Employer toolkit for EU Settlement Scheme published

Following Brexit, the government has published an updated toolkit for employers on how to support their employees who are EU citizens (including EEA and Swiss citizens) to apply to stay in the UK. The content includes print and digital fact sheets, leaflets and posters covering the key areas of the EU Settlement Scheme, i.e. eligibility, the application process, the wide range of support available and the deadline for applications. It also includes a template letter that employers can give to their staff and a presentation they can use to introduce the EU Settlement Scheme. 

EU citizens and their family members (including non-EU citizens) need to apply to the EU Settlement Scheme to continue to live, work and study in the UK. The deadline for applications to the scheme is 30 June 2021. It is the responsibility of the individual to make an application to the scheme and there is no requirement for them to inform their employer that they have applied, or the outcome of their application. Employers have a duty not to discriminate against EU citizens in light of the UK’s decision to leave the EU and, as such, they cannot make an offer of employment, or continued employment, dependent on an individual having made an application to the scheme.

Job applicants can prove their right to work using any of the following:

  • their valid passport or national identity card if they are an EU, EEA or Swiss citizen
  • their valid biometric residence card if they are a non-EU, EEA or Swiss citizen family member
  • their status under the EU Settlement Scheme using the Home Office’s online right to work checking service.

There will be no change to right to work checks until 1 January 2021 and employers will not be required to undertake retrospective checks on existing employees who are EU citizens. A new immigration system will apply to people arriving on or after 1 January 2021 and new right to work checks will then apply.

Source: Home Office Thu, 20 Feb 2020 05:00:00 +0100

Change to the off-payroll working rules

As part of a review into changes to the operation of the off-payroll working rules (IR35), HMRC has announced that the changes will only apply to payments made for services provided on or after 6 April 2020. Previously, the rules would have applied to any payments made on or after 6 April 2020, regardless of when the services were carried out. It means businesses will only need to determine whether the rules apply for contracts they plan to continue beyond 6 April 2020, giving businesses more time to prepare. The latest position is now set out in the updated guidance in the Employment Status Manual.

The formal publication of a review into the implementation of changes to the off-payroll working rules is due to conclude later in February 2020.

Source: HM Revenue & Customs Thu, 20 Feb 2020 05:00:00 +0100

Rent a room relief 2019-20

The rent-a-room scheme is a set of special rules designed to help homeowners who rent-a-room in their home. The current tax-free threshold of £7,500 per year has been in place since 6 April 2016. If you are using this scheme you should ensure that rents received from lodgers during the current tax year do no exceed £7,500. The tax exemption is automatic if you earn less than £7,500 and there are no specific tax reporting requirements.

The relief applies to the letting of furnished accommodation, for example, when one bedroom is rented out in a furnished house to a lodger. This process is becoming more widely adopted as more home owners rent out rooms online. The relief also simplifies the tax and administrative burden for those with rent-a-room income up to £7,500. The limit is reduced by half if the income from letting accommodation in the same property is shared by a joint owner of the property.

The rent-a-room limit includes any amounts received for meals, goods and services provided, such as cleaning or laundry. If gross receipts are more than the limit, taxpayers can choose between paying tax on the actual profit (gross rents minus actual expenses and capital allowances) or the gross receipts (and any balancing charges) minus the allowance – with no deduction for expenses or capital allowances.

Source: HM Revenue & Customs Wed, 19 Feb 2020 05:00:00 +0100

Student and postgraduate loans

If you have a student loan, have finished your studies and entered the workforce you must begin to make loan repayments from the April after you have finished your studies or when your income begins to exceed the annual threshold. The annual threshold amounts are currently £18,935 for plan 1 and £25,725 for plan 2. The Department for Education has confirmed that the thresholds will increase to £19,390 for plan 1 and to £26,575 for plan 2 from 6 April 2020.

The terms of loan repayment for courses of study started before 01 September 2012 are referred to as 'Plan 1', and those started after 01 September 2012, are referred to as 'Plan 2'. Repayments are deducted at a rate of 9% of income over the threshold. The threshold for postgraduate loans is £21,000 (no change for 2020-21) and repayments are deducted at a rate of 6%

The loans are also subject to varying levels of interest. The interest rates for Plan 2 repayments are based on the Retail Prices Index plus a variable rate dependent on income. The interest rates for Plan 1 repayments are significantly lower than for Plan 2 repayments.

Student Loans are part of the government’s financial support package for students in higher education in the UK. They are available to help students meet their expenses while they are studying. It is HMRC’s responsibility to collect repayments if you are working in the UK. The Student Loans Company (SLC) is responsible for collecting the loans of borrowers outside the UK tax system.

Source: HM Revenue & Customs Wed, 19 Feb 2020 05:00:00 +0100

PAYE payment dates

This article is a reminder to payroll staff about the electronic PAYE payment dates. The due date for electronic PAYE payments falls on the 22nd of the month and when a payment is made electronically, a payment on the day usually suffices.

However, where the due date falls on a non-banking day (weekend or bank holidays), HMRC must have cleared funds by the last bank working day before the 22nd. This advice is particularly relevant this month i.e. for electronic payments due on 22 February 2020, which this year falls on a Sunday. The electronic payments must therefore clear HMRC’s bank account by Friday 21 February 2020.

Remember that electronic payments sent using the Faster Payments Service (FPS) are able to clear into HMRC’s account on a non-banking day – a Saturday, Sunday and most Bank Holidays. The service enables electronic payments to be made and processed in hours rather than days.

Source: HM Revenue & Customs Wed, 19 Feb 2020 05:00:00 +0100

New bandings for electric vehicles

From 6 April 2020, the car and car fuel benefit calculations are changing with the introduction of 11 new bands for ultra-low emission vehicles (ULEVs) including a separate zero emissions band.

If a car has a CO2 emission figure of 1-50g/km employers will need to provide the car’s zero emission mileage. This is the maximum distance that the car can travel in miles on a single electric charge. The graduated table of company car tax bands will be based on the zero emission mileage of the car.

This change will result in some new reporting requirements for electric cars that have a CO2 emission figure of between 1-50g/km. HMRC has confirmed that from 6 April 2020, if you are adding a new car or making one available to an employee for the first time, a new zero emission mileage field will be shown on the form P46 (car). The online P46 (car) will be updated with the changes. For paper P46 (car) submissions you will need to ensure you complete the latest version as historic copies may not include the new zero emission mileage field. In addition, there will be a new field on the Full Payment Submission (FPS) to provide the car’s zero emission mileage figure (if relevant).

The zero emission mileage figure should be available on the vehicle’s Certificate of Conformity. For leased cars, the information should be provided from the car leasing firm or fleet provider. If, in extreme circumstances, this information is not available, HMRC allows you to obtain the zero emission mileage figure via the car manufacturer.

Source: HM Revenue & Customs Wed, 19 Feb 2020 05:00:00 +0100

IHT tenants in common or joint tenants?

As a general rule, Inheritance Tax (IHT) is collected from a person's estate when they die and can also be payable during a person’s lifetime on certain trusts and gifts. There is normally no tax to be paid if the value of the estate is below the IHT nil rate threshold of £325,000.

The remaining amount after deducting the nil rate band, main residence nil-rate band, IHT exemptions and reliefs is liable to IHT at 40%. A reduced rate of IHT of 36% applies where 10% or more of a deceased’s net estate is left to charity.

A surviving joint tenant automatically inherits anything that was owned as 'joint tenants'. Joint tenants hold equal shares of the property with the same deed. The surviving joint tenant can be liable to pay IHT if the deceased’s estate can’t or doesn’t pay.

The rules are similar for 'tenants in common'. The basic difference versus joint tenants is that tenants in common can have unequal shares and different ownership interests.  As with joint tenants, if the estate doesn’t have enough money to pay the IHT, the tenants in common will be liable.

The inheritor is also liable to pay tax on any profit they make from inherited cash or assets. For example, where a property is inherited and then rented – Income Tax would be due on the rental income (subject to the usual rules). Likewise, if assets are inherited and subsequently sold, Capital Gains Tax would be due on the increase in value since the person died.

Source: HM Revenue & Customs Wed, 19 Feb 2020 05:00:00 +0100

A reminder – badges of trade

The 'badges of trade' tests, whilst not conclusive, are used by HMRC to help determine whether an activity is a proper economic / business activity or merely a money-making side-line to a hobby. Eventually, taxpayers may have to decide if their hobby has morphed into a trade – and therefore subject to tax. The badges of trade can be used at this time to help resolve this dilemma.

Both HMRC and the courts are clear that it is important to look at the whole picture rather than looking at each 'badge' in isolation when considering options.

HMRC will consider the following nine badges of trade as part of their overall investigation as to whether a hobby is actually a trade:

  • Profit-seeking motive
  • The number of transactions
  • The nature of the asset
  • Existence of similar trading transactions or interests
  • Changes to the asset
  • The way the sale was carried out
  • The source of finance
  • Interval of time between purchase and sale
  • Method of acquisition

The introduction of the trading allowance in April 2017 allows taxpayers to make small amounts of money from their hobby without concerns about any tax complications. Even if HMRC considers that the activities in question are a trade, taxpayers can make up to £1,000 per year from their hobby tax-free.

Source: HM Revenue & Customs Wed, 19 Feb 2020 05:00:00 +0100

Could you claim the marriage allowance?

If you are entitled to the marriage allowance and have not yet applied, you could receive a payment of up to £1,150 from HMRC. HMRC used the occasion of Valentine’s Day to remind couples to make a claim. It is estimated that whilst 1.78 million couples have already claimed the Marriage Allowance, there are still more than 2 million eligible couples that have not made a claim.

The marriage allowance is available to qualifying married couples and those in a civil partnership where a spouse or civil partner is a non-taxpayer i.e. has an income below their personal allowance (currently £12,500). The marriage allowance facilitates the lower earning partner to transfer up to £1,250 of their personal tax-free allowance to their spouse or civil partner. The marriage allowance can only be used when the recipient of the transfer (the higher earning partner) doesn’t pay more than the basic 20% rate of Income Tax. This would usually mean that the higher earner's income is between £12,500 to £50,000 in 2019-20. The limits are slightly different if you live in Scotland.

If you meet the eligibility requirements and have not yet claimed the allowance, then you can backdate your claim to 6 April 2015. This could result in a total tax break of up to £1,150.

Please note, that back-dating claims for the tax year 2015-16 is 5 April 2020.

Source: HM Revenue & Customs Wed, 19 Feb 2020 05:00:00 +0100

Budget date re-confirmed

After a tumultuous few days in politics, it has been confirmed by the new Chancellor of the Exchequer, Rishi Sunak that the Budget will take place as planned on Wednesday 11 March 2020.

There has been fevered press speculation that the new Chancellor might delay the Budget date to give him more time to prepare. Rishi Sunak was previously the chief secretary to the Treasury and has had a meteoric rise to the top echelons of government becoming Chancellor at the relatively tender age of 39.

The previous Chancellor, Sajid Javid, resigned on February 13 after resisting calls from the Prime Minister to sack all of his special advisers. Mr Javid will be partly remembered for being one of the UK’s few chancellors never to have presented a Budget to the House of Commons.

On Tuesday of this week, the new Chancellor posted a photo of himself preparing for the Budget and confirmed that he was 'cracking on with preparations for my first Budget on March 11. It will deliver on the promises we made to the British people – levelling up and unleashing the country’s potential'. This announcement was later followed by confirmation from HM Treasury that the Budget will go ahead as planned.

This will be the first Budget following the UK’s departure from the EU and we may see many new measures being announced. Details will be posted on this news-feed after the budget.

Source: HM Treasury Wed, 19 Feb 2020 05:00:00 +0100