July Tax Update
New employer details: on-line registration
Until recently, new employers or their agents wishing to register with
HMRC for a new employer PAYE scheme needed to telephone the New Employer
Helpline. However, there is now also an on-line facility for new employers
and agents to provide new employer registration details.
HMRC will issue an acknowledgement e-mail to all on-line new employer
registration details received, and once the details have processed the
new employer PAYE and Accounts Office reference numbers will be issued
by post, as now, usually within three working days. A Starter Pack will
also be issued, if requested.
The telephone helpline remains available as an option for registering
new employers.
Company cars: advisory fuel rates
HMRC's Advisory Fuel Rates have been revised, and the new rates set
out below apply to all journeys on or after 1 July 2006:
Engine size Petrol Diesel LPG
1400cc or less 11p 10p 7p
1401cc to 2000cc 13p 10p 8p
Over 2000cc 18p 14p 11p
Taxation of computers provided for private use
It was announced in this year's Budget that the tax exemption, which
applied to the first £500 of annual benefit-in-kind arising on
computers made available by employers for private use by their employees
would be removed with effect from 6 April 2006. (The benefit equated
to the tax-free provision of computer equipment up to the value of £2,500
including VAT.)
HMRC subsequently confirmed that an employee who had a computer made
available for private use before that date (or who had then an arrangement
which committed their employer to providing a computer which for reasons
beyond their control the employee could not take physical possession
of until 6 April or later) would not be affected by the change.
Following speculation about the impact that this change would have on
computers provided for business purposes but where some private use
is also made, HMRC have sought to allay fears that employers will need
to maintain additional records in order to establish whether significant
private use has been made in such circumstances and so determine whether
a tax charge arises.
Section 316 of the Income Tax (Earnings & Pensions) Act 2003 provides
that no income tax will arise on accommodation, supplies and services
used in employment duties. This includes computer equipment provided
for business purposes where any private use made is "not significant".
Consequently, where employers provide computer equipment to employees
solely to enable them to carry out the duties of their employment at
home, HMRC accept that it is unlikely that private use of the computer
will be significant in relation to the primary business purpose.
Following royal assent to the Finance Bill, expected in July, HMRC
will provide updated guidance to ensure that clear practical advice
is available for employers and tax practitioners, particularly on the
interpretation of the term 'not significant'.
Scholarship and apprenticeship schemes: review of
the SP 4/86 financial limits
HMRC's Statement of Practice (SP) 4/86 sets out how scholarship income
works when there is an employment relationship between the payer of
the scholarship income and the recipient.
The financial limit for the academic year 2006-07 will remain at £15,000,
following the increase from £7,000 announced in the 2005 Budget
for 2005-06.
Please contact us if you would like further information on the tax
and National Insurance implications of employers' scholarship payments
to employees.
Pensions simplification: lump sum death benefits
The transitional measures introduced as part of the pensions tax simplification
included protection from the lifetime allowance and unauthorised payment
charges given to certain lump sum death benefits paid in respect of
people who died before 6 April 2006.
One requirement for this transitional protection was that the lump
sum death benefit must be paid within two years of the pension scheme
member's death. However, following representations HMRC are amending
the regulations to allow transitional protection where the payment is
made within two years of the date upon which the scheme could reasonably
have known about the death.
For further information on the new pensions regime and the transitional
provisions, please contact us.
Gurkhas: changes to the income tax and National Insurance
legislation
The general rule, recognised by successive Governments, is that Crown
Servants posted abroad continue to be chargeable to UK income tax on
their earnings wherever they are serving, although, in accordance with
long-standing practice and in keeping with international treaty obligations,
legislation was introduced to remove from the scope of United Kingdom
income tax any locally engaged low-paid staff employed overseas by the
Crown. Until now this exemption was extended to the Ghurkas, but changes
to the Brigade of Gurkhas mean that it is no longer considered appropriate
for Gurkhas to be treated differently from other members of HM Forces
for tax purposes when serving overseas.
HMRC originally made an Order under section 28(5) Income Tax (Earnings
and Pensions) Act 2003 (ITEPA), effective from 13 June 2006, that removed
the income tax exemption but explicitly disregarded, for the purposes
of payment of National Insurance contributions, employment as a Queen's
Gurkha officer or as any other member of the Brigade of Gurkhas of a
person who was recruited for that Brigade in Nepal. The Order is now
being amended, with effect from 5 July, so that such employment will
count for the payment of contributions for the purposes of contributory
benefits.
VAT: hire of staff by employment bureaux
HMRC are inviting contributions to a review of the VAT staff hire concession.
Currently, many employment bureaux act either as agents for VAT purposes
or are able, as principals, to use the staff hire concession. In either
case, bureaux are only required to charge VAT on their commission, or
on an amount excluding salary and other associated costs.
HMRC's review will inform decisions on the future of the current arrangements
and will consider issues such as:
· the existing use of the staff hire concession and the effect
of any withdrawal;
· the VAT treatment of employment bureaux, dependent on their
status; and
· the impact of the DTI regulations, under which some bureaux
may have changed their business structure in a way that makes them principals
when they place staff.
The views of affected businesses and other interested parties on the
above issues are invited to help inform the review. Where possible,
representations should be supported with evidence of existing use and
impact. All contributions must be received by 31 August 2006, and should
be sent to:
Ian Broadhurst
VAT Supply Team
Corporation Tax and VAT Products and Processes Group
HM Revenue & Customs
Room 3E/02
100 Parliament Street
London
SW1A 2BQ
or e-mailed to ian.broadhurst@hmrc.gsi.gov.uk
Contributions may be made public, so if contributors do not wish their
response to be identifiable in any published summary, they should state
this clearly in their communication.
VAT: EC Sales Lists
HMRC have issued a reminder that the facility to submit EC Sales List
data by plain paper schedules will be withdrawn on 31 July, and any
data received by plain paper schedules after that date will be rejected.
A new service is now available, enabling businesses to submit their
EC Sales List declarations (form VAT 101) via the Internet using either
of the following submission options:
a) completion of an on-line form; or
b) uploading bulk files, using CSV or XML formats.
The service is free, and registration is via the Government Gateway
using PIN and password. Please contact us if you would like more information.
If you require any assistance in reference to issues raised by the foregoing
information, or any other matter, please contact us.
DISCLAIMER
The monthly updates have been prepared to provide information for general
guidance only. It is not intended to replace specific professional advice
and we would always recommend that you seek appropriate professional
advice before acting on any information contained within the updates.