Newsletter - October 2019
In this month’s newsletter we report on the delay to the VAT domestic reverse charge and the announcement of an independent review of the loan charge. A consultation has also been launched on clinicians’ pensions. With inheritance tax statistics, latest Brexit guidance, changes to insolvency and money laundering non-compliance there are lots of issues to consider.
- VAT domestic reverse charge for building and construction services delayed
- Independent review of the Loan Charge
- Senior clinicians' pensions consultation
- HMRC collects record amounts of IHT
- 'Major gaps' in no-deal Brexit guidance
- Brexit-readiness events for business
- Experts warning over insolvency debts
- Money Laundering non-compliance
VAT domestic reverse charge for building and construction services delayed
HMRC has announced a one-year delay to the introduction of the VAT domestic reverse charge for building and construction services.
The reverse charge represents part of a government clamp-down on VAT fraud. According to the government, large amounts of VAT are lost through 'missing trader' fraud. As part of missing trader fraud, VAT is charged by a supplier, who then disappears, along with the output tax. The VAT is thus lost to HMRC. The construction industry is considered a particularly high-risk sector.
The reverse charge when introduced will not change the VAT liability but instead it will change the way that VAT is accounted for. In the future, the recipient of the services, rather than the supplier, will account for VAT on specified building and construction services. This is called a reverse charge. The reverse charge is a business-to-business charge, applying to VAT-registered businesses where payments are required to be reported through the Construction Industry Scheme (CIS).
The charge was due to come into effect on 1 October 2019. It has now been delayed by 12 months until 1 October 2020 due to fears that businesses in the construction sector were not ready.
HMRC says it remains 'committed to the introduction of the reverse charge', and has put a robust compliance strategy into place in order to tackle fraud in the construction sector.
Source: GOV.UK revenue and customs brief
Independent review of the Loan Charge
The government has initiated a review of the Loan Charge and whether the policy is an appropriate way of dealing with disguised remuneration loan schemes used by individuals who entered directly into these schemes to avoid paying tax.
Sir Amyas Morse, the former Comptroller and Auditor General and Chief Executive of the National Audit Office (NAO), will lead an independent review of the Loan Charge.
The government has asked Sir Amyas Morse to report back by mid-November, giving taxpayers certainty ahead of the January Self Assessment deadline.
Source: GOV.UK news
Senior clinicians' pensions consultation
The government has launched a consultation on proposals to give senior NHS doctors and nurses access to more flexible pensions. The proposals aim to offer senior clinicians more control over their pensions growth.
The consultation follows reports that senior NHS clinicians pension tax charges are making them retire early or change their working habits. The Department of Health and Social Care estimates that a third of consultants and GPs may be turning down extra shifts because of how the NHS Pension Scheme interacts with the wider pension tax rules.
The new proposals are designed to allow those affected to have freedom to individually control how much their pension fund grows, allowing them to maximise the amount they can save without facing significant pension tax bills having breached limits on tax relief.
The new proposals include:
- a 'flexible accrual' option where scheme members can choose an accrual level in 10% increments
- the option to 'fine tune' pension growth towards the end of the scheme year, when total earnings are clearer.
The consultation closes on 1 November 2019.
Source: GOV.UK news
HMRC collects record amounts of IHT
The government has announced that HMRC collected a record sum of £5.4 billion in inheritance tax (IHT) during the 2018/19 tax year.
The increase comes on the back of a 15% rise in the number of estates liable for IHT. Between 2015/16 and 2016/17, the number of estates paying IHT rose by 3,600 to 28,100.
Rising asset values, particularly in regard to properties in London and the South East of England, have been a key factor behind the increased number of estates falling into the IHT net. The freezing of the tax-free nil-rate band threshold also played a key role.
The residence nil-rate band (RNRB) gives an additional allowance to people leaving their family home to direct descendants, such as children or grandchildren. The amount of relief is £150,000 for 2019/20, rising to £175,000 for 2020/21.
Despite the increase in estates paying IHT, the tax only applies to 4.6% of deaths in the UK. The average amount of tax paid was £179,000.
Please contact us for advice on estate and IHT planning.
Source: GOV.UK IHT statistics
'Major gaps' in no-deal Brexit guidance
According to the British Chambers of Commerce (BCC) there are 'major gaps' in the government's no-deal Brexit guidance for UK businesses.
The BCC carried out a review of official government no-deal Brexit guidance for businesses, and found that 31 of 36 critical areas are still marked amber or red, suggesting that businesses have 'incomplete or insufficient information available to plan thoroughly for a no-deal outcome'.
Dr Adam Marshall, Director General of the BCC, said:
'While the government has ramped up communication to businesses in recent weeks, there are still big gaps in the guidance available to help businesses to prepare for Brexit, with just weeks to go until 31 October.
Our business communities don't want to see a disorderly no-deal exit on 31 October, which would lead to an overnight change in trading conditions.
Averting a messy and disorderly exit is still critical. Businesses across the UK want politicians on all sides to come together and find a way forward – fast.'
Source: BCC news
Brexit-readiness events for business
The Department for Business has launched a nationwide programme of events to help businesses prepare for Brexit.
The free events are designed to provide free advice on a range of Brexit-related topics, including exporting, importing and employing EU citizens. Attendees will also have the opportunity to hear from senior government officials and access support tailored to their location and business.
More than 30 Brexit-readiness events have been scheduled to take place across the UK.
Source: GOV.UK news
Experts warning over insolvency debts
Prioritising HMRC over other creditors in insolvencies will have a 'negative impact on the UK's economic growth', experts have warned Chancellor of the Exchequer Sajid Javid.
The warning was issued in a letter from 11 business organisations and insolvency experts to the Chancellor. Signatories of the letter include the Institute of Chartered Accountants in England and Wales, the Institute of Chartered Accountants of Scotland, the Insolvency Practitioners Association and the City of London Law Society.
The letter says that the proposed change will make it more difficult to rescue businesses. According to the organisations, it will also reduce access to finance for small businesses, increase the harm done to other businesses in insolvencies and could ultimately result in losses to the Exchequer.
Writing in the letter, the organisations said:
'While we understand that the government wishes to increase the value of taxes repaid in the event of insolvency, there is a serious risk that the wider costs of the government's approach will outweigh any expected benefit.
This proposed policy would reverse successive governments' attempts to encourage a culture of business rescue in the UK, and would undermine the government's recent work to strengthen the UK's insolvency and restructuring framework.'
The proposal, which was announced in the 2018 Budget and is now included in the draft Finance Bill, will see a change implemented from 6 April 2020. This would entail taxes, including the VAT, Pay as You Earn (PAYE), CIS and employee national insurance contributions (NICs) owed by an insolvent company to be paid to HMRC ahead of floating charge holders and unsecured creditors.
Source: Economia news
Money Laundering non-compliance
HMRC has published details of businesses that have failed to comply with the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017.
HMRC is also advising that the published person may have changed their behaviour or no longer be based at the published address. Also that the business currently at the published address may have no connection with the published business, or may have the same name as the published business but could be under new, and completely different, management.
If you would like advice on anti-money laundering procedures please contact us.