‘Client’ ‘Intermediary’ Service company/partnership ‘Worker’
Public sector workers “Off Payroll” • Government departments, legislative bodies, armed forces • Local government • NHS • Schools and further and higher education institutions • Police forces • Other public bodies (such as BBC, Channel 4)
Public sector workers “Off Payroll” • From April 2017 , individuals working through a personal service company (“PSC”) in the public sector are no longer responsible for deciding whether the intermediaries legislation applies • The public sector employer/agency now has to decide if the rules apply to a contract and, if so, account for and pay the liabilities through RTI and deduct the relevant tax and NICs. • Consultation - extend to Private sector?
Tax driven incorporation?
Is it Working in Public sector? • Some public authorities did have difficulties implementing - understanding the new rules and resolving disputes with contractors • Check Employment Status for Tax (CEST) software • Used 750,000 times – 60% self-employed, employed around 40% ? • HMRC will stand by the determinations by CEST
Is it Working in Public sector? • Some public authorities did have difficulties implementing - understanding the new rules and resolving disputes with contractors • Check Employment Status for Tax (CEST) software • Used 750,000 times – 60% self-employed, employed around 40% ? • HMRC will stand by the determinations by CEST
Options being considered • Extend public sector rules to private sector • Due diligence – labour providers in supply chain tax compliant? • Rejected: • New “Freelance Limited Company” - Look through entity? • Flat rate deduction similar to CIS
Advisory Fuel Rates – 1 June 2018 Engine Petrol Diesel LPG < 1400 cc 11p 7p < 1600cc 10p (9p) 1400 – 2000 14p 9p (8p) 1601 - 2000 11p > 2000 cc 22p 13p 14p (13p)
No BiK If employees charge own cars Also 100% FYA
Employees charging own electric cars • From 6 April 2018 charging facilities for all-electric and plug-in hybrid cars and vans exempt. Covers: – the cost of electricity – the cost to the employer of providing the charging facilities – any connected services • Charging must be available to either: – all the employer’s employees generally – all the employer’s employees generally at a particular location
Employees charging own electric cars • Must meet all of the qualifying conditions for exemption: • Electricity must be provided through a dedicated charging point. • = a charging point dedicated to charging all-electric or plug-in hybrid vehicles and specifically designed for this purpose. • The charging facilities must be provided at premises under the control of the employer • NB exemption does not apply where the charging facilities are at the employee’s home
Guidance on new company loss rules • New corporation tax loss set-off rules from 2017 • For new losses incurred on or after 1 April 2017 , companies will be able to use carried forward losses against profits from other income streams or other group companies • “Old” losses will still be streamed • Limited to 50% of future profits where company profits exceed £5m
Relaxation in company loss relief rules • Trading losses b/fwd at 1 January 2017 £300,000 • Year ended 31 December 2017 the company incurred further trading losses of £1,600,000 • Divide into two notional accounting periods pre and post 1 April 2017 • Year ended 31 December 2018 - trading profit of £500,000 and profits from a new trade of £2,000,000
New company loss relief rules – 2018 Old trade New trade Carry forward Trading 500,000 2,000,000 profits Old losses (500,000) 200,000 New losses (1,200,000) Profits 0 800,000 chargeable
£5 million profit restriction • £5 million limit applies to UK group • First £5 million – full relief, subject to “streaming” • Then only 50% relief • “Old” losses relieved before “new” losses • E.g. Bigco plc has profits y/e 31 March 2019 £12 million ; Losses brought forward £10 million
MTD delayed still further • Further delays due to Brexit • Press release lists “successes” • 2020 at earliest for quarterly updating by traders and landlords (IT and NICs) • Simple assessments and real time tax code changes put on hold • But VAT quarterly updating from 2019
Why Have A Share Scheme? • Attract and retain key staff • Motivate staff • Reward without reducing profit, cash • Link between success and “pay” • Tax efficient for employEE and ER • BUT – Dilutes owners stake!
Dilution Of Owners Equity • Mr and Mrs Bloggs own 100% of Bloggs Ltd, worth £1,000,000 • Looking to sell in 2 years • Award options over 10% of shares to lock in management team • Company worth £2,000,000 in 2 years? • 90% of £2,000,000 better than 100% of £1m!
Why have an “approved” scheme? • Unapproved scheme – Income tax (and NIC) if shares received at undervalue – MV at acquisition, less price paid – CGT on sale • Tax advantaged (Approved) scheme – No IT or NIC if correctly priced – Just CGT on sale – 10% if use EMI share option scheme
Alternative Share Incentives • All employees: – SAYE share options – Share Incentive Plan • Discretionary: – CSOP – EMI – (Employee Shareholder Shares)
CT relief for employee shares • APs beginning on/after 1.1.03 • CT deduction when employee acquires shares • MV less price paid by employee • Affects direct awards, share options and shares subject to forfeiture
CT deduction for employee shares • Relief = MV less price paid • Shares must be fully paid ord. shares. Not redeemable and – Listed on recognised exchange, or – Shares in top company (not controlled), or – Shares in a company controlled by a listed company
EMI Options – Key conditions • Purpose – to attract, retain, motivate key staff • Set performance criteria – profit target, sale of business • Must be capable of being exercised within 10 years • Gross assets of company <£30 million • Carrying on a qualifying trade (similar to EIS) • Options in company not controlled by another company • Employee must work > 25 hours a week • Notify HMRC within 92 days
Example – Rubble Ltd • Rubble Ltd worth £1 million • New MD Fred Flintstone recruited • EMI Option granted to Fred over 10% of shares • Market value of 10% = £20,000 (say 80% discount) • Option price set at £20,000 • Exercisable on a sale only • Option lapses if Fred leaves the company
EMI shares – company sale • Rubble Ltd sold for £5 million a few years later • Fred exercises option - pays £20,000 • Fred sells shares - proceeds £500,000 (10%) • Taxable gain - £480,000 • Capital gains tax - £48,000 (ie 10% rather then IT + NIC!) • (if unapproved £480,000 employment income) • Company has corporation tax deduction of
VAT Penalty – Late Annual Return • Curtises Limited v HMRC [2018] UKFTT 227 • Rapidly growing business - £700,000 => £2.75m • Return due 2m after year end • Late return – HMRC assessed £35,578 • Payments on account £32,499 • Actual liability £215,233.43 • Penalty £179,655 x 15% = £26,948.25
VAT - “White Goods” in New Homes
VAT - “White Goods” in New Homes • Taylor Wimpey v HMRC [2018] UKFTT • Input VAT blocked even though supply zero rated • cannot deduct input tax on goods that are ‘incorporated’ in the building • = fixed in such a way that its fixing or removal would either require the use of tools, or result in need for remedial work to the fabric of the building, or substantial damage to the goods themselves • Case concerned items “ordinarily” incorporated/
VAT due on “free” wine
VAT due on “free” wine • Marks and Spencer v HMRC [2018] UKFTT • Dine in for £10 Meal Deal • Included “free” wine or soft drink • Food zero rated • No VAT on wine as “free” • the Dine In promotion apportions the discount across all items in the bundle and VAT is calculated automatically on the discounted amount …”
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