September 24, 2018
The government has published the second tranche in its series of technical notices providing guidance for UK businesses, workers and citizens on how to prepare for a “no deal” Brexit. A "no deal" Brexit will occur if the UK and the EU fail to conclude a withdrawal agreement by the time of the UK’s exit from the EU at 11pm on 29 March 2019. This would mean there would be no transitional period and a sudden break in the application of EU rules to the UK.
One of the latest notices is entitled “Data protection if there’s no Brexit deal” and it sets out the actions UK organisations should take to enable the continued flow of personal data between the UK and the EU in the event that the UK leaves the EU in March 2019 with no withdrawal agreement in place.
Currently, the rules governing the collection and use of personal data are set at an EU-level by the General Data Protection Regulation (GDPR). In the UK, the Data Protection Act 2018 and the GDPR provide a comprehensive data protection framework. Under GDPR rules, organisations are only permitted to transfer personal data outside the EU if there is a legal basis for doing so. Transfers of personal data within the EU are not restricted. If the UK leaves the EU in March 2019 with no agreement in place regarding future arrangements for data protection, there would be no immediate change in the UK’s own data protection standards. This is because the Data Protection Act 2018 would remain in place and the European Union (Withdrawal) Act 2018 would incorporate the GDPR into UK law to sit alongside it. UK organisations would continue to be able to send personal data from the UK to the EU. In recognition of the degree of alignment between the UK and EU’s data protection regimes, the UK would continue to allow the free flow of personal data from the UK to the EU. The government would propose to keep this under review.
However, the legal framework governing transfers of personal data from organisations established in the EU to organisations established in the UK would change at the point of exit. The EU has an established mechanism to allow the free flow of personal data to countries outside the EU – this is called an adequacy decision. The European Commission has stated that if it deems the UK’s level of data protection essentially equivalent to that of the EU, it would make an adequacy decision allowing the transfer of personal data from the EU to the UK without restrictions. Unfortunately, there is no timetable in place yet for preliminary discussions on an adequacy assessment to commence and the European Commission has stated that an adequacy decision cannot be taken until the UK has left the EU. If the European Commission doesn’t make an adequacy decision regarding the UK at the point of exit and UK organisations want to continue to receive personal data from organisations established in the EU, they should start proactively identifying a legal basis for those transfers.
For most organisations, the most relevant alternative legal basis would be standard contractual clauses. These are model data protection clauses that have been approved by the European Commission and enable the free flow of personal data when embedded in a contract. The clauses contain contractual obligations on UK organisations and their EU partners, and rights for the individuals whose personal data is transferred.
September 18, 2018
The Chancellor Philip Hammond, has stated before the House of Lords Economic Affairs Committee, that he is not yet in a position to announce a date for the Autumn Budget 2018 saying it was ‘difficult to fix’. Last year, the Chancellor had used his annual meeting before the Economic Affairs Committee to announce the Budget date.
Now the Chancellor has said he is unable to fix a date at this time due to the significant political events currently taking place in relation to Brexit, including continued speculation that there may be a special European Council summit in November. The Chancellor also commented that he was ‘acutely conscious of the danger of creating precedent’ by announcing a date for the Budget this year at the Committee meeting.
The Chancellor has asked the Office for Budget Responsibility (OBR) to begin planning for an Autumn Budget. In response to a question from the Committee Chairman, he also commented that the required 10-week notice period given to the OBR is a minimum, not a maximum. Mr. Hammond has confirmed that he will announce a date to Parliament for the Autumn Budget as soon as it can be fixed in the calendar.
A new workplace right to paid leave for bereaved parents has been officially enshrined in law after the Parental Leave and Pay Bill achieving Royal Assent. The new law, which is expected to come into force in 2020, was welcomed by charities helping bereaved parents to cope with the distress of losing a child.
The new Parental Bereavement Leave and Pay Act, gives qualifying employed parents the right to claim bereavement pay and leave. The Act will give all employed parents a day-one right to 2 weeks’ leave if they lose a child under the age of 18 or suffer a stillbirth from 24 weeks of pregnancy. Employed parents will also be able to claim pay for this period, subject to meeting eligibility criteria.
The new legislation will replace existing rules, where employees have a day-one right to take a reasonable amount of unpaid time off work to deal with an emergency such as the death of a dependant. However, there is no statutory definition of what is a reasonable amount of time and this could give rise to potential disagreements between an employer and employee at a most difficult time.
Business Minister Kelly Tolhurst, said:
‘This law makes Parental Bereavement Leave a legal right for the first time in the UK’s history. Losing a child is an unimaginable trauma. I am delighted we have reached this important milestone which so many have campaigned for.’
The new Help to Save scheme for people on low incomes was officially opened with effect from 12 September 2018 following an 8-month trial. The new scheme allows those in work entitled to Working Tax Credit, and in receipt of Working Tax Credits or Child Tax Credits to save up to £50 a month for two years and receive a 50% government bonus.
The scheme is also open to UK residents who are claiming Universal Credit, and have a household or individual income of at least £542.88 for their last monthly assessment period (though note that payments from Universal Credit are not considered to be part of household income).
The scheme allows those eligible to save up to £50 a month for two years and receive a 50% government bonus. Account holders will then be able to continue saving under the scheme for a further 2 years, and receive another bonus. This could see those on low incomes receive a bonus of up to £1,200 on maximum savings of £2,400 over 4 year. After the 4 years, the Help to Save account will be closed and savers will not be able to reopen it or open another Help to Save account. The account balances are expected to be rolled over into successor accounts.
The new scheme could benefit an estimated 4 million people across the UK. There are no limits on how the money used can be spent but it is hoped that the money will be saved for urgent costs. Money paid into the account can be withdrawn at any time, but this could affect the size of the bonus payment.
The annual Capital Gains Tax (CGT) exemption for individuals is £11,700 for 2018-19. A husband and wife each benefit from a separate exemption. Same-sex couples who acquire a legal status as civil partners are treated in the same way as married couples for CGT purposes.
CGT is normally charged at a simple flat rate of 20% and this applies to most chargeable gains made by individuals. If taxpayers only pay basic rate tax and make a small capital gain, they may only be subject to a reduced rate of 10%. Once the total of taxable income and gains exceed the higher rate threshold, the excess will be subject to 20% CGT. A higher rate of CGT applies (18% and 28%) to gains on the disposal of residential property (apart from a principal private residence).
It is important that any individuals keep proper records of any capital gains for at least a year after the Self- Assessment deadline. They may need to keep records for longer, if the tax return was submitted late or HMRC has started a check into the return. Businesses must keep records for 5 years after the deadline.
HMRC suggests that taxpayers keep receipts, bills and invoices that show the date and the amount:
- paid for an asset,
- of any additional costs such as fees for professional advice, Stamp Duty, improvement costs, or to establish the market value,
- received for the asset – including payments made by instalments, or compensation if the asset was damaged
It is also recommended to keep any contracts for buying and selling the asset (for example from solicitors or stockbrokers) and copies of any valuations. If records are no longer available for any reason, you must try and recreate them letting HMRC know if the figures are estimated or provisional.
The Tax-Free Childcare Scheme (TFCS) helps support working families with their childcare costs. The scheme provides for a government top-up on parental contributions. For every 80p in the £1 contributed by parents, an additional 20p or 20% is funded by Government up to a maximum total of £10,000 per child per year. This gives parents an annual savings of up to £2,000 per child (and up to £4,000 for disabled children until the age of 17) in childcare costs.
The scheme is open to all qualifying parents, including the self-employed and those on a minimum wage. The scheme is also available to parents on paid sick leave as well as those on paid and unpaid statutory maternity, paternity and adoption leave. To be eligible to use the scheme, parents will have to be in work at least 16 hours per week and earn at least the National Minimum Wage or Living Wage. If either parent earns more than £100,000, both parents are unable to use the scheme.
In addition, parents of three and four year old children living in England can apply for 30 hours of free childcare. HMRC advises that taxpayers may be able to claim compensation if they applied or reconfirmed before the relevant deadline, but technical issues meant they were unable to take up a 30 hours free childcare place or have paid out for childcare that would have been free. These claims can be made under the existing compensation scheme for users affected by system issues that plagued the launch of the TFCS.
The First-Tier Tribunal (FTT) recently heard three joined appeals that concerned the availability of tax relief for employee expenses. In each of the cases the expense claims related to the costs incurred cleaning and sanitising working clothes together with the cost of toiletries for personal hygiene. The FTT collectively referred to these costs as cleaning expenses. All three taxpayers were appealing against PAYE coding notices where HMRC denied the cleaning expense claims.
Two of the taxpayers worked in the sewerage industry and the third taxpayer was an environmental worker involved in outdoor maintenance services. HMRC at no time disputed that some valid expenditure had been incurred on cleaning ‘special clothing’. However, it was the amount that the taxpayers claimed that appeared to have riled HMRC with each taxpayer claiming £2,200 for each of the tax years under appeal. This figure seemed to tally with HMRC’s requirement that anyone claiming relief for expenditure over £2,200 needs to make a self-assessment return. We are advised as part of the Tribunal proceedings, that a higher figure had initially been calculated for the taxpayer’s cleaning expenses but had been revised down for this reason.
HMRC argued against this appeal on a number of different fronts. This included the fact that there were no valid receipts presented by the claimants and that no tax relief was available for cleaning ‘ordinary clothing’. HMRC also argued that a significant amount of the expenditure incurred by the appellants was not incurred wholly, exclusively and necessarily in the performance of the duties of their employment as the equipment and washing powder was also used for the family wash.
The Tribunal came down on the side of HMRC and dismissed the three appeals. The Tribunal did agree that the taxpayers were entitled to the fixed £60 flat rate relief, which HMRC agreed to allow for cleaning costs. The Tribunal also commented that whilst this figure has been fixed since 2008-9, HMRC has itself stated that a higher claim can be made where there is proper evidence of the actual costs incurred.
Any employees required to pay for the upkeep of protective clothing used in their work, should examine whether they ought to claim the flat rate amount or make a claim based on the actual costs involved.
Stamp Duty Land Tax (SDLT) is payable whether you buy a freehold property, a new or existing leasehold property or a shared ownership property. SDLT has been replaced in Scotland by the Land and Buildings Transaction Tax and in Wales by the Land Transaction Tax.
The amount of SDLT you pay when you buy a leasehold property, depends on whether it’s an existing lease (an assigned lease) or a new one. There are also different amounts of SDLT payable depending on whether you are buying residential or non-residential property.
SDLT on an existing lease, described as an assigned lease, is usually based on the lump sum paid for the assignment of the lease. In most cases, the amount of SDLT due is worked out in the same way as if the purchaser had bought a freehold residential or commercial property.
SDLT on new leases is payable both by reference to lease premiums and to the rental element of a lease. The premium is broadly treated for SDLT purposes as if it was a payment for the purchase of a freehold. In cases where SDLT is payable, both the lease premium or purchase price and the net present value of the rent payable are calculated separately and then added together to obtain the amount of SDLT payable. For non-residential properties the nil rate band does not apply if the relevant rental figure for the lease is more than £1,000 per year.
There are special rules for the provision of living accommodation to employees under certain circumstances. In most cases, employees will pay tax on any living accommodation provided by an employer unless they qualify for an exception. However, where an employee qualifies for an exception, there is no tax to pay on the provision of living accommodation. The definition of living accommodation includes houses, flats, houseboats, holiday homes and apartments. It does not include hotel rooms or board and lodgings.
An exception for living accommodation will generally apply in cases where:
- the accommodation is necessary for an employee to do their job properly,
- it is customary to have living accommodation provided so that the employee can better perform their job,
- the employee faces a special threat to their security because of their job, and the living accommodation is in place to help protect them.
HMRC publishes a list of some of the main occupations that typically provide living accommodation. This includes: agricultural workers living on farms or estates, pub and off-license managers living on premises, police officers and prison governors.
Employees provided with living accommodation can also be provided with other related benefits such as:
- heating and lighting the accommodation,
- the repair, maintenance and decoration of the interior,
- the cost of servants, gardeners etc..,
- provision of furniture, domestic appliances and other equipment.
The 2017-18 tax return deadline for taxpayers who continue to submit paper Self-Assessment returns, is 31 October 2018. Late submission of a Self-Assessment return will become liable to a £100 late filing penalty. The penalty usually applies even if there is no liability or if any tax due is paid in full by 31 January 2019.
We would recommend that anyone still submitting paper tax returns, consider the benefits of submitting the returns electronically and benefit from an additional three months (until 31 January 2019) in which to submit a return.
Taxpayers with certain underpayments in the 2017-18 tax year can elect to have this amount collected via their tax code (in 2019-20), provided they are in employment or in receipt of a UK-based pension. The coding applies to certain debts, and the amount of debt that can be coded out ranges from £3,000 to £17,000 based on a graduated scale. The maximum coding out allowance only applies to taxpayers with earnings exceeding £90,000.
Daily penalties of £10 per day will also take effect if the tax return is still outstanding three months after the filing date up to a maximum of £900. If the return still remains outstanding further higher penalties will be charged from six months and twelve months late.
Taxpayers that received a letter informing them that they have to submit a paper return after 30 July 2018, have an extended deadline which runs for three months from the date they received the letter to submit a paper return.