from A newsletter for proactive planning... In this edition... Tax and tips NIC advantages of part-time workers Mobile phones – a worthwhile benefit Do you need to complete a tax return? Are you entitled to small business rate relief? Tax Diary- July 2023 July 2023 Issue www.compassaccountants.co.uk
PAGE 2 Tax and Tips The Employment (Allocation of Tips) Act 2023 sets out a new legal framework for the fair allocation of tips. A new Code of Practice is to be introduced and employers will have a legal obligation to adhere to the Code. It will set out the principles of fairness and transparency and will reflect the different ways in which tips are reasonably collected by employers and distributed to workers. Tips, gratuities and service charges A customer may pay extra as a tip, a service charge or a gratuity. A tip or gratuity is a voluntary payment that the customer has no obligation to pay. Increasingly, restaurants are adding a service charge to the bill. If it is made clear that there is no obligation on the customer to pay the service charge, it is a voluntary service charge. If the customer must pay it, the charge is a mandatory service charge. The tax and National Insurance consequences depend on the nature of the payment and how it is made and distributed. Tips made directly to the staff A customer may give a tip direct to a worker or leave the tip on the table at the end of a meal. Tips given directly to workers are liable for tax. It is the responsibility of the worker to tell HMRC about the tips that they receive, either by completing a SelfAssessment tax return or via their personal tax account. HMRC will usually collect the associated tax via an adjustment to the employee’s PAYE code. There is no National Insurance to pay on tips given direct to a worker. Employer shares out the tips In a situation where the employer initially collects all the tips, irrespective of whether they are made in cash or paid by card, and distributes them to the employees, the amounts distributed must be paid through the payroll and included in gross pay for tax and for National Insurance. The amounts are liable to both tax and National Insurance. Troncs A tronc is an arrangement for sharing tips. A tronc is run by a troncmaster and the troncmaster is responsible for operating PAYE and National Insurance on the distributed tips. The tronc will have its own PAYE scheme for this purpose, which must be run independently from the employer’s PAYE scheme. Tips and the NMW A worker is entitled to be paid at least the National Living Wage (NLW) or National Minimum Wage (NMW) for their age. Amounts paid to workers in respect of tips, gratuities or service charges do not count towards the minimum wage – the worker must be paid these in addition to the NLW or NMW.
PAGE 3 NIC advantages of part-time workers
PAGE 4 The tax system contains a number of exemptions, some of which are more useful than others. One of the more valuable exemptions is that for mobile telephones. As long as the associated conditions are met, an employee can use an employer-provided mobile phone for private use without being taxed on the associated benefit. However, there are some pitfalls to avoid. Provision of the phone The exemption applies where an employee is provided with a mobile phone ‘without any transfer of property in it’. This means that the legal ownership of the phone must not be transferred to the employee. The method of provision is also key. The exemption will only apply if the contract is between the mobile phone provider and the employer. If the employer chooses to purchase the handset outright, they must retain ownership of it; the airtime contract must be between the employer and the mobile phone provider. From a tax position, the outcome is different if the employee contracts with the mobile phone company and the employer pays the bill on the employee’s behalf. Here the employer is meeting a personal bill of the employee rather than providing the employee with a mobile phone. As a result, the mobile phone exemption does not apply and the amount paid on the employee’s behalf is taxable and liable to Class 1 National Insurance. Likewise, if the employee initially meets the cost of the phone and/or the airtime and this is later reimbursed by the employer the mobile phone exemption does not apply as the employee is not being provided with the use of a phone. The exemption for paid and reimbursed expenses does not apply either if the phone is used privately, as the employee would not be entitled to a deduction should they meet the cost personally. Although at first sight it may seem that the same result is obtained in each case – the employee has the private use of a phone the cost of which is met by the employer – the tax consequences are very different. It is essential that the employer provides the phone and contracts with the mobile phone provider for the exemption to apply. One phone per employee The exemption is limited to one phone for private use per employee. Where the employee also has a phone which can only be used for business calls, the exemption remains available for a phone which can be used privately. There is no tax charge if the phone is only available for business calls and is only used for business calls --the business phone is ignored for the purposes of the exemption. Beware salary sacrifice The exemption does not apply where the phone is made available under a salary sacrifice or other optional remuneration arrangement.
PAGE 5 Do you need to complete a tax return? Even if you pay all your tax through PAYE, you may still need to complete a Self-Assessment tax return if you are a high earner. For 2022/23 and earlier tax years, this is the case if your income is more than £100,000. However, for 2023/24 onwards, the trigger threshold is increased to £150,000. Unless you have to complete a self-assessment tax return for another reason, if you are taxed under PAYE and your income is between £100,000 and £150,000, you will need to file a tax return for 2022/23 but will not need to do so for 2023/24 onwards. You must file your 2022/23 tax return online by 31 January 2024. It is important that you do this, as HMRC will charge you a late filing penalty of £100 if you miss the deadline, even if you have no tax to pay. Reasons you may need to file a return Even if you are employed and your income is below the Self-Assessment trigger threshold, you may still need to file a Self-Assessment tax return. This could be because you also had income of more than £1,000 from selfemployment or because you were a partner in a business partnership. You may also need to file a Self-Assessment tax return if: ·you receive income of more than £1,000 from renting out properties; ·you receive dividend income in excess of the dividend allowance; ·you receive interest that is taxable; ·you have foreign income to report; ·you realise chargeable gains in the tax year; or ·you are liable to pay the high-income child benefit charge. Remember that the additional rate threshold has been reduced from £150,000 to £125,140 from 2023/24. If your income is between £125,140 and £150,000, you will no longer receive a personal savings allowance as this is only available to higher and basic rate taxpayers. The allowance is set at £500 for higher rate taxpayers. If you were previously entitled to the allowance and you received savings interest of less than £500, you would not have had to pay tax on that interest. However, if you are now an additional rate taxpayer, any savings interest (other than that in a tax-free wrapper such as an ISA) is taxable and you will need to report it to HMRC. Telling HMRC If you think that you no longer need to file a SelfAssessment return because your income is below the new threshold and you have nothing else to report, or if you have retired, you will need to tell HMRC. You can do this online, either using HMRC’s digital assistant or by completing an online form. You can also write to HMRC or tell them by phone (although it should be noted that the Self-Assessment helpline is closed until 4 September).
PAGE 6 Are you entitled to small business rate relief? Business rates are charged on non-domestic properties like shops, offices, warehouses, factories and holiday rentals or guest houses. However, if your property’s rateable value is less than £15,000 and your business only uses one property, you may be entitled to small business rate relief. Nature of the relief The amount of relief to which you are entitled depends on the rateable value of your business property. If this is £12,000 or less and you only have one business property, you will receive 100% relief. This means that you will not need to pay any business rates. Where the rateable value of your business property is between £12,000 and £15,000, the rate of relief is found by the following formula: (£15,000 – rateable value)/(£15,000 – £12,000) x 100% For example, if the rateable value of your business property is £14,000, you will receive relief of 33.33% (£1,000/£3,000 x 100%). Similarly, if the rateable value of your business property is £13,500, you will receive 50% relief (£1,500/£3,000 x 100%). The rate of relief gradually reduces from 100% for properties with a rateable value of £12,000 or less to 0% for properties with a rateable value of £15,000. Further conditions for holiday lets From April 2023, holiday lets are only eligible for business rates if certain conditions are met. To qualify, the property must be actually let as a holiday let for at least 70 nights in the tax year and available for letting as a holiday let for at least 140 nights. If the holiday let qualifies as a furnished holiday letting for tax purposes, it will meet the business rates test as this is less stringent. If the property does not meet the new business rates test, council tax will be payable instead. More than one business property If you have more than one business property, you may still qualify for small business rate relief. This will be the case if none of your other business properties have a rateable value in excess of £2,899 and the total rateable value of all your properties is not more than £20,000 (£28,000 in London). Claim the relief You will need to claim the small business rate relief if you are eligible. Contact your council to find out how to make a claim. 2023 revaluation Properties are revalued every five years for business rates purposes. From 1 April 2023, business rates are based on the rateable value at 1 April 2021. If your rateable value has changed, this may affect your entitlement to small business rate relief. You may be entitled to transitional relief if your bill has increased from 1 April 2023 as a result of the revaluation, either because you have lost small business rate relief or because the relief that you received has been reduced. The relief caps the amount by which the bill can increase. If your rateable value is less than £20,000 (£28,000 in London), the amount by which your bill can increase from one year to the next is capped at 5% for 2023/24, at 10% plus inflation for 2024/25 and at 25% plus inflation for 2025/26. Transitional relief ends when your business rates bill reaches the amount calculated by reference to your new rateable value. The council should give you the relief automatically if you are eligible but check your bill to make sure it is correct.
PAGE 7 TAX DIARY JULY 2023 6 July 2022 - P11D Employees must submit a P11D form to HMRC by the 6th of July. This is a declaration of all costs and benefits other than tax and insurance payments, such as car allowances or interest-free loans. You'll need to create one of these forms for each person who receives any of these perks. 19th July 2022 - Payment of NI Any Class 1A National Insurance owed on travel or attendance expenses or benefits for the preceding tax year must be paid to HMRC by the 19th of July if paying by cheque. 22nd July 2022 - Payment of NI Digitally Any Class 1A National Insurance owing on expenses or benefits for the previous tax year must be paid to HMRC by the 22nd of July if you pay electronically. 31 July 2022 - 2nd Payment on Account Payments on account are advance tax payments made by self-employed self-assessment individuals twice a year to avoid the cost of the year's tax. They are estimated based on your prior year's tax bill, which is about half of the previous year's tax bill—the deadline for making the second payment on account for the income tax year ending 5 April 2022 is 31st July. For further information on any of the stories in this month’s newsletter, or for any other matter that Compass Accountants can assist you with, please contact us on 01329 844145 or contact@compassaccountants.co.uk To subscribe to the newsletter, so that each edition is delivered to your inbox, go to www.compassaccountants.co.uk and add your contact details. Compass Accountants, Venture House, The Tanneries, East Street, Titchfield Hampshire. PO14 4AR
Fleepit Digital © 2021