New draft legislation has been published as part of the draft Finance Bill 2018-19 that aims to change the VAT treatment of vouchers. The legislation will focus on bringing the UK VAT treatment of vouchers in line with that published in the EU directive. Notwithstanding the Brexit negotiations, the UK continues to be a member of the EU for the time being and this legislation will help remedy a long running saga concerning the VAT treatment of vouchers.

The new legislation is not concerned with the scope of VAT and whether VAT is due, but with the question of when VAT is due and - in the case of multi-purpose vouchers - the consideration upon which any VAT is payable. The changes will apply to any vouchers issued on, or after, 1 January 2019 and will introduce a common VAT treatment of vouchers across the EU.

The new rules will see a consistent approach to the VAT treatment of vouchers especially those that involve more complex scenarios: where vouchers can be used in the UK and across the EU. This will help ensure that the correct amount of VAT is charged irrespective of the payment method used. This in turn will help stop the double-taxation or non-taxation of goods or services purchased with the use of a voucher.

HMRC has said they will take a pragmatic approach to businesses experiencing any difficulties complying with the new rules especially as the changes will be implemented over the busy Christmas holiday period.

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18-07-2018
Corporation Tax relief for carried forward losses

The rules for the Corporation Tax treatment of carried forward losses changed from 1 April 2017. The changes increased flexibility to set off carried forward losses against total profits of the same company or another company in a group whilst at the same time introducing new restrictions as to the amount of profits against which carried forward losses can be set.

A number of further changes to the Corporation Tax treatment of carried forward losses rules were included in the draft Finance Bill 2018-19. These measures make some amendments to the reform of loss relief rules to correct some anomalies.

The first change relates to the treatment of Basic Life Assurance and General Annuity Business (BLAGAB). We are told in HMRC's policy paper that the inclusion of the special BLAGAB rules in the loss reform legislation created an unintended consequence that may result in relief for carried-forward losses being claimed in excess of that intended. Furthermore, the 'BLAGAB rules' do not fully meet the policy objective as they restrict losses using a measure of profit that is in part not subject to Corporation Tax and this can lead to excessive relief.

The other aspects of the legislation that require changes to ensure that they work as intended are as follows:

  • the deductions allowance 
  • terminal relief
  • transfer of a trade without a change of ownership
  • oil and gas losses

The change relating to BLAGAB was made effective from 6 July 2018 with all other changes expected to come into force from 1 April 2019.

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18-07-2018
Requirement to correct tax due on overseas assets

The Requirement to Correct (RTC) legislation created a new statutory obligation for taxpayers with undeclared UK tax liabilities that involve offshore matters. The RTC applies to any person with undeclared UK Income Tax, Capital Gains Tax and/or Inheritance Tax liability concerning offshore matters or transfers relating to offshore tax non-compliance committed before 6 April 2017.

Information that is required to be provided to HMRC under the RTC rules must be provided to HMRC by 30 September 2018. This date coincides with the date when more than 100 countries will exchange data on financial accounts under the Common Reporting Standard (CRS). This data will significantly enhance HMRC’s ability to detect offshore non-compliance and it is in taxpayers’ interests to correct any non-compliance before that data is received.

Once the deadline ends, any new disclosure will be subject to the new Failure To Correct (FTC) penalties which are more punitive that the existing RTC penalties. Also, taxpayers risk being publicly named and shamed. The FTC standard penalty will start at 200% of any tax liability not disclosed under the RTC and cannot be reduced to less than 100% even with mitigation.

Any taxpayers that are unsure as to whether or not they need to make a disclosure are strongly encouraged to check their tax position. The RTC rules are very complex and we can help review any historic issues and advise and assist with making any necessary disclosures to HMRC. A disclosure can be made using the Worldwide Disclosure Facility or possibly using alternative disclosure methods which may be more suitable. HMRC’s guidance on making a disclosure, deadlines and penalty reductions under the RTC has been updated.

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18-07-2018
Tax codes for employees

P9 tax code notices are used to notify employers of the tax codes to use when calculationg PAYE due from employees' wages and salaries. In a service availability update published on 17 July 2018, HMRC has confirmed that they are aware of an issue with employers failing to receive P9 files for the tax year 2018-19.

HMRC has now identified the employees affected by this issue and has sent P6 notices in cases where the employer did not receive a P9 notice before the start of the 2018-19 tax year. Affected employers may therefore see an increase in P6 notices dated 11 July 2018.

The basic personal allowance for the tax year starting 6 April 2018 is £11,850 and the emergency tax code will be 1185L. The basic rate limit is £34,500 except for those defined as Scottish taxpayers who have a lower basic rate limit as well as a new intermediate rate.

HMRC has also reported that some PAYE accounts are not showing the latest position. HMRC is urgently investigating this issue and will publish an update when the problem has been resolved. Employers who believe that their account is incorrect and wish to check the current position, should contact the employer helpline.

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16-07-2018
New toolkit on handling domestic abuse

Public Health England (PHE) and Business in the Community have published a new toolkit to help employers support workers who are affected by domestic abuse.

One in four women and one in six men suffer from domestic abuse in their lifetime and domestic abuse apparently costs businesses £1.9 billion every year due to decreased productivity, time off work, lost wages and sick pay. The new domestic abuse toolkit is aimed at raising awareness of the issue with employers and providing guidance on how they can support those affected by it. The toolkit, developed in consultation with employers, will help them spot the signs and symptoms of domestic abuse, which include frequent absence, lateness or needing to leave work early, reduced quality and quantity of work or missing deadlines, changes in the way an employee communicates (e.g. a large number of personal calls or texts or a strong reaction to personal calls) and physical signs and symptoms, such as unexplained or frequent bruises or other injuries.

The toolkit provides three key actions for employers:

  • Acknowledge – employers should use the toolkit to help understand the issues and acknowledge their responsibility to address domestic abuse, by enabling staff to openly discuss the topic.
  • Respond – employers should review their policies and processes to ensure they’re providing a supportive workplace and can respond to disclosure.
  • Refer – access should be provided to organisations who can help employees affected by the issue.

The toolkit is part of a suite of toolkits for employers developed by PHE in association with Business in the Community. The other employer toolkits available cover: mental health for employers; drugs, tobacco and alcohol; musculoskeletal health in the workplace; reducing the risk of suicide; crisis management in the event of a suicide; physical activity, healthy eating and healthier weight; and sleeping and recovery.

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11-07-2018
Rent-a-room relief to be modified

The publication of the draft Finance Bill 2018-19 includes legislation to change the way the rent-a-room relief scheme works. Following last year's Budget, a consultation was launched by HM Treasury to examine the design of the rent-a-room scheme.

When the relief was first launched it was intended to be used where one bedroom in a house was rented out to a lodger for medium to long-term lets, however this has changed as more and more people rent out rooms online for short term lets using property portals and apps (such as AirBnB).

The new legislation will introduce a new test that must be satisfied in order to be eligible for the relief. The test requires that the individual or individuals in receipt of rental income, need to share occupancy of the residence for all, or part of the period, of occupation which gives rise to the receipts. This change will mean that the relief will not be available if the owner is absent for the whole period that they sub-let rooms.

If an individual lets their house and is away for only part of the rental period, then the rental would be eligible for rent-a-room relief. The initial consultation also suggested the removal of relief for rentals of less than 30 days. However, this measure has not been included in the new legislation. The changes are expected to come into force from April 2019.

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