MTD VAT Pilot is Now… Open to All

HMRC announced (10/1/2019) that their Making Tax Digital for VAT (MTDfV) pilot is now open to all those mandated to keep digitally compliant records and to file MTD-compatible VAT returns for return periods commencing after 31 March 2019.

In an email issued, HMRC stated: “this marks a significant milestone towards our ambition to become one of the most digitally advanced tax administrations in the world.”

HMRC boasts that over one hundred VAT-registered businesses are now signing up to the scheme on a daily basis, with more than 3,500 having already joined.

Testing time

Even though the majority will not need to file their first MTD-complaint return until early August, the department wants “as many eligible businesses as possible to join the pilot ahead of the mandation of the service in April”, as it will provide assurance that the service works for all types of customer.

What does it mean?

This means that all VAT-registered entities with an annual VAT-able turnover in excess of the £85,000 compulsory registration threshold – i.e. those mandated to onboard from April – will now have the chance to test their accounting systems prior to April.

A minority of compulsory registered businesses – those with the most complex VAT affairs – have had their mandation date deferred to their first return period starting on or after 1 October 2019.

VAT groups now able to join the pilot

HMRC has also opened its MTDfV pilot to VAT groups with immediate effect, in order to enable them to start testing the service – even though they are not mandated to join until October.

The department “will continue to update you as we open up the pilot to the remainder of the population who are mandated to join from October.”

Want to know more?

Further details can be found in HMRC’s updated guidance for businesses, updated guidance for agents, and the stakeholder partner packs on GOV.UK.

Update letter from The Pensions Regulator

The Pensions Regulator (TPR) is beginning to write reminders to all employers that, from 6 April 2019, the minimum amount to be paid to a workplace pension is increasing to 8% – and that they, the employers, must contribute at least 3% of the total contribution.

To be prepared for this increase, TPR have recommended seeking further guidance from their website, and to ensure that the payroll software used is compliant with the changes.

Alternatively, if you want informed, proactive advice, you can talk to us.

Guide to completing P11Ds published

A new online guide has been published by HMRC to aid employers in determining which benefits and expenses need to be declared in the P11D forms.

These forms can be completed online using:

  • the PAYE online for employers’ service;
  • or the online end-of-year expenses and benefits forms.

More details are available in the HMRC expenses and benefits guide.

Employer tax rates and thresholds for 2019/20

HMRC have updated the online guidance available, now providing a detailed list of income tax and NIC rates applicable to employers for 2019/20. The comprehensive list can be used by employers for 2019/2020 for payroll and employee expenses.

The list includes:

  • PAYE tax and Class 1 National Insurance Contributions
  • Tax thresholds, rates, and codes
  • Class 1 National Insurance thresholds
  • Class 1 National Insurance rates
  • Class 1A National Insurance: expenses and benefits
  • Class 1B National Insurance: PAYE Settlement Agreements (PSAs)
  • National Minimum Wage
  • Statutory Maternity, Paternity, Adoption and Shared Parental Pay
  • Statutory Sick Pay (SSP)
  • Student loan and Postgraduate loan recovery
  • Company cars: Advisory Fuel Rates (AFRs)
  • Employee vehicles: Mileage Allowance Payments (MAPs)

HMRC’s most bizarre excuses for late returns

As the deadline approaches for submitting returns, here are HMRC’s strangest reasons for late or failed submissions, from taxpayers who missed the Self-Assessment deadline last year.

  • My mother-in-law is a witch and put a curse on me.
  • I’m too short to reach the post box.
  • I was just too busy – my first maid left, my second maid stole from me, and my third maid was very slow to learn.
  • Our junior member of staff registered our client in Self-Assessment by mistake because they were not wearing their glasses.
  • My boiler had broken, and my fingers were too cold to type.

There were also some dubious expenses claims for unconvincing items like woolly underwear and pet insurance for a dog. Some of the most questionable include:

  • A carpenter claiming £900 for a 55-inch TV and sound bar – to help him price his jobs.
  • £40 on extra woolly underwear, for five years.
  • £756 for a dog’s pet insurance.
  • A music subscription, so someone could listen to music while they worked
  • A family holiday to Nigeria.

None of these excuses and expenses were successful!

Scottish Budget income tax changes

The Scottish Draft Budget took place on 12 December 2018. To assist those of you who might be affected, we have published a table containing the 2019/20 proposed rates and bands (for non-savings and non-dividend income), along with the 2018/19 rates and bands.

Scottish Bands 2018/19 Scottish Bands 2019/20 Band Name Scottish Rates
Over £11,850* – £13,850 Over £12,500* – £14,549 Starter 19%
Over £13,850 – £24,000 Over £14,549 – £24,944 Scottish Basic 20%
Over £24,000 – £43,430 Over £24,944 – £43,430 Intermediate 21%
Over £43,430 – 150,000** Over £43,430 – 150,000** Higher 41%
Over £150,000** Over £150,000** Top 46%

* assuming the individual is entitled to a full UK personal allowance.

** The personal allowance will be reduced if an individual’s adjusted net income is above £100,000.

The allowance is reduced by £1 for every £2 of income over £100,000.

The personal allowance is currently £11,850 for 2018/19 and will increase to £12,500 for 2019/2020.

  • For UK taxpayers entitled to a full personal allowance, the higher rate is set at £50,000.
  • The tax rates for non-savings and non-dividend income remain at 20%, 40%, and 45% for income over £150,000.

The rate for 2019/2020 will mean that Scottish employees earning approximately £27,000 from employment income will pay the same income tax as the rest of the UK on a similar income. Higher rate earners in Scotland with income of £150,000 and over will pay, approximately, £2,670 of income tax more than those on a similar income in the rest of the UK.

Scottish Budget property tax changes

The 2019/20 Scottish Draft Budget includes changes to Scottish Land and Buildings Transaction Tax (LBTT).

The policy priority for residential Land and Buildings Transaction Tax (LBTT) continues to be to help first-time buyers and those moving through the property market.

The policy has helped over 80% of taxpayers to pay less LBTT than in England – or none at all.

The current rates and bands are as follows.

  Residential property
  
  Rate
  
  0 – £145,000
  
  0%
  
  £145,001 – £250,000
  
  2%
  
  £250,001 – £325,000
  
  5%
  
  £325,001 – £750,000
  
  10%
  
  £750,001 and over
  
  12%
  

The rates apply to the portion of the total value which falls within each band.

First-time buyers’ relief

Relief is available for first-time buyers of properties costing up to £175,000. The relief increases the zero-tax threshold from £145,000 to £175,000. First-time buyers purchasing a property which is more than £175,000 will also benefit, and the relief will be apportioned only to the price below the threshold.

Higher rates of Land and Buildings Transaction Tax

Certain residential properties, such as buy-to-let and second homes, incur higher rates of LBTT.

From the 25 January 2019, the Additional Dwelling Supplement (ADS) increased from 3% to 4% and will apply to transactions which occurred before the 12 December 2018. ADS is applicable where an individual owns, or partially owns, a property, or purchases another which is not replacing a main residence. There is an eighteen-month rule which will prevent some purchases incurring the additional rates.

Non-residential rates and bands

The Government has reduced the non-residential LBTT rates from 3% to 1%, and increased the upper rate from 4.5% to 5%, with the starting threshold reduced to £250,000 from £350,000.

These changes will not apply where a transaction was started before the 12 December 2018.

The revised rates and bands for non-residential LBTT transactions are as follows.

Non-residential transactions

Residential property Rate
0 – £145,000 0%
£145,001 – £250,000 2%
£250,001 – £325,000 5%
£325,001 – £750,000 10%
£750,001 and over 12%

List of deliberate tax defaulters published online

HMRC have published an updated list containing details of taxpayers who have been penalised for deliberate errors in their tax returns or have purposely failed to comply with tax requirements.

HMRC are able to publish details where an investigation has been made and where the taxpayer has been charged one or more penalties for deliberate tax evasion on tax of more than £25,000.

Open Banking: What is it and how can it help your business?

In the UK, the Competition and Markets Authority (CMA) has mandated that the nine largest current account providers must offer standardized Application Programming Interfaces (APIs) for current accounts to Account Information Service Providers (AISPs) and for payments to Payment Initiation Service Providers (PISPs).

What does this mean? By providing access to this data from third parties and banks, Open Banking provides small businesses with the opportunity, through technology such as QuickBooks Online, to have a real-time view of their banking and transactional data.

This will help to more accurately predict tax liability (VAT payments), to proactively manage cashflow, to more quickly provide credit scores for loan and finance applications, and to offer the ability to analyse spend and buying patterns – all to help small businesses best budget their finances.

The UK is not at the forefront of Open Banking innovation globally, but it is estimated that Open Banking has the potential to create a revenue opportunity of at least £7.2bn by 2022 across retail and SME markets.