Court rules on online filing penalties

The Construction Industry Scheme (CIS) is a set of special rules for tax and national insurance (NI) for those working in the construction industry. Businesses in the construction industry are known as ‘contractors’ and ‘subcontractors’. The scheme applies mainly to contractors and subcontractors involved in construction.

A recent First-Tier Tribunal decision examined a case, where a limited company in the floor and wall covering business had failed to make monthly returns on time for the period April 2016 – December 2016. There are penalties for late submission of CIS contractor monthly returns. The penalties increase the longer the returns are outstanding. HMRC issued the company with penalty assessments of

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11
Apr

Treatment of termination payments

With effect from 6 April 2018, employers will need to pay income tax and Class 1 national insurance contributions (NICs) on certain parts of termination payments made to employees whether or not these payments are contractual. The element that is liable to taxation is the amount of the termination payment that represents a payment in lieu of notice, commonly referred to as ‘PILON’. The measure will mean that all PILONs rather than just contractual PILONs will be treated as taxable earnings.

In addition, all employees will pay income tax and Class 1 NICs on the amount of basic pay that they would have received if they had worked their notice in full, even if they are not paid a contractual PILON. This means that the tax and NICs consequences will be the same for everyone and will not be dependent on how an employment contract is drafted or whether payments are structured in some other form, such as damages.

The changes apply to payments, or benefits received on, or after, 6 April 2018 in circumstances where the employment also ended on, or after, 6 April 2018. Foreign service relief on termination payments has also been removed for all UK residents, apart from seafarers from 6 April 2018.

Planning note

The introduction of employer NICs on termination payments above

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Reminder to submit details for Benefits in Kind

Employers are reminded that the deadline for submitting the 2017-18 forms P11D, P11D(b) and P9D is 6 July 2018. P11D forms are used to provide information to HMRC on all Benefits in Kind (BiKs), including those under the Optional Remuneration Arrangements (OpRAs) unless the employer has registered to payroll benefits. This is known as payrolling and removes the requirement to complete a P11D for the selected benefits. However, a P11D(b) is still required for Class 1A national insurance payments.

The new OpRA legislation was introduced with effect from 6 April 2017. The legislation means, that the tax and NIC advantages of benefits where an employee gives up the right to an amount of earnings in return for a benefit are largely withdrawn. This includes flexible benefit packages with a cash option, cash allowances and salary sacrifice. The taxable value is now the higher of the cash foregone or the taxable value under the normal BiK rules.

From 6 April 2018, the rules cover all OpRAs, apart from those for cars with emissions above 75g CO2/km, school fees and accommodation – these will be included from 6 April 2021. Pensions, pension advice, childcare, cycle-to-work schemes and cars with emissions of 75g CO2/km or less are not currently affected by the rules.

Planning note

Where no benefits have been provided from 6 April 2017 to 5 April 2018 and a form P11D(b) or P11D(b) reminder is received, employers can either submit a ‘nil’ return or notify HMRC online that no return is required. Employers should ensure that they complete their P11D accurately, including all the details of cars and loans provided.

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