Many of the articles link back to the website of ACAS - the Advisory Conciliation and Arbitration Service - and we are grateful for their contribution to improved employment relations. We also acknowledge Farringdon and Cº for providing regular updates on such issues.
Autumn Budget 2017
The Chancellor Philip Hammond presented his first Autumn Budget on Wednesday 22 November 2017.
His report set out a number of actions the government will take including support for more housebuilding. His view is that the economy continues to grow and continues to create more jobs. The major attention-grabber was aimed at first time buyers who will not have to pay Stamp Duty Land Tax on homes costing up to £300,000.
Our summary focuses on the tax measures which may affect you, your family and your business. To help you decipher what was said we have included our own comments. If you have any questions please contact us for advice.
Main Budget tax proposals
Our summary concentrates on the tax measures which include:
- increases to the personal allowance and basic rate band
- more tax relief for investment in certain Enterprise Investment companies
- proposed changes to Entrepreneurs' Relief
- improvements to Research and Development tax credit regimes
- VAT limits frozen for two years
- support for businesses to cope with the effects of business rates revaluation and the so called 'staircase tax'.
Previously announced measures include:
- plans for Making Tax Digital for Business
- the reduction in the Dividend Allowance
- changes to NICs for the self-employed
- capital allowance changes for cars from April 2018.
Our Autumn Budget 2017 summary focuses on the issues likely to affect you, your family and your business. To help you decipher what was announced we have included our own comments. If you have any questions please do not hesitate to contact us for advice.
Interest rates rise
The Bank of England (BoE) has raised interest rates from 0.25% to 0.5%, the first rate rise in ten years.
In explaining the reasons behind the rise, the BoE monetary policy summary states:
'CPI inflation rose to 3.0% in September. The MPC still expects inflation to peak above 3.0% in October, as the past depreciation of sterling and recent increases in energy prices continue to pass through to consumer prices. The effects of rising import prices on inflation diminish over the next few years, and domestic inflationary pressures gradually pick up as spare capacity is absorbed and wage growth recovers. On balance, inflation is expected to fall back over the next year and, conditioned on the gently rising path of Bank Rate implied by current market yields, to approach the 2% target by the end of the forecast period.'
Mark Carney, the Governor of the BoE, suggested that many mortgages, credit cards and loans would not be impacted in the short term by the interest rate rise. He also indicated that two more interest rate rises may be required by 2020 to help bring inflation back to the BoE's target.
Rain Newton-Smith, Chief Economist at the Confederation of British Industry (CBI), said:
'The decision to raise interest rates comes as no surprise, given the recent signals from the Bank and several MPC members, signalling their intention to vote for a change of course.
'Businesses will be watching the reaction of consumers closely, and what's important is the pace of any future rises. As rates creep up, it'll be important to keep an eye on the impact for those at the lower end of the income scale.'
Autumn Budget wishlist
With the Chancellor's first Autumn Budget due to be presented on 22 November, professional bodies and business groups are setting out their Budget wishlists. Recommendations include changes to Business Rates, a 'Brexit ready' Budget, incentives for business and an appeal for changes to the Apprenticeship Levy. The ICAEW is urging that the government give sufficient attention to Making Tax Digital to ensure a successful roll out and making the necessary changes to accommodate Brexit.
Meanwhile, the Federation of Small Businesses (FSB) has urged Philip Hammond to deliver a 'Brexit-ready' Budget, which rules out any new business tax increases and maintains investment incentives.
We will update you on pertinent announcements.
HMRC have changed the way in which they will assess some taxpayers removing the need for these individuals to complete a Self Assessment Tax Return. These changes took effect from September 2017.
The affected taxpayers fall into one of two categories:
- new state pensioners with income more than the personal tax allowance (£11,000) in 2016/17; and
- employees or pensioners with PAYE tax codes who have underpaid tax and who cannot have that tax collected through their tax code because it is too high to code out.
HMRC have also confirmed that all existing state pensioners who complete a tax return because their state pension is more than their personal allowance will be removed from self assessment in 2017/18. This may mean that some clients are dropped out of self assessment and issued an assessment instead based on the information which HMRC hold. Of course, whether the assessment is actually correct will be a different matter.
'HMRC will write to customers from September 2017 with a tax calculation. This could be a P800 or a Simple Assessment letter (PA302).
The letter will show their:
- income from pay
- state benefits
- savings interest
- employee benefits.
Customers just need to check the information is correct, and if it is they can pay their bill online or by cheque by the deadline in the letter.
If a customer thinks any information is incorrect they have 60 days to contact HMRC. For instance, if they think amounts used are wrong or HMRC didn't act on information received.
Should customers miss the deadline they should contact HMRC to discuss their circumstances or financial penalties will be applied in line with current policy.
If customers are not happy with the follow-up response from HMRC, they have 30 days to appeal against the decision.'
If you would like help with your personal tax affairs please get in touch.
Internet links: GOV.UK briefing policy paper
Welsh Land Transaction Tax
The Welsh Assembly has announced the proposed rates and bands for land transaction tax (LTT) which is to be introduced for land and property in Wales on 1 April 2018, replacing Stamp Duty Land Tax.
Under the new rates for LTT, Wales will have the highest starting threshold for the property tax in the UK. The proposed rates are as follows:
0 - 150,000 0 150,001 - 250,000 2.5 250,001 - 400,000 5 400,001 - 750,000 7.5 750,001 - 1.5m 10 1.5m plus 12
0 - 150,000 0 150,001 - 250,000 1 250,001 - 1m 5 1m plus 6
Announcing the rates and bands, Professor Mark Drakeford, Cabinet Secretary for Finance and Local Government, said:
'From April, Wales will introduce the first Welsh taxes in almost 800 years, supporting first-time buyers and boosting business.
The devolution of tax powers provides us with the opportunity to reshape and make changes to improve existing taxes to better meet Wales' needs and priorities. I have always been clear that we will use these powers to help improve fairness and support jobs and economic growth in Wales.
These new progressive rates and bands for land transaction tax and landfill disposals tax will make a real difference to people's lives; help change behaviours and deliver improvements to communities across Wales. We are being bold but balanced and leading the way in creating a fair and progressive tax system.'
Internet link: GOV.UK Wales
Scottish Budget proposals
On 14 December, the Scottish Budget will set out the Scottish Government's financial and tax plans.
Currently taxpayers who are resident in Scotland pay income tax on their non-savings and non-dividend income at rates and thresholds determined by the Scottish Government. Scottish higher and additional rate taxpayers may pay more income tax than those with similar income in the rest of the UK. The Scottish Parliament is considering plans to radically revise the bands and possibly to introduce some further income tax rates so that middle and higher earners pay additional tax.
The Scottish Parliament are also expected to announce the details of Air Departure Tax which takes effect for flights from Scotland from April 2018.
We will keep you up to date with pertinent announcements.
Internet links: BBC news
Criminal Finances Act
The Criminal Finances Act 2017 took effect on 30 September 2017. It makes companies and partnerships, a 'relevant body', criminally liable if they fail to prevent the facilitation of tax evasion being carried out by an employee, anyone acting on their behalf or someone acting as an agent. If found guilty, the business could face unlimited fines and potentially further consequential sanctions within their industry or profession.
This Act has the effect of creating an offence at corporate and partnership level which does not require the directors/partners to have had any knowledge of the offence in question. Broadly, the offence is the failure to prevent the crimes of those who act for or on behalf of the corporate body or partnership instead of the need to attribute criminal acts to that body.
For a firm to be criminally liable under the new Act, there are three elements of the offence:
- There must be the execution of a criminal act of tax evasion.
- The crime must have been facilitated or carried out by a person associated with a relevant body.
- The relevant body failed to initiate adequate prevention procedures in relation to the act carried out by the associated person.
A defence is available when it can be shown that 'reasonable prevention procedures' were in place to prevent the associated person from committing or facilitating the crime; or that it would have been unreasonable or disproportionate to expect such procedures to be in place.
The government advises that any reasonable prevention procedures should be based on six guiding principles:
- Risk assessment - the relevant body should assess the nature and extent of its exposure to the risk of an associated person committing a criminal act;
- Proportionality - the procedures should take into account the nature, scale and complexity of the relevant body's activities;
- Top level commitment - the management of the relevant body should be committed to preventing illegal acts and should foster a culture that tax evasion and its facilitation is never acceptable;
- Due Diligence - with appropriate procedures put in place with respect to all people who perform services for the relevant body;
- Communication - training staff and ensuring the message effectively gets across to all employees and agents;
- Monitoring and reviewing - ensuring that whatever procedures are put into place are regularly reviewed and updated and amended where necessary.
Please contact us if you require further information on this issue.
Internet link: GOV.UK Tackling tax evasion corporate-offence
Help to Save Accounts
The government have announced details of a new Help to Save saving scheme. The scheme is government backed and designed to support working people on low incomes build up their savings.
The scheme, administered by HMRC, will be open to working people who receive Working Tax Credits, and those who receive Universal Credit with a household income equivalent to at least 16 hours a week at the national living wage (currently £120 a week).
Over a four year period, savers can deposit up to £50 per month.
At the end of two years, savers will get a 50% bonus based on the highest balance achieved. Savers can then carry on saving for another two years and get another 50% bonus on their additional savings.
Over four years those saving the maximum amount of £2,400 will receive bonuses of £1,200.
Money paid into the account can be withdrawn at any time but will affect the final bonus payment.
The government has confirmed that all transactions, including checking the balance and paying in savings, will be managed in an online account available through GOV.UK and that further information will be available from early 2018.
Internet link: GOV.UK help to save
New guidance for employers
HMRC have issued the October 2017 Employer Bulletin which contains a number of articles relevant to employers on payroll related issues.
HMRC are advising that following the changes to the valuation of benefits in kind (BiK) where there is a cash option available, they will consult and then issue the necessary amendments to the PAYE Regulations. The guidance will also clarify the taxable amounts that need to be reported under Optional Remuneration and salary sacrifice arrangements.
Where a BiK is taken rather than the alternative cash option, the taxable value of the benefit is the higher of the cash foregone or the taxable value under the normal BiK rules. Transitional provisions apply for arrangements entered into before 6 April 2017.
The Bulletin also includes articles on:
- Changes to Business Tax Account for employers, including new data on the Apprenticeship Levy and the introduction of monthly and annual statement pages
- Data matters - ensuring RTI returns are submitted on or before the date the wages are paid, that the returns are accurate, cover all employees, including those that earn less than the National Insurance lower earnings limit
- Paying HMRC at the Post Office - via transcash. This option will be withdrawn from 15 December 2017
- Construction Industry Scheme - clarification of when CIS deductions should be reported via the Employer Payment Summary (EPS)
- Student Loans - new income thresholds from April 2018 for Plan Type 1 and 2 loans
- Apprenticeships benefit your business - includes links to help on finding apprenticeship training and recruiting an apprentice.
For help with payroll matters please get in touch.
Internet link: Employer Bulletin