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18-09-2018
Budget date remains to be confirmed

The Chancellor Philip Hammond, has stated before the House of Lords Economic Affairs Committee, that he is not yet in a position to announce a date for the Autumn Budget 2018 saying it was 'difficult to fix'. Last year, the Chancellor had used his annual meeting before the Economic Affairs Committee to announce the Budget date.

Now the Chancellor has said he is unable to fix a date at this time due to the significant political events currently taking place in relation to Brexit, including continued speculation that there may be a special European Council summit in November. The Chancellor also commented that he was 'acutely conscious of the danger of creating precedent' by announcing a date for the Budget this year at the Committee meeting.

The Chancellor has asked the Office for Budget Responsibility (OBR) to begin planning for an Autumn Budget. In response to a question from the Committee Chairman, he also commented that the required 10-week notice period given to the OBR is a minimum, not a maximum. Mr. Hammond has confirmed that he will announce a date to Parliament for the Autumn Budget as soon as it can be fixed in the calendar.

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18-09-2018
Help-to-Save scheme launched

The new Help to Save scheme for people on low incomes was officially opened with effect from 12 September 2018 following an 8-month trial. The new scheme allows those in work entitled to Working Tax Credit, and in receipt of Working Tax Credits or Child Tax Credits to save up to £50 a month for two years and receive a 50% government bonus.

The scheme is also open to UK residents who are claiming Universal Credit, and have a household or individual income of at least £542.88 for their last monthly assessment period (though note that payments from Universal Credit are not considered to be part of household income).

The scheme allows those eligible to save up to £50 a month for two years and receive a 50% government bonus. Account holders will then be able to continue saving under the scheme for a further 2 years, and receive another bonus. This could see those on low incomes receive a bonus of up to £1,200 on maximum savings of £2,400 over 4 year. After the 4 years, the Help to Save account will be closed and savers will not be able to reopen it or open another Help to Save account. The account balances are expected to be rolled over into successor accounts.

The new scheme could benefit an estimated 4 million people across the UK. There are no limits on how the money used can be spent but it is hoped that the money will be saved for urgent costs. Money paid into the account can be withdrawn at any time, but this could affect the size of the bonus payment.

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18-09-2018
CGT record keeping

The annual Capital Gains Tax (CGT) exemption for individuals is £11,700 for 2018-19. A husband and wife each benefit from a separate exemption. Same-sex couples who acquire a legal status as civil partners are treated in the same way as married couples for CGT purposes.

CGT is normally charged at a simple flat rate of 20% and this applies to most chargeable gains made by individuals. If taxpayers only pay basic rate tax and make a small capital gain, they may only be subject to a reduced rate of 10%. Once the total of taxable income and gains exceed the higher rate threshold, the excess will be subject to 20% CGT. A higher rate of CGT applies (18% and 28%) to gains on the disposal of residential property (apart from a principal private residence).

It is important that any individuals keep proper records of any capital gains for at least a year after the Self- Assessment deadline. They may need to keep records for longer, if the tax return was submitted late or HMRC has started a check into the return. Businesses must keep records for 5 years after the deadline.

HMRC suggests that taxpayers keep receipts, bills and invoices that show the date and the amount:

  • paid for an asset,
  • of any additional costs such as fees for professional advice, Stamp Duty, improvement costs, or to establish the market value,
  • received for the asset - including payments made by instalments, or compensation if the asset was damaged

It is also recommended to keep any contracts for buying and selling the asset (for example from solicitors or stockbrokers) and copies of any valuations. If records are no longer available for any reason, you must try and recreate them letting HMRC know if the figures are estimated or provisional.

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18-09-2018
Childcare and compensation claims

The Tax-Free Childcare Scheme (TFCS) helps support working families with their childcare costs. The scheme provides for a government top-up on parental contributions. For every 80p in the £1 contributed by parents, an additional 20p or 20% is funded by Government up to a maximum total of £10,000 per child per year. This gives parents an annual savings of up to £2,000 per child (and up to £4,000 for disabled children until the age of 17) in childcare costs.

The scheme is open to all qualifying parents, including the self-employed and those on a minimum wage. The scheme is also available to parents on paid sick leave as well as those on paid and unpaid statutory maternity, paternity and adoption leave. To be eligible to use the scheme, parents will have to be in work at least 16 hours per week and earn at least the National Minimum Wage or Living Wage. If either parent earns more than £100,000, both parents are unable to use the scheme.

In addition, parents of three and four year old children living in England can apply for 30 hours of free childcare. HMRC advises that taxpayers may be able to claim compensation if they applied or reconfirmed before the relevant deadline, but technical issues meant they were unable to take up a 30 hours free childcare place or have paid out for childcare that would have been free. These claims can be made under the existing compensation scheme for users affected by system issues that plagued the launch of the TFCS.

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18-09-2018
Spotless but not tax deductible

The First-Tier Tribunal (FTT) recently heard three joined appeals that concerned the availability of tax relief for employee expenses. In each of the cases the expense claims related to the costs incurred cleaning and sanitising working clothes together with the cost of toiletries for personal hygiene. The FTT collectively referred to these costs as cleaning expenses. All three taxpayers were appealing against PAYE coding notices where HMRC denied the cleaning expense claims.

Two of the taxpayers worked in the sewerage industry and the third taxpayer was an environmental worker involved in outdoor maintenance services. HMRC at no time disputed that some valid expenditure had been incurred on cleaning 'special clothing'. However, it was the amount that the taxpayers claimed that appeared to have riled HMRC with each taxpayer claiming £2,200 for each of the tax years under appeal. This figure seemed to tally with HMRC’s requirement that anyone claiming relief for expenditure over £2,200 needs to make a self-assessment return. We are advised as part of the Tribunal proceedings, that a higher figure had initially been calculated for the taxpayer's cleaning expenses but had been revised down for this reason.

HMRC argued against this appeal on a number of different fronts. This included the fact that there were no valid receipts presented by the claimants and that no tax relief was available for cleaning 'ordinary clothing'. HMRC also argued that a significant amount of the expenditure incurred by the appellants was not incurred wholly, exclusively and necessarily in the performance of the duties of their employment as the equipment and washing powder was also used for the family wash.

The Tribunal came down on the side of HMRC and dismissed the three appeals. The Tribunal did agree that the taxpayers were entitled to the fixed £60 flat rate relief, which HMRC agreed to allow for cleaning costs. The Tribunal also commented that whilst this figure has been fixed since 2008-9, HMRC has itself stated that a higher claim can be made where there is proper evidence of the actual costs incurred.

Any employees required to pay for the upkeep of protective clothing used in their work, should examine whether they ought to claim the flat rate amount or make a claim based on the actual costs involved.

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18-09-2018
Stamp duty and leasehold property

Stamp Duty Land Tax (SDLT) is payable whether you buy a freehold property, a new or existing leasehold property or a shared ownership property. SDLT has been replaced in Scotland by the Land and Buildings Transaction Tax and in Wales by the Land Transaction Tax.

The amount of SDLT you pay when you buy a leasehold property, depends on whether it’s an existing lease (an assigned lease) or a new one. There are also different amounts of SDLT payable depending on whether you are buying residential or non-residential property.

SDLT on an existing lease, described as an assigned lease, is usually based on the lump sum paid for the assignment of the lease. In most cases, the amount of SDLT due is worked out in the same way as if the purchaser had bought a freehold residential or commercial property.

SDLT on new leases is payable both by reference to lease premiums and to the rental element of a lease. The premium is broadly treated for SDLT purposes as if it was a payment for the purchase of a freehold. In cases where SDLT is payable, both the lease premium or purchase price and the net present value of the rent payable are calculated separately and then added together to obtain the amount of SDLT payable. For non-residential properties the nil rate band does not apply if the relevant rental figure for the lease is more than £1,000 per year.

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18-09-2018
Accommodation expenses and benefits

There are special rules for the provision of living accommodation to employees under certain circumstances. In most cases, employees will pay tax on any living accommodation provided by an employer unless they qualify for an exception. However, where an employee qualifies for an exception, there is no tax to pay on the provision of living accommodation. The definition of living accommodation includes houses, flats, houseboats, holiday homes and apartments. It does not include hotel rooms or board and lodgings.

An exception for living accommodation will generally apply in cases where:

  • the accommodation is necessary for an employee to do their job properly,
  • it is customary to have living accommodation provided so that the employee can better perform their job,
  • the employee faces a special threat to their security because of their job, and the living accommodation is in place to help protect them.

HMRC publishes a list of some of the main occupations that typically provide living accommodation. This includes: agricultural workers living on farms or estates, pub and off-license managers living on premises, police officers and prison governors.

Employees provided with living accommodation can also be provided with other related benefits such as:

  • heating and lighting the accommodation,
  • the repair, maintenance and decoration of the interior,
  • the cost of servants, gardeners etc..,
  • provision of furniture, domestic appliances and other equipment.
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18-09-2018
Paper Self-Assessment return deadline

The 2017-18 tax return deadline for taxpayers who continue to submit paper Self-Assessment returns, is 31 October 2018. Late submission of a Self-Assessment return will become liable to a £100 late filing penalty. The penalty usually applies even if there is no liability or if any tax due is paid in full by 31 January 2019.

We would recommend that anyone still submitting paper tax returns, consider the benefits of submitting the returns electronically and benefit from an additional three months (until 31 January 2019) in which to submit a return.

Taxpayers with certain underpayments in the 2017-18 tax year can elect to have this amount collected via their tax code (in 2019-20), provided they are in employment or in receipt of a UK-based pension. The coding applies to certain debts, and the amount of debt that can be coded out ranges from £3,000 to £17,000 based on a graduated scale. The maximum coding out allowance only applies to taxpayers with earnings exceeding £90,000.

Daily penalties of £10 per day will also take effect if the tax return is still outstanding three months after the filing date up to a maximum of £900. If the return still remains outstanding further higher penalties will be charged from six months and twelve months late.

Taxpayers that received a letter informing them that they have to submit a paper return after 30 July 2018, have an extended deadline which runs for three months from the date they received the letter to submit a paper return.

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13-09-2018
Self-employed Class 2 NIC changes cancelled

In a surprise move, the government has announced that, following a lengthy consultation, the planned abolition of Class 2 National Insurance Contributions (NIC) will not take place in the current parliament. The announcement was made in a written statement by Robert Jenrick MP, the Exchequer Secretary to the Treasury on 6 September 2018. The withdrawal of Class 2 NICs was originally due to take place from April 2018, but had been delayed until April 2019.

The written statement cited concerns relating to the impact on self-employed individuals with low profits. They would have suffered an increase in costs if they made voluntary NIC payments to maintain access to the State Pension. There were also concerns that the planned abolition of Class 2 NICs would have actually made the tax system more complex, at a time when the government is trying to simplify the tax code. The government have said that they will keep the issue under review 'in the context of the wider tax system and the sustainability of the public finances'.

Class 2 NICs are currently paid by self-employed taxpayers and members of partnerships if their annual profits are over £6,205. Class 2 NICs are payable at a flat weekly rate, currently £2.95. Class 2 NICs count towards payments such as the state retirement pension, the employment and support allowance, maternity allowance and bereavement benefits.

The government still intends to legislate for reforms to the NIC treatment of termination payments and income from sporting testimonials, set out in the draft NICs Bill.

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13-09-2018
Receipts to cover certain expenses to be abolished?

A new measure to remove the requirement for employers to check receipts for expense claims made by employees using the HMRC benchmark scale rates or overseas scale rates is to be introduced. The change will be included in the Finance Bill 2018-19.

The benchmark scale rates can be used by employers to reimburse staff for subsistence expenses when they are travelling on business away from their normal workplace. HMRC lists maximum rates, but employers can choose to pay less if they so wish. The new legislation will also place the concessionary accommodation and subsistence overseas scale rates on a statutory basis and the same rules will apply. The overseas scale rates are similar to the benchmark scale rates but take into account the cost of subsistence overseas including hotel accommodation etc and are calculated on a country-by-country basis.

From April 2019, employers will only be required to ensure that employees are undertaking qualifying business travel. This measure was first announced at Autumn Budget 2017 and should create ongoing administrative savings for many businesses. The new legislation will not stop employers checking employee receipts when reimbursing in this way for their own purposes. The proposed legislation does not apply to payments or reimbursements made under bespoke scale rate payments or industry-wide rates.

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