Points mean penalties in HM Revenue & Customs late filing reforms

A shake-up of penalties for late submissions and payments under the Government’s Making Tax Digital (MTD) programme is to see a points-based system introduced, HM Revenue & Customs (HMRC) has confirmed.

The new system is set to be introduced in tandem with the launch of MTD for VAT in 2019 and will see taxpayers receiving a point each time they file or pay after a deadline.

Taxpayers who then exceed a penalty threshold will be fined and will receive further fines each time they subsequently miss a deadline. After a period of meeting deadlines on time, the points total will reset to zero.

HMRC has proposed the following penalty thresholds:

Submission frequency         Penalty threshold

Annual                                     2 points

Quarterly                                 4 points

Monthly                                   5 points

Meanwhile, it has proposed the following good compliance periods, in which taxpayers who have exceeded the above thresholds would need to meet every deadline in order to see their points totals reset to zero:

Submission frequency         Good compliance period

Annual                                     2 points

Quarterly                                 4 points

Monthly                                   6 points

The move is intended to penalise those who repeatedly miss deadlines while offering leniency in respect of one-off late filings or payments and encouraging improvement from those who have repeatedly missed deadlines.

Full details of the scheme are to be included in draft legislation, which is expected to be published this summer before being put out for consultation.

Link: Making Tax Digital – sanctions for late submission and late payment

Recently given your staff a gift?

Maybe you have recently given your staff members a bottle of wine or a voucher to help celebrate the New Year or as a thank you for their services in 2018, but did you know this could be classed as a trivial benefit in kind.

While the cost may not be ‘trivial’ to some, this tax relief does cover benefits, such as taking employees out for meals or giving gifts – costs which quickly add up.

New rules introduced in 2016 overhauled the procedures for taxing trivial benefits in kind, which state that any benefit that meets the following criteria set out by HM Revenue & Customs is exempt from income tax and national insurance:

  • The cost of providing the benefit does not exceed £50 (or the average cost per employee if a benefit is provided to a group of employees and it is impracticable to work out the exact cost per person);
  • The benefit is not cash or a cash voucher;
  • The employee is not entitled to the benefit as part of any contractual obligation (including under salary sacrifice arrangements); and
  • The benefit is not provided in recognition of particular services performed by the employee as part of their employment duties (or in anticipation of such services).

The rules differ slightly for office holders of the company, family members and members of the household, whose exemption is capped at £300 for each tax year.

If you believe that such a benefit has been provided to your employees then you may no longer need to include them on a P11D form, as has previously been the case.

Link: Tax exemption for trivial benefits in kind

New Year, New Home – Self-employed reminded about changes to SA302

With many people looking to get on to the housing ladder in 2018, it has never been more important to have easy access to a mortgage.

However, since HM Revenue & Customs (HMRC) changed the way it issues details of tax calculations and tax year overviews for submission with mortgage applications last year, self-employed workers in the UK have found it harder to get a mortgage.

Before 4 September 2017, self-employed workers and their accountants had been able to get a paper copy of form SA302 that lenders require in order to complete the mortgage application process.

HMRC now no longer issues paper copies and instead provides digital versions.

This has restricted the number of lenders that will offer a mortgage to self-employed workers, with initial reports suggesting that lenders are still insisting on original paper copies rather than electronic printouts, despite HMRC undertaking discussions with UK Finance, formerly the Council of Mortgage Lenders, about lenders’ requirements.

When submitting information to eligible mortgage lenders, self-employed individuals and their advisers are now required to supply the relevant year’s tax computation, printed from the adviser’s software, along with the tax year overview that advisers can print from HMRC’s online services page in order to act as a self-serve SA302 that will satisfy lenders.

Many accountants are therefore reminding self-employed individuals to check their lender’s requirements before making an application.

LINK: SA302 Tax Calculation

Auto-enrolment to be expanded to younger workers, as minimum contributions rise

The majority of businesses across the UK are making preparations to increase their minimum workplace pension contributions, having successfully enrolled more than 8.5 million staff into schemes.

Auto-enrolment minimum contributions were due to rise in October 2017 under the original plans and then again in October 2018, but the Government took the decision to push the date back six months.

This means that the first increase will now take place on 6 April 2018 and will see total contributions increase from two per cent of qualifying earnings to five per cent of qualifying earnings, of which two per cent must be paid by the employer.

Then on 6 April 2019, the rate of contribution will rise again to a total of eight per cent of qualifying earnings, of which three per cent must be paid by the employer.

The increase in minimum contributions comes as the Government confirms that it will lower the starting age for auto-enrolment on workplace pension savings schemes from the current age of 22, down to 18.

It is believed that the move will introduce more than 900,000 young people into the workplace pension system, allowing these workers to save an additional £800 million.

Work and Pensions Secretary David Gauke told the BBC’s Andrew Marr Show: “We believe that what we’ve seen over the last few years since auto-enrolment came into place in 2012 is much greater saving for pensions.

“After decades of declines in workplace pension saving we are now seeing increases. We want to extend that benefit to people under the age of 22. At the moment the starting point is 22, we’re now lowering that to 18.”

While many workers may welcome these changes, some employers may look at them as yet more of a burden on their limited time and resources.

LINK: Pension Contributions Rise