|
Welcome to March’s Tax Centre of Excellence (Tax CoE) Customer Bulletin. The following aims to provide a snapshot of tax news/updates and signpost to more information where relevant. The Tax CoE is a central resource for tax advice and services available to the public sector. We can provide advice on a wide range of complex tax matters not limited to topics discussed here. Contact us at Tax.CoE@justice.gov.uk.
For more information, please visit our website on OneFinance. Please note that you need to register on OneFinance to access the content, but this is a quick and easy process. If you have any issues getting access to OneFinance then please contact us. Quick tip - you can click “Add notification” on any page to receive alerts when our guidance is updated.
The Spring Statement 2022
The chancellor delivered his Spring Statement on 23 March. Here are the key points:
- reduction in the rate of Fuel Duty for 12 months by cutting the main rates of petrol and diesel by 5p per litre and other rates proportionally
- extending the VAT relief available by introducing a time limited zero-rate for the installation of energy saving materials (ESM) for example households installing solar panels
- the government’s Household Support Fund will be doubled bringing total funding to £1billion, to be managed by devolved administrations and by Local Authorities in England
- the introduction of the Health and Social Care Levy (1.25%) remains, but the National Insurance Primary Threshold for employees and Lower Profits Limit for the self-employed will increase from £9,880 to £12,570 from July 2022
- the Employment Allowance for small businesses increases by £1000 to £5000
- the basic rate of income tax will be cut from 20% to 19% from April 2024
NAO investigation into the implementation of IR35 tax reforms
The NAO recently published its investigation into the implementation of IR35 tax reforms. It follows the 2017 reforms to the public sector and the 2021 reforms in the private sector. The NAO report covers the risks of implementation, compliance, the significant cost of getting IR35 wrong, lessons learned and recommendations for HMRC to continue to promote compliance, working alongside key stakeholders such as the Tax Centre of Excellence.
The Tax CoE has published a news article on OneFinance reflecting on the findings of the report and highlighting the guidance and tools available to help with this area of tax.
Tax CoE technical calls
The Tax CoE holds regular tax technical calls on a variety of subjects and taxes relevant to the public sector. The recordings and slides are published on the OneFinance Tax CoE website. Recent calls include:
We will be delivering a tax technical call at the end of April on the tax implications of electric vehicles and electric charging points. You will receive an invitation to this soon.
HMRC Employer Bulletin
HMRC have issued their February 2022 Employer Bulletin. This issue covers a range of updates on tax matters, and it is important to read and comply with these. The bulletin includes a section on grossing up benefits and expenses through the payroll where the employer chooses to meet the employees tax and NIC liability on their behalf.
Finance Act 2022 receives Royal Assent
The Finance Act 2022 received Royal Assent on 24 February 2022.
As a reminder, here are the key tax changes for 2022-23
National Insurance Contributions and the introduction of the Health and Social Care Levy
From 6 April 2022, employee Class 1, employer Class 1, Class 1A, Class 1B and Class 4 National Insurance contributions will increase by 1.25%.
HMRC are asking all employers to put a message on payslip templates explaining what these funds will be used for. The message applies to all payslips for the tax year 2022-23 and should read “1.25% uplift in NICs funds NHS, health & social care”.
From 6 April 2023, the National Insurance contribution rates will return to their 2021-22 levels and the Health and Social Care Levy will become a separate new tax of 1.25%. Liability to the levy from 6 April 2023 also includes individuals in work who are over State Pension age. Further information on the health and social care levy can be found on gov.uk.
A new 0% rate of class 1 secondary (employer’s) NIC is introduced from 6 April 2022, up to the Freeport Upper Secondary Threshold of £25,000. This applies for newly employed employees that spend 60% or more of their employment in a freeport tax site, where their employer has a business premises in that tax site. See section 3.9.7 of HMRC’s further guide to PAYE and National Insurance contributions.
Coronavirus test exemption extended
The current tax and NIC exemptions were due to end on 5 April 2022. Regulations have now been introduced to extend the coronavirus testing exemption for 2022-23. This means that the provision of a coronavirus diagnostic test to an employee, or the reimbursement to employees of the cost of such tests, will remain exempt from tax and NICs until 5 April 2023.
Exemption ending for reimbursement of home-working equipment
The temporary covid-19 exemption for reimbursement of the cost of equipment to work from home is ending on 5 April 2022. From 6 April 2022, such reimbursements will become taxable as earnings, subject to income tax and class 1 NIC.
Tax relief will only be available under S.336 ITEPA 2003 where it is wholly, necessarily and exclusively for delivering the duties of employment. This will not be available under normal circumstances as it would have to be necessary for the employee to work from home with no alternative facilities available on the employer’s premises.
Tax relief is still available under S.316 ITEPA 2003 where the employer provides equipment or supplies directly to the employee to enable them to work from home, provided there is no significant private use.
The Tax CoE recently held a tax technical call on the tax implications of hybrid working.
Cycle to Work qualifying journey easement ending
The easement for qualifying journeys under the cycle to work tax exemption is ending on 5 April 2022. The exemption for the employer provision of cycles and cycle safety equipment to staff is normally only available where the main use is for qualifying journeys, e.g. commuting or part of a commute to work. During the pandemic, HMRC relaxed this condition for employees that joined a cycle to work scheme on or before 20 December 2020.
This easement comes to an end on 5 April 2022, which means that all employees that have joined a Cycle to Work scheme will need to meet the qualifying journeys condition to continue to qualify for the tax exemption.
VAT - Compensation, termination payments and dilapidations changes
From 1st April, the treatment of most compensation and early-termination payments charged by suppliers is changing. These were previously treated as outside-the-scope of VAT but will now be treated within scope, as further consideration for the supply to which they relate. Some payments will remain outside-the-scope of VAT, such as dilapidations (payments to landlords to return properties to their original state) and payments that are clearly designed to be punitive. The HMRC brief 2 (2022) introduces this revised policy and provides additional information and links to new guidance.
End of reduced VAT rate for hospitality, hotel and holiday accommodation
The VAT rate for hospitality, hotel and holiday accommodation and attractions returns to 20% from 1 April 2022. The government temporarily applied the 5% reduced rate to certain supplies in the tourism and hospitality sectors, which was replaced by a 12.5% reduced rate on 1 October 2021.
Suppliers are responsible for applying the correct VAT rate which can be more complicated where supplies straddle a rate change or where payments are received or invoices raised for a supply which is made on the other side of a rate change. Please refer to HMRC guidance on tax rate changes for further information.
Making Tax Digital (MTD) for VAT
From April 2019, MTD became mandatory for bodies obliged to register for VAT due to breaching the VAT registration threshold.
From April 2022, all bodies registered for VAT, including voluntarily registered bodies, are required to follow MTD for VAT rules.
However, MTD for VAT is not yet a requirement for government departments and NHS bodies who are users of the GIANT (Government Information and NHS Trusts) system. In July 2021, HMRC advised that for these bodies, there is no need to implement MTD before April 2023 and that this deferral was to take account of the timeline for the potential reform to VAT refund rules. There has been no official confirmation as to whether this deadline will be pushed back considering the recent announcement that there will be no decision on Section 41 reform until 2024/25.
Plastic Packaging Tax (PPT)
This is a new tax, effective from 1 April 2022, which will apply to plastic packaging manufactured in, or imported into the UK, that does not contain at least 30% recycled plastic. UK manufacturers of plastic packaging, importers of plastic packaging, business customers of manufacturers and importers of plastic packaging in the UK are likely to be affected where they meet the registration threshold of 10 tonnes in a 12 month period.
Please note that the PPT will apply to commercial activities only. The Tax CoE have sought clarity from HMRC on the definition of ‘commercial activities’. Although this is not defined for the purposes of PPT, HMRC have suggested that if your activities are treated as business activities for VAT or other taxes, then that would be the sort of indicator that it is commercial for the purposes of PPT. Whilst it is likely in the public sector that your main activities are statutory, if for example, you are selling on anything you have procured, this could be considered a commercial activity for PPT to apply.
If you are registered for PPT, you must keep accounts and records to support and evidence PPT returns and relevant transactions. However, even if not required to register, you will still need to introduce a form of governance and keep records demonstrating you’ve not met the requirement to register. Finally, HMRC have made PPT jointly and severally liable and therefore you will need to consider what action to take to mitigate this risk. HMRC state that any related business should be conducting due diligence checks to lessen the risk of being involved in a supply chain where PPT goes unpaid.
For further information please see HMRC guidance on PPT including HMRC - How to make due diligence checks. In addition, HMRC have introduced two webinars to help explain this new tax and how it will work.
Reform of red diesel and other rebated fuel entitlement
From 1 April 2022, a legislative change will be introduced to restrict the entitlement to use red diesel and rebated biofuels to a revised list of qualifying purposes. Please see HMRC guidance for further information.
Notification of Uncertain Tax Treatment
Uncertain Tax Treatment (UTT) notification requirements by large businesses comes into effect on 1 April 2022. This requires large businesses to notify HMRC of any uncertain tax treatments where a provision has been recognised in the accounts in respect of this.
To be in scope, a company is a “qualifying company” in any financial year if, in the previous financial year, the company had either or both of the following:
- relevant UK turnover of more than £200 million
- relevant UK balance sheet total of more than £2 billion
Public Bodies (as defined by Schedule 1 of the Freedom of Information Act 2000) are excluded from scope of this legislation. However, if the Public Body has an incorporated subsidiary that satisfies the criteria above, that subsidiary is within scope.
For further information, HMRC has published technical guidance on GOV.UK. An HMRC webinar is available that provides an overview of UTT and the requirements.
|
