Budget date 2018 announced, with half the usual notice

The Chancellor has announced that the 2018 Budget will take place on Monday 29 October 2018, having given just half the usual 10 weeks’ notice of the date.

The Autumn Budget, which took place for the first time last year, having been moved from the traditional spring date, was initially trailed to take place annually in November or December, as was the case for the Autumn Statement, which it replaced.

The Chancellor has said that the Budget has been moved forward to this month, owing to the final stages of the Brexit negotiations taking place in November.

Link: Budget 2018 date confirmed

Employment claims from contractors brought within IR35 expected after HMRC settlement

A freelance marketing and business development consultant has reached a settlement with HM Revenue & Customs (HMRC) after arguing that she should be entitled to holiday pay as she was considered to be a worker for tax purposes.

Susan Winchester had claimed £4,200 in holiday pay against HMRC after she was deemed to fall within the IR35 rules, which apply to freelancers working as if they are employees, but given none of the entitlements enjoyed by employees. She settled with HMRC on the morning of an Employment Tribunal.

The IR35 rules, which date back to April 2000, require that freelancers working through personal service companies for a third party and who would otherwise be employees, pay tax and national insurance as if they were employees.

Previously, individual contractors had to determine whether their work fell within IR35, but following a change to the rules in April 2017, public sector organisations were required to determine whether the freelancers they engage fall within IR35.

Susan Winchester said: “I’m a very fair person, with a strong moral compass. I would never have taken someone to court without a very good reason.

“But I just couldn’t understand why somebody could make some arbitrary decision about my tax and employment status on a brief, over-simplified questionnaire that I had no input in and seemingly no right to challenge.”

Chris Bryce, CEO of the Association of Independent Professionals and the Self-Employed (IPSE) – the organisation that funded Winchester’s case, added: “[Her] case sends a very clear message to clients, that if you are going to treat contactors like workers then you’ve got to give them worker entitlements. You can’t just decide someone is inside IR35, shunt them onto an agency payroll and expect someone further down the line to pick up the tab for your obligations like holiday pay.”

A spokesperson for HMRC said: “HMRC does not discuss identifiable individuals. In general, in deciding if the off-payroll working rules in the public sector applied, HMRC would consider a number of factors, including how the engagement worked in practice, as well as examining the contract itself. HMRC was committed to ensuring that its approach to the changes as an engager was clear and transparent.”

Link: Contactor’s £4,000 holiday pay claim is the ‘tip of the iceberg’

Just eight per cent of business loan applications successful with one high street bank

On average, less than one in 10 SME loan applications to one nameless high street bank are successful.

The figures were released by SME funding platform, Code Investing, whose CEO, Ayan Mitra, said: “Due to regulation, due to banks having huge cost structures, due to SMEs not having standardised data, there’s quite a big funding gap.”

He added that he expected this low level of lending would lead to a boom in alternative finance, which currently accounts for just two per cent of SME lending in the UK. Alternative finance relates to funding channels other than the traditional banking institutions.

The success rate for SME alternative finance applicants is understood to be nearer 40 per cent.

Link: High street bank converts just 8% of SME loan applications

Government backed tax-free savings plan to help savers earn 50p on every £1

The Government has launched a new savings account that offers savers a 50 per cent tax-free bonus on the money they deposit.

The new Help to Save account will offer savers up to 50p for every £1 that they save, which could mean that people could benefit from as much as £1,200 of tax-free money if they save £2,400 over the four years of saving permitted.

Under the rules of the scheme, savers can put away between £1 and £50 every calendar month for up to four years after the date the account is set up. However, they do not have to make deposits every month to benefit from the bonus.

They can then receive a 50 per cent tax-free bonus on their savings after two years, with an additional 50 per cent tax-free bonus after four years.

The account has already been trialled for eight months amongst 45,000 customers who deposited over £3 million.

The Government describes the new account as “easy to use, flexible and secure” and believes it will “encourage savings behaviours and habits” at a time when saving is at an all-time low.

Help to Save will only be available to working people in receipt of Tax Credits or Universal Credit.

Link: Help to Save

HMRC investigates estate valuations as part of IHT campaign

The number of investigations conducted against estates thought to be avoiding Inheritance Tax (IHT) has increased, according to new data from HM Revenue & Customs (HMRC).

The tax authority has revealed that 5,400 estates were investigated during the 2017/18 tax year – a five per cent increase on the previous year’s figure (5,100 estates).

This means that nearly a quarter (24 per cent) of all estates liable for IHT were investigated by HMRC for avoidance during the last tax year.

Experts have said that the rapid rise in property prices is a key factor to these investigations, as HMRC believes that additional value should be attributed to properties that have the potential for refurbishment, or that have land attached that could be developed.

If an estate is investigated by HMRC, beneficiaries may have to pay up to 100 per cent of the tax charged on the estate if the tax authority can prove avoidance has taken place.

Data shows that HMRC is increasingly challenging the value of estates as it has become a lucrative approach for uncovering unpaid liabilities.

An HMRC spokesperson said that their investigations into IHT ensured that everyone paid the right amount of tax.

Link: HMRC annual report and accounts: 2017 to 2018

Micro businesses bear the brunt of late payments

Recent research has shown that micro businesses are bearing the brunt of late payments, with just 52 per cent of the invoices they issue being paid on time.

However, the research found significant regional variation, with 68 per cent of micro businesses in Peterborough encountering the scourge of late payments.

The research was based on data from 50,000 users of a prominent cloud accounting software provider.

Meanwhile, related research has found that a quarter of micro businesses are having to wait between three and six months to receive payments owed to them. A further 10 per cent report that they have clients who have never paid them.

When asked whether the Government should legislate to make it easier for micro businesses to recover funds from late payers, 70 per cent of respondents agreed.

Link: Nearly half of micro businesses plagued by late payers

HMRC finally launches MTD communications plan and simplified guidance

With only six months left until the launch of Making Tax Digital for VAT, HM Revenue & Customs (HMRC) has finally begun sharing information with businesses about the new regime.

While accountants and professional advisers across the UK have been making clients aware of the new digital system for more than two years, the nation’s official tax authority has remained fairly quiet on what has been described as one of the biggest changes to taxation in the last 70 years.

However, in mid-September HMRC finally began making businesses aware of their plans, initially posting a tweet linking to a new webpage entitled Making Tax Digital: How VAT businesses and other VAT entities can get ready.

The new webpage provides simplified guidance to businesses, outlining the criteria for businesses that will be mandated to join the scheme i.e. those registered for VAT with a taxable turnover above the VAT registration threshold (£85,000).

According to AccountingWEB, HMRC has revealed that it has further plans to increase its social media and public relations activity around MTD, as well as directly contacting those businesses affected via post.

HMRC also confirmed that it will publish details of the compliant VAT reporting products later this year when the current private pilot becomes public. A list of software companies currently working with HMRC is, however, already available here.

Link: Making Tax Digital: how VAT businesses and other VAT entities can get ready.

Workers miss out on £15.6 million in pay through minimum wage breaches

Minimum wage breaches, including breaches of the National Living Wage, have cost workers from across the UK a combined total of £15.6 million in lost wages.

Figures released by the Government show that around 200,000 workers were affected in 2017/18, in what was the highest underpayment since the National Minimum Wage was introduced.

In total, more than 600 employers were named and shamed in 2017/18 for minimum wage breaches, the highest figure since naming and shaming was introduced in 2014.

Business Minister, Kelly Tolhurst, said: “We are dedicated to stopping underpayment of the minimum wage. Employers must recognise their responsibilities and pay their workers the money they are entitled to.”

Low Pay Commission Chairman, Bryan Sanderson, added: “All workers are entitled to be paid at least the minimum wage, so it is good to see increased focus on enforcement bearing fruit and securing more arrears for more workers.

“Awareness of the minimum wage is vital for workers and employers alike, and strong enforcement is critical to its success.”

The current rates of the National Living and Minimum Wage are:

25 and over 21 to 24 18 to 20 Under 18 Apprentice
£7.83 £7.38 £5.90 £4.20 £3.70

If anyone thinks they are not receiving at least the minimum wage, they can contact the Acas helpline on 0300 123 1100 in confidence or submit a query online via a complaints form.

Link: Record £15.6 million underpayment identified for workers on the minimum wage

CIOT reports increase in R40 refund errors

According to a new report by the Chartered Institute of Taxation (CIOT), there have been a growing number of R40 computation errors on refunds processed by HM Revenue & Customs (HMRC).

Individuals can use R40 forms to claim tax refunds on tax deducted from savings income. Following the CIOT report, HMRC has now confirmed that there is an issue with R40 computations.

The issue lies in the computation for the Personal Savings Allowance and the Dividend Allowance and HMRC have provided a workaround that should address the issue in most cases.

Despite this, the CIOT have said that they still may be other errors relating to R40 computations that are not connected to these allowances and have suggested claiming a refund using the correct form to check that the computations are accurate.

 (R40)Link: Claim a refund of Income Tax deducted from savings and investments (R40)

Property investments once again hit by new tax rules

In the last few years the property sector has been hit by a number of new tax rules, but now there are two new things on the horizon that landlords must consider.

Rent-a-Room Scheme

The current Rent-a-Room scheme offers people up to £7,500 a year tax-free from letting out a spare room.

However, HM Revenue & Customs (HMRC) has revealed new plans to introduce a shared occupancy test, which would restrict the allowance to those landlords who are living and physically present in the property during the letting period.

For those letting out their whole property, this may mean that they are required to pay additional tax, while for some it may mean that it is the first time they are charged tax on their property rental.

The government will include legislation for the shared occupancy clause in the Finance Bill 2018 to 2019 and the change will take effect from 6 April 2019.

Let Property Campaign

Concerned that some landlords may not be paying the correct amount of tax on their rental property, HMRC has also launched the Let Property Campaign.

This will give landlords the chance to disclose any unpaid tax in the UK or abroad, allowing them to get up to date with their tax affairs.

Similar to other recent disclosure campaigns, once the tax is disclosed landlords have 90 days to calculate and pay what they owe. Full and voluntary disclosure of all unpaid liabilities will usually lead to a lower penalty for unpaid tax.

If a person does not come forward and HMRC discovers that tax is due, it may be harder to convince them that it was simply a mistake and they could find that a higher penalty could be applied – including fines of up to 200 per cent of tax due or criminal prosecution.

To take part in the Let Property Campaign a person should:

  • tell HMRC that they want to take part in the Let Property Campaign
  • inform HMRC about all income, gains, tax and duties not previously disclosed
  • make a formal offer
  • pay what they owe

There is no disclosure ‘window’ requiring a landlord to disclose what they owe by a specific date and HMRC have confirmed that the campaign will be ongoing for some time.

Links: Rent-a-Room & Let Property Campaign