HMRC proposes to introduce new VAT rules for construction services which are subject to consultation.
HMRC has published a draft statutory instrument for technical consultation together with a draft explanatory memorandum and a draft tax information and impact note.
Under the draft legislation supplies of standard or reduced-rated construction services between construction or building businesses will be subject to a domestic reverse charge. This means that the customer will be liable to account for VAT due, instead of the supplier.
The legislation will not apply to specified supplies made to customers who are consumers, or to those that use specified supplies to make other supplies, such as those selling new houses.
The legislation is expected to take effect from 1 October 2019. More details of the proposed new rules can be found at the following link.
Internet link: GOV.UK consultation
HMRC has announced that it has saved the public over £2.4m by tackling fraudsters that trick them into using premium rate phone numbers for services that HMRC provide for free.
HMRC has reported that scammers create websites that look similar to HMRC’s official site and then direct the public to call numbers with extortionate costs in comparison to the low cost and no cost services that HMRC provides.
These websites promote premium rate phone numbers as a means of phoning HMRC but these are call forwarding services which connect the unsuspecting to HMRC at a premium rate.
HMRC’s has confirmed that its genuine 0300 numbers are mainly free or charged at the local landline rate. In other cases, websites charge for forwarding information to HMRC which can be provided free of charge via GOV.UK website.
HMRC has successfully challenged the ownership of these websites, masquerading as official websites, and removed them from the hands of cheats. Analysis carried out shows that had HMRC not taken this action then the public would have lost £2.4m to these scams.
Mel Stride, Financial Secretary to the Treasury said:
‘We know that HMRC is the most spoofed government brand as criminals try to take advantage of the fact that everyone has some involvement with the tax authority. In this particular case, scammers try to dupe the public into paying large sums for services that are available for free or low cost.’
‘This is a brazen con, charging premium rates whilst simply redirecting calls to the real HMRC numbers that are available at low or no cost. It is a testament to the hard work of HMRC that they have prevented criminals extracting £2.4m from the public.’
Internet link: GOV.UK news
HMRC has extended the payroll Real Time Information (RTI) late filing easement until April 2019.
Under RTI payroll obligations employers must submit details of payments made to employees on or before the day that wages are paid via a Full Payment Submission.
The updated guidance extends the easement, introduced in April 2015 to April 2019. The easement applies where an employer’s FPS is late but all reported payments on the FPS are within three days of the employees’ payday. This easement applies from 6 March 2015 to 5 April 2019. However, HMRC go on to clarify that employers who persistently file after the payment date but within three days may be contacted or considered for a penalty. Potential monthly penalties range from £100 to £400 depending on the size of the employer.
Please contact us for help or advice with payroll matters.
Internet link: GOV.UK PAYE guidance
It has previously been reported that the Enterprise Management Incentive scheme State Aid approval lapsed on 6 April 2018. HMRC had previously warned that EMI share options granted in the period from 7 April 2018 until EU State Aid approval was received may not be eligible for the tax advantages afforded to option holders but has now confirmed the scheme will operate as before.
On 15 May EU approval was granted and HMRC has now confirmed that the Enterprise Management Incentives scheme will continue to operate as before and no changes have therefore been made to the scheme.
The Enterprise Management Incentive (EMI) allows selected employees (often key to the employer) to be given the opportunity to acquire a significant number of shares in their employer through the issue of options. An EMI can offer significant tax advantages as the scheme allows options to be granted to employees which then allows shares to be acquired without any tax bill arising until the shares are sold.
Internet link: GOV.UK bulletin
HMRC has confirmed that the tax gap for 2016/17 has fallen to 5.7%.
The ‘tax gap’ is the difference between the tax that should theoretically be paid to HMRC and the actual tax that has been paid. HMRC believes that the tax gap is lower as a result of its work to help taxpayers get things right from the start, and the department’s sustained efforts to tackle evasion and avoidance.
Key findings from the Measuring the Tax Gap publication include:
- small businesses made up the largest proportion of unpaid tax by taxpayer group at £13.7 billion
- taxpayer errors and failure to take reasonable care made up £9.2 billion of unpaid taxes by behaviour, while criminal attacks made up £5.4 billion
- income tax, national insurance contributions and capital gains tax made up the largest proportion of the tax gap by tax type at £7.9 billion for 2016/17; equivalent to 16.4% of self assessment liabilities
- the VAT gap showed a declining trend over time, falling from 12.5% in 2005/06 to 8.9% in 2016/17.
Mel Stride, Financial Secretary to the Treasury, said:
‘These really positive figures show that the tax gap is the lowest in the last 5 years, which reflects the hard work that HMRC and I have been doing to ensure we support businesses to pay the right tax at the right time and clamp down on tax evasion and avoidance.’
‘Collecting taxes is essential for funding our vital public services such as the NHS – indeed, had the tax gap remained at its 2005/06 level the UK would have lost £71 billion in revenue destined for public services, enough to build 200 hospitals.’
Internet link: GOV.UK tax gap
A plumber has won a legal battle for working rights in a Supreme Court ruling.
The Supreme court has backed up an earlier ruling by an Employment Tribunal in the case of a contractor engaged by Pimlico Plumbers.
Plumber Gary Smith carried out plumbing jobs for Pimlico Plumbers. He was VAT registered and paid tax on a self employed tax basis.
The Supreme Court has ruled that Gary Smith was entitled to workers’ rights and confirmed that the Employment Tribunal was ‘entitled to conclude’ that Mr Smith was a worker.
As a worker Mr Smith was entitled to rights including holiday and sick pay. Details of workers rights can be found GOV.UK worker
Pimlico Plumbers chief executive Charlie Mullins said that he was ‘disgusted by the approach taken to this case by the highest court in the United Kingdom.
‘This was a poor decision that will potentially leave thousands of companies, employing millions of contractors, wondering if one day soon they will get a nasty surprise from a former contractor demanding more money, despite having been paid in full years ago. It can only lead to a tsunami of claims.’
Internet links: Press summary BBC News
From April 2019, the National Assembly for Wales will be able to vary the rates of income tax payable by Welsh taxpayers.
Responsibility for many aspects of income tax will remain with the UK government, and the tax will continue to be collected by HMRC for Welsh taxpayers.
The process for setting Welsh rates of income tax
From April 2019, the UK government will reduce each of the three income tax rates: basic, higher and additional rate, paid by Welsh taxpayers by 10 pence.
The National Assembly for Wales will then decide the three Welsh rates of income tax, which will be added to the reduced UK rates. The combination of reduced UK rates plus the Welsh rates will determine the overall rate of income tax paid by Welsh taxpayers.
If the National Assembly for Wales approves each of the Welsh rates of income tax at 10p, this will mean the rates of income tax paid by Welsh taxpayers will continue to be the same as that paid by English and Northern Irish taxpayers. However the National Assembly for Wales may decide to set different rates ‘to reflect Wales’ unique social and economic circumstances’.
Internet link: GOV.Wales
It has previously been reported that the Enterprise Management Incentive State Aid approval lapsed on 6 April 2018. On 15 May EU approval was granted however HMRC have not confirmed expressly that this approval will be backdated to 6 April 2018.
The Enterprise Management Incentive (EMI) allows selected employees (often key to the employer) to be given the opportunity to acquire a significant number of shares in their employer through the issue of options. An EMI can offer significant tax advantages as the scheme allows options to be granted to employees which may allow the shares to be received without any tax bill arising until the shares are sold.
HMRC had previously warned that EMI share options granted in the period from 7 April 2018 until EU State Aid approval is received may not be eligible for the tax advantages afforded to option holders.
We await official confirmation on the position from HMRC.
Please contact us for specific advice on this issue.
Internet link: Europa press release
HMRC has launched a consultation on how to tackle non-compliance with the off-payroll working rules in the private sector and are asking for comments on the best way to do this.
HMRC estimates only 10% of PSCs that should apply the legislation actually do so, and the the cost of this is projected to increase from £700m in 2017/18 to £1.2bn in 2022/23.
This consultation provides an early evaluation of the public sector reform and invites responses on how best to deal with non-compliance in the private sector.
This consultation considers a number of potential options for tackling the non-compliance with the off-payroll working rules in the private sector. However, the fundamental principles of the off-payroll working rules, that the employment status test determines who should be taxed as employees, are not being considered as part of this consultation.
In respect of the public sector
‘HMRC has analysed PAYE data covering the first 10 months of the reform, from April 2017 to February 2018. This shows that in any given month since the reform was introduced, there are an estimated 58,000 extra individuals who are paying income tax and NICs undertaking work for a public authority above expected levels.
HMRC estimates that an additional £410 million of income tax and NICs has been remitted from these engagements, since the public sector reform was introduced.
On the basis of this evidence, the government’s assessment is that the public sector reform has been successful both in increasing tax compliance and resolving the compliance challenges faced by HMRC in enforcing the off-payroll working rules in the public sector.’
‘The government considers extension of similar reform to the private sector to be the lead option which will effectively tackle non-compliance.’
The consultation closes on 10 August. We will keep you updated on this issue.
Internet link: GOV.UK consultation
BEIS and HMRC are urging underpaid workers to complain about National Minimum Wage (NMW) and National Living Wage (NLW) underpayments. Recent figures show that the number of workers receiving the money they are owed has doubled.
During 2017/18, HMRC investigators identified £15.6 million in pay owed to more than a record 200,000 of the UK’s lowest paid workers. This is an increase on the previous years figures of £10.9 million for more than 98,000 workers.
HMRC launched its online complaints service in January 2017 and believes this has contributed to the 132% increase in the number of complaints received over the last year and the amount of money HMRC has been able to recoup for those unfairly underpaid.
The figures are published as the government launches its annual advertising campaign which encourages workers to take action if they are not receiving the NMW or NLW. The online campaign urges underpaid workers to proactively complain by completing an HMRC online form.
HMRC state that the types of business receiving most complaints include restaurants, bars, hotels and hairdressing.
Business Minister Andrew Griffiths said:
‘Employers abusing the system and paying under the legal minimum are breaking the law. Short changing workers is a red line for this government and employers who cross the line will be identified by HMRC and forced to pay back every penny, and could be hit with fines of up to 200% of wages owed.
I would urge all workers, if you think you might be being underpaid then you should check your pay and call Acas on 0300 123 1100 for free and confidential advice.’
Please contact us for help with payroll matters.
Internet link: GOV.UK news 200000 receive back pay