Making Tax Digital for VAT pilot

In the middle of October, HMRC opened the Making Tax Digital for VAT pilot. This is now available for nearly 70% of those mandated to file MTD-compliant VAT returns for all future VAT-return periods starting after the 31 March 2019.

The requirement to join VAT-MTD applies to all VAT registered entities with a VAT-able turnover of above the £85K compulsory VAT-registration threshold. This applies whether they file their returns on a monthly or quarterly basis.

Businesses wishing to join HMRC’s pilot must complete an online registration process, they must keep their VAT records digitally from the first day of their next VAT Return period, and they must submit subsequent VAT returns using MTD-compliant software such as QuickBooks Online.

There is a six-month deferral of mandation for the approximately 3.5% who have complex requirements. These include trusts, not for profits, VAT divisions and groups, local authorities, overseas traders, and annual accounting scheme users. Pilot testing for these groups is expected to open in Spring 2019.

HMRC have released a timeline with more details on Pilot eligibility, which you can view here.

Autumn Budget 2018

In the Autumn Budget, the Chancellor Philip Hammond stated that “austerity is coming to an end, but discipline will remain”. He outlined a promise for a “double deal dividend” from Brexit and referenced that there is likely to be a full-scale Spring Budget if Brexit negotiations don’t go well.

Changes to Entrepreneurs’ Relief

For disposals on or after 29 October 2018, the Chancellor announced changes to the Entrepreneurs’ Relief (ER) rules.

During his October Budget, he introduced a requirement for a person claiming ER to have at least a 5% interest in the distributable profits and the net assets of the company. This stands in order for one to be deemed to have an interest in a ‘personal company’.

The new ‘tests’ are in addition to the existing tests and they must be met throughout the specified period in order for relief to be due.

The existing tests require a 5% interest in the ordinary share capital and 5% of voting rights.

In addition to the new tests, the Chancellor extended the minimum qualifying period from one year to two years. For this, certain conditions must be met by the claimant.

The measure will take effect on disposals on or after 6 April 2019, except where a business ceased before 29 October 2018.

Draft legislation has been issued which, if enacted, will ensure that, where an individual’s qualifying holding is reduced below 5%, they can elect to exercise their entitlement to ER by claiming a deemed disposal. Furthermore, where there arises a charge to capital gains tax, a further election can be made to defer the payment of the tax due until actual disposal.

The relief will only apply where the reduction below 5% occurs as a result of the company raising funds for commercial purposes by means of an issue of new shares wholly for cash consideration. The new rules will apply for share issues which occur on or after 6 April 2019.

Changes to Capital allowances

The Budget includes an increase to the Annual Investment Allowance (AIA) for two years up to £1 million. This is in relation to qualifying expenditure incurred from 1 January 2019, currently at £200,000 per year. Additional changes to the rules outlined include the following:

  • Reduction to the rate of writing down allowance on the special rate pool of plant and machinery. This includes long-life assets, thermal insulation, integral features, and expenditure on cars with CO2 emissions of more than 110g/km, from 8% to 6% in April 2019.
  • Confirmation and clarification as to the costs of altering land, for the purposes of installing qualifying plant or machinery for capital allowances, for claims on or after 29 October 2018.
  • The 100% first year allowance and first year tax credits for products on the Energy Technology List and Water Technology List will come to an end from April 2020.
  • An extension to the current 100% first year allowance for expenditure incurred on electric charge-point equipment until 2023.
  • The introduction of a new capital allowances regime for structures and buildings will apply to new non-residential structures and buildings. Relief will be provided on eligible construction costs incurred on or after 29 October 2018, at an annual rate of 2% on a straight-line basis.

HMRC Tax Return Filing Time

The deadline for submitting 2017/18 self-assessment tax returns online is 31 January 2019 with a penalty of £100 if the return is late.

Last year approximately 11 million taxpayers completed the return with 10.7 million being on time. In a statement, Angela MacDonald, HMRC’s Director General for Customer Services:

“Time flies once the festive period is underway, yet the ‘niggle’ to file your tax return remains… We want to help people get their tax returns right, starting the process early and giving yourself time to gather all the information you need will help avoid the last minute, stressful rush to complete it on time. Let’s beat that niggle.”

For help with completing your tax return please contact us.

Choosing the right location for your business

With Amazon’s recent decision on the new location for their business, here are some aspects to consider when making a similar investment of your own. The location should be consistent with your particular style and image. If your business is retailing, do you want a traditional store, for example? Or would you like to try operating from a kiosk or a cart that you can move from place to place?

Consider who your customers are

Demographics play an important part in your choice of location. Consider who your customers are and how important might be their proximity to you. For a retailer and some service providers, this is a critical consideration. For other types of businesses, however, it might not be as important.

Research and review the community to establish whether there is a sufficient percentage of that population that matches your customer profile. Do however think about communities that are largely dependent on a particular industry for their economy, as a downturn could be bad for business.

In addition, consider the work force skills required. Are there people with these skills in the community, with sufficient housing, schools, recreational opportunities, and culture?

Foot fall, traffic, and parking

If you are a retail business, then consider where shoppers are likely to pass by, rather than being hidden away. Monitor traffic outside of the location at various times throughout the day and assess how accessible the facility will be for customers, employees and suppliers.

If requiring deliverables, establish whether suppliers will be able to easily and efficiently courier. Be sure that there is convenient parking for both customers and employees. As with foot traffic, take the time to monitor the facility at various times and days, to see how the demand for parking fluctuates.

Competition and other services

Are competing companies located nearby? Sometimes that’s good, such as in industries where comparison shopping is popular, as you can catch the overflow from existing businesses. If a nearby competitor is only going to make your marketing job tougher, look elsewhere.

Consider what other businesses and services are in the vicinity, whether there is any benefit from customer traffic, and whether there is a suitable range of places and restaurants for employees. You might also want to think about the location of other facilities nearby, such as child care, convenient shops, etc.

Infrastructure, utilities and costs

Check that the building has the infrastructure – adequate electrical, air conditioning, and telecommunications services – to support your business requirements and to meet your present and future needs. For utilities, check what is included in rent, as this can be a major part of the expense.

Lastly, verify the medium- to long-term rental expectations and commitments, so as to mitigate any rental rise.

Brexit: The ‘No Deal’ Scenario

In preparation for the possibility of the UK leaving the EU without a Withdrawal Agreement, the Government has published a collection of documents outlining what a “no deal” Brexit could mean.

They have stated: “The government does not want or expect a no deal scenario. However, it is the duty of a responsible government to prepare for a range of potential outcomes, including the unlikely event of no deal. In the event of leaving the EU without a deal, legislation will be necessary to ensure the UK’s Customs, VAT and Excise regimes function as intended after the UK leaves the EU and so, on a contingency basis, HM Treasury and HM Revenue and Customs will lay a number of Statutory Instruments (SIs) under the Taxation (Cross-border Trade) Act 2018 (TCTA) and the EU Withdrawal Act 2018 (EUWA).”

As events unfold in the rundown to 29 March, please reach out to us for help to understand how it may impact your business.

Stamp duty relief benefits 180,000 new homeowners

According to HMRC, more than 180,000 first-time buyers have benefitted from First Time Buyers’ Relief (FTBR) from Stamp Duty Land Tax (SDLT).

Introduced in the November 2017 Budget, FTBR has saved homeowners more than £426 million.

FTBR is a relief from a charge on SDLT for first-time buyers of residential property situated in England and Northern Ireland – where the market value purchase price is no more than £500,000.

If you, and anyone else you’re buying with, are a first-time buyer of a residential property, you can claim relief on purchases:

  • made on or after 22 November 2017;
  • Where the purchase price is no more than £500,000.

You will pay:

  • 0% on the first £300,000;
  • 5% on the remainder up to £500,000.

In the 2018 Autumn Budget, it was announced that FTBR had been extended to cover purchases of qualifying shared ownership properties where the first-time buyers did not elect to pay SDLT on the market value of the whole property when acquiring their initial interest.

The extension of the relief will apply retrospectively from 22 November 2017, meaning that a refund of tax will be payable to those who have paid SDLT after 22 November 2017 in circumstances which now qualify for first-time buyers’ relief.

Note:

  • Scotland replaced SDLT with Land and Buildings Transaction Tax in 2015 and then, in February 2018, brought in its own version of FTBR.
  • In April 2018, Wales replaced SDLT with Land Transaction Tax (LBT). While Wales does not have a version of FTBR, the residential property threshold at which LBT becomes payable (£180,000) is higher than in any other part of the UK.

Please do not hesitate to talk to us if you want to know more about any of the property transaction taxes within the UK.

Inheritance Tax Review by the Office of Tax Simplification

The first of two reports on inheritance tax (the second will be shared in Spring 2019) has been published by The Office of Tax Simplification (OTS).

An unprecedented 3,000 people shared their views about Inheritance Tax with the OTS, far more than in any previous review. Many of the respondents told the OTS that, at what is such a difficult time, they felt they were being asked to fill in complicated forms even when the relative who had died had only left a small amount.

The OTS’s own website stated:

“Too many people have to fill in Inheritance Tax forms, and the process is complex and old fashioned.

“Although Inheritance Tax is payable on less than 5% of the estates of the 570,000 people who die in the UK each year, around half of the families have to fill in the forms. Many also told us that their relative had worried about inheritance tax during their lifetime, even though it was not going to affect them.”

The first report gives an overview of concerns raised by the public and by professional advisors during the review and highlights the benefits of:

  1. Reducing or removing the requirement to submit forms for smaller or simpler estates, especially where there is no tax to pay;
  2. Simplifying the administration and guidance;
  3. Having banks and other financial institutions standardise their requirements;
  4. Automating the whole system by bringing it online.

It will be interesting to see what the second report has to say…

Small Businesses warned of “heavy price” of Making Tax Digital

Shortly before Christmas, HMRC started to send out “encouragement letters” to businesses within the scope of Making Tax Digital for VAT (MTDfV) and to those who were eligible to join the MTDfV pilot. In total, over a million letters will be sent out before the end of February.

Parliament’s Economic Affairs Committee has warned HMRC that small businesses “could pay a heavy price for the proposed change.” It also stated that HMRC has “failed to adequately support small businesses” ahead of the introduction of MTDfV, set to start from 1 April 2019. The Committee has urged HMRC and the Government to “start listening” to small businesses’ MTDfV concerns.

The legislation affects businesses which have a VAT-able turnover above the current VAT registration threshold of £85,000. Affected firms will need to keep a digital record of their business transactions and submit their VAT returns through third-party software, or spreadsheets, linked to HMRC’s own systems – via an application programming interface (API).

Please contact us for more information about the forthcoming MTDfV and how it may impact on your business.

Scottish tax bands diverge further

On the 12 December 2018, Derek Mackay, the Scottish Finance Secretary, unveiled the Scottish Budget for 2019/20 .

You will recall that this time last year he introduced two additional tax bands, which meant that Scottish resident taxpayers would now pay income tax at five different rates on their non-savings non-dividend income. Meanwhile, their income from savings, dividends, and any capital gains were to be taxed by reference to the rates and tax bands effective in the rest of the UK.

The effect of last year’s changes means that, in many instances, it is necessary to perform two parallel tax computations to establish the total income tax due and the applicable CGT rate.

This year, it’s okay – you can breathe a sigh of relief. Mackay has resisted the temptation to introduce further divergence in the rates of income tax this year.

Same allowances

For 2019/20, a Scottish taxpayer will be entitled to the same £12,500 personal allowance as the rest of the UK. The Scottish allowance will also be withdrawn at the same rate of £1 for every £2 of adjusted net income over £100,000.

Band in 2019/20 Name of band Income tax rate %
12,501 – 14,549 Starter rate 19
14,550 – 24,944 Basic rate 20
24,945 – 43,430 Intermediate rate 21
43,431 – 150,000 Higher rate 41
>150,000 Top rate 46

National Insurance

Due to the fact that the power to set NIC rates and thresholds has not been devolved, the rates and thresholds applicable in Scotland are the same as in the rest of the UK.

In her recent AccountingWEB article, Rebecca Cave drew attention to the fact that “Combining the NIC and income tax rates for a Scottish taxpayer produces some very odd marginal rates”.

Land and Building Transaction Tax changes

Mackay is to increase Scotland’s Land and Buildings Transaction Tax (LBTT) Additional Dwelling Supplement (ADS) from 3% to 4%, effective from the 25 January 2019. This will take it out of line with the English equivalent Stamp Duty Land and Tax (SDLT) ADS rate of 3%.

The LBTT changes do not stop there. On the same date (25 January), the LBTT rates applicable to commercial property are also set to change:

Thresholds Percentage to
25/1/2019
Percentage from
25/1/2019
Up to 150,000 0 0
150,001 – 250,000 3 1
250,001 – 350,000 3 5
>350,000 4.5 5

The shape of things to come

Unless the Chancellor’s threat of a Spring Budget comes to fruition, we will have to wait until next autumn to see if the changes to LBTT will be mirrored by similar SDLT changes in England and Northern Ireland.

What about Wales?

Many of you reading this article will recall that since the 1 April 2018, the Welsh Assembly replaced SDLT with a Land Transaction Tax (LTT). It is, therefore, entirely possible that Wales might choose to adopt similar rates to those proposed by Scotland, or even to do something entirely different.

Advisory fuel rates for company cars

From 1st December 2018, there have been new company car advisory fuel rates published, stating that the previous rates can be used for up to one month from the date the new rates apply. The rates only apply to employees using a company car, and the advisory fuel rates for journeys undertaken on or after 1st December 2018.

Engine
size
Petrol
1400cc or less 12p
1401cc – 2000cc 15p
Over 2000cc 22p
Engine
size
LPG
1600cc or less 8p
1601cc – 2000cc 10p
Over 2000cc 15p
Engine
size
Diesel
1600cc or less 10p
1601cc – 2000cc 12p
Over 2000cc 14p

Marketing considerations for 2019

As we leave 2018 behind, it’s worth taking stock of this period of increased regulation on customer data protection and privacy – in parallel with its acceleration in marketing technology capabilities.

This blog provides an overview of what to consider in terms of the evolving expectations of and demands on customer journeys and the impact they may have on the marketing aspect of your business. The following are the top three marketing trends and strategies to consider for 2019.

Evolving customer experience and journeys

2018 has brought more paths through which customers can satisfy their ideal approach to buying. With the onset of conversational user interfaces through voice search and recognition from the likes of Apple Siri and Amazon Alexa, this is adding a key customer touchpoint that many marketing approaches are yet to adopt and adapt to.

Such examples help fuel the customer need for convenience, being able to request what they want, when they want it, and how. As data becomes richer in terms of what we understand about customer behaviour, the personalisation of the customer experience can become deeper – albeit at a time when the use of data is being re-evaluated by companies such as Facebook.

If you are continuing with the over-used approach of marketing to “millennials”, this will limit how your brand or customer experience connects with twenty- to thirty-year olds today – as building your marketing approach will be subject to change in observing this consumer group.

There is a huge opportunity in blending customer data from silos, such as combining what you know from your business data on your customers with that which is coming from social data. Marketing teams will need to best balance the careful use of client data, segmenting based on specific personas and on an experience personalised on how customers wish to interact.

Be more than a service. Be a trusted brand with values

“Your brand is what people say about you when you’re not in the room” (Jeff Bezos)

For companies who have not yet positioned their brand to a set of values, you should do so in 2019. The majority of today’s customers are belief-driven buyers, harnessing their brand loyalty to what the company stands for – whether that is helping others, trust, quality, innovation etc. Although there maybe the danger of alienating some customers, brand values can deepen the customer-company relationship at an emotional level.

Manage your reputation; be prepared for a crisis

“It takes twenty years to build a reputation and five minutes to ruin it” (Warren Buffett)

“With Google, if a result is based on an established view, it will find its way on to the first page. Taking this approach, if the sentiment about your brand is a bad one, intentionally or accidently, then this may cause significant collateral damage for a long time – if a suitable response is not deployed.

“With the depth of opportunity for brands to advertise on nearly every website and platform consumers use, negative reviews can proliferate rapidly, and it is essential you are able to respond to help mitigate, correct, or address the perception. For example, this might be by listening to what people are saying online and making adjustments accordingly.

“No company is safe from reputation or brand crises and, as such, it is recommended to have a dedicated owner in your team to manage such an unfortunate event.