Taxation and trusts; Company cars: Latest HMRC data, Second Home Disposals and more.

• Company cars: Latest HMRC data
• Updated guidance on calculating the minimum wage for seafarers
• Consumer credit and overdraft customers: Next stage of support
• FCA bans the sale of crypto-derivatives to retail consumers
• Expansion of the JSS
• Updates to the COVID Corporate Financing Facility (CCFF)
• Second Home Disposals: HMRC campaigns to collect unpaid CGT

 

Company cars: Latest HMRC data

(AF2, JO3)

 

HMRC has published its latest statistical tables on company cars and the provision of car fuel. The data comes with a fair chunk of caveats:

• The figures are based on electronically captured P11D returns for all tax years and, for 2017/18 only, voluntarily payrolled cars reported on Real Time Information (RTI) as part of PAYE submissions.

• Voluntary payrolling was introduced in 2016/17, but for that year there was no way of reporting cars via RTI. For the subsequent tax year, reporting was possible, but not mandatory.

• RTI reporting of voluntarily payrolled cars became mandatory from 2018/19 onwards, but HMRC believes there is still under-reporting. It says that ‘initial analysis suggests this may account for a large part of the reduction in car numbers since 2015/16’.

• Figures for 2017/18 and 2018/19 are classed as ‘experimental’.

With these warnings in mind, there are still some interesting data in the HMRC tables:

• Up to 2016/17, when the data becomes flakey, company car numbers were broadly flat.

• In contrast, there has been a sharp decline in the provision of car fuel from 250,000 recipients in 2010/11 to 180,000 in 2015/16 and a ‘provisional experimental’ figure of 110,000 in 2018/19. The decline makes sense, as the level of benefit charge means the break-even private mileage point is very high, especially for diesels.

• 75% of cars in 2017/18 were diesel, down from 79% in 2016/17.

• 5% of cars had emissions of 75g/km or less in 2017/18. Two-thirds of all cars had emissions of under 115g/km, a figure that underlines the dominance of diesel.

• Despite flat car numbers and declining car fuel recipients, tax raised from company car drivers increased from £1.43bn in 2010/11 to £1.74bn in 2015/16 (+22%) and a ‘provisional experimental’ figure of £1.91bn (+34%) in 2018/19. The corresponding figures for employer National Insurance contributions (NICs) were £570m, £700m and £800m respectively. The rises are a reminder of how George Osborne steadily turned the tax screw on company cars.

These numbers are very much history. Dieselgate, the spread of electric and hybrid vehicles and the introduction of the WLTP (Worldwide harmonised Light vehicles Test Procedure) emissions measurement will all have changed the company car landscape in 2020/21. Looking further ahead, the plan for electric-only vehicle (EV) car sales from 2035 (or possibly 2030) presents the Treasury with a similar problem to the one it faces with road fuel duty (worth an estimated £23bn in 2020/21): when does it start raising taxes on EVs? 

Source: HMRC Official Statistics: Benefits in kind statistics: September 2020 – dated 30 September 2020

Updated guidance on calculating the minimum wage for seafarers

(AF1, RO3) 

HMRC has recently updated its guidance to reflect new legislation that came into force on 1 October 2020 affecting seafarers and the national minimum wage.

As of 1 October, seafarers who navigate to UK waters will benefit from the national minimum wage when they are working on a domestic voyage:

• in UK internal waters and ports, regardless of their nationality or the ship’s flag;

• in the UK territorial waters, regardless of their nationality or the ship’s flag;

• in the UK sector of the Continental Shelf, including where the oil or gas field crosses the boundary of the UK section, and where the work is connected to UK offshore activity on the Continental Shelf;

• outside the UK on a UK-flagged ship, unless either their employment is wholly outside the UK or they are not ordinarily resident in the UK;

• outside the UK on non-UK flagged ships, if they ordinarily work in the UK.

Those entitled will benefit from a minimum hourly rate of £8.72, for those aged 25 and over, £8.20 for those aged 21-24, £6.45 for those aged 18-20 and £4.55 for under 18s.

HMRC’s guidance also provides practical advice and examples to explain:

• what counts and does not count as pay and working hours for minimum wage purposes;

• eligibility for the minimum wage;

• how to calculate the minimum wage;

• how they will enforce the minimum wage.

Source: HMRC Guidance: Calculating the minimum wage (updated to reflect new legislation that came into force on 1 October 2020 affecting seafarers and the national minimum wage) – dated 1 October.

Consumer credit and overdraft customers: Next stage of support

(AF1, RO3) 

In September the Financial Conduct Authority (FCA) published updated proposals, which cover users of credit cards and other revolving credit (store card and catalogue credit), personal loans, overdrafts, motor finance, buy-now pay-later (BNPL), rent-to-own (RTO), pawnbroking and high-cost short-term credit (HCSTC) products.

The FCA has now confirmed that the new guidance has come into force, as of 2 October.

The measures apply both to consumers who have benefited from support under the previous guidance and continue to face financial difficulties, as well as those whose financial situation may be newly affected by coronavirus after the previous guidance ends on 31 October. 

The FCA’s previous guidance, published in July, will continue to ensure temporary support for those impacted by coronavirus until 31 October 2020. The new guidance should ensure consumers will still be able to obtain the support they need from their lenders after 31 October. 

The FCA says that the guidance will be kept under review and if circumstances change significantly, consideration will be given to any further measures that may be needed to support consumers during the ongoing pandemic. The FCA will also review this guidance within six months of it coming into effect to determine whether it remains relevant given the coronavirus crisis or whether it needs to be amended, withdrawn or replaced.

You can read the FCA’s finalised guidance on overdrafts and coronavirus here and on consumer credit and coronavirus here.

Source: FCA News: FCA confirms next stage of support for consumer credit and overdraft customers - dated 30 September 2020. 

FCA bans the sale of crypto-derivatives to retail consumers

(AF4, FA7, LP2, RO2) 

Two consultations were published in July which proposed increasing the oversight of financial promotions issued by unauthorised firms, and bringing the promotion of certain types of cryptoasset under Financial Conduct Authority (FCA) regulation for the first time. Both consultations will run until 25 October.

In the meantime, the FCA has decided to act in relation to derivatives and exchange traded notes (ETNs) that reference certain types of cryptoasset product. The FCA has made rules banning the sale, marketing and distribution to all retail consumers of any derivatives (i.e. contracts for differences – CFDs, options and futures) and ETNs that reference unregulated transferable cryptoassets by firms acting in, or from, the UK.

The FCA feels they are ill-suited for retail consumers due to the harm they pose. It believes that these products cannot be reliably valued by retail consumers because of the: 

• inherent nature of the underlying assets, which means they have no reliable basis for valuation;

• prevalence of market abuse and financial crime in the secondary market (e.g. cyber theft);

• extreme volatility in cryptoasset price movements;

• inadequate understanding of cryptoassets by retail consumers;

• lack of legitimate investment need for retail consumers to invest in these products.  

Unregulated transferable cryptoassets are tokens that are not ‘specified investments’ or e-money that can be traded, and which include well-known tokens such as Bitcoin, Ether or Ripple. Specified investments are types of investment which are specified in legislation. Firms that carry out particular types of regulated activity in relation to those investments must be authorised by the FCA. 

The FCA estimates that retail consumers will save around £53m from the ban on the sale of these products.

The new rules can be found here. The ban will come into effect on 6 January 2021.

The FCA has added a warning that UK consumers should continue to be alert for crypto-derivative investment scams. As the sale of derivatives and ETNs that reference certain types of cryptoasset to retail consumers is now banned, any firm offering these services to retail consumers is likely to be a scam.

For more information on these types of scams or to inform the FCA of a potential investment scam, please refer to the FCA’s ScamSmart pages. 

Source: FCA: FCA bans the sale of crypto-derivatives to retail consumers – dated 6 October. 

Expansion of the JSS

(AF1, AF2, AF3, AF4, ER1, FA2, FA4, FA5, FA7, JO2, JO3, JO5, LP2, RO2, RO3, RO4, RO5, RO7, RO8)

The Chancellor, Rishi Sunak, first announced the introduction of the Job Support Scheme (JSS) in his Winter Economy Plan on 23 September, as a replacement for the Coronavirus Job Retention Scheme (CJRS).

On 9 October, the Government announced an expansion of the JSS to provide temporary support to businesses whose premises have been legally required to close as a direct result of coronavirus restrictions.

Under this expansion, affected businesses will receive grants towards the wages of employees who have been instructed to and cease work. This will cover businesses that, as a result of restrictions set by one or more of the four Governments of the UK, are legally required to close their premises, or to provide only delivery and collection services from their premises.

The Government will pay two-thirds of employees’ usual wages, up to a maximum of £2,100 per month. Employers will not be required to contribute towards wages, but do need to cover employer National Insurance and pension contributions.

Businesses will only be eligible to claim the grant while they are subject to restrictions and employees must be off work for a minimum of seven consecutive days.

Employers can apply for the JSS, including the new expansion, even if they haven’t previously used the CJRS.

The JSS is available for six months, from 1 November, with the payment of grants in arrears from early December. The scheme will be reviewed in January.

Further details on the expanded JSS can be found on this factsheet: Job Support Scheme Expansion for Closed Business Premises. More information will be published in the coming weeks.

Employers can still claim the Job Retention Bonus (see below) if they make a claim for the same employees through the JSS, as long as they meet the eligibility criteria for both.

Cash grants

The Government is increasing the cash grants to businesses in England shut in local lockdowns, and they will be eligible for payment sooner, after only two weeks of closure rather than three.

These grants will be linked to rateable values, with up to £3,000 per month payable every two weeks, compared to the up to £1,500 every three weeks which was available previously.

Small businesses with a rateable value of or below £15,000 can now claim £1,334 per month; medium sized businesses with a rateable value between £15,000 and £51,000 can claim £2,000 per month; and larger businesses can claim £3,000.

The Government says this could benefit hundreds of thousands of businesses, including restaurants, pubs, nightclubs, bowling alleys and many more.

The devolved administrations in Scotland, Wales and Northern Ireland will benefit from a £1.3 billion increase to their guaranteed funding for 2020/21 - allowing them to continue their response to COVID-19 including through similar measures if they wish.

Job Retention Bonus

Further guidance for the Job Retention Bonus is now available - here. It includes information about how employers can check if their employees are eligible and when they can claim the bonus.

Employers will be able to claim a one-off payment of £1,000 for every eligible employee they furloughed and claimed for through the CJRS and kept continuously employed until at least 31 January 2021. The employer does not have to pay this money to their employee.

To be eligible, employees must earn at least £1,560 between 6 November 2020 and 5 February 2021 and have received earnings in the November, December and January tax months. Employees must also not be serving a contractual or statutory notice period for the employer on 31 January 2021.

Employers will be able to claim the bonus from 15 February until 31 March, once they have submitted PAYE information for the period up to 5 February 2021.

HMRC will let employers know how to make a claim when further guidance is published by the end of January.

CJRS – changes from 1 October  

From 1 October, HMRC will pay 60% of usual wages up to a cap of £1,875 per month for the hours furloughed employees do not work. 

Employers will continue to pay their furloughed employees at least 80% of their usual wages for the hours they do not work, up to a cap of £2,500 per month. Employers will need to fund the difference between this and the CJRS grant themselves. 

The caps are proportional to the hours not worked. For example, if the employee is furloughed for half their usual hours in October, the employer is entitled to claim 60% of their usual wages for the hours they do not work, up to £937.50 (half of £1,875 cap). The employer must still pay their employee at least 80% of their usual wages for the hours they don’t work, so for someone only working half their usual hours the employer would need to pay them up to £1,250 (half of £2,500 cap), funding the remaining portion themselves.

Employers will also continue to pay their furloughed employees’ National Insurance and pension contributions from their own funds. 

Further guidance for the CJRS is available - here. 

The scheme closes on 31 October and employers will need to make any final claims on or before 30 November. Employers will not be able to submit or add to any claims after 30 November.

Updates to the COVID Corporate Financing Facility (CCFF)

The CCFF provides temporary direct support to investment grade firms with short-term cash-flow problems, and is designed to ensure that firms accessing Government-backed CCFF financing are able to repay.

To ensure the CCFF continues to meet its objectives, the Treasury has introduced a new access review process under which the Treasury will continue to assess the credit quality of firms in the CCFF and, from 9 October, will also ask firms to provide an up-to-date credit rating when requesting financing from the scheme. Where the firm’s credit rating has dropped below investment grade, the Treasury will ask for additional information before deciding the appropriate level of support.

Full details have been published by the Bank of England. 

Sources:

• HM Treasury News Story: Job Support Scheme expanded to firms required to close due to COVID Restrictions – dated 9 October 2020.
• HM Treasury News story: Updates to the COVID Corporate Financing Facility – dated 9 October 2020. 

Second Home Disposals: HMRC campaigns to collect unpaid CGT

(AF1, RO3)

HMRC is planning to send 14,000 'nudge' letters to individuals that it believes made a taxable residential property disposal in the 2018/19 tax year without declaring it on their tax return.

The letter gives details of the information HMRC is attempting to check and asks recipients to consider whether they should have paid capital gains tax on the disposal. It advises them to either amend their return or use HMRC's digital disclosure service, if necessary.

A similar campaign last year has reportedly produced a 15% success rate regarding disposals in the 2017/18 tax year. The number of letters being sent out this year indicates that HMRC believes that up to 2,000 taxpayers have a liability to disclose for 2018/19.

Taxpayers and their advisers will need to carefully consider the best response to any nudge letter, especially if a disclosure is required, as HMRC will almost certainly be looking to charge penalties.

There have been a number of recent capital gains tax changes that adversely affect owners of second homes, such as buy-to-let investors, including restrictions on lettings relief and principal private residence relief, a shorter payment deadline for capital gains tax on residential property gains, and a capital gains tax rate of 28% (18% for gains chargeable within the basic rate tax band).

However, there are a number of perfectly legitimate planning actions that can be used to maximise the use of allowances, reliefs and exemptions to combat some of these negative tax changes. 

Source: STEP News: HMRC prepares compliance campaign regarding second home disposals – dated 12 October 2020.