Statutory maternity, adoption, paternity, shared parental and sick pay to rise from April 2020

According to proposals set out in a government policy paper, the revised rates for statutory maternity pay (SMP), statutory adoption pay (SAP), statutory paternity pay (SPP), statutory shared parental pay (ShPP) and statutory sick pay (SSP) for tax year 2020/21 are to be as follows:

  • the standard weekly rates of SMP, SAP, SPP and ShPP will increase from £148.68 to £151.20 (or 90% of the employee’s weekly earnings if that amount is lower than the statutory rate) – it is assumed this will be for payment weeks commencing on or after Sunday, 5 April 2020
  • the prescribed weekly rate of maternity allowance (MA) will increase from £148.68 to £151.20 (or 90% of the individual’s weekly earnings if that amount is lower than the statutory rate)
  • the weekly rate of SSP will increase from £94.25 to £95.85 from 6 April 2020.

The amount of the earnings threshold (currently £118.00 per week) for tax year 2020/21, below which employees are not entitled to SMP, SAP, SPP, ShPP and SSP, is yet to be confirmed.

Money laundering and terrorist financing

The money laundering rules are designed to protect the UK financial system and put in place certain controls to prevent businesses being used for money laundering by criminals and terrorists. The money laundering and terrorist financing (amendment) regulations 2019 (MLRs) came into force on 10 January 2020. This updates the existing regulations to incorporate international standards set by the Financial Action Task Force (FATF) and to comply with the EU’s 5th Money Laundering Directive.

The key changes for businesses dealing with HMRC mean that money service businesses and trust or company service providers who apply to register from 10 January 2020, will not be able to carry out relevant activity until HMRC has determined their application for registration.

HMRC will now supervise two new groups of businesses that are subject to the new anti-money laundering regulations. 

Firstly, letting agents who rent out property valued at 10,000 euros or more for a minimum of one calendar month, including both commercial and residential property – the online system for these letting agency businesses to register will open in May 2020.

Secondly, those in the art market who deal in in sales, purchases, and storage of works of art with a value of 10,000 euros or more, whether this is for a single transaction or series of linked transactions, regardless of payment method used – art market participants can register now via the online system. Businesses must register by 10 January 2021. The changes also add more categories within the scope of the anti-money laundering regulatory framework.

Close down a company by striking it off the register

There are a limited range of circumstances when a company can request to be removed from the register (known as being struck off). For example, a voluntary strike-off can be requested by a dormant or non-trading company.

A limited company can be closed down by using this striking-off process, but only if it:

  • hasn't traded or sold off any stock in the last 3 months. For example, a company in business to sell apples could not continue selling apples during that 3 month period but it could sell the truck it once used to deliver the apples or the warehouse where they were stored.
  • hasn't changed names in the last 3 months
  • isn't threatened with liquidation
  • has no agreements with creditors, e.g. a Company Voluntary Arrangement (CVA)

If the company does not meet these conditions, then the company will need to be liquidated (also known as a 'winding up').

Before applying for a strike off, the company must be legally closed down. This involves:

  • announcing plans to interested parties and HMRC
  • making sure employees are treated according to the rules
  • dealing with business assets and accounts.

On your bike – tax free cycling

There are special rules involving bicycles for work use, usually referred to as 'Cycle to Work' arrangements. The Cycle to Work scheme was introduced almost 20 years ago to help promote the use of healthy ways to commute to work using an environmentally friendly mode of transport.

The scheme allows employers to provide bicycles and cyclists’ safety equipment to employees as a tax-free benefit. The scheme was recently extended to include the use of electronic bikes known as e-bikes. The scheme must be offered to all employees and the bike must be used for qualifying journeys (but pleasure use is also allowed). Where the scheme conditions are satisfied, employees can benefit from a tax and National Insurance Contributions (NICs) reduction of between 32% and 42% through a salary sacrifice scheme. In addition, there is no employer liability to NICs.

The cycle to work benefits only relate to the loan period. However, it is commonplace for an employer or a third party bicycle provider to offer the employee the bicycle / equipment they have been using for sale after the loan period has ended. The bike may be offered to the employee for sale at a fair market value, but this must be done as a separate agreement.

Employers of all sizes across the public, private and voluntary sectors are eligible to take part in the scheme to provide (technically loan) bicycles and cyclists’ safety equipment to employees as a tax-free benefit. If you are interested in hearing more about the benefits of this scheme, please let us know.

What qualifies for First Year Allowances?

Businesses can claim a 100% first-year allowance (FYA) on the purchase of certain qualifying Plant and Machinery (P&M). The cash-flow benefit of accelerated tax relief is designed to encourage businesses to invest in capital items which help reduce their carbon footprint by being energy and water efficient. The list of qualifying items includes expenditure on new unused electric vehicles and other cars within the 50g/km threshold for low CO2 emissions.

The list also includes:

  • energy saving equipment that’s on the energy technology product list, for example certain motors
  • water saving equipment that’s on the water efficient technologies product list, for example meters, efficient toilets and taps
  • plant and machinery for gas refuelling stations, for example storage tanks, pumps
  • gas, biogas and hydrogen refuelling equipment
  • new zero-emission goods vehicles

The use of the FYA allows companies to set the full cost of qualifying P&M against their tax bills in the year of purchase. The FYA is only available on the purchase of new qualifying cars, second-hand cars do not qualify for FYAs (but writing down allowances can be claimed).

If claiming the full amount of FYA would create a loss, it is also possible to claim less than the full 100% FYA and claim the balance using writing down allowances.

Obviously there are a range of non-tax issues that need to be considered if you are advising clients on these issues, prior to investing in new equipment or vehicles. Hopefully, this post will clarify one raft of tax allowances that you could consider.

VAT – what is a limited cost trader?

The VAT Flat Rate Scheme (FRS) has been designed to simplify the way a business accounts for VAT and in so doing reduce the administration costs of complying with the VAT legislation. The scheme is open to businesses that expect their annual taxable turnover in the next 12 months to be no more than £150,000.

The limited cost trader test, introduced in April 2017, can increase the VAT flat rate percentage used by VAT registered businesses that use the Flat Rate scheme. Businesses that meet the definition of a 'limited cost trader' are required to use a fixed rate of 16.5%. The highest 'regular' rate is 14.5%.

A limited cost trader is defined as one whose VAT inclusive expenditure on goods is either:

  • less than 2% of their VAT inclusive turnover in a prescribed accounting period;
  • greater than 2% of their VAT inclusive turnover but less than £1,000 per annum if the prescribed accounting period is one year (if it is not one year, the figure is the relevant proportion of £1,000).

For some businesses, for example, those who purchase no goods or who make significant purchases of goods, the outcome of the test will be self-evident. Other businesses need to complete a simple test, using information they already hold to work out whether they need to use the higher 16.5% rate. Businesses using the scheme are expected to check that they use the appropriate flat rate percentage for each accounting period.

For some business clients it may be more beneficial to leave the FRS and account for VAT using the normal rules. 

Public transport costs and tax

There are certain tax rules that it is important to consider if you pay for the public transport costs of your employees. The provision of public transport costs includes season tickets provided for employees, season ticket costs reimbursed to employees, loans made to employees to buy season tickets and contributions to subsidised or free public bus transport.

If you are contributing to subsidised or free public bus transport there are no reporting requirements to HMRC, and you do not have to pay any tax or National Insurance based on these costs. This is because there is a special exemption in place for subsidies to public bus services. One example of this provided by HMRC is where you help finance a bus route that gives your employees free or reduced-rate transport between their homes and work or between workplaces.

However, if the public transport costs are not exempt then the costs will need to be reported to HMRC with tax and National Insurance implications. This includes where season tickets are provided to your employees, where the cost of a season ticket is reimbursed or where a loan is made to your employee to purchase a season ticket.

Tax allowances you can claim for business cars

Capital Allowances allow your business to secure tax relief for certain capital expenditure. Qualifying expenditure on cars must usually be allocated to one of two general pools of expenditure. Which pool is appropriate depends on the car’s CO2 emissions.

Expenditure on cars with CO2 emissions over 110g/km will be dealt with in the special rate pool and attract a writing down allowance (WDA) of 6% p.a. This capital allowances rate was reduced in April 2019 from 8%.

Expenditure on cars with CO2 emissions from 50g/km up to and including 110g/km are dealt with in the main pool and attract a WDA of 18% p.a.

Cars that have an element of non-business use, by self-employed drivers, must be allocated to a single asset pool with a rate of either 18% or 6% (depending on the CO2 emissions) to enable the private use adjustment to be made.

First year allowances (FYA’s) are available for expenditure on new electric cars and cars with CO2 emissions up to 50g/km. This expenditure benefits from 100% capital allowances. The FYA’s that related to low CO2 emission cars was due to expire on 31 March 2018 but has now been extended until at least 31 March 2021.

There are different CO2 emission bands for cars bought from April 2015-April 2018, April 2013-April 2015 and April 2009-April 2013.

Budget date announced

The Chancellor of the Exchequer, Sajid Javid has announced that he is planning to hold his first Budget on Wednesday, 11 March 2020.

This announcement follows a turbulent period in Parliament that saw the Autumn 2019 Budget pencilled in for 6 November 2019 and then cancelled as Brexit was delayed. With Brexit now looking set for 31 January 2020 and the Government working with a comfortable majority, the new date has been announced. The Budget traditionally took place in the spring but was moved a few years ago to the autumn. It remains to be seen if the Budget schedule will move back to the autumn and if we will have another Budget later in 2020.

The Chancellor said:

'With this Budget we will unleash Britain’s potential – uniting our great country, opening a new chapter for our economy and ushering in a decade of renewal.'

This will be the first Budget after the UK leaves the EU and we are likely to see many new measures being announced. We are also told that at the Budget, the Chancellor will also update the Charter of Fiscal Responsibility with new rules, to help HM Treasury take better advantage of the current low interest rates. 

The Treasury has also confirmed that the opportunity to submit representations for the Budget is now available. A Budget representation is a written representation from an interest group, individual or representative body to HM Treasury with the aim of commenting on Government policy and / or suggesting new policy ideas for inclusion in the Budget. Any submissions should be sent to HM Treasury by 7 February 2020.

Details of all the Budget announcements will be made on a special section of the GOV.UK website which will be updated following completion of the Chancellor’s speech in March.

Getting clients ready for Brexit

HMRC has published a useful list to help businesses be prepared to import goods from the EU to the UK as we count down to the 31 January 2020 Brexit date. We are then likely to see a fixed transition period until 31 December 2020 by the end of which the Government expects to have a trade deal in place with the EU.

The six points of action listed are relevant if there is a no-deal Brexit but are also likely to be required once a trade deal is in place.

  1. Make sure your client has an EORI number that starts with GB. They will need an Economic Operator Registration and Identification (EORI) number starting with GB to continue importing goods.
  2. Decide who will make the import declarations. Your client can hire someone to deal with customs or if properly prepared, can do it themselves.
  3. Apply to make importing easier. Your clients can apply to use 'transitional simplified procedures' to reduce the amount of information they need to give at the border. They should also ensure they have a duty deferment account if they want to be able to make one payment of customs duties a month instead of paying for individual shipments.
  4. Check the rate of tax and duty they’ll need to pay. They will need to pay customs duties and VAT on all imports.
  5. Check what you need to do for the type of goods you import. There might be other things required, depending on what they are importing. For example, check if the import licences or certificates needed will change. Check the rules for importing alcohol, tobacco and certain oils. Check the labelling and marketing standards for importing food, plant seeds and manufactured goods
  6. Get help and support. HMRC has setup a Brexit imports and exports helpline. The helpline can help with queries about customs declarations and procedures, duties and tariffs, importing and exporting different goods, transporting goods to and from the EU and product safety regulations.

There are also likely to be different rules if your clients are moving goods from Ireland to Northern Ireland.