General

HMRC has issued a new briefing paper on disguised remuneration charge on loans. Disguised remuneration schemes are tax avoidance arrangements that seek to avoid Income Tax and National Insurance contributions by paying scheme users their income in the form of loans.

HMRC is clear that these loans were never intended to be repaid and are no different to normal income and are therefore taxable. HMRC is encouraging tax-payers affected to come forward and settle their tax affairs before a charge on these outstanding loans comes into effect.

The charge will not arise on outstanding loans if the individual has agreed a qualifying settlement with HMRC before 5 April 2019. HRMC is offering flexible payment arrangements to those having genuine difficulty paying what they owe. For example, HMRC will allow scheme users to spread their payments over 7 years if their current taxable income is less than £30,000, and 5 years if their current taxable income is less than £50,000. This offer only applies if the taxpayer is no longer engaged in tax avoidance and takes sufficient action before 5 April 2019. HMRC will look at other taxpayers on a case-by-case basis.

Although the deadline is fast approaching, HMRC has been clear that you will not be disadvantaged if you provided the relevant information by 5 April but have not been able to settle due to a delay at HMRC.

The City of Edinburgh Council is seeking permission to introduce a tourist tax. After an extensive consultation, the members of Edinburgh Council have agreed to submit proposals to the Scottish Government. The City Council voted in favour of the proposal by a margin of 43 to 15. The Scottish government, that had previously been against such a tax, has agreed to further consultations on the issue. Any changes will require that necessary legislation be put in place.

A number of different options were put forward for the introduction of a Transient Visitor Levy (TVL) scheme in Edinburgh. The council agreed that if the TVL is introduced it will be at a flat rate levy of £2 per night room charge. The charge would apply all year round for all accommodation types within the council boundary of Edinburgh except for campsites and for a maximum of 7 consecutive nights.

There are similar tourist tax charges in other European cities including Barcelona and Amsterdam. However, if approved this will be the first tourist tax to be introduced in the UK. This could be the thin edge of the wedge with many other UK cities looking to follow such a move.

It is estimated that this tax could raise between £11.6m and £14.6m per year. The monies raised would be used managing, supporting and increasing tourism in the city. This would include improving the visitor experience of Edinburgh and also managing the impacts of tourism within the city.

The Finance (No.3) Bill 2017-19 received Royal Assent (later than originally planned) on 12 February 2019 following agreement by both Houses on the text of the Bill. The Bill is now an Act of Parliament known as Finance Act 2019. The Act contains the legislation for many of the tax measures announced by the government at Autumn Budget 2017 some of which had been the subject of further consultation. The Bill also includes other measures that were first announced in the Autumn Budget 2018.

Some of the measures included within the Bill are:

• The Income Tax rates, thresholds, and allowances for 2019-20. This includes meeting the government’s commitment to increase the basic personal allowance to £12,500 and the higher rate threshold to £50,000.
• The setting of the Corporation Tax rate for 2020-21 at 17%. The rate for 2019-20 remains at 19%.
• The temporary increase in the Annual Investment Allowance (AIA) from £200,000 to £1m for two years from 1 January 2019.
• The introduction of a new 30 day reporting and payment deadline for CGT on UK residential property gains from 6 April 2020.
• A number of changes to entrepreneurs’ relief.
• A reduction in the tax writing down allowance from 8% to 6% from April 2019.
• The current VAT registration limit (£85,000) and deregistration limit (£83,000) will continue to apply for a further two years; until 31 March 2022.

The Chancellor, Philip Hammond, has announced that he will deliver his Spring Statement to the House of Commons on Wednesday, 13 March 2019. The timing of the statement is interesting as the Spring Statement is due to take place just over 2 weeks before the 29 March Brexit withdrawal date.

This will be the second Spring Statement to take place following the government’s decision to switch to a new cycle with the annual Budget taking place in the autumn, and the annual Statement taking place in the spring.

The Spring Statement is used to give an update on the state of the economy and will respond to the economic and fiscal forecast published by the independent Office for Budget Responsibility. The Spring Statement will also be an opportunity for the government to publish consultations, including initiating early-stage calls for evidence and consultations on long-term tax policy issues.

The Chancellor has previously said he will not make significant tax or spending announcements at the Spring Statement unless the economic circumstances require it. However, given the current uncertainties regarding Brexit, there could be scope for further material announcements to be made at the Spring Statement or more likely after the 29 March 2019, especially if we have a ‘no deal’ Brexit.

The Brexit uncertainties continue. To help businesses consider their options HMRC has published more information for UK businesses that buy or sell goods from or to the EU. We have copied in below three specific actions that need to be considered and updated them for recent changes to the information available on the GOV.UK website. They are:

1. Complete an application and register for a UK Economic Operator Registration and Identification (EORI) number athttps://www.tax.service.gov.uk/shortforms/form/EORIVAT. You’ll need an EORI number to continue to import or export goods with the EU after 29 March 2019, if the UK leaves the EU without a deal. Registration will make customs processes easier for you. Full details of why you should consider registering for EORI can be found herehttps://www.gov.uk/guidance/get-a-uk-eori-number-to-trade-within-the-eu.
2. Decide if you want to hire an agent to make import and/or export declarations for you or if you want to make
   these declarations yourself (by buying software that interacts with HMRC’s systems). If you want to:
   declare through an agent, contact one to find out what information they’ll need from you, use software to make declarations yourself, talk to a software provider to make sure that their product meets your needs, depending on whether you import, export or both.
3. Contact the organisation that moves your goods (for example, a haulage firm) to find out if you will need to
   supply additional information to them so that they can make the safety and security declarations for your
   goods, or whether you will need to submit these declarations yourself.

Planning note

Please call if you would like help in actioning these points. We are getting close to the 29 March 2019 leave date and prudence would seem to dictate that this advice from the government is given appropriate consideration.

HM Treasury has confirmed that the £1 coin will be going global. This announcement means that the UK’s Overseas Territories and Crown Dependencies will be able to design and mint their own versions of the 12-sided £1 coin replacing the older coins. The coins are expected to feature images celebrating the heritage of these territories, with their history and culture pictured on the reverse side.

The new £1 coin was introduced in 2017. The coin was introduced partly to help combat the problem of counterfeit coins. The features of the new £1 coin include: hidden high security features to combat counterfeiting in the future as well as a hologram-like image that changes from a ‘£’ symbol to the number ‘1’ when the coin is seen from different angles. The Royal Mint will work to ensure that the new coins in these territories meat the same security standards as in the UK.

Robert Jenrick, Exchequer Secretary to the Treasury, said:

‘The Great British pound is internationally recognised and as we extend the new £1 coin to our territories and dependencies, we will see new designs emerge that together symbolise our shared history. In the same way that the rose, leek, thistle and shamrock are used on our coin to represent the four nations of the UK, these new designs will reflect the rich and varying British communities across the world. From the Falklands to Gibraltar, this move sends a clear message of our unshakeable commitment to our territories around the globe.’

HMRC has issued an updated version of their online guidance on Genuine HMRC contact and recognising phishing emails and texts. The guidance provides a current list of genuine messages from HMRC. This includes: email messages, text messages and telephone contacts from HMRC.

The latest updates on the list include information on a research project being carried out to see how businesses are preparing for Brexit. HMRC has confirmed that Ipsos MORI are carrying out this research and you may receive a letter and phone call asking your business to take part in the survey. We are sure the responses would make for interesting reading!

HMRC is also working with IFF Research in seeking businesses’ views towards HMRC’s digital transformation and separately emailing taxpayers to invite them to take part in an online survey to help evaluate changes made to the Basic PAYE tools software and accompanying guidance. Finally, please note that letters from HMRC’s Debt Enforcement ADT unit titled‘Immediate action required – please pay’ are genuine.

Although all these communications are genuine, taxpayers should still be wary of receiving messages that are purported to come from HMRC. Fake email and text messages can appear to be genuine, but clicking on a link from these messages can result in personal information being compromised and the possibility of computer viruses affecting your computer or smartphone. If you are unsure as to the validity of any message, it should not be opened until the sender can be verified. The validity of letters from HMRC can also be checked by contacting HMRC directly by telephone to confirm if a letter is genuine.

The government published Finance (No.3) Bill 2017-19 on Wednesday, 7 November 2018. The Bill is so named as it is the third Finance Bill in the current special two-year session of Parliament. The Bill, colloquially known as Finance Bill 2018-19 will become Finance Act 2019 after Royal Assent is received which is expected in March 2019 before the Brexit deadline.

The progress of the Bill through parliament was delayed as a result of the extensive Brexit debate that took place before the Christmas recess. The Bill is now due to have its report stage and third reading on Tuesday 8 January 2019, a day after parliament returns to the House of Commons. Amendments can be made to the Bill at Report Stage.

Some of the measures included within the Bill are:

• The Income Tax rates, thresholds, and allowances for 2019-20. This includes meeting the government’s commitment to increase the basic personal allowance to £12,500 and the higher rate threshold to £50,000.
• The setting of the Corporation Tax rate for 2020-21 at 17%. The rate for 2019-20 remains at 19%.
• The temporary increase in the Annual Investment Allowance (AIA) from £200,000 to £1m for two years from 1 January 2019.
• The introduction of a new 30 day reporting and payment deadline for CGT on UK residential property gains from 6 April 2020.
• A number of changes to Entrepreneurs’ Relief that have been subject to modification from what was originally proposed.
• A reduction in the tax writing down allowance from 8% to 6% from April 2019.
• The current VAT registration limit (£85,000) and deregistration limit (£83,000) will continue to apply for a further two years; until 31 March 2022.

The government has announced more than £2 billion in additional funding across 25 government departments to help with Brexit planning. This brings the total amount provided by the government for EU exit preparations since 2016 to £4.2 billion.

The government has apparently been left with no choice but to step up no-deal Brexit contingency plans. There are now less than 100 days to go to the expected Brexit date of 29 March 2019 and the prospect of a no-deal exit appears to be increasing significantly.

We are told that the money will be used to support vital preparations including: getting new border and customs operations ready, gearing up UK trade policy with existing and new international partners, and taking back control of our waters.

Commenting on the announcement, the Chancellor of the Exchequer, Philip Hammond, said:

‘The PM’s deal is the only way to deliver on the referendum while protecting jobs, businesses and prosperity. I’ve worked with departments so they have the resources to prepare as we leave the European Union, including our borders, trade policies and support for businesses. But a responsible government prepares for all contingencies and that is why we’re stepping up no deal planning.’

HMRC has been allocated £375m and will use this money to employ over 3,000 additional customer service and compliance staff in operational roles to handle increases in customs activity, ensuring trade continues to flow and revenue is protected. HMRC will also use its funding to deliver new technology and IT requirements at the border to ensure trade is as frictionless as possible.

Following the publication of its technical notice in September 2018 on “Data protection if there’s no Brexit deal”, the government has now published an online summary covering what amendments would be required to UK data protection law in the event of a no deal Brexit.

The European Union (Withdrawal) Act 2018 (EUWA) will retain the GDPR in UK law, but the government will make appropriate changes to that and to the Data Protection Act 2018 using regulation-making powers under the EUWA to ensure the UK data protection framework continues to operate effectively when the UK is no longer in the EU.

In the event of a no deal Brexit, the summary confirms that:

• The responsibilities of UK data controllers will not change and the same GDPR standards will continue to apply in the UK
• The UK will transitionally recognise all EEA states, EU and EEA institutions and Gibraltar as providing an “adequate” level of protection for personal data, which means that personal data can continue to flow freely from the UK to these destinations after exit day. However, the UK cannot provide for the free flow of data into the UK from other jurisdictions and therefore alternative mechanisms for such transfers will be required to be put in place by UK organisations, e.g. Standard Contractual Clauses (SCCs)
• Existing adequacy decisions made by the EU concerning countries outside the EU will be preserved by the UK on a transitional basis
• Existing SCCs issued by the European Commission will also continue to be an effective basis for international transfers from the UK in the event of no deal (with the Information Commissioner’s Office (ICO) having the power to issue new SCCs after exit day)
• Existing authorisations of Binding Corporate Rules (BCRs) made by the ICO will continue to be recognised in domestic law
• The extraterritorial scope of the UK’s data protection framework will continue to apply. However, the UK will require controllers based outside of the UK to appoint a representative in the UK where certain processing conditions are met.