Construction Industry Scheme: repayment claims for limited company subcontractors

If you are a limited company acting as a subcontractor and have had deductions taken from your Construction Industry Scheme (CIS) payments and want to reclaim them, there is now an electronic form available to make your claim. You no longer need to write in or call the helpline to make your claim.  Login via your gateway.

Once you have filed your company’s final Employer Payment Summary (EPS) and all associated Full Payment Submissions (FPS) for the tax year, complete the electronic form providing all of the information requested.

You do not have to send in any documents to support your claim. However please note; if the repayment is to be sent to your agent or a nominee you will not be able to use the online claim form, you will need to send the claim and a signed form R38 to the following address:

National Insurance Contributions and Employer Office

HM Revenue & Customs

BX9 1BX

P11D and P11D(b) Filing and Payment Deadlines

Don’t forget that you need to tell HMRC about any Class 1A National Insurance contributions (NICs) that you owe for the tax year ending 5 April 2017 by 6 July 2017 at the latest. You also need to send us any P11D forms due by 6 July.

Please remember it’s important that you complete your forms P11D correctly the first time. If you make a mistake, it’s time-consuming to correct it and your employees will pay the wrong tax in the meantime.

There are a number of live and pre-recorded webinars being run throughout June covering expenses and benefits, and filing forms P11D and P11D(b). Full guidance is also available.

Here are some common questions, and mistakes to avoid.

What do I need to file?

If you paid any benefits and/or non-exempt expenses, you need to file a P11D(b). Include the total benefits liable to Class 1A NICs, even if you taxed some or all of them through your employees’ pay.

You need to send a P11D for each employee in receipt of benefits and/or non-exempt expenses, unless you registered with HMRC online before 6 April 2016 to tax them through the payroll. If you didn’t register online but then went on to tax some or all benefits through your payroll, you still have to send a P11D form, but mark clearly on each one, which benefits have been taxed through the payroll already.

If you haven’t already registered online to payroll your company benefits, you may wish to do so now ahead of the 2018-2019 tax year. It’ll mean you no longer need to send P11Ds, as long as you can payroll all your benefits. Please note that if you are taxing benefits through the payroll and haven’t registered online to do so, you need HMRC’s agreement each year to continue using this method. HMRC normally only agree that you can do this in exceptional circumstances.

I didn’t pay any expenses or benefits. Do I need to tell you if I don’t need to file a P11D/P11D(b)?

You only need to tell HMRC that you don’t need to make a return if HMRC sent you a paper P11D(b), an electronic notice to file a P11D(b) or a reminder letter. You can tell HMRC here.

How can I be sure I’ve filled everything in correctly?

There are free, online toolkits which you can use to help avoid mistakes. Some common ones to watch out for are;

  • Please don’t put ‘6 April 2016’ in the start date and/or ‘5 April 2017’ in the end date for your company cars, unless they are genuinely the dates your employee received or returned a company car. If your employee already had the car before the start of the tax year, leave the ‘from’ box blank. If they kept the car into the new tax year, leave the ‘to’ box blank
  • Remember to sign the form P11D(b) if you’re sending a paper one
  • Only send one P11D(b) for each scheme, showing the total amount due, don’t send a separate one for employees and directors for example. We treat each separate P11D(b) as an amendment to any we’ve previously received
  • Check to see if you need to use the ‘adjustments’ at Section 4 before you complete box C. If you do need to make an adjustment, you need to leave box C blank
  • If you’ve given someone a beneficial loan, double-check that you’ve completed all parts of Section H.

Tax free childcare and tax credits is changing…

As you may know, employer childcare schemes will no longer be available to new applicants, from April 2018. In its place, HMRC have decided to introduce a new tax free childcare scheme, in conjunction with National Savings & Investments.

What is the government tax free childcare?

 The aim of this government initiative, is to help parents manage the mounting costs of childcare. If you are eligible for the scheme, for every £8 a parent pays into their childcare account, the government will top it up by £2.

At the moment, any working parents that have children, aged under 4 on 31st August 2017, can apply through the new digital childcare service for tax-free childcare. This is going to be extended over the course of the year, to include children up to the age of 11.

Things to know:

  • The maximum you can pay into the scheme is £10,000 per year, per child. It is ONE account per child, so if parents have separated, you need to reach a mutual agreement to go ahead with this option.
  • Unlike existing childcare vouchers, the scheme is open to all eligible workers, including the self-employed. Importantly, if you are self-employed, you AND your partner will need to be in work to qualify.
  • To qualify, you both need to earn a minimum of £120 per week and no more than £100,000 per year.
  • Warning: It’s important to note, you won’t be able to get the childcare element of working tax credit or universal credit if you’re signed up to the new Tax-Free Childcare scheme. If you open a childcare account, you will lose the childcare element of tax credit permanently.

What’s the alternative?

 There are 2 alternatives, however, these are not available to everyone:

 Employer supported childcare voucher scheme: this option is not available to the self-employed and is only accessible, if you employer operates a qualifying scheme.

  1. Childcare element of working tax credits or universal credits: The level of tax credit awarded, depends on a number of factors including, household income, number of children and weekly childcare cost. Please visit https://www.tax.service.gov.uk/tax-credits-calculator, for further details.

What should you do now?

Our first tip, is to check if you are entitled to the childcare element of working tax credits.

Secondly, check to see if  your employer or your partner’s employer, offer an Employer supported childcare voucher scheme.

If you are also the company director, you should consider setting up a childcare voucher scheme, as there may also be savings from an Employer’s point of view.

When it comes to childcare, you need to ensure you are choosing the best possible option for your situation. What suits your mate down the pub or the parent at the school gates, may not suit you. If your family circumstances change, you should re-assess your options.  Based on the reviews we have carried out so far, the best option is not always the obvious one.

This website provides a good starting point, when considering the choices available: https://www.childcarechoices.gov.uk/

If you feel it would be beneficial to have Courts Accountants conduct a review into your childcare options, please do not hesitate to contact a member of the team for further details.

The apprenticeship levy

The apprenticeship levy was introduced on 6 April 2017 meaning some UK employers now need to calculate, report and pay a contribution towards the apprenticeship levy to HMRC through the PAYE process each month. Levy payers should use the Employer Payment Summary (EPS) to report any levy due and should pay the apprenticeship levy alongside tax and national insurance contributions by the 19th (or 22nd if paying electronically) of each month.

Employers will be able to see their apprenticeship levy data using their Business Tax Account after April. Agents will be able to view their clients’ apprenticeship levy data through Agent Services from late summer 2017.

https://www.gov.uk/guidance/pay-apprenticeship-levy

Working from home?

A client asked me about working from home…

She spends time working from home and wishes to claim a deduction against her trading profits for use of home expenses. She doubts whether the income tax savings will be significant and could easily be outweighed by future capital gains tax payable because of a loss of principal private residence relief. What should she do?

It is possible there is no capital gains tax problem to worry about. The legislation denies PPR relief to that part of a gain which is attributable to any part of the house which has been used exclusively for business purposes. So, for example, a room which is occupied for business use during the working day but occupied for family and residential purposes in the evenings and at weekends will qualify in full for relief.

On the other hand, HMRC take the view that where the residential use is occasional and very minor then relief can be denied. They give the example of a doctor who keeps some private possessions in a room used as a surgery – the room will be treated as used exclusively for business purposes.

Student loan repayment thresholds

From 6 April 2017, the repayment threshold for plan 1 loans increased to £17,775. The plan 2 threshold will remain at £21,000.

Off Payroll working – student loan deductions

From 6 April 2017 reforms to off-payroll working in the public sector introduced a change to the way fee-payers (public authority, agency or other third party) pay for services from individuals engaged through an intermediary.

The fee-payer will:

  • be required to report the amounts deemed paid to the worker, including Income Tax and National Insurance contributions to HMRC. This should be done on or before the date of deemed payment to the worker on a Full Payment Submission (FPS).
  • not be required to report or deduct Student Loan payments from these individuals. Student Loan payments will be calculated and deducted from the individual’s Self Assessment (SA) return based on their total income.

If the fee-payer receives a Student Loan Start Notice (SL1) and a Generic Notification Service (GNS) Employer Prompt for these individuals, they do not need to take any action and should file these away for their own records.

GNS Notifications for student loans Employers – remember to regularly check your inbox for online notices as this is where you’ll find any GNS student loan notifications.

If you receive a GNS notification instructing you to start student loan deductions, ask each employee displayed which plan type they are repaying, or refer to the SL1 Start Notice if you have it. Either way, you can now begin making deductions.

Read HMRC Student Loan repayment: guidance for employers.

https://www.gov.uk/guidance/special-rules-for-student-loans

SELLING LAND TO A DEVELOPER – IS THAT TRADING OR A CAPITAL GAIN?

Farmers and other landowners will often be approached by developers seeking to obtain planning permission to build on the land. Great care is needed to avoid unnecessary tax charges on the transaction. HMRC have recently updated their guidance on transactions in land clarifying that under certain circumstances some of the eventual profit can be taxed as income not a capital gain. For individual property owners that could mean 45% income tax as opposed to just 28% CGT.

For example, a landowner sells some land to a developer for £5 million plus 10% of any profit on the development over £6 million. If the profit on the project was £8 million then the additional £200,000 would be taxed as a trading profit.

The tax rules in this area are complex. If you are involved in such a deal contact us so we can advise on the best way of structuring the transaction.