DMS Posts

Employee gifts – tax free?

Some employers may wish to make small gifts to their employees.

A tax exemption is available which should give employers certainty that the benefits provided are exempt and do not result in a reportable employee benefit in kind. In order for the benefit to be exempt it must satisfy the following conditions:

-the cost of providing the benefit does not exceed £50 per employee (or on average when gifts made to multiple employees)
-the benefit is not cash or a cash voucher
-the employee is not entitled to the voucher as part of a contractual arrangement (including salary sacrifice)
-the benefit is not provided in recognition of particular services p-performed by the employee as part of their employment duties
-where the employer is a ‘close’ company and the benefit is provided to an individual who is a director, an office holder or a member of their household or their family, then the exemption is capped at a total cost of £300 in a tax year.

If any of these conditions are not met then the benefit will be taxed in the normal way subject to any other exemptions or allowable deductions.

One of the main conditions is that the cost of the benefit does not exceed £50. If the cost is above £50 the full amount is taxable, not just the excess over £50.The cost of providing the benefit to each employee and not the overall cost to the employer determines whether the benefit can be treated as a trivial benefit. So, a benefit costing up to £50 per employee whether provided to one or more employees can be treated as trivial. Where the individual cost for each employee cannot be established, an average could be used. Some HMRC examples consider gifts of turkeys, a bottle of wine or alternative gift voucher.

Further details on how the exemption will work, including family member situations, are contained in HMRC manual.

DMS Posts

Advisory fuel rates for company cars

New company car advisory fuel rates have been published which took effect from 1 September 2017. The guidance states: ‘You can use the previous rates for up to one month from the date the new rates apply’. The rates only apply to employees using a company car.

The advisory fuel rates for journeys undertaken on or after 1 September 2017 are:

Engine size                                        Petrol
1400cc or less                                    11p
1401cc – 2000cc                                 13p
Over 2000cc                                       21p
Engine size                                        LPG
1400cc or less                                     7p
1401cc – 2000cc                                  8p
Over 2000cc                                      13p

Engine size                                       Diesel
1600cc or less                                     9p
1601cc – 2000cc                                11p
Over 2000cc                                      12p
The guidance states that the rates only apply when you either:

reimburse employees for business travel in their company cars
require employees to repay the cost of fuel used for private travel
You must not use these rates in any other circumstances.

HMRC Advisory Fuel Rates

DMS Posts

HMRC phishing and scam advice

HMRC have updated their list of examples of websites, emails, letters, text messages and phone calls used by scammers and fraudsters to obtain individual’s personal information.

The guidance can be used to help you decide if a contact from HMRC is genuine, this guidance provides examples of the different methods that fraudsters use to get individuals to disclose personal information.

You can also read about how to recognise genuine contact from HMRC, and how to tell when an email is phishing/bogus.

HMRC Phishing

DMS Posts

Making Tax Digital (update)

The government has published proposals concerning the introduction of MTD-VAT. This new information outlines how it expects the new system to operate, including details of voluntary data businesses can submit to support their VAT returns and calculations.

The government has set out some proposed changes to legislation to regulate the new VAT-MTD system and to make it mandatory for certain businesses. The deadline for responses is 10 November, with the government aiming to have new regulations in place by next April.

When will the new rules come into force?

The new regulations will come into effect on 1 April 2019. So the businesses affected (i.e those registered for VAT with turnover above the VAT registration threshold) will be required to keep certain information in digital format from that date. They will also be required to submit any VAT returns starting on or after 1 April 2019 via the MTD system.

What information will businesses be required to keep in digital form?

Businesses will be required to keep their “designatory data”, information about supplies made and received, and details of the VAT account in digital format.

The designatory data is the business name, principal place of business and VAT registration number, plus details of membership of any VAT schemes.

The information about supplies will include details of individual sales and purchases, including relevant tax dates, splits between different VAT rates or treatments (i.e. standard rate, reduced rate etc), and a breakdown of invoices and the VAT rates charged.

The VAT account provides an audit trail between the primary data and the values in the VAT submission. It will include adjustments such as corrections from previous returns, changes in consideration and relief for bad debts. Only the totals for each item are required to be kept digitally.

What information do businesses need to submit to HMRC?

Businesses are only required to submit the same (nine-box) information contained on the current VAT return. The VAT return frequency will remain the same, and those submitting monthly or annual returns can continue to do so. The deadlines for submission and payment will remain unchanged, although the government may review this if and when quarterly reporting becomes mandatory.

Can businesses submit additional information?

Businesses will be able to submit two new pieces of voluntary information – periodic updates and supplementary data to support their VAT submissions.

Periodic updates are additional VAT submissions, covering say one or two months, that can be submitted between mandatory VAT returns. The chances of businesses wanting to do this are low as the rules stand now, although these submissions will be a way of notifying HMRC of changes in designatory data such as a new address. These voluntary submissions won’t create a VAT liability or refund, and the mandatory VAT submissions will still be required in the normal way.

Businesses can also submit supplementary data, on a voluntary basis, to support the calculations behind a VAT return. The government will set out more details in the legislation, but it envisages this data being the relevant items from the VAT account (see above).

What about businesses below the VAT threshold?

Businesses with turnover below the VAT threshold can opt into MTD, and then opt back out again later. In both cases they will need to inform HMRC in writing.

What happens if turnover rises above the VAT threshold?

Under the current proposals, businesses under the threshold must monitor their income (i.e. the rolling total for the previous 12 months) and will remain outside the MTD requirements in say, March, if income was below the threshold in the twelve months to the end of February. Once a business is mandated to use MTD it cannot drop out again, even where turnover falls back below the registration threshold.

So do we need to press for any changes?

While many accountants have objections to MTD in general, there are some specific areas of the government’s proposals that raise concerns.

One is what happens when a business breaches the registration threshold part way through a VAT period? The digital record keeping requirements seem to start immediately, and the current VAT return (some of which would cover the period before MTD became mandatory) may also need to be submitted using MTD software. This could force the business to change software overnight, and possibly copy data from the old system to the new.

Another concern is a lack of clarity on what software businesses can or will be required to use. The condoc says a business caught by the new requirements must use “a software program or set of compatible software programs which can connect to HMRC systems via an Application Programming Interface (API)”. Would using a spreadsheet to maintain the records, and then manually typing the nine VAT values into the HMRC portal, be considered a “set of compatible software programs” meeting this requirement?