DIARY OF MAIN TAX EVENTS MARCH/APRIL 2020

Date What’s Due
1st March Corporation tax payment for year to 31/5/19 (unless quarterly instalments apply)
19th March PAYE & NIC deductions, and CIS return and tax, for month to 5/03/20 (due 22/03 if you pay electronically)
1st April Corporation tax payment for year to 30/6/20 (unless quarterly instalments apply)
5th April End of 2019/20 tax year, Many tax actions need to be taken by this date (see above).
19th April PAYE & NIC deductions, and CIS return and tax, for month to 5/04/20 (due 22/04 if you pay electronically)

TikTok

What is TikTok and does it work as a social media platform for businesses?

TikTok is a video-sharing app that allows users to create and share 15-second videos on any topic.

It was launched in 2017 for both iOS and Android devices and has grown in popularity. TikTok was the most downloaded app in the US in October 2018 and reportedly has over 500 million active users. The app has paid partnerships with several celebrities, in various regions, who promote the app to local audiences, a strategy which seems to have driven the rapid uptake of TikTok.

TikTok is available in over 150 markets and in 75 languages. There is also a specific China-only version of the app called Douyin which is run separately, in order to comply with Chinese censorship restrictions. There are no such restrictions on TikTok.

The TikTok mobile app allows users to create a short video of themselves, which often features background music, and can be sped up, slowed down or edited with a filter. TikTok has a “react” feature, which allows users to film their reaction to a specific video, The videoed “reaction” is then placed in a small window, on screen.

TikTok utilises artificial intelligence to analyse user’s preferences and interests through their interactions with content. The app then feeds more relevant content to each user. Content can be tagged. The platform offers memes, challenges and entertainment content. The key priority of TikTok is to encourage users to have fun.

Given the popularity of TikTok, businesses are beginning to think about how to use the platform to reach out to target audiences. TikTok offers an interesting opportunity to target a very specific demographic – Generation Z. The bulk of the app’s users are 24 years old and younger. Users typically spend 52 minutes per day on the app and 29% of monthly users open TikTok every day.

Undoubtedly there is an opportunity for businesses to engage with TikTok as a new way to promote themselves, and chances are your competitors aren’t using it yet.

HMRC’s Off Payroll Working Rules

The off-payroll working rules first came into force from April 2000.

They were introduced to ensure that those who work like employees pay broadly the same Income Tax and National Insurance contributions as employees, regardless of the structure they work through.

Working through an intermediary

 

In 2017, to improve compliance, the government changed the responsibility for applying the rules in the public sector.

Public sector off-payroll working for clients

Public sector off-payroll working for intermediaries

 

In May 2018, the government announced that from April 2020 it would extend the changes in the public sector to engagements with medium and large-sized organisations in all sectors.

The results of a consultation on the detailed design of the changes were published in July 2019.

Off-payroll working rules from April 2020 – summary of consultation responses

 

On 7 January 2020 the government launched a review to determine if any further steps can be taken to ensure the smooth and successful implementation of the reforms.

Off-payroll review launched 7 January 2020

 

Scope of the changes

Small organisations, outside the public sector, that engage off-payroll workers will be outside the scope of the changes.

Defining the scope of the changes – small organisations (PDF, 463KB, 20 pages)

 

Check Employment Status for Tax service

The Check Employment Status for Tax service is a digital tool available on the GOV.UK website.

It is provided to help organisations and individuals determine employment status.

Check Employment Status for Tax

 

Further guidance

Further guidance about the changes was published on GOV.UK on 22 August 2019:

April 2020 changes for clients

April 2020 changes for intermediaries

Off-payroll working for agencies

Fee-payer responsibilities under the off-payroll working rules

 

Changes to off-payroll working rules: contractor factsheet

HMRC has published a factsheet for contractors to explain who is affected, how the changes will affect them and what they need to do before April 2020.

Factsheet for contractors

How to manage salary and bonus conversations

Talking about money with your employees can be uncomfortable.

Even when you have good news for an employee, discussing pay can be difficult.

An employee’s performance is inextricably linked to their salary and bonus. However, discussing the two together can lead to the employee focusing only on the conversation about pay. As such, managers should discuss performance in a separate meeting prior to any discussion about pay or bonuses. This ensures that both conversations are heard clearly by the employee, and expectations can be managed, prior to any conversation about compensation.

When a salary and bonus conversation gets tough, it is often because an employee is not getting the information they need or the manager feels that they can’t answer certain questions. Managers need to have key information to hand such as pay scales for the various roles across the business, details regarding potential for pay increases or promotions and any other key information such as company performance and how this has affected the salary and bonus figures this year etc.

If a salary and bonus conversation is not going well, managers should spend more time listening to the employee in order to understand where they are coming from, what their concerns are etc.

There is often a lot to be gained by managers who are curious when it comes to having tough pay-related conversations. For example, they might learn that an employee feels that their job has not been correctly benchmarked against competitors or the wider market.

More often than not, a challenging conversation around salary and bonus will require a follow up meeting, giving managers an opportunity to come back with more facts and secure a positive outcome with the employee.

Innovation Champions

Innovation is key to building a resilient business

The word innovation can conjure up images of disruptive developments such as online streaming services or companies such as Uber. Fortunately, innovation doesn’t have to happen on a grand scale to make an impact in your business.

Driving innovation in any business begins with creating and encouraging an innovative and forward-thinking culture to allow your employees to bring new and interesting ideas to the table, and put them into effect. Your employees need to feel free to contribute, to feel their contribution is acknowledged, appreciated and taken into consideration.

You need to break down barriers between management and employees and ensure that there is regular two-way communication. Creating a team of innovation champions can help. Instead of putting innovation on the backburner until an opportunity presents itself (which it might not), task the right people in your business with driving innovation in a proactive manner. If your innovation champions have a particularly heavy workload, perhaps re-allocate some of their roles to allow them time to devote to driving innovation.

When things go well, it is good to celebrate success. However, your innovation champions shouldn’t be afraid to make mistakes. Managers need to help employees to feel comfortable and ready to share.

Good ideas should be recognised but equally, ones that don’t get off the ground should be applauded as something to learn from for the future.

Driving innovation involves focusing on what you do and what products or services you sell to your customers. Customer feedback can be used to drive innovation. Your customers are generally happy to tell you what it is they want from your firm. Perhaps they want flexibility or they really value quick turnaround times. Spend time gathering feedback from your customers and share this with your innovation champions.

From your perspective you don’t ever want to give your customers a reason to go elsewhere. Make this the central focus of your innovation strategy and task your innovation champions with finding new and better ways to keep your customers coming back again and again. Perhaps the solution to the problem lies in doing simple things a little bit better or perhaps you can utilise technology to make your product / service delivery more efficient. Focus on your customers, listen to their feedback and let that feedback drive your innovation strategy and the activity of your innovation champions.

WILL INHERITANCE TAX BE SIMPLIFIED?

Another announcement to listen out for in the Spring Budget is whether the Chancellor acts on the recommendations of the Office of Tax Simplification (OTS) regarding inheritance tax (IHT). As reported in an earlier newsletter, the OTS suggested simplifying IHT on lifetime gifts including reducing the period of potential exemption from 7 to 5 years. Such a change would mean that the donor would only be required to survive for 5 years following a gift for the transfer to be exempt from IHT.

The OTS also suggested that the conditions for Business Property Relief might be tightened up by aligning the rules with the definition of a trading company for CGT. This relief currently provides 100% relief on the transfer of shares in an unquoted company.

The suggested change would mean that more transfers of shares would potentially be liable to IHT and may require a careful review of your plans if you are looking to pass on your business.

ANOTHER REASON TO SELL PROPERTY BEFORE 6 APRIL 2020

If the draft legislation issued for consultation last year is enacted in the next Finance Act there will be important changes to private residence relief for disposals after 5 April 2020.

Firstly, the exemption for the final period of ownership will be reduced from 18 months to 9 months. This applies where a former main residence is disposed of and is intended to give relief where the owner has moved to another main residence until the former residence is sold i.e. “bridging”. Note that for many years this additional allowance was 36 months that led to a tax planning strategy referred to as “second home flipping” which HMRC are seeking to counteract.

The second change will be the abolition of letting relief except for situations where the taxpayer lives with the tenant. This generous relief currently provides an exemption of up to £40,000 per owner where the former main residence is rented out.

As a result of these two proposed changes you might want to consider disposing of a property before 6 April 2020 if you were planning to take advantage of these CGT reliefs.

CHANGES TO PAYING CGT ON RESIDENTIAL PROPERTY FROM 6 APRIL

From 6 April 2020 there is a major change in the reporting and payment of CGT on residential property disposals. From that date, it will be necessary to report the disposal of the property within 30 days of completion of the disposal and pay CGT on account to HMRC.

This will be a significant acceleration of the payment date as CGT is currently payable with income tax on 31 January following the end of the tax year. Hence, where completion of a property disposal takes place on 1 April 2020 CGT will be due 31 January 2021. If however completion were delayed to 1 May 2020, CGT would need to be paid on 31 May 2020.

Note that the new 30 day reporting and payment obligation will not apply where no tax is payable such as the disposal of the taxpayers private residence.

 

POSSIBLE U-TURN ON PENSIONS FOR HIGH EARNERS?

There have been many stories in the press about GPs and senior hospital doctors refusing to take on extra shifts and additional responsibilities due to the additional tax they are required to pay on the extra pension contributions paid by the NHS. A number of solutions have been put forward. There are now strong rumours that the tapering of the annual pension allowance for those with income over £150,000 may be abolished or amended for all taxpayers, not just those working in the NHS.

Listen out for a possible announcement in the Spring Budget, together with other changes to pension tax relief.

CHANGES TO DISGUISED REMUNERATION LOAN CHARGE

The independent loan charge review, conducted by Sir Amyas Morse, was published on 20 December, having been delayed due to the general election. The loan charge was introduced to collect tax from individuals who had benefited from schemes devised to avoid PAYE and national insurance. The date that the loan was made to the individual is critical in determining whether the loan charge will apply.

The major change, which will be legislated in the next Finance Act, is that taxpayers who took loans before 9 December 2010 will not now be subject to the loan charge. This was the day when draft legislation was published, alongside a ministerial statement, to make it clear that disguised remuneration arrangements, including loans, would be specifically taxed as earned income. The current legislation, introduced in 2018, applies retrospectively to such loans and will need to be repealed.

Those taxpayers who took loans between 10 December 2010 and 5 April 2016 and who fully disclosed the use of the loan scheme will not be subject to the loan charge if, and only if, HMRC failed to take action because of disclosure.

Loans taken out on or after 6 April 2016 and which were still outstanding on 5 April 2019, remain within the loan charge. Such taxpayers can now elect to spread the tax charge over three tax years from 2018/19 to 2020/21