New Advisory Fuel Rates

A new set of Advisory Fuel Rates came into effect from the beginning of December 2019, which apply to employees who use a company car.

The rates can be used in circumstances where you are reimbursing employees for business travel in their company car or in requiring employees to repay the cost of fuel used for private journeys. If you use these rates, you will not need to seek a dispensation to cover the payments.

The new rates are:

Engine size Petrol – amount per mile LPG – amount per mile Diesel – amount per mile
1400cc or less 12 pence 8 pence 9 pence
1401cc to 2000cc 14 pence 9 pence 11 pence
Over 2000cc 21 pence 14 pence 14 pence

Hybrid cars are treated as either petrol or diesel cars for the purposes of Advisory Fuel Rates.

Meanwhile, the Advisory Electricity Rate for fully electric cars is 4 pence per mile, although electricity is not considered a fuel for car fuel benefit purposes.

Link: HMRC advisory fuel rates for company car users from 1 December

Reminder: National Living Wage set to increase from April

On 1 April 2020 the Government will introduce increases to the National Living and Minimum Wage.

From this date the National Living Wage (NLW) will rise from £8.21 to £8.72 per hour and will mean that 2.8 million full-time workers will see a £930 boost to their annual earnings.

The Government claims that the introduction of the NLW, which is available to those aged 25 and over, has delivered the fastest pay rise for the lowest earners in 20 years.

From April workers who are paid the National Minimum Wage (NMW) will also see their pay increase. The table below outlines the new rates of pay:

Year 25 and over 21 to 24 18 to 20 Under 18 Apprentice
April 2019 (current rate) £8.21 £7.70 £6.15 £4.35 £3.90
April 2020 £8.72 £8.20 £6.45 £4.55 £4.15

As well as increasing the NLW, the Chancellor Sajid Javid has said that the Government intends to expand the reach of the NLW to cover workers aged 23 and over from April 2021, and to those aged 21 and over within five years.

Link: National Minimum Wage and National Living Wage rates

Should your company pay a data protection fee?

We are aware that the Information Commissioner’s Office (ICO) has been contacting companies to remind them of their legal obligation to pay a data protection fee.

The ICO has confirmed that the UK’s 4.2 million limited companies will receive letters sent to their registered office addresses making them aware of this obligation, which is mandatory for some data controllers.

While the notice implies that all registered companies should pay a data protection fee of £40, some companies will be exempt from this legislation.

Where the processing of data is solely to keep accounts, records of purchases, sales or other transactions, deciding whether to accept any person as a customer or supplier, or making financial or financial management forecasts, the business is likely to be exempt under the Schedule to the Regulations.

However, the ICO has posted on its website that “if you hold personal information for business purposes on any electronic device…it is likely an annual fee payment is due”.

To determine whether or not you are exempt, complete a short questionnaire on the ICO’s website here.

Please be aware that failure to pay the fee in circumstances where no exemption applies may attract a penalty of up to £4,350.

Link: Registration for ICO self-assessment

More than 3,000 taxpayers complete self-assessment on Christmas Day

Instead of tucking into turkey or unwrapping their gifts, 3,003 taxpayers completed their self-assessment returns on 25 December 2019, according to HM Revenue & Customs (HMRC).

Every year hundreds of people across the UK use the Christmas break as a time to manage their financial affairs, with HMRC declaring it a “Christmas tradition”.

HMRC said that peak times for self-assessment submissions on Christmas Day were between 12:00 and 12:59 when more than 245 customers filed online.

Incredibly, Boxing Day saw more than three times the number of submissions than Christmas Day with 9,524 taxpayers logging on to submit their tax records, while Christmas Eve was busier still with 22,035 self-assessment returns submitted.

Angela MacDonald, HMRC’s Director General for Customer Services, said: “Whether you squeezed it in before tucking into a Christmas pudding, after the Queen’s Speech or trying to grab a bargain during the festive sales; our online service is available for you to file your tax return, at any time you wish.”

More than 11 million customers are expected to complete a 2018/19 self-assessment tax return form by 31 January 2020, which is the final deadline for online submissions. Failure to submit your tax return on time could lead to an automatic fine of £100 with further penalties depending on the lateness of a submission.

For any taxpayers who are yet to start their 2018/19 self-assessment return, it is strongly advised that they seek professional assistance or gain help via GOV.UK or from the official self-assessment helpline on 0300 200 3310.

Even if taxpayers completed a self-assessment tax return last year but didn’t have any tax to pay, they will still need to fill out a 2018/19 tax return, unless HMRC has written to them to say that it is not required.

Link: ‘We’ve been Santa lot of Elf Assessments’ says HMRC

Annual R&D spend in the UK reaches £25 billion

According to the latest figures from the Office for National Statistics (ONS) businesses in the UK spent £25 billion on research and development (R&D) during 2018.

The figure represents a 5.8 per cent increase on the previous year when the figure stood at £23.7 billion.

The ONS claim the figures highlight an upward trend when looking at R&D expenditure in constant price terms with an average annual growth rate of 2.5 per cent since 2007 levels.  The increase from 2017 was 3.9 per cent.

The largest increase in R&D expenditure came from the Aerospace sector which rose 14 per cent to £210 million.

Pharmaceuticals maintained its position as the largest product group, with £4.5 billion expenditure, a 3.3 per cent increase on 2017. The product group accounted for 18 per cent of total expenditure performed in UK businesses.

Motor vehicles and parts took second place, increasing by 4.3 per cent to £3.8 billion, continuing the growth seen over the last nine successive years.  This group represented 15 per cent of total expenditure.

Large increases in expenditure were also seen in the telecommunications group, at £192 million (25 per cent) and other manufactured goods at £48m (21 per cent).

The top five product groups accounted for over half (54 per cent) of the total UK business R&D expenditure in 2018.

More than two-thirds of product groups saw increasing investment in R&D. However, 10 product groups posted a decline. The largest two decreases were in electricity, gas and water supply; waste management, and food products and beverages; which both fell by £21 million.

Link: Research and development expenditure

Keeping workplace gifts tax-free this Christmas

Over the Christmas period, you may wish to treat your employees. This is a tried and trusted approach to building a strong relationship with your team.

But are you aware that you may be breaking PAYE rules by doing so?

We want to ensure that you enjoy the holidays just as much as your team, so we’ve put together our top tips to ensure that you stay on the right side of the taxman this Christmas.

Getting gifts right

Trivial benefits are items of value given to an employee that do not count towards taxable income or National Insurance Contributions (NICs).

To qualify, the gift must meet ALL of the following conditions:

  • The gift isn’t in the terms of the employee’s contract
  • It is below the value of £50
  • It isn’t a performance-linked reward
  • It isn’t cash or a cash voucher

A trivial benefit in kind could include a Christmas lunch, a small Christmas present, or a gift on the day of an employee’s wedding.

If the gift does not meet all of the above criteria, it must be reported as a benefit in kind to HM Revenue & Customs (HMRC) and tax must be paid as appropriate.

What about incidental expenses?

Incidental expenses, as described by HMRC, are expenses “incurred by an employee while travelling overnight on business”. These may include purchasing newspapers, paying for laundry or using the hotel telephone.

As long as the value of the expenses does not exceed more than £5 per night for travel within the UK and £10 per night for travel outside the UK, they do not have to be reported to HMRC.

For more information on tax exemption for benefits in kind, click here

Link: Tax on trivial benefits

HMRC urges taxpayers to be vigilant ahead of self-assessment deadline

HM Revenue & Customs (HMRC) has urged taxpayers to be vigilant ahead of the self-assessment deadline on 31 January 2020, with a surge in fraudulent activity expected.

HMRC has said that it has received 900,000 reports in the last 12 months relating to suspected fraud, with phone calls, text messages and emails being the most common form of scam.

The volume of scams is expected to increase ahead of the self-assessment deadline, with fraudsters purporting to be from HMRC sending emails or text messages with a link to a fake HMRC page in an attempt to steal data and money.

Genuine organisations such as HMRC or banks would never contact an individual to ask for personal data, such as passwords, bank details and pins.

Gareth Shaw, Head of Money at Which?, said: “The number of people targeted by
HMRC scams is staggering and the problem is only likely to get worse as the self-assessment deadline looms.

“Sophisticated tactics like number spoofing see innocent people losing life-changing sums every day – so banks, telecoms companies and firms being targeted must collaborate on developing solutions to halt this worsening crime.

“Victims of HMRC scams often end up being tricked into transferring money to a criminal, and while a new industry code is in place offering greater protections against transfer fraud, the next government must make this mandatory to ensure all payment providers are signed up to these vital measures.”

Some experts are also calling for banks and regulators to agree on a reimbursement fund that will ensure that victims will be able to recoup money lost if they are affected by these scams.

Link: HMRC warns customers to be aware of Self-Assessment tax scams

The end of the help-to-buy ISA – What’s next?

Since 2015, banks and building societies have been offering help-to-buy ISAs to first-time buyers. To qualify, you had to be 16 or over and be a first-time buyer.

However, as of the end of last month, the scheme has been closed to new savers. Under the scheme savers could deposit a lump sum of up to £1,200 when they opened an account, following this, each month they were able to save up to £200 a month.

The Government then boosted savings by 25 per cent, so for every £200 saved, first-time buyers received a bonus of £50.

The minimum Government bonus is £400; this means you needed to have saved at least £1,600 into your ISA before you can claim your bonus. The maximum Government bonus is £3,000 and to receive that, you needed to have saved £12,000.

To receive the Government bonus, the money must be used to buy a home up to the value of £250,000 outside London, or up to £450,000 in the capital. In addition, this must be your only home, and it can’t be rented out or used as a holiday home.

What happens since its closure on 30 November?

The ISA’s won’t be available to new savers anymore; however, if you opened your account before then, you can keep saving into it until November 2029.

At this stage, your account will close to additional contributions and you must claim your bonus by 1 December 2030.

LISA

Although the Help to Buy ISA has ceased for new savers, individuals over the age of 18 will still be able to use the Lifetime ISA (LISA) to purchase a home if they are first-time buyers.

The LISA offers a similar top-up of 25 per cent on a person’s savings when it is used to buy a home worth up to £450,000, but as you can deposit a greater amount over a longer timeframe – £4,000 each year, until you’re 50 – there is the potential to build up a far larger deposit.

The bonus is paid at the end of the tax year in which the money is withdrawn for sale, which may mean that the bonus can contribute directly to the final deposit amount.

The LISA must be used to either purchase a home or withdraw funds when a person is aged 60 or older as part of their retirement fund. Withdrawing the funds for any other reason means that they will not benefit from the bonus.

Link: Help to Buy

Late payments a huge drain on SMEs

Small firms are owed a staggering £23.4 billion in late payments, an issue that is continuing to cause greater problems for businesses each year.

In the last year alone, the figure has increased by £10.4 billion

According to one study by Pay.UK, this is costing small businesses dear in both time and money, as 22 per cent of those waiting to be paid are spending £500 per month chasing payment and are using up millions of hours per year.

The research also shows that the number of firms in the UK experiencing overdue payments has hit 54 per cent among small to medium-sized enterprises (SMEs), the highest level since 2015.

In addition, the average late payment debt has increased this year to £25,000 per business, an increase from £17,000 in 2018, which is worrying as, on average, SMEs say that a debt burden of just £35,000 could jeopardise their business.

Numerous studies suggest that more than half the small firms affected chase payment in their own time, which eats into their personal life and jeopardises their business, with 63 per cent of those impacted saying that bad debt has a negative effect on their business.

Different business owners have different methods of coping with the burden of bad debt, with more than a third saying they have to rely on bank overdrafts, while almost a quarter revealed that being paid late forces them to hold back on settling their own business debts or even paying their staff on time.

Link: UK SMEs face debt burden of £23.4 billion

Around half of the UK’s SMEs admit to making errors on taxes

According to accounting software providers, QuickBooks, over 50 per cent of UK small and medium-sized enterprise (SME) owners have made a mistake when filing their VAT returns, while just a quarter (25 per cent) feel confident that they have filed their VAT accurately.

As the business owner, it is important to bear in mind the following tax obligations when filing your taxes:

Tax Returns

If you are self-employed, you need to check whether you are entitled to tax credits, so you don’t lose out on valuable income later on.

Self-employed individuals are entitled to the same personal allowance as someone who is employed.

Don’t overpay your taxes

A recent study revealed that small businesses are 56 per cent more likely to overpay on their taxes due to VAT filing mistakes.

Only half of all SME owners have completed their taxes efficiently or even correctly, and subsequently, many are overpaying their taxes.

Despite being able to claim this tax back, these errors could ultimately cost you and your business, which could negatively impact your cash-flow.

Making Tax Digital 

In April 2019, the Government began its digital transition for ‘making tax digital’, making it easier for individuals and businesses to accurately file their taxes and reduce the number of mistakes being made.

Therefore, as an SME owner, you must stay ahead of the changes, as this will affect your businesses taxes.

To avoid any errors in your next tax return it makes sense to seek out professional advice to ensure that you avoid penalties and do not pay more than is due.

Link: A quick tax guide for small businesses