BMG Weekly Tax Tips

BMG ACCOUNTANTS – WEEKLY TAX TIPS – 21 FEBRUARY
2019
Week 53 payments
The 2018/19 tax year started on a Friday — Friday 6 April 2018; it also ends on a
Friday – Friday 5 April 2019. Where employees are paid in multiples of a week, their
payday often falls on a Friday. As a result, where the last pay day in the 2018/19
tax year is Friday 5 April 2019, depending on their pay frequency, some employees
may have an additional payday in 2018/19; there are 53 paydays for weekly paid
employees, 27 for fortnightly paid employees and 14 for four-weekly paid
employees.
The additional payday is referred to as ‘Week 53’ for weekly paid staff, ‘Week 54’ for
fortnightly paid staff and as ‘Week 55’ for four-weekly paid staff. Where employers
are required to make an additional payment in 2018/19, it is important that they
know how to treat is correctly.
Under the PAYE system, an employee’s allowance is spread evenly throughout the
year by allowing the employee a certain amount of ‘free pay’ each time that they
are paid. For week 53, 54 and 55 payments, the employee benefits from an
additional amount of free pay; achieved by using a non-cumulative basis for that
payment only. The free pay is determined as if the payment were, respectively, a
week 1, week 2 or week payment. The exception to this rule is if the cumulative pay
for the year to date is less than the employee’s personal allowance, in which case,
tax should be computed on a cumulative basis.
The payroll software should identify week 53 payments, but check whether it is
necessary to set an indicator to recognise the additional week. The correct week
number (53, 54 or 55) should be entered on the FPS.
HMRC’s Employer Bulletin, February 2019
CWG2 Employer’s Further Guide to PAYE and National Insurance contributions
BMG ACCOUNTANTS – WEEKLY TAX TIPS – 21 FEBRUARY
2019
Updating tax codes for 2019/20
The tax code is fundamental to the operation of PAYE. Not only does it ensure that
employees’ tax is calculated by reference to their own personal allowance, it also
ensure that Scottish and Welsh payers are identified so that tax is paid at the
correct rates. Codes for Scottish taxpayers have a ‘S’ prefix, whereas those for
Welsh taxpayers have a ‘C’ prefix.
HMRC have begun their annual task of sending out P9 Notice of Coding email
notifications advising employers of the tax code that they should use for employees
for the 2019/20 tax year. Employers who have not received codes by 22 March
2019 should call HMRC’s employer helpline on 0300 200 3200.
If the employer has received a P9(T) or other tax code notification for the
employee, the latest code should be used.
If no notification has been received, the code should be updated in accordance with
the instructions contained in leaflet P9X.
For codes with an ‘L’ suffix, employers should add 65 to the 2018/19 code, so that
1185L become 1250L. Employers should add 71 to 2018/19 codes ending in M, and
59 to 2018/19 codes ending in N to arrive at the 2019/20 code.
Some codes can be carried forward unchanged – BR, SBR, D0, SD0, D1, SD1, SD2
and NT.
Care should be taken when updating the codes that they apply from the start of
2019/20 tax year only.
P9X: Tax codes to use from 6 April 2019
HMRC’s Employer Bulletin, February 2019
BMG ACCOUNTANTS – WEEKLY TAX TIPS – 21 FEBRUARY
2019
‘Living’ in a property for PRR purposes
Private residence relief provides relief from capital gains tax arising on the disposal
of a property which has been the taxpayer’s only or main residence.
In the recent tribunal decision of Hezi Yechiel TC06829, consideration was given as
to whether, for the purposes of the legislation, Mr Yechiel occupied the property in
question, 6 Beaufort Drive, as his only or main residence.
Mr Yechiel purchased the property in September 2007 intending it to be a family
home for him and his then fiancée. The property, which was 15 minutes from his
parents’ house, needed a lot of work. They married in 2008 and separated in
January 2011. Mr Yechiel moved into the house in April 2011. In October 2011 the
property was advertised for sale and Mr Yachiel moved in with his parents. Mr
Yechiel was present each morning in the property during the period April to July
2011. His builder had previously ‘kitted up’ a bedroom and kitchen for him. The
property was sold in August 2012 at a significant gain.
In determining whether the property was occupied as a main residence, the Tribunal
considered the ordinary English meaning of ‘reside’ which is ‘to dwell permanently
or for a considerable period of time, to have one’s usual or settled abode, to live in
a particular place’.
In determining whether a property qualifies as a `residence’, the nature, quality,
length and circumstance of the occupation are taken into account. Weight is also
given to the taxpayer’s intention – in this case to have a ‘bolt hole’ to escape the
stress of his divorce and for it to be a long-term home.
The tribunal considered what Mr Yechiel did in the house. It had a working kitchen
and bedroom and (the Tribunal presumed) a bathroom. While Mr Yechiel slept
there, he did not cook there or do his washing there; when he ate there, it was
mainly take-way food. He brought only a bed and a side table for the property.
During the period Mr Yechiel spent a significant amount of time at his parents’
house, eating there and doing his laundry there.
The Tribunal dismissed Mr Yechiel’s appeal. They found his occupation lacked
sufficient quality of occupation, concluding ‘that to have a quality of residence, the
occupation of the house should constitute not only sleeping, but also period of
‘living’, being cooking, eating a meal sitting down, and generally spending some
periods of leisure there.
It is important that clients appreciate the quality of occupation as well as the
quantity when seeking to claim private residence relief.
Tribunal decision Hezi Yechiel TC06829

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