Trivial benefits, VAT on market stalls, Taxable employee expenses

There are many influences which add to the constant changes for the UK tax system, but the top three are; new tax legislation, rulings in tax cases, and alterations in HMRC practice. We had examples of each of these last week; new rules about trivial benefits enacted by FA 2016, VAT treatment of market stalls decided by an Upper Tax Tribunal, and changes to the P11D proceeds effective from 6 April 2016.

This is an
extract from our topical tax tips newsletter dated 27 October
2016 (5 days before we publish an extract on this blog). You can obtain future issues by registering here>>>

Trivial benefits 

For years HMRC has applied a concessionary tax exemption for trivial benefits provided by employers to their employees. This exemption has been given statutory backing in ITEPA 2003, ss 323A-323C, introduced by FA 2016, s 13 with effect from 6 April 2016. 
The new rules are actually very generous. The employer can provide a trivial benefit to any employee without having to justify his reason, on as many days in a tax year as he wishes, although there is a cap on the value of benefits provided to close company directors and their families (see below). 
If the benefit meets the following three conditions it can be paid with no tax or NIC for employee or employer, and business can claim tax deduction for the cost. The benefit must: 
a) cost no more than £50; 
b) not be a reward for services or in any way contractual; and 
c) not be cash or voucher which can be exchanged for cash. 
In theory the employer could provide a £50 gift voucher to every employee on every working day of the year, but that is likely to be seen as a reward for services, so it would break condition b) above. 
HMRC have provided some detailed guidance on these new rules which includes examples of the wide range of situations in which the trivial benefit exemption can be used. It is certainly worth reading to help answer clients’ questions in this area. 
Directors and office-holders of close companies are only permitted to receive up to £300 of trivial benefits per tax year. That total includes the value of trivial benefits provided to the director’s family members. This allows the company to buy six £50 gift vouchers to give to the director/shareholder at intervals (they must be separate gifts), who is then free to spend or distribute those gift vouchers as he wishes.

This is an
extract from our topical tax tips newsletter dated 27 October
2016 (5 days before we publish an extract on this blog). You can obtain future issues by registering here>>>

The
full newsletter contained the remainder of this item plus links to related source material and the
other two topical, timely and commercial tax tips. We’ve been
publishing this newsletter weekly since 2007; it’s clearly written
and focused on precisely what accountants in general practice need to
know about each week.
You can obtain future issues by registering here>>>


Maternity Allowance, Intermediaries reporting, VAT on meals

Last week we had three examples of how ordinary people and businesses are not well served by our incredibly complex tax system. We explained how self-employed women may lose their entitlement to the maternity allowance, and how employers can be fined for not telling HMRC that nothing was paid. We also had a cautionary tale of a business which was set up to help housebound individuals but was hit with a VAT bill.

This is an
extract from our topical tax tips newsletter dated 20 October
2016 (5 days before we publish an extract on this blog). You can obtain future issues by registering here>>>

Intermediaries reporting 
Since 6 April 2015 employment agencies and employment intermediaries have been required to report payments to workers they place with third parties, or find work for, if those workers are not paid under PAYE. We outlined the conditions for this reporting requirement in our newsletter on 9 July 2015. 
Note that personal service companies (PSC) who supply only one worker are not considered to be employment intermediaries for this purpose, so don’t have to report. If the PSC supplies more than one worker it will fall under this reporting requirement, if it also doesn’t operate PAYE on all the workers’ payments. 
The report must include details of: 
  • The agency’s name, address and postcode; 
  • The worker’s name, address, NI number (if held) UTR number; 
  • The worker’s engagement and payment details, including the customers’ details in most cases; and 
  • why PAYE was not applied 
The report must be submitted online using a report template provided by HMRC, which essentially is a spreadsheet in the form of a ODS or CVS file. There may be commercial software available which can do this. 
The report can be submitted for periods to suit the agency, but it must be supplied at least for every quarter in the tax year, within one calendar month of the end of the reporting period. For the quarter to 5 October 2016 the report must arrive with HMRC by 5 November 2016. 
If the agency has not supplied any workers in the period it must submit a nil report by the deadline. Many employment intermediaries are not aware of this requirement. 
HMRC has the power to issue stiff penalties for late reports.
Our employment tax experts can advise on how to appeal these penalties and how to meet the reporting requirements.

This is an
extract from our topical tax tips newsletter dated 20 October
2016 (5 days before we publish an extract on this blog). You can obtain future issues by registering here>>>

The
full newsletter contained the remainder of this item plus links to related source material and the
other two topical, timely and commercial tax tips. We’ve been
publishing this newsletter weekly since 2007; it’s clearly written
and focused on precisely what accountants in general practice need to
know about each week.
You can obtain future issues by registering here>>>


MTD: quarterly reporting, MTD: software and costs, State pension top-ups

We generally don’t discuss tax proposals which are still at the consultation stage in this practical tax update, but we are making an exception this week to answer some key questions about the Making Tax Digital (MTD) proposals. We also have some good news about topping-up a state pension.

This is an
extract from our topical tax tips newsletter dated 13 October
2016 (5 days before we publish an extract on this blog). You can obtain future issues by registering here>>>

State pension top-ups

Only individuals who have paid sufficient NIC for the requisite number of tax years can qualify for the maximum state pension. The number of tax years required depends on when the individual attained state pension age (SPA). Those that reach SPA on or after 6 April 2016 need to have paid NIC for 35 full years, but where the individual was contracted out for any part for their working life they may receive less state pension than they were expecting.
You can help your clients budget for their retirement by using the online state pension checker facility. Where NICs have been missed for certain tax years, the missing amounts can often be replaced using voluntary NIC payments, as detailed in the excellent guide from Royal London.

This top-up facility is particularly useful for individuals who have retired before they reach SPA or have missed contribution years by living overseas. Spouses and civil partners of members of the armed forces, who accompanied their partners when posted overseas, can apply for NI credits toward their state pension for tax years back to 1975/76.

The
full newsletter contained the remainder of this item plus links to related source material and the
other two topical, timely and commercial tax tips. We’ve been
publishing this newsletter weekly since 2007; it’s clearly written
and focused on precisely what accountants in general practice need to
know about each week.
You can obtain future issues by registering here>>>


Requirement to send HMRC leaflet, CGT for non-residents, VAT responsibilities of online markets

We live in an interconnected world; your UK-based clients may have investments in other countries, and non-resident clients may have invested in UK property. We have tips on actions required in respect of both categories of investor. Clients who run online marketplaces also need to know about new VAT rules, which will impact their businesses.

This is an
extract from our topical tax tips newsletter dated 6 October
2016 (5 days before we publish an extract on this blog). You can obtain future issues by registering here>>>

VAT responsibilities of online markets 
From 15 September 2016 online marketplaces (such as Ebay and Etsy) can be held jointly and severally liable for VAT which remains unpaid by overseas businesses which sell through those sites. 
The basic VAT rule is that overseas retailers must pay UK VAT on goods they sell which are stored within the UK at the point of sale. This rule has always applied, but it has not been enforced effectively. Hence overseas suppliers have been able to undercut UK traders on price. 
In VAT terminology an overseas supplier which has no place of business in the UK is referred to as a non-established taxable person (NETP). The NETP must register for VAT from its first sale in the UK, as there is a zero VAT registration threshold for such supplies. 
Any NETP whose home base is outside the EU can now be required to appoint a UK-based VAT representative, which may in turn be made liable for any unpaid VAT due by the NETP. However, the online marketplace through which the NETP sells its goods can also be made liable for the VAT due to be paid by the NETP. HMRC say it will normally pursue the overseas business first before issuing a notice for joint and several liability for VAT to the online marketplace. The marketplace business will be given a 30-day warning to allow it to take action against the errant trader to either secure the VAT due, or ban the trader from the site. 

Businesses who run online marketplaces need to ensure that all traders who are based outside of the UK provide evidence of their VAT registered status. 

This is an
extract from our topical tax tips newsletter dated 6 October
2016 (5 days before we publish an extract on this blog). You can obtain future issues by registering here>>>

The
full newsletter contained the remainder of this item plus links to related source material and the
other two topical, timely and commercial tax tips. We’ve been
publishing this newsletter weekly since 2007; it’s clearly written
and focused on precisely what accountants in general practice need to
know about each week.
You can obtain future issues by registering here>>>


Official recognition of Tax Advice Network as a “trusted organisation”

I received a letter at the weekend from Stephen Banyard, Director Business Customer Unit at HMRC. Please share my excitement at the implications of this letter – especially in the light of the clarification I have just received.

It includes this line by reference to the Tax Advice Network:

“As a trusted organisation, small businesses already look to you for advice. We would like to ask for your help in sharing this important tax guidance with your members. It could save them, and you, time and money.”

The Tax Advice Network is a ‘trusted organisation’. Well, that’s nice. But how many other such organisations are there?

I telephoned the contact number on the letter and was told that Stephen/HMRC had only sent out about 20 copies of the letter. Now I’m feeling quite chuffed.


VAT Office tells caller to ring the Tax Advice Network

When people call our switchboard they are normally put through to whichever of the tax advisers they have chosen from our website.

Around 4.30 today a caller (Tina) was put through to me as my assistant was unable to determine what she required. Tina offered to quote her enquiry number to me. I thought maybe she had called us by mistake. Perhaps our number is very similar to an HMRC office. But no, she had called the number she’d been given by the local VAT office!

(Given the rate at which HMRC are shedding staff at the moment I wonder if the day will come when there are more tax advisers within the Tax Advice Network than left in HMRC?!)

Once we had established what had happened, Tina was equally confused as to why HMRC had given her our number. She thought it was because no one at HMRC was able to resolve her enquiry and they wanted to get rid of her.

This seems unlikely to me. Tina is a bookkeeper for a client in the catering industry and wanted clearance as to whether certain supplies were zero registered. She’d been told to go to a specific page of HMRC website but had been unable to find the relevant contact details thereon. It took me less than a minute to do so. Why had the person she spoke with at HMRC been unable to assist her? Maybe they don’t have access to a computer?

I also questioned whether the clearance facility was really what Tina wanted. I suggested that if she wanted help with a formal letter or anything that involved more than a few minutes on the phone, she should speak to one of the VAT specialist members of the Tax Advice Network.

I’m not complaining – indeed I’m thrilled – that HMRC are directing people with complex tax problems to the Tax Advice Network. Thank you to whoever it was and by all means do it again.