Every week we take a look at what is trending in the accountancy and tax press and share items that we think will interest you. However, these are only outlines and where they relate to tax planning should not be acted upon without looking into them more completely as everyone’s circumstances are particular to them. You need to take specific advice appropriate to your own circumstances.
While every effort is made to deliver accurate, informative and balanced articles this content is general in nature and should not be used as the sole basis for making decisions.
Vans – Benefits in Kind
The original designation of the vehicle is the descriptor which must be used when reporting expenses and benefits in kind for the tax year ending 5 April 2022, regardless of actual usage.
For benefits purposes, the ‘construction’ of a vehicle is that of the final product when it is made available to the employee. The use to which a vehicle is subsequently put is not relevant when considering the meaning of construction.
The correct approach is to determine what a vehicle was first and foremost suitable for, and it can only be classified as a van if the predominant suitability of the vehicles in question was for the conveyance of goods or burden.
A car for car benefits purposes, is every mechanically propelled road vehicle unless it is:
(i) a goods vehicle (a vehicle of a construction primarily suited for the conveyance of goods or burden of any description);
(ii) a motor cycle (as defined in section 185 Road Traffic Act 1988);
(iii) an invalid carriage (also as defined in that Act); or
(iv) a vehicle of a type not commonly used as a private vehicle and unsuitable to be so used.
A mixed-use vehicle not primarily suitable for the carriage of goods may well be classified therefore as a car for benefit purposes.
HMRC – one-stop-shop for tax support
HMRC has launched a one-stop-shop comprising multiple areas of financial support available that could help you with living costs
You can find it on the HMRC gov.co.uk website labelled under Check what financial help you can get from HMRC. It was launched on 5 April.
You can check out the range of financial support available to make sure you are not missing out on any savings or tax breaks.
Some of the tax breaks that are highlighted include:
- The new rates of child benefit for the 2022-23 tax year are £21.80 for an eldest or only child, and £14.45 for additional children.
- Tax-free childcare allows an individual to claim £500 every three months, up to £2,000 a year, for each child to help with the cost of childcare. A parent with a disabled child can claim up to £1,000 every three months or up to £4,000 annually.
- The marriage allowance allows you to transfer 10%, or £1,260, of your personal tax allowance to a husband, wife or civil partner if you earn less than the personal tax allowance, which is usually £12,570.
- Tax relief on employment expenses explains how to claim money that has been spent on things such as work uniforms, clothing, tools, subscription and business travel.
There is nothing new but it could be worth a look to make sure you are not missing out on anything.
HMRC Glasgow Regional Hub Opens
The Glasgow regional hub, based at 1 Atlantic Square, has opened its doors to civil servants. The Glasgow site is Scotland’s second centre and now means there are 11 regional centres open in the UK. It has a staff of 3000.
The design of the space focuses on inclusiveness with level access, power-assisted wide doors, security gates, and height adjustable desks to support staff who use wheelchairs. It also includes a private area for staff who use assistance dogs.
HMRC has also created different workstation surfaces and finishes that use colours and materials to support neurodivergent and visually impaired employees. The site also includes accessible toilets and showers and gender-neutral toilets plus standard male/female.
The space also includes a mix of reflection, wellbeing, and recovery rooms as well as quiet and do not disturb areas.
Office staff will have the choice of where they conduct their daily activities with the space including booths fitted with charging points, comfortable seating, and TV screens.
HMRC will continue to offer its staff a hybrid working model which it adopted during the Covid-19 pandemic.
HMRC will be 14 regional centre locations.
Flexible Work Patterns
We are starting to see some normality return to working life but not necessarily the normal we had all been expecting.
Along with many other businesses we have adopted a flexible and hybrid working regime, and it is written into our employment handbook.
Many firms are favouring a hybrid workplace, rather than fully remote, because of the results and exchange of ideas when employees meet face to face, as well as the benefits in the training and development of more junior staff.
Having worked from home for the past two years, many employees are now used to the convenience that working from home brings. There are also employees who do not want to return to the office and may be nervous about the end of Covid-19 restrictions and high infection rates across the UK.
What about your contracts of employment?
The contract sets out the agreed terms and conditions, including place of work and unless there is a specific agreement from both parties, this cannot be varied.
The contractual place of work will be key for those employees that were hired and have always worked from home during the pandemic. If their contract states that they are home workers and the firm no longer can justify exclusive remote working, then there may be redundancy situations to deal with, and the fairness of that decision and process will need to be carefully managed.
If employees were only ever expected to work from the office, then legally they can be expected to comply with the reasonable management instruction to do so again, unless they arrange otherwise, or the business confirms a hybrid policy for all.
Once employed for 26 weeks, any employee can make a flexible working request. This could be about their place of work, or the hours of work and an employer can only refuse this for specific reasons, such as affecting quality and performance, and not meeting customer demand.
In theory, an employee is able to work from anywhere, provided that they adhere to the terms of their contract, and this includes living in another country. You need to manage the health and safety issues that arise from such remote working, deal with cross-border data protection issues, and ensure you can manage the employee remotely as needed.
The sensible approach for many businesses is going to be a compromise that meets the needs of the business, as well as the needs of the employees but it is essential to have clear policies around hybrid working.
Is that Turnover or not? The VAT issues.
Turnover is defined differently depending on what aspect of VAT you are dealing with,
- VAT registration
- Flat Rate Scheme,
- Cash Accounting.
For the purposes of registration for VAT, taxable turnover includes:
- Sales at standard rate, reduced rate, zero rate;
- Sales of opted land and property;
- Value of Reverse Charge services received from outside the UK.
But taxable turnover excludes:
- Exempt sales
- Sales of capital assets (except opted land and property);
- Value of construction industry Reverse Charge.
For the Flat Rate Scheme, after you have joined, turnover is calculated in one of three different methods. In general, you should not join the FRS if you receive construction industry Reverse Charge supplies or you use the margin scheme for second hand goods. This is because ‘turnover’ is defined so widely for the FRS.
For the Cash Accounting scheme, once in the scheme some transactions are accounted for outside of Cash Accounting, such as Reverse Charge, HP, credit sale transactions etc.
Tips and Tax
A tip or gratuity is an uncalled for and spontaneous payment offered by a customer. This can be in cash, as part of a cheque payment, as a specific gratuity on a credit or debit card payment or paid using a digital payment service or application
HMRC has updated its guidance on tax treatment of tips, gratuities, service charges and troncs to include details on how to handle electronic payments.
The payment of tips is commonplace for employees in the catering and service industries but recently there has also been a shift towards customers paying tips electronically.
Where the employer collects the tips and pays them to employees, the employer is required to deduct income tax and NIC from these payments.
Where customers pay tips directly to staff, each employee is responsible for declaring these earnings to HMRC.
There are also separate rules for payments made through ‘troncs’ (a special pay arrangement used to distribute tips, gratuities, and service charges where a person other than the employer is responsible for sharing the amounts).
A customer may make different types of payment on top of the basic charge, but usually it will be one of the following:
- mandatory service charge
- discretionary service charge
- gratuity paid to the employer as part of a cheque, credit or debit card payment
- gratuity paid into a staff box or similar
- gratuity handed or paid directly to an employee
Tips are outside the scope of VAT when genuinely freely given. This is regardless of whether:
- the customer requires the amount to be included on the bill
- payment is made by cheque or credit or debit card
- the amount is passed to employees
Restaurant service charges are part of the consideration for the underlying supply of the meals if customers are required to pay them and are therefore standard rated.
If customers have a genuine option as to whether to pay the service charges, it is accepted that they are not a consideration (even if the amounts appear on the invoice) and therefore fall outside the scope of VAT.
Where tips are paid by credit or with debit card, and the proprietor of a restaurant passes on all tips paid by credit or debit card to his employees, the proprietor has made a payment to his employees and must operate PAYE on these payments as part of the normal payroll.
Where tips are left on tables in cash but collected and distributed by the proprietor, they must also include the amounts received as part of the payroll and operate PAYE.
As regards Nation Insurance, where any amount is paid to an employee which is a payment ‘of a gratuity’ or is ‘in respect of a gratuity’, it is exempt from National Insurance contributions if it meets either of the following 2 conditions:
- it is not paid, directly or indirectly, to the employee by the employer and does not comprise or represent monies previously paid to the employer, for example, by customers
- it is not allocated, directly or indirectly, to the employee by the employer
So, where you pass tips on to your employee, you are liable for both employer and employee National Insurance contributions because neither of the 2 conditions are satisfied
If you have any questions about any of these, you know where to find us. If you prefer, just give me a ring on 07770 738770 or email me at firstname.lastname@example.org.