Tax e-News June 2020

With many employees and the self-employed being furloughed, being made redundant, or making lower profits, their income for 2020/21 may well fall below the £50,000 limit at which child benefit starts being taxed.

The charge is 1% for every £100 that adjusted net income exceeds £50,000 multiplied by the child benefit claimed in respect of the children. Note that the rate of Child benefit increased from 6 April to £21.05 a week for the eldest child and £13.95 for each additional child.

Many couples with income over £60,000, when the benefit is fully taxed stopped, claiming Child Benefit rather than have to repay it back in tax. They should therefore reinstate their claims if the income of the higher paid taxpayer could drop back below £60,000.

The latest Finance Bill includes important changes to private residence relief that took effect from 6 April 2020.

The first change is to limit to just 9 months the period prior to disposal that counts as a period of deemed occupation and thus exempt from CGT even though the owners are not living in the property during that period

The second is to limit “letting relief” to periods where the taxpayer is in shared occupation with the tenant.

Final period exemption now reduced to 9 months

The final period exemption was for many years the last 36 months which was felt to be too generous. The period was then reduced to the last 18 months and has now been further reduced to the last 9 months.

The final period exemption will remain at 36 months for those with a disability, and those in or moving into care.

CGT Lettings Relief Changes

Lettings relief provided a further exemption for capital gains of up to £40,000 per property owner.

The additional relief was introduced in 1980 to encourage people to let out spare rooms within their property on a casual basis without losing the benefit of PRR, for example where there are a number of lodgers sharing the property with the owner. It no longer applies where property owners rent out their former main residence.

Those who are renting their property temporarily whilst working elsewhere are unlikely to be affected by this change as there are alternative reliefs available under those circumstances.

A new CGT reporting and payment on account system was introduced for residential property disposals by UK resident taxpayers from 6 April 2020.  The new system as originally announced required the disposal to be reported and any CGT due to be paid on account within 30 days of completion. HMRC have now announced that for disposals between 6 April and 30 June there will be no penalty provided that the return is made by 31 July 2020 although HMRC will still charge interest!

We can of course assist you with this new reporting obligation, but you will need to be registered with the Government Gateway and authorize us to act on your behalf.

During the lockdown period many employees and directors have not been using their company cars and it has been sitting on their driveway. You might think that means that the benefit of having a company car does not apply but unfortunately HMRC do not agree.

HMRC have recently confirmed that there continues to be a taxable benefit unless the car is unavailable for private use for 30 or more consecutive days. They would continue to regard the car as available to the employee unless the keys or fobs are returned to the employer or to a third party as instructed by the employer.

This guidance needs to be taken into consideration when form P11Ds are completed. Note also that where the employee is provided with a motor car with zero CO2 emissions there is no taxable benefit in kind for 2020/21.

Despite the coronavirus lockdown HMRC have announced that they will still expect P11d forms reporting expenses and benefits to be submitted by the normal 6 July deadline.

Remember that reimbursed expenses no longer need to be reported where they are incurred wholly, exclusively and necessarily in the performance of the employee’s duties. Dispensations from reporting are no longer required.

Note also that trivial benefits of no more than £50 provided to employees need not be reported.

Many of you will be looking forward to the football season resuming, albeit behind closed doors. There has been an interesting tax case recently concerning the employment status of referees.

The Upper Tier Tribunal has rejected an appeal by HMRC concerning whether referees officiating at matches in the Championship and lower leagues were employees of Professional Game Match Officials Limited (PGMOL).

Whilst referees in charge of Premier League matches are employees of PGMOL those refereeing other matches have always been treated as self-employed.

A crucial determinant was the degree of control over the individual and whether there is “mutuality of obligations” (MOO) between the parties.

This means that the employer is obliged to provide work and the employee is obliged to perform the work provided. The Upper Tribunal decided that no such obligations were present. MOO is a key factor in determining employment status and it is considered that insufficient weighting is placed on this factor when using the Check Employment Status for Tax (CEST) software which is a cornerstone of the “off-payroll” working rules scheduled to be rolled out to the private sector from 6 April 2021.

The Government are still committed to the transitional Brexit period ending on 31 December 2020 and businesses trading with the EU need to make sure they are ready for major changes. If you’re submitting an application for Authorised Economic Operator (AEO) status from 1 June 2020, you must submit them through the EU Customs Trader Portal.

This will not change the way HMRC checks your application or visits your business before they approve your application.

You will need to ask HMRC for access to the portal (which can take up to 5 days). The information for the current C117 will be completed online and a completed C118 (Self-Assessment questionnaire) attached to the application.

1 June 2020 – Corporation tax for year to 31 August 2019 due (unless paid quarterly)

19 June 2020 – PAYE & NIC deductions, and CIS return and tax for month to 5 June 2020 (due 22 June if you pay electronically)

1 July 2020 – Corporation tax for year to 30 September 2019 due (unless paid quarterly)

5 July 2020 – Last date for agreeing PAYE settlement agreements for 2019/20 employee benefits

5 July 2020 – Deadline for agents and tenants to submit returns of rent paid to non-resident landlords and tax deducted for 2019/20

6 July 2020 – Deadline for forms P11D and P11D(b) for 2019/20 tax year. Also deadline for notifying HMRC of shares and options awarded to employees.

19 July 2020 – PAYE & NIC deductions, and CIS return and tax for month to 5 July 2020 (due 22 July if you pay electronically)

31 July 2020 – 50% payment on account of 2020/21 tax liability due. However, due to Covid-19 taxpayers may defer the payment until 31 January 2021 without incurring interest and penalties.