Taxaccount; views from the village.

This is another Making Tax Digital (“MTD”) update  …..the taxman has FINALLY agreed what a good idea it would be to contact all VAT registered taxpayers, advisors and others to warn them about the upcoming start of MTD.

Only 6 months to go before kick off but, hey, better late than never I suppose. I know some will say “too little, too late”.

Their tweet said …”VAT registered businesses with a taxable turnover above the VAT threshold (£85,000) will need to keep digital VAT records and send returns using #MTD compatible software from April 2019.”

There are exceptions and workarounds to make this MTD journey simpler than it sounds but the main issue is that the necessary software to do the job is STILL not available. Many software companies say their products will be “ready” for launch day but who knows what will happen between now and then?

For example Jon Thompson (Chief Exec and Permanent Secretary of HMRC) says that HMRC will make a decision, at their October board meeting, as to whether or not MTD for VAT goes ahead as planned next April.

It might not even happen. (Gets my vote)

 Amongst a raft of “consultation documents” published by HMRC for discussion is this >> new powers enabling HMRC to get your personal financial information without telling you.

No notification would be provided and there would be no right of appeal to the data access.

The bank or any other third party possessing the data to be accessed (including building societies, solicitors, accountants, estate agents and more) would be legally prohibited from telling you that HMRC requested and was given access to your private data.

These powers are not just for tax assessment but also proposed for debt collection purposes and other (unnamed) functions.

These proposals are at the consultation stage before implementation. Any responses from “stakeholders” will be accepted until October 2018.

Interested in the detail? It’s here……
https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/724048/Amending_HMRC_s_Civil_Information_Powers_consultation_document.pdf

Might be a good idea to lobby your MP if you don’t agree with this.

…..for those if you who have – or are going to get – a Personal Tax Account be VERY CAREFUL and AVOID the Capital Gains Tax add-on for voluntary “Real time reporting”.

This add-on has NO legal standing, it makes you pay Capital Gains Tax earlier than necessary and causes utter confusion with the Self Assessment Tax Return system.

I could continue listing many more things wrong with this barking mad idea but, hey, that’s put simple enough.

Mr Hammond didn’t announce any new tax measures in his Spring Statement yesterday, 13th March 2018, as, under his new system, such changes will wait till the Autumn Budget.

That said, he did announce 13 consultation documents on a variety of topics including international corporate tax issues, cash and the gig economy, business rates, resolving an Entrepreneur’s Relief share problem, some aspects of VAT and steps to tackle the problem of plastic waste.

Two other issues that may be of direct interest to our readers are outlined below.

ENSURING TAX COMPLIANCE

HMRC feel that people who sell online via platforms such as eBay are not filing Tax Returns or paying tax as they should because of deliberate evasion or lack of knowledge.

Either way HMRC is considering how to change this and encourage/compel everyone to file whatever Tax Returns are due and pay their share of tax and Natioanl Insurance.

Watch out for new laws on that with attendant increases in HMRC powers and more interest, fines and penalty charges for defaulters.

TAX RELIEF FOR SELF FUNDED TRAINING

Costs of training to gain new knowledge are rarely tax deductible. We all know this.

For self employed people IF training merely maintains or updates existing knowledge, WITHOUT acquiring new skills,then tax relief is often available.

For employees their costs of training are usually paid by the employer but, sometimes, that isn’t the case. Ocassionally it is the employees who pay to train themselves.

Where this happens, generally speaking, the employee cannot claim tax relief for the cost of the training.

HMRC estimate that around 860,000 employees self-funded their own training in 2016 and the vast majority of them would not have received any tax relief.

HMRC is considering how more relief can be given for training costs so, hopefully, this is good news on the horizon.

Employers can make small gifts to employees WITHOUT paying tax or National Insurance on the money involved.

The basic rule is that an employer can now provide what are termed “trivial benefits” (e.g. a bunch of flowers, a box of chocolates, a meal out) without having to declare them on the expenses/benefits declaration form P11D and without any tax or National Insurance for either employer or employee.

The employer will also be entitled to claim income tax or corporation tax relief on the cost.

The three key conditions are:

• the trivial benefit must cost no more than £50
• the benefit must not be a reward for services or in any way contractual
• the benefit must not be cash or a cash voucher

You are now asking “Can directors/shareholders in their own company enjoy trivial benefits themselves?”

Yes they can but the new rules impose an exemption limit of £300 if such benefits are provided to a director or “office-holder” of a close* company or to members of their family/household.

* “close” = 5 or fewer shareholders/participators

Maybe get your company to fund your Christmas meal or summer outing? Could do but make sure all rules are followed so HMRC cannot challenge.

As always – discuss with us if you want more advice  but, whatever your plans, we wish you all the best of times in this festive season.

So….that was it. A Budget.

Skipping over all the macro technical stuff, getting down to things that affect people at the sharp end, most personal and company tax rates etc were already set by previous Budgets.

However, the personal allowance will increase in April 2018 to £11,850 and the 40% higher tax rate threshold rises to £46,350. (NOT in Scotland)

One change of note is the Capital Gains “indexation allowance” for companies will be frozen as at January 2018.

The VAT registration threshold is the highest in Europe at £85,000. It remains at that figure for two years.

Enterprise investment Scheme incentives are to be increased for tech start up companies.

Further improvements announced to business rates including steps to mitigate the colloquially named “Staircase” charge. That said there was no announcement about how management of the so-called rates relief already in place will improved.

With effect from April 2019 digital businesses paying royalties to a low tax jurisdiction will be subject to income tax on those payments here in the UK.

On housing there was an announcement to “increase the supply of land” to build more homes, some figures proposed on future building but I sort of switched off there for a moment with a feeling of déjà vu. Previous similar pledges have all failed abysmally so why this one should be any different is beyond me.

Anyway, apparently, the government wants 5 new “garden towns” to be built. No doubt after long research, one or more feasibility studies etc. so don’t hold your breath.

Also on housing first time property buyers will pay NO Stamp Duty Land Tax on purchases up to £300,000 and nothing on the first £300,000 of any property costing up to £500,000.

This week the “Office of Tax Simplification” issued a report suggesting that the VAT registration threshold  – currently £85,000 – be LOWERED perhaps down to £26,000, the so-called “official” national average wage.

That would mean any self employed person or buiness at that level of sales – BEFORE deducting expenses – would be required to register for VAT, charging their customers and submitting quarterly VAT Returns.

Official estimates say that would cause another MILLION businesses to register.

Would you, or anyone you know, be amongst them?

Then there is the prospect of “Making Tax Digital” (MTD).

At the moment only VAT registered taxpayers are required to join MTD from April 2019 and start making quaterly Returns. If you are not VAT registered then you won’t be required to make quaterly Returns until at least 2020.

So what happens if the VAT registration threshold is lowered to the point where you have to register? Looks like you will also have to join MTD in April 2019.

Make no mistake. Both will be huge burdens on the small buisness.

Maybe lobbying your MP may be the way to go.

I’ll leave you to draw your own conclusions and ponder what action you would need to take if all this goes ahead as suggested.