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18-06-2018
New “Spotlight” explains impact on pensions of maternity leave

The Pensions Advisory Service (TPAS) has published a “Maternity Leave Spotlight” outlining the impact on pensions of maternity leave. It also covers what happens when the employee returns to work and the impact of having a baby on the state pension. Although aimed at employees rather than employers, the Spotlight is a useful summary for employers of the law in this area.

The Spotlight confirms that employers and employees are required to continue contributing to a pension scheme during maternity leave as follows:

  • During ordinary maternity leave and the first 13 weeks of additional paternity leave where the employee is entitled to statutory maternity pay (SMP): the employer must contribute based on the employee’s pay before maternity leave, but the employee’s contributions are based on her actual pay
  • During the final 13 weeks of additional maternity leave where the employee is entitled to SMP: contributions are only payable by either party if this is stated in the pension scheme rules or it’s in the employee’s employment contract
  • During ordinary maternity leave where the employee is not entitled to SMP: the employer must contribute based on the employee’s pay before maternity leave, but employee contributions are not required
  • During additional maternity leave where the employee is not entitled to SMP: contributions are only payable by either party if this is stated in the pension scheme rules or it’s in the employee’s employment contract. 

On return to work after maternity leave, the Spotlight states that the employee will be able to pay extra contributions to make up for any period of unpaid leave and that, if she chooses to do this, her employer will also be required to contribute.

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13-06-2018
Dormant assets scheme to be expanded

The Government has announced that the dormant asset schemes is to be expanded to include to a wider set of financial assets including stocks, shares, pensions or bonds. The government has appointed four 'industry champions' to expand the dormant assets scheme across these four important financial sectors.

The Independent Dormant Assets Commission was set up in March 2016 and was tasked with unlocking billions of pounds worth of dormant assets, such as stocks and shares and bank accounts that have been untouched for more than 15 years. In a report published last year, the Commission recommended that the scheme be extended to include assets such as pensions and insurance, securities and investments.

John Glen, Economic Secretary to the Treasury, said:

'We introduced the Dormant Assets scheme with the aim of changing the lives of millions of people across the country through good causes. But without the support of businesses, the scheme wouldn’t be what it is today.

I’m delighted that these highly-experienced business leaders have agreed to be our new industry champions. Their expertise will be vital as we look at ways to expand the scheme, and I look forward to working with them to reach even more people.'

The existing Dormant Accounts scheme came into effect in November 2008. The scheme defines a dormant bank account as an account which has been continually open for at least fifteen years during which time no transactions have been carried out by the account holder or at his instruction.

Under the current scheme, banks and building societies transfer the money held in dormant accounts to a central reclaim fund. The reclaim fund is responsible for managing dormant account money, meeting reclaims and passing on surplus money to various charities for reinvestment in the community. The original account holder retains the rights to repayment upon providing satisfactory proof that the money is theirs.

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13-06-2018
VAT reverse charge may be coming to the construction sector

HMRC has launched a new consultation inviting comments from interested parties regarding the introduction of new VAT reverse charge legislation for certain construction services. The new legislation will make the supply of construction services between construction or building businesses subject to the domestic reverse charge.

This move is part of the government’s measures to combat what is known as missing trader fraud in the construction sector where VAT due to HMRC is never paid. This type of fraud has been common in other business sectors trading in goods such as mobile telephones, computer chips and emissions allowances where the reverse charge has already been introduced. Using the reverse charge procedure changes the usual VAT treatment so that the customer is liable to account for the VAT due rather than the supplier. This removes the ability for fraudsters to defraud the public purse by adding VAT to their bills and then disappearing without making payment to HMRC.

The reverse charge will be most relevant to sub-contractors and contractors carrying out supplies reported through the Construction Industry Scheme. These changes will lead to many administrative changes for some 100,000 to 150,000 businesses in this sector, including many small businesses. This will include setting up new systems to deal with the changes as well as ongoing administrative issues dealing with the reverse charge. The government has recognised this and said they will provide a long lead-in time to help businesses adjust. The changes were first announced in Autumn 2017 and are expected to take effect from 1 October 2019.

Excluded from the reverse charge will be businesses that supply specified services to a connected party within a corporate group structure. In these circumstances, the supplies in question will then revert to normal VAT accounting rules.

Planning note

The new legislation will not require other types of business to apply the reverse charge when receiving construction services. HMRC expects the introduction of the new reverse charge to raise over £400m between 2019 and 2023.

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13-06-2018
The maternity allowance

The maternity allowance is a financial benefit for pregnant women who are self-employed, who are working but do not qualify for statutory maternity pay (SMP) or who have recently stopped working. The maternity allowance is paid directly by the Department for Work and Pensions for up to 39 weeks for qualifying applicants. An application must be made for the maternity allowance using the Department for Work and Pensions - Maternity Allowance claim form (MA1).

The amount of maternity allowance payable (if any) depends on eligibility. It can range from £145.18 a week or 90% of your average weekly earnings (whichever is less) for 39 weeks, £27 a week for 39 weeks or £27 a week for 14 weeks.

If you are self-employed you must have paid Class 2 National Insurance for at least 13 of the 66 weeks before your baby is due in order to get the full amount of maternity allowance. If you haven't paid Class 2 National Insurance, you will receive just £27 a week for 39 weeks assuming all the other eligibility conditions are met. You may be able to make extra National Insurance payments to qualify for the higher rate. 

If you are an employee (and don’t qualify for the SMP) you may be able to get the maternity allowance if in the 66 weeks before your baby’s due you were:

  • Employed for at least 26 weeks;
  • Earning £30 or more a week for at least 13 of those weeks – they don’t have to be together.

SMP on the other hand is a weekly payment payable to qualifying employees by their employer at:

  • 90% of the employee's average weekly earnings (AWE) for the first 6 weeks with no upper limit;
  • £145.18 (for 2018-19) or 90% of their AWE (whichever is lower) for the remaining 33 weeks.

Your employer may also offer further additional benefits which includes higher maternity payments, however this is at their discretion and is not legally required.

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13-06-2018
Claim back pre-registration VAT

There are special rules that determine the recoverability of VAT incurred before a business registers for VAT. This type of VAT is known as pre-registration input VAT. There are different rules for the supply of goods and services and VAT can only be reclaimed if the pre-registration expenses relate to the supply of taxable goods or services by the newly VAT registered business.

The time limit is backdated from the date of registration and is:

  • 4 years for goods on hand, or that were used to make other goods on hand;
  • 6 months for services.

The VAT should be reclaimed on the business's first VAT return. When a new VAT registration is applied for there is an option to backdate the registration (known as the effective date of registration), this option should be carefully considered if there is additional input tax that would then be recoverable. However, on the other side of the coin, there may be additional VAT due on sales within the back-dated period so careful consideration must be taken to ensure optimum recovery of pre-registration expenses.

There are special rules for partially exempt businesses and for businesses that have non-business income and for the purchase of capital items within the capital goods scheme (CGS).

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13-06-2018
When do charities pay or not pay tax?

The tax treatment of charities is complex. Many charities trade either as part of their charitable interests or to raise funds. As a first step, any charity hoping to claim from beneficial tax treatment needs to be recognised as a charity for UK tax purposes by HMRC as well as meeting other criteria.

A recognised charity may qualify for a number of tax exemptions and reliefs on income and gains, and on profits for certain activities. For example, charities don’t pay tax on most types of income as long as they use the money for charitable purposes.

This includes tax:

  • on donations;
  • on profits from trading;
  • on rental or investment income, e.g. bank interest;
  • on profits from the sale or disposal of an asset, like property or shares;
  • on the purchase of a property.

The VAT rules for charities deemed to be carrying on business activities can be complex. However, certain VAT reliefs and exemptions may be available. Charities are sometimes required to pay tax if they receive income that doesn’t qualify for tax relief or have spent any of their income on non-charitable purposes. Charities are also liable to pay tax on any business activities in which case the same rules apply as to any other business. Charities should pay careful consideration when organising their trading activities. In some circumstances it can be advantageous to establish a trading subsidiary for the charities business activities.

Charities can also claim back part of the tax deducted on donations. Provided all the qualifying conditions are met charities can reclaim the basic rate tax on donations allowing for an extra 25p of tax relief on every pound donated.

Higher rate and additional rate taxpayers (not the charity) are eligible to claim tax relief on the difference between the basic rate and their highest rate of tax.

Planning note

The Charity Tax Commission has recently launched a consultation to examine the effectiveness of current tax reliefs and to see what improvements could be made. The consultation is open for comment until 6 July 2018.

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13-06-2018
Companies and capital gains

Capital Gains Tax (CGT) is not payable by limited companies or unincorporated associations when they sell an asset and make a gain. Instead, the gain (proceeds less any allowable costs and reliefs) is subject to Corporation Tax at the applicable rate, currently 19%. There are various allowances and reliefs available that can reduce the amount of Corporation Tax payable.

Until 31 December 2017, there was also an indexation allowance for corporate chargeable gains. The indexation allowance was used by companies to remove the effect of inflation when calculating any chargeable gains that they made.

The monthly indexation allowance was frozen from 1 January 2018. This means that the indexation relief available for any gain after 1 January 2018 will be calculated based on the indexation allowance between the date the asset was acquired and the end of December 2017 regardless of the date the asset is disposed of. Any assets purchased after 1 January 2018 have no indexation allowance associated with them.

This change effectively brought the corporate tax system into line with personal Capital Gains Tax and non-incorporated businesses for whom indexation allowance was abolished in 2008. There is no annual exemption for chargeable gains for companies as is the case for individuals.

Planning note

A company can also reduce their total chargeable gains by deducting any capital losses. Any loss claimed will be reduced by any amount that was claimed for capital allowances.

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13-06-2018
Don’t forget to renew your tax credit claims

Families and individuals that receive tax credits should ensure that they renew their tax credit claims by 31 July 2018. Claimants who do not renew on-time may have their payments stopped.

HMRC has begun sending tax credits renewal packs to tax credit claimants and is encouraging recipients to renew their tax credits claim online. All packs should be with recipients by 26 June 2018. If you haven’t received one by then you should contact the HMRC tax credits helpline. No renewal pack will be sent to taxpayers until April 2019 if they first claimed tax credits after 6 April 2018.

A renewal is required if the first page of the pack has a red line across it and says, 'reply now'. Claimants need to notify HMRC where there have been changes to the family size, child care costs, number of hours worked and salary. Details of previous year's income also need to be completed on the form to allow HMRC to check if the correct tax credits have been paid. Claimants must also inform HMRC of any changes in circumstances not already reported during the year such as new working hours, different childcare costs or changes in pay.

In some areas of the country new claims for tax credits may no longer be possible as the introduction of universal credit is slowly rolled out. Universal credit will eventually replace tax credits, and other social security benefits. Existing tax credit claimants are expected to be moved across to universal credit between 2019 and 2022.

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11-06-2018
World Cup 2018 – Acas guidance

The World Cup 2018 will take place in Russia between Thursday, 14 June and Sunday, 15 July 2018, with 32 national football teams taking part, including England. Football match times in the UK will vary between 1pm and 8pm. Acas has now published new guidance explaining how employers worried about staff productivity should start planning now to reduce the impact the World Cup could have on their business. The guidance covers the following topics:

• Planning ahead
• Taking a flexible approach
• Time off
• Sickness absence
• Websites and social networking
• Drinking or being under the influence at work.

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11-06-2018
Religion and belief discrimination

Acas has published new guidance on religion and belief discrimination in the workplace. The 26-page guidance booklet, entitled “Religion or belief discrimination: key points for the workplace”, primarily offers employers, managers, HR professionals, employees and job applicants a grounding in how to reduce the chance of religion or belief discrimination happening in the workplace, how it might still occur and how it should be dealt with if it does happen. While employers and employees can be liable for their own acts of discrimination, employers can also be liable for their employees’ acts.

The guidance covers:

  • What religion or belief discrimination is
  • How it can happen
  • In what work situations it’s most likely to happen
  • The raising and handling of complaints.

There’s also a large section on general considerations, covering such diverse issues as job duties and religion or belief, talking about religion or belief at work, unacceptable language, food and fasting, behaviours based on religious belief, working on a holy day of the week, bereavement, washing and changing rooms, avoiding stereotyping and occupational requirements.

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