JTC publishes important updates on VAT, Employment and more
15 May 2018
The Joint Taxation Committee (JTC) have released their latest newsletter, including important updates on VAT and Employment. Below is a summary of the most important points for ECA members to consider.
1. The Making VAT Digital (MVD) pilot starts this month, and a small number of businesses that meet the eligibility criteria have been asked to join. There is still a lack of MVD compliant software in the market although HMRC report that they have had strong interest from software developers and members of the accountancy profession.
You must talk to your accountants to see what they advise to get ready for the change.
Remember, every VAT return for a VAT period starting after April 2019 will have to be sent automatically from your accounting software to HMRC. There will be no way for anyone to send an online return as many people do now, by logging into HMRC and completing the figures manually into an online return.
2. A reverse charge VAT system to be implemented in October 2019 will involve all traders knowing whether their customers are VAT registered and holding their VAT numbers. As you trade going forward it would be useful if contracts supplied the customer’s VAT status and number and that you prepared to request details and store them.
A consultation is expected in the next couple of months on this issue.
As the start date is not until October 2019 there is no immediate urgency but you should begin to prepare for a major change that will affect cash flow most of all. For every £120 you take for VAT able supplies this year, it is possible that you will only receive £100 after 2019. The money flowing in and out of your business as VAT will dry up unless you contract directly with non VAT registered customers or VAT registered end users of a building.
3. VAT Notices that have been updated:
700/1: Should I be registered for VAT?
700/11: Cancelling your registration.
706/2: Capital Goods Scheme.
4. HMRC have published their Employer Bulletin for April 2018:
Reporting expenses and benefits
The deadline for reporting Expenses and Benefits in Kind for 2017-18 is 6 July 2018.
From 6 April 2018, the diesel supplement for company car benefits is increased from 3% to 4%. The supplement will apply to:
- Diesel cars registered on or after 1 January 1998 with no registered NOx emissions value.
- Diesel cars registered on or after 1 January 1998 registered with a NOx emissions value exceeding the Real Driving Emissions 2 (RDE2) standard.
No supplement will apply to diesels that meet the RDE2 standard. It is not expected that any cars on the market will meet the RDE2 standard prior to 2019/10. If there is one that requires reporting on a 2018/19 P11D or through payroll, then ‘Fuel Type A. All other cars’ should be used for the calculation.
Contractors must verify subcontractors are CIS registered before paying them. o Abbreviations should be avoided, including the word Limited for company subcontractors. You may have to check whether it is registered as ‘Ltd’ or ‘Limited’. If you receive ‘unknown’ results, you should double check that you have the correct name and details received from the subcontractor.
If you make a payment to a subcontractor which is subject to a CIS deduction, you must provide the subcontractors with a Payment and Deduction Statement (PDS). This must be provided by 19th of the month following the payment. If the subcontractor has lost or mislaid a copy, you must provide a copy clearly marked ‘duplicate’. A PDS does not need to be provided to subcontractors paid gross.
Monthly CIS returns must be submitted by 19th of the month following the month end. If you didn’t pay any subcontractors in the month, a nil return must be submitted. This can be submitted online. You can make an ‘Inactivity Request’ online under the declaration section of the monthly returns. This will tell HMRC you will not pay any subcontractor for up to six months.
New rules affect Termination payments made on, or after 6 April 2018. Payment in lieu of notice (PILONs) will be taxable in all cases. If not specifically split, the payment will be separated into:
- Post-employment notice pay (PENP), based on basic pay that would have been received had proper notice been given, which is subject to PAYE. This is calculated by applying a formula specified in legislation.
- The remaining balance, is taxable to the extent it exceeds £30,000. None of this balance is subject to employee’s NIC. From 6 April 2019, the balance is subject to employer’s NIC.
Pension contribution increase
From 6 April 2018, the minimum pension contribution for employers and staff increases from 2% to 5% and then to 8% from 6 April 2019.
The rules for flexible benefits, salary sacrifices, and optional remuneration schemes changed on 6 April 2017:
- All benefits in kind, with the exception of cars with emission of 75g CO2/km or less, are taxed based on the higher of the cash given up or the normal benefit in kind rules. Pensions, childcare, cycle to work, and cars with less CO2 emissions under 75g/km are not caught.
- School fees have special transitional rules but also move into the new rules from April 2021.
- All previous exempt benefits in kind which are taken up in exchange for cash given up are now taxable based on the cash given up.
Pre 6 April 2017 company cars and accommodation benefits do not move into the new regime until April 2021.
P11Ds for 17/18 are affected by these changes and the correct taxable amount must be used.
Care should be taken to report the correct car details for company cars.
To read the full JTC newsletter, please click here.