DMS Posts, PAYE, Tax

Latest guidance for employers

HMRC has issued the latest version of the Employer Bulletin. This April edition has articles on a number of issues including:

  • Cash Allowances, Flexible Benefits Packages and Salary Sacrifice
  • Unpaid work trials and the National Minimum Wage
  • Diesel Supplement Company Car Tax Changes to meet Euro standard 6d
  • Student Loans
  • Construction Industry Scheme – helpful reminders for contractors and subcontractors
  • Welsh rate of income tax and Scottish Income Tax.

If you have any queries on payroll matters please contact us.

Internet link: Employer Bulletin April 2019

DMS Posts

VAT Updated Valuation Table: Road Fuel Scale Charges (RFSCs) effective from 1 May 2019

The VAT road fuel scale charges are amended with effect from 1 May 2019. Businesses must use the new scales from the start of the next prescribed accounting period beginning on or after 1 May 2019.

  1. The Valuation Table sets out the new scale charges (a VAT inclusive amount). This table must be operated in accordance with the notes to the table and these are set out below.
  2. The VAT Rate Tables set out the VAT to be charged if you account for VAT on an annual, quarterly or monthly basis.

1. Valuation table

Description of vehicle: vehicle’s CO2 emissions figureVAT inclusive consideration for a 12 month prescribed accounting period (£)VAT inclusive consideration for a 3 month prescribed accounting period (£)VAT inclusive consideration for a 1 month prescribed accounting period (£)
120 or less59214749
12588622273
13094723678
135100425083
1401,06626587
1451,12328093
1501,18429698
1551,241310103
1601,303325107
1651,360340113
1701,421354117
1751,478369122
1801,540384128
1851,597399132
1901,658414137
1951,715429143
2001,777444147
2051,834458152
2101,895473157
2151,952487162
2202,014502167
225 or more2,071517172

Where the CO2 emission figure is not a multiple of five, the figure is rounded down to the next multiple of five to determine the level of the charge.

For a bi-fuel vehicle which has two CO2 emissions figures, the lower of the two figures should be used.

For cars which are too old to have a CO2 emissions figure, you should identify the CO2 band based on engine size, as follows:

  • If its cylinder capacity is 1,400cc or less, use CO2 band 140
  • If its cylinder capacity exceeds 1,400cc but does not exceed 2,000cc, use CO2 band 175
  • If its cylinder capacity exceeds 2,000cc, use CO2 band 225 or more

Please see the notes to the Valuation Table for more details.

Notes to the Valuation Table

  1. For a car of a description in the first column of the valuation table, the value on the flat-rate basis of all supplies of road fuel made to any one individual in respect of that car for a prescribed accounting period is the amount specified under whichever of the second, third or fourth columns corresponds with the length of the prescribed accounting period.
  2. Where a CO2 emissions figure is specified in relation to a car in a UK approval certificate or in a certificate of conformity issued by a manufacturer in another member state corresponding to a UK approval certificate (“corresponding certificate of conformity”), the car’s CO2 emissions figure for the purposes of the valuation table is determined as follows:
    • if only one figure is specified in the certificate, that figure is the car’s CO2 emissions figure for those purposes
    • if more than one figure is specified in the certificate, the figure specified as the CO2 (combined) emissions figure is the car’s CO2 emissions figure for those purposes
    • if separate CO2 emissions figures are specified for different fuels, the lowest figure specified, or, in a case within sub-paragraph (b), the lowest CO2 (combined) emissions figure specified is the car’s CO2 emissions figure for those purposes
  3. For the purpose of paragraph 2, if the car’s CO2 emissions figure is not a multiple of 5 it is rounded down to the nearest multiple of 5 for those purposes.
  4. Where no UK approval certificate or corresponding certificate of conformity is issued in relation to a car, or where a certificate is issued but no emissions figure is specified in it, the car’s CO2 emissions figure for the purposes of the valuation table is:
    • 140 if its cylinder capacity is 1,400 cubic centimetres or less
    • 175 if its cylinder capacity exceeds 1,400 cubic centimetres but does not exceed 2,000 cubic centimetres
    • 225 or more if its cylinder capacity exceeds 2,000 cubic centimetres
  5. For the purpose of paragraph 4, the car’s cylinder capacity is the capacity of its engine as calculated for the purposes of the Vehicle Excise and Registration Act 1994.
  6. In any case where:
    • in a prescribed accounting period, there are supplies of fuel for private use to an individual in respect of one car for a part of the period and in respect of another car for another part of the period
    • at the end of that period one of those cars neither belongs to, nor is allocated to, the individual, the flat-rate value of the supplies is determined as if the supplies made to the individual during those parts of the period were in respect of only one car
  7. Where paragraph 6 applies, the value of the supplies is to be determined as follows:
    • if each of the 2 or more cars falls within the same description of car specified in the valuation table, the value specified in the valuation table for that description of car applies for the whole of the prescribed accounting period
    • if one of those cars falls within a description of car specified in that table which is different from the others, the value of the supplies is the aggregate of the relevant fractions of the consideration appropriate for each description of car in the valuation table “The relevant fraction” in relation to any car is that which the part of the prescribed accounting period in which fuel was supplied for private use in respect of the car bears to the whole of that period.
  8. “CO2 emissions figure” means a CO2 emissions figure expressed in grams per kilometre driven.
  9. “UK approval certificate” means a certificate issued under either:
    • Section 58(1) or (4) of the Road Traffic Act 1988
    • Article 31A(4) or (5) of the Road Traffic (Northern Ireland) Order 1981

2. VAT rate tables

Annual charges

CO2 bandVAT fuel scale charge, 12 month period (£)VAT on 12 month charge (£)VAT exclusive 12 month charge (£)
120 or less59298.67493.33
125886147.67738.33
130947157.83789.17
1351,004167.33836.67
1401,066177.67888.33
1451,123187.17935.83
1501,184197.33986.67
1551,241206.831,034.17
1601,303217.171,085.83
1651,360226.671,133.33
1701,421236.831,184.17
1751,478246.331,231.67
1801,540256.671,283.33
1851,597266.171,330.83
1901,658276.331,381.67
1951,715285.831,429.17
2001,777296.171,480.83
2051,834305.671,528.33
2101,895315.831,579.17
2151,952325.331,626.67
2202,014335.671,678.33
225 or more2,071345.171,725.83

Quarterly charges

CO2 bandVAT fuel scale charge, 3 month period (£)VAT on 3 month charge (£)VAT exclusive 3 month charge (£)
120 or less14724.50122.50
12522237185
13023639.33196.67
13525041.67208.33
14026544.17220.83
14528046.67233.33
15029549.17245.83
15531051.67258.33
16032554.17270.83
16534056.67283.33
17035459295
17536961.50307.50
18038464320
18539966.50332.50
19041469345
19542971.50357.50
20044474370
20545876.33381.67
21047378.83394.17
21548781.17405.83
22050283.67418.33
225 or more51786.17430.83

Monthly charges

CO2 bandVAT fuel scale charge, 1 month period (£)VAT on 1 month charge (£)VAT exclusive 1 month charge (£)
120 or less498.1740.83
1257312.1760.83
130781365
1358313.8369.17
1408814.6773.33
1459315.5077.50
1509816.3381.67
15510317.1785.83
16010717.8389.17
16511318.8394.17
17011719.5097.50
17512220.33101.67
18012821.33106.67
18513222110
19013722.83114.17
19514323.83119.17
20014724.50122.50
20515225.33126.67
21015726.17130.83
21516227135
22016727.83139.17
225 or more17228.67143.33
DMS Posts

Advisory Fuel Rates from 1 March 2019

The advisory fuel rates are changing from the 1st March 2019.

These rates apply to employees who claim back fuel expenses when using a company car.

The previous rates can be used for up to 1 month from the date the new rates apply.

Engine sizePetrol – amount per mileLPG – amount per mile
1400cc or less11 pence7 pence
1401cc – 2000cc14 pence8 pence
Over 2000cc21 pence13 pence
Engine sizeDiesel – amount per mile
1600cc or less10 pence
1601cc – 2000cc11 pence
Over 2000cc13 pence

Hybrid cars are treated as either petrol or diesel cars for this purpose.

Advisory Electricity Rate
The Advisory Electricity Rate for fully electric cars is 4 pence per mile.
Electricity is not a fuel for car fuel benefit purposes.

DMS Posts

Loans to employees

A reminder that if your business makes a loan to your employees or their relatives this can create tax problems for both employees and employers.

And please don’t forget that the term “employee” includes directors, and also that loans to family members may be caught. 

For example, the employer will have an obligation to report a beneficial loan to HMRC (and pay Class 1A NIC) and the deemed benefit would be a taxable benefit in kind for the relevant employee.

A beneficial loan is one that is interest free or the rate charged is below the “official rate” and the benefit is the difference between these interest rate charges. 

Fortunately, not all loans create a tax problem, certain loans are exempt from this reporting obligation. These could include loans employers provided:
•    in the normal course of a domestic or family relationship as an individual (not as a company you control, even if you are the sole owner and employee),
•    with a combined outstanding balance due from an employee of less than £10,000 throughout the whole tax year,
•    to an employee for a fixed and never changing period, and at a fixed and constant rate that was equal to or higher than HMRC’s official interest rate when the loan was taken out – the official rate for 2018-19 is 2.5%,
•    under identical terms and conditions as those provided to the public (this mostly applies to commercial lenders),
•    that are ‘qualifying loans’, meaning all the interest charged to the loan account qualifies for tax relief.
Loans written off also create a National Insurance Class 1 charge for the employee.

They must be reported on a P11D and the employer has an obligation to deduct and pay Class 1 NIC from the employee’s salary, on the amount written off for tax purposes.

Calculating the taxable benefits for chargeable loans can be somewhat complex and readers are advised to take advice if they are unsure of their tax and NIC responsibilities. 

DMS Posts

Changes to income tax for 2019/20

The new tax year brings changes to income tax bands and allowances.

The personal allowance is £11,850 for 2018/19 and increases to £12,500 for 2019/20. There is a reduction in the personal allowance for those with ‘adjusted net income’ over £100,000. The reduction is £1 for every £2 of income above £100,000. So for 2018/19 there is no personal allowance where adjusted net income exceeds £123,700. For 2019/20 there is no personal allowance available where adjusted net income exceeds £125,000.

The marriage allowance permits certain couples, where neither pays tax at more than the basic rate, to transfer 10% of their personal allowance to their spouse or civil partner.

The basic rate of tax is 20%. In 2018/19 the band of income taxable at this rate is £34,500 so that the threshold at which the 40% band applies is £46,350 for those who are entitled to the full personal allowance. In 2019/20 the basic rate band increases to £37,500 so that the threshold at which the 40% band applies is £50,000 for those who are entitled to the full personal allowance.

Individuals pay tax at 45% on their income over £150,000.

DMS Posts, PAYE, Tax

Reporting Benefits in Kind – Forms P11D

The forms P11D which report details of benefits and some expenses provided to employees and directors for the year ended 5 April 2019, are due for submission to HMRC by 6 July 2019. The process of gathering the necessary information can take some time, so it is important that this process is not left to the last minute.

Employees pay tax on benefits provided as shown on the P11D, generally via a PAYE coding notice adjustment or through the self assessment system. Some employers ‘payroll’ benefits and in this case the benefits do not need to be reported on forms P11D but employers should advise employees of the amount of benefits payrolled.

In addition, regardless of whether the benefits are being reported via P11D or payrolled the employer has to pay Class 1A National Insurance Contributions at 13.8% on the provision of most benefits. The calculation of this liability is detailed on the P11D(b) form. The deadline for payment of the Class 1A NIC is 19th July 2019 (or 22nd for cleared electronic payment).

HMRC has produced an expenses and benefits toolkit. The toolkit consists of a checklist which may be used by advisers or employers to check they are completing the forms correctly.

DMS Posts

Be prepared for new IR35 rules

Rebecca Seeley Harris drills into the proposals for off-payroll working (IR35) rules to apply in both the private and public sector from 6 April 2020 and provides tips on how to prepare.

The latest consultation on the off-payroll working rules offers wide-ranging insight into what is to come and also provides some clarification on the existing public sector rules. The consultation refers to the customer or engager of the worker as the “client” throughout, and this is the term that is used in this article.A

The April 2020 reform will use the off-payroll working rules in the public sector as a starting point. The client will be required to make a determination of a worker’s employment status and communicate that determination. If the determination of employment status is “deemed employee”, the fee-payer will need to make deductions for income tax and NICs, and pay any employer NICs.

The small company exception

The reforms will only apply where the client is a medium or large business, or a public body, which means there is an exception for clients who are small businesses. The government has chosen to use the definition of ‘small company’ in the Companies Act 2006, mainly because businesses and accountancy professionals should already be familiar with this definition and to what extent it applies to them.

The Companies Act definition doesn’t include non-corporate entities so, the government is proposing two options:

a)           to apply the reform to unincorporated entities with 50 or more employees and to entities with a turnover exceeding £10.2m.

b)           to apply the reform only to unincorporated entities that have both 50 or more employees and a turnover in excess of £10.2m.

When an organisation becomes or ceases to be “small” in an accounting period, the change relating to the off-payroll rules will apply from the start of the tax year following the end of that accounting period. This is the case regardless of whether the organisation is incorporated or unincorporated.

Practical effect

From 6 April 2020, any client organisation which falls within the rules will be liable for any income tax and Class 1 employee NICs due on deemed payments of employment income until it has fulfilled its obligations. These organisations will also be liable for employer NICs due on those same payments.

It is not clear how an off-payroll worker would know whether the engager should be applying the rules or not or whether, as in the case of the small company exception, the off-payroll worker themselves should be making the determination.

Information sharing

The proposed reforms are designed to ensure the determination of employment status, and the reason for that determination, are cascaded to all parties within the labour supply chain. The consultation document doesn’t comment on whether the client is required to make the determination themselves, or whether the client could outsource the employment status decision and the whole process could be handled by an external team.

For off-payroll workers, the client will be required to provide the determination of employment status and, if requested, the reasoning for the determination, to the worker directly. The legislation will be changed to provide clarity that the client must provide both the contracting party and the off-payroll worker with the determination of status for each engagement.

Under the current public sector rules, the fee-payer is not entitled to see the determination of status, but the government intends to legislate to require all recipients of a determination to pass that information on to the next party in the contractual chain at, or before, they make the first payment.

Long chains

A ‘short circuit’ solution will be available where labour supply chains are long and complex. In this version, the fee-payer would receive the determination of status directly from the client. This would require the client to know who the fee-payer is. As a result of the complexity, the government is seeking views on how the client may be in a position to identify the fee-payer and provide the determination to the party they contract with, the off-payroll worker and the fee-payer directly.

What is clear is that all parties in the labour supply chain will need robust systems to ensure that they can track that the determination of status has been cascaded and received by the next party in the chain. Otherwise, they risk having the liability for tax transferred to them.

Tax liability

In the event that HMRC does not receive the tax due, the government is proposing that the liability should initially rest with the party that has failed to fulfil its obligations. If, however, HMRC was unable to collect the outstanding liability from the defaulting party if, for example, it ceased to exist, the liability should transfer back to the first party or agency in the chain. If HMRC could not collect from them, it would then default back to the client.

The government believes that as the agency is the first supplier of labour to the client, it should be responsible for the behaviour of the chain. The government also believes that the agency has a number of options open to it such as getting an indemnity against non-compliant fee-payers, taking on the fee-payer responsibility themselves or choosing to only work with reputable firms.

Challenging status

Currently, there is no mechanism for challenging a status determination other than the off-payroll worker using the end-of-year processes for overpayment of tax. In addition to the off-payroll worker being entitled to receive the status determination and the reasoning for the determination from the client, the government understands that the off-payroll worker or the fee-payer may disagree with a client’s determination. This might be either because it is believed that the full circumstances have not been considered, or that the client has not taken reasonable care in making the determination.

There are two steps proposed for resolving any status disagreements:

  1. To have the right to seek the status determination directly from the client.
  2. To allow for the status determination to be challenged.

The government plans to introduce a client-led status disagreement process where the client will develop and implement a process to resolve disagreements based on a set of requirements laid out in legislation. This client-led process should also mean fewer off-payroll workers using the end of year processes to reclaim tax, and it is hoped that it will provide a resolution in real time.

No employment rights or benefits

As applies in the public sector, statutory payments and other employment rights will not be affected by the proposed reforms to off-payroll working rules from April 2020. This means that the deemed employment relationship for tax purposes will not result in employment rights or statutory payments obligations for the deemed employer or for the fee-payer.

Be prepared

Organisations affected by the reforms to off-payroll working should take the following actions now to prepare:

  1. Identify and review their current engagements with intermediaries, including PSCs and agencies that supply labour to them.
  2. Review current arrangements for the use of contingent labour, particularly within the organisation functions that are more likely to engage off-payroll workers.
  3. Put in place comprehensive, joined-up processes (assess roles from a procurement, HR, tax and line management perspective) to get consistent decisions about the employment status of the people they engage.
  4. Review internal systems, such as payroll software, process maps, HR and on-boarding policies to see if they need to make any changes.

Written by:

Rebecca Seeley Harris

Employment Status & IR35 expert

PKF Francis Clark LLP