Category Archives: Uncategorized

New timetable for Making Tax Digital

The government has announced a revised timetable for the introduction of Making Tax Digital for Business (MTDfB).

MTDfB introduces extensive changes to how taxpayers record and report income to HMRC. Unincorporated businesses, including landlords, were expected to be the first to see significant changes in the recording and submission of business transactions but the government has announced a delay to the implementation of the new rules and some exceptions for smaller businesses.

The government had decided how the general principles of MTDfB will operate after receiving responses to their original ideas first published in August 2016. Some legislation was published in Finance Bill 2017 but this was removed due to the General Election.

Under MTDfB, businesses will be required to:

  • maintain their records digitally, through software or apps
  • report summary information to HMRC quarterly through their ‘digital tax accounts’ (DTAs)
  • submit an ‘End of Year’ statement through their DTAs.

The new timetable is being introduced following concerns raised by the Treasury Select Committee, businesses and professional bodies about the implementation of the new rules and to hopefully ensure a smooth transition to a digital tax system.

Mel Stride, Financial Secretary to the Treasury and Paymaster General said:

‘Businesses agree that digitising the tax system is the right direction of travel. However, many have been worried about the scope and pace of reforms.

We have listened very carefully to their concerns and are making changes so that we can bring the tax system into the digital age in a way that is right for all businesses.’

The government has confirmed that under the new timetable:

  • only businesses with a turnover above the VAT threshold (currently £85,000) will have to keep digital records and only for VAT purposes
  • they will only need to do so from 2019
  • businesses will not be asked to keep digital records, or to update HMRC quarterly, for other taxes until at least 2020.

This means that businesses and landlords with a turnover below the VAT threshold will not have to move to the new digital system.

Ministers have also confirmed that the Finance Bill will be introduced as soon as possible after the summer recess and that all policies originally announced to start from April 2017 will be effective from that date.

The government has also confirmed that the proposed changes to VAT reporting will come into effect from April 2019. From that date, businesses trading above the VAT threshold will have to provide their VAT information to HMRC through Making Tax Digital software.

Internet link: GOV news

Advisory fuel rates for company cars

New company car advisory fuel rates have been published which took effect from 1 June 2017. The guidance states: ‘You can use the previous rates for up to one month from the date the new rates apply’. The rates only apply to employees using a company car.

The advisory fuel rates for journeys undertaken on or after 1 June 2017 are:

Engine size Petrol
1400cc or less 11p
1401cc – 2000cc 14p
Over 2000cc 21p
Engine size LPG
1400cc or less 7p
1401cc – 2000cc 9p
Over 2000cc 14p
Engine size Diesel
1600cc or less 9p
1601cc – 2000cc 11p
Over 2000cc 13p

The guidance states that the rates only apply when you either:

  • reimburse employees for business travel in their company cars
  • require employees to repay the cost of fuel used for private travel

You must not use these rates in any other circumstances.

If you would like to discuss your car policy, please contact us.

Internet link: GOV.UK AFR

VAT fuel scale charges

HMRC have issued details of the updated VAT fuel scale charges which apply from the beginning of the next prescribed VAT accounting period starting on or after 1 May 2016.

VAT registered businesses use the fuel scale charges to account for VAT on private use of road fuel purchased by the business.

Please do get in touch for further advice this or other VAT matters.

Internet link: Gov.uk Fuel scale charges

Trivial benefits exemption

From April 2016, where trivial benefits are provided to employees they may be exempt from tax if certain conditions are met. The conditions are:

  • the cost of providing the benefit does not exceed £50
  • the benefit is not cash or a cash voucher
  • the employee is not entitled to the voucher as part of a contractual arrangement (including salary sacrifice)
  • the benefit is not provided in recognition of particular services performed by the employee as part of their employment duties
  • where the employer is a ‘close’ company and the benefit is provided to an individual who is a director, member of their household or their family, then the exemption is capped at a total cost of £300 in a tax year.

If any of these conditions are not met then the benefit will be taxed in the normal way subject to any exemptions or allowable deductions.

One of the main conditions is that the cost of the benefit is less than £50, if the cost is above £50 the full amount is taxable, not just the excess over £50. The cost is the cost of providing the benefit to each employee not the overall cost to the employer. Where the individual cost for each employee cannot be established, an average could be used.

Further details on how the exemption will work, including family member situations, are contained in the Government guidance. However if you are unsure please do get in touch before assuming the trivial benefit you are about to provide is covered by the exemption.

Internet link: GOV.UK

Benefits and expenses – bespoke scale rates

From 6 April 2016 there are a lot of changes to the way in which benefits and expenses are reported to HMRC.

HMRC have set out the maximum tax and NICs free allowances that can be paid by employers to employees for subsistence. Subject to qualifying conditions, the amounts are set out below:

Minimum journey time Maximum amount of meal allowance
5 hours £5
10 hours £10
15 hours £25

Where a meal allowance of £5 or £10 is paid and the qualifying journey in respect of which it is paid lasts beyond 8pm a supplementary rate of £10 can be paid.

Employers may choose to reimburse employees for the actual costs incurred. However where employers wish to use bespoke rates other than those set out above, they will need to apply for approval from HMRC for bespoke rates.

HMRC have issued an online application form to allow employers to request approval for these bespoke amounts. This should state the rate that the employer wishes to pay and also needs to demonstrate that the amount is a reasonable estimate of the amount of expenses actually incurred by the employees.

To establish these amounts, HMRC have confirmed that the employer should carry out a sampling exercise to verify the actual expenses incurred by employees. We would be happy to advise you on the sampling which would need to be carried out for your business.

In addition, employers will need to have a checking system in place which ensures that the payments or reimbursements are only make on occasions where the employee would be entitled to a deduction from their earnings and that the employees have actually incurred and paid the amounts.

Once approval has been given by HMRC, they will issue an approval notice which sets out the date from which the approval is given and what expenses are covered. It will also state the date when the approval notice ends which will be no later than five years from the start date.

Please do get in touch if you would like help with benefits and expense reporting or agreeing Bespoke rates.

Internet links: GOV.UK HMRC

Research and Development (R&D) relief

R&D relief gives additional tax relief to companies for expenditure incurred on R&D projects that seek to achieve an advance in science or technology. For an SME company which incurs losses when conducting R&D activity, a tax credit can be claimed by way of a cash sum paid by HMRC.

From 1 April 2014 the rate of the R&D payable tax credit will be increased from 11% to 14.5%.

Internet link: Gov.uk Budget