Share scheme reporting, Non-resident landlords scheme, ATED reporting

This newsletter looked ahead to the next tax form filing deadlines. July brings two deadlines for share scheme registration and reporting, which is particularly complicated this year. The non-resident landlord scheme annual return must also be made by 5 July. Finally don't forget the more pressing deadline for ATED return forms on 30 April 2015!

Non-resident landlords scheme 
The non-resident landlords scheme (NRL) has been in place for many years, but it still comes as a surprise to property owners who move abroad, and to many letting agents who ought to know better. 
  
The “non-resident” condition for a landlord to fall under the NRL is not aligned with the statutory residence test which determines whether person is not resident in the UK for tax purposes. A landlord is non-resident for the NRL if his normal place of abode is outside the UK. An absence from the UK for as little as six months can make the landlord fall under the NRL (see chapter 2 of NRL guidance), but that person may be still technically resident in the UK for other tax purposes. 
  
Unless the landlord has approval from HMRC to receive their rent gross, basic rate income tax must be deducted from rents paid to the landlord by the agent, or where there is no letting agent, by the tenant. The letting agent or tenant must make an annual report (form NRLY) to HMRC by 5 July 2015 for the year to 31 March 2015, and also account to HMRC for the tax deducted each calendar quarter. 
  
This year HMRC are not sending out reminders to letting agents to complete NRLY, so this will be an easy deadline to miss. Interest will be charged on the late payment of tax by agents, and penalties are due for errors in returns. 
  
An application to have rent paid gross must now be made online using an interactive PDF form NRL1i (for individuals), NRLi2 (for corporate landlords) or NRL3i (for all trustees). The rent must only be paid gross once permission is granted by HMRC, and that permission will only be back dated to first day of the quarter in which the application is approved. 

This is an extract from our tax tips newsletter dated 16 April 2015. The newsletter itself contained links to related source material for this story and the other two topical, timely and commercial tax tips. It's clearly written and extremely good value for accountants in general practice. Try it for free by registering here>>>

Pension withdrawals, Employment intermediaries, VAT-MOSS or cancel registration

The new tax year has brought new opportunities for pension withdrawals, and new burdens for engagers of self-employed workers, as we explain in this week's tax tips newsletter. We also highlight new VAT-MOSS guidance from the EU and look at how someone can deregister for VAT.

Employment intermediaries 
A new quarterly reporting requirement came into force from 6 April 2015 for agencies and employment intermediaries. It is designed to provide HMRC with information on who is working as “false self-employed” or through off-shore agencies, but the regulations could catch many businesses who don't think of themselves as employment intermediaries.      
  
The Income Tax (Pay As You Earn) (Amendment No. 2) Regulations 2015 (SI 2015/171) define an intermediary for this purpose as: “a person who makes arrangements under or in consequence of which an individual works for a third person or if an individual is remunerated for work done for a third person.” This could apply to any contractor company in many industry sectors, including construction or security. 
  
There are exceptions in the regulations which exempt the contractor company from the reporting requirements if: 
·     it does not provide more than one person's services to a client; or 
·     those persons are all its employees; or 
·     it applies PAYE to the pay of the workers it places with clients.     
       
Thus one-person personal service companies (PSC) don't have to a worry about this new regulation, but if the PSC engages a substitute who is not an employee a reporting requirement may kick-in.   
  
The definition of an agency in the regulations is very broad: ”a person other than the worker, the client or a person connected with the client”. This could catch almost any business where there is another client in the contractual chain, even an organisation that connects clients with tax advisers for specific pieces of work. 
  
The contracting company which has the potential to be deemed to be an “agency” for these regulations needs to show it is the “client” for the services it commissioned, rather than an agent, in order that the reporting regulations do not apply. 
  
Our employment tax experts can help you decide if these new reporting regulations apply to you or your clients. 
 
This is an extract from our tax tips newsletter dated 9 April 2015. The newsletter itself contained links to related source material for this story and the other two topical, timely and commercial tax tips. It's clearly written and extremely good value for accountants in general practice. Try it for free by registering here>>>

VAT-MOSS returns, RTI penalties, Auto-enrolment exemptions

The Parliamentary candidates are out banging on doors, appealing for votes. If you are bothered by such a call why not ask the candidate about: VAT-MOSS, RTI or auto-enrolment for pensions. These new processes have all made life more difficult for small businesses in the last five years. We also have further updates on these issues this week.

VAT-MOSS returns 
The first period for submitting VAT-MOSS returns opened on 1 April 2015. Those businesses who have registered for VAT-MOSS must submit their return by 20 April 2015, and pay any VAT due as reported under VAT-MOSS by the same date. Are you and your clients ready? 

The VAT-MOSS returns are always due by 20th of the month following the end of the calendar quarter, irrespective of when the UK VAT return is due. The VAT-MOSS return can be done online or by completing a very simple spread-sheet like template. If no digital sales have been made to non-business customers in other EU countries a nil VAT-MOSS return is required. 

The online version of the return may be easier to use as it contains some automatic calculation, which is missing from the spreadsheet template. The online return also has links to EU VAT rates, but you may find it easier to use the more direct link below. However, the trader also needs to report which VAT rate applies to their sale e.g. standard rate, reduced rate, zero rate etc. The same product will not necessarily attracted the same type of VAT rate in all EU countries. 

The value of each digital sale made from the UK and the amount of VAT due on each of those sales must be reported in pounds sterling. So if your client has priced their European sales in euros or other local currencies, those sales will have to be translated into £s. But which date should the business pick for calculating the relevant exchange rate: the date of sale or the end of the VAT period? 

In fact either date appears to be acceptable to HMRC. The VAT-MOSS guidance says if the trader has invoiced in currency other than sterling, that invoiced amount must be translated into sterling at the end of the calendar quarter. However, if the business automatically converts the foreign currency amount into sterling using an agreed daily or other periodic rate to use in their business accounts, those translated amounts should be used in the VAT-MOSS return.


This is an extract from our tax tips newsletter dated 2 April 2015. The newsletter itself contained links to related source material for this story and the other two topical, timely and commercial tax tips. It's clearly written and extremely good value for accountants in general practice. Try it for free by registering here>>>

Relief back-dated, Changes from 1 April 2015, Changes from 6 April 2015

Has the House of Commons been using a time-machine? By the time you read this MPs will have considered, and probably voted through, all 127 clauses and 21 schedules of Finance Bill 2015. We are stepping into our own time-machine today, to look at a tax change which has been back-dated to 3 December 2014, and some of the changes which come into effect on 1 April and 6 April 2015.

Relief back-dated 
In our newsletter on 11 December 2014 we explained the block on using entrepreneurs' relief for gains arising on the transfer of goodwill on incorporation. However, it appears the draft law (which is effective for transfers on and after 3 December 2014), would catch more transactions than the Government intended it to. 
  
Entrepreneurs' relief is in many ways the replacement for retirement relief, which applied from 1965 to the start of taper relief in 1998. The tax cases which considered whether retirement relief applied to the disposal of “part of a business” are equally relevant for entrepreneurs' relief, (see CG64035). Thus when partners retire from a partnership, they should expect to take advantage of entrepreneurs' relief on the transfer of their share of the partnership assets, including goodwill, to the remaining partners, as that is what the relief was intended for. 
  
However, where a partner (P) leaves the partnership and the remaining partners decide to incorporate the business, the gain on P's share of the partnership goodwill would be blocked from benefiting from entrepreneurs' relief. This is because P is a related party to the remaining partners and to the close company that carries on the partnership business after incorporation. Even if there is some delay between P's retirement and the incorporation, this would not prevent the block on the relief due to the anti-avoidance provisions. 
  
The Government has solved this problem by including a new condition in TCGA 1992, s 169LA that introduces the block on entrepreneurs' relief on the transfer of goodwill, such that the restriction won't apply if P is a retiring partner. However, to fit the profile of a “retiring partner” P must not:

• hold or acquire a shareholding in the close company(C ) that carries on the business transferred from the partnership, or in a company that controls C or has a major interest in C; or
• be associated to the remaining partners who become shareholders in C other than as a partner.

This second condition could still restrict the relief for family partnerships where the older generation retires and the remaining younger generation incorporate the business. Our capital gains tax experts can help you decide whether your clients can still claim entrepreneurs' relief on retirement or not.

This is an extract from last week's tax tips newsletter, dated 26 March 2015. The newsletter itself contained links to related source material for this story and the other two topical, timely and commercial tax tips. It's clearly written and extremely good value for accountants in general practice. Try it for free by registering here>>>

Entrepreneurs' relief changes, Happy birthday!, Over turning penalties

The 2015 Budget made two adjustments to the operation of Entrepreneurs’ Relief which we outline below, as they both take effect immediately for transactions undertaken on or after 18 March 2015. We also remind you why birthdays are important for employers, and how you can challenge a penalty notice issued by HMRC.

Entrepreneurs’ relief changes

The legislation for entrepreneurs’ relief (ER) was drawn-up in a great rush with little consultation in early 2008, so it is not surprising that it has worn thin in places, such that tax avoidance schemes can pass through the holes. 

One of those glaring gaps is the treatment of associated disposals. This only applies on the disposal of a business asset held personally by a shareholder or partner, which is used by the shareholder’s personal company or his trading partnership. It does not apply where a sole-trader disposes of the assets used in his business after that business has ceased.  

The gain on the associated disposal qualifies for ER if the individual also makes a material disposal, at the same time, of shares in his company or a share of his interest in the partnership. However the legislation, until now, didn’t require the disposal to be any minimum number of shares or minimum percentage of partnership interest, to qualify as a “material disposal”. Although the shareholder is required to withdraw from the business (company or partnership) at the same time as making the associated disposal, some continuing involvement in the business is permitted. 

From 18 March 2015 a material disposal for the purposes of associated disposals will be defined as a disposal of at least 5% of the shares in the personal company or at least 5% of the partnership assets. 

The other change concerns the definition of a trading group, which until yesterday could include companies which were not trading. From 18 March 2015 the activities of joint venture companies are excluded when considering the trading activities of a group.

The fine details of these new requirements will have to be reviewed when Finance Bill 2015 is published on 24 March 2015.

This is an extract from our tax tips newsletter dated 19 March 2015. The newsletter itself contained links to related source material for this story and the other two topical, timely and commercial tax tips. It's clearly written and extremely good value for accountants in general practice. Try it for free by registering here>>>

Zero rate band, VAT MOSS, Growth and connection vouchers

We are now in that pre-Budget period when everyone has their own predictions about what George Osborne will or should say next Wednesday. We are sticking to the known facts: the new zero rate band for income tax, and VAT MOSS. We also examine the reasons behind the HMRC emails which publicise growth and connection vouchers.

Zero rate band 
From 6 April 2015 the “starting rate” of income tax will be reduced from 10% to zero, and will apply to savings income of up to £5,000. Thus a person with earnings or pension income of less than £10,600 and interest of up to £5,000 will pay no income tax in 2015/16. 
  
This is certainly good news for taxpayers who are living off small pensions and savings. What's better is that HMRC will now allow people with total income of less than £15,600 to register to have their bank/ building society interest paid gross, using form R85. Note that form R85 only covers bank/building society interest, not interest paid by other bodies such as NS&I on savings bonds. 
  
Examples of those who will be eligible to apply for gross interest are given in HMRC's issue briefing for the starting tax rate. There is also a R85 helpsheet and an online calculator to help people decide if they are eligible. 
  
At very end of the R85 helpsheet there is a warning about Gift Aid. To make a valid Gift Aid declaration, which allows the charity to reclaim basic rate tax on the gift, the individual has to confirm they pay enough tax to cover the amount reclaimed by the charity. If the individual is applying for gross interest on form R85, they may not be paying any tax for the tax year concerned, and hence their Gift Aid declaration will be invalid. HMRC can ask the donor to pay tax the charity has reclaimed, based on an invalid Gift Aid donation. 
  
Remember tax credits deemed to be deducted from dividends received are counted as income tax paid for the purpose of Gift Aid donations, but those dividend tax credits can never be reclaimed by the taxpayer.

This is an extract from our tax tips newsletter dated 12 March 2015. The newsletter itself contained links to related source material for this story and the other two topical, timely and commercial tax tips. It's clearly written and extremely good value for accountants in general practice. Try it for free by registering here>>>

Payroll tasks, Cars and vans, Working with HMRC

We are now one month away from the end of the tax year, so we are looking at payroll tasks that need to be completed around the year end, and benefit changes that need to be reported before 6 April 2015. We also have an update on HMRC’s relationship with tax agents, and how you can influence the new online systems they are building.

Payroll tasks

The end of year reporting under RTI should be easier this year, as most employers have gone through the procedure once already for 2013/14. The Employer Bulletin number 52 has some detailed guidance, but unfortunately it is not totally accurate.

The end of year checklist (questions previously on the P35) is not required for 2014/15 as the PAYE regulations have been changed, but most payroll software has not. Thus although employers don’t have to answer those questions, thier payroll software will not permit a ‘final’ report to be filed for 2014/15 without answers being given.

It is crucial that the last FPS for 2014/15 is marked as “final”, and it is submitted to HMRC within three days of the last payment day in the tax year. Any delay beyond this three day grace period will trigger a penalty for the employer. Although large employers (50 or more employees) are allowed one late filing in 2014/15, other employers are not. So if the last FPS for the year is more than 3 days late, the unfortunate small employer will get a penalty notice.   

If you forget to mark the last FPS as “final”, you can submit a nil EPS as the final submission of the year. If you need to correct information on the final submission this should be done on an amended FPS before 20 April 2015. Any corrections after that date need to be submitted on an Earlier Year Update (EYU).

Finally, watch out for letters from HMRC closing PAYE schemes. They plan to close around 15,000 PAYE schemes which have made no RTI reports since April 2013. These could include schemes which are kept open solely to report P11D benefits.

This is an extract from our tax tips newsletter dated 5 March 2015. The newsletter itself contained links to related source material for this story and the other two topical, timely and commercial tax tips. It's clearly written and extremely good value for accountants in general practice. Try it for free by registering here>>>