Newsletter March 2019

Newsletter March 2019

Our newsletter this month includes: a reminder of some of the tax issues if you make loans to employees; certain tax risks when you sell your own home; a last call for VAT traders to adapt to new filing regulations and details of the new National Minimum Wage rates from 1 April 2019.

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.

Limitations of tax relief when you sell your home

It is a commonly held point of view that when you sell your home you won’t pay any tax, and in particular, that you won’t pay any Capital Gains Tax on the difference between the purchase and sales prices.

Unfortunately, there are circumstances when this is not true. For example, you may have some tax to pay if you have let all or part of your house for part of your period of ownership.

There is also a restriction on the amount of land you can sell as part of your home/garden tax-free. Presently this is 5,000 square metres (just over one acre). And if you sell your home and retain part of the garden to sell at a later date, the subsequent sale of the land will attract a Capital Gains Tax charge.

You may also incur a tax cost when you sell your home if you have used part of the property exclusively for business purposes - this would not include non-exclusive use, such as using a spare bedroom or study as a part-time home office.

Issues may also occur if you sell your UK home while you are non-resident for UK tax.

If you are unsure of the tax status of your home for tax purposes, by all means call to discuss your options.

Last call for VAT traders to prepare for new filing regulations

As we have mentioned before in this newsletter, VAT returns filed for periods commencing on or after 1 April 2019, may need to be filed using the new Making Tax Digital (MTD) protocols. The new filing obligations will apply to VAT registered businesses with turnover above the current VAT registration limit, 85,000.

To comply with MTD firms will need to file their returns - for periods commencing on or after 1 April 2019 - using software that can link with HMRC’s MTD servers.

Readers affected, and who have not yet considered their options, should take advice, and quickly. We can offer advice on the use of appropriate software, but time is running out. Avoid last minute challenges and call now to discuss your options.

Changes to minimum wage rates

From April 2019, minimum pay rates will increase as set out below.

  • National Living Wage (NLW) rates for workers aged 25 and over - from 7.83 to 8.21 per hour.
  • National Minimum Wage rates:
    • workers aged 21-24 - from 7.38 to 7.70 per hour
    • workers aged 18-20 - from 5.90 to 6.15 per hour
    • workers aged 16-18 - from 4.20 to 4.35 per hour
    • apprentice rate - from 3.70 to 3.90 per hour.

The accommodation offset rate will rise to 7.55.

This should mean that a full-time worker aged 25 and over on the NLW will receive an annual pay increase of 690.

Employers are reminded that these rates are not optional. HMRC police the National Minimum Wage and NLW regulations and employers found to be in breach will be subject to penalties and have to repay any arrears to affected employees.

Tax Diary March/April 2019

1 March 2019 - Due date for Corporation Tax due for the year ended 31 May 2018.

2 March 2019 - Self assessment tax for 2017/18 paid after this date will incur a 5% surcharge.

19 March 2019 - PAYE and NIC deductions due for month ended 5 March 2019. (If you pay your tax electronically the due date is 22 March 2019)

19 March 2019 - Filing deadline for the CIS300 monthly return for the month ended 5 March 2019.

19 March 2019 - CIS tax deducted for the month ended 5 March 2019 is payable by today.

1 April 2019 - Due date for Corporation Tax due for the year ended 30 June 2018.

19 April 2019 - PAYE and NIC deductions due for month ended 5 April 2019. (If you pay your tax electronically the due date is 22 April 2019)

19 April 2019 - Filing deadline for the CIS300 monthly return for the month ended 5 April 2019.

19 April 2019 - CIS tax deducted for the month ended 5 April 2019 is payable by today.

30 April 2019 - 2017-18 tax returns filed after this date will be subject to an additional 10 per day late filing penalty.




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