Newsletter – October 2012

eNEWS – October 2012

In this month’s enews we report that HMRC are about to issue letters to those families likely to be affected by the High Income Child Benefit Charge.

Please contact us if you would like any further details on any of the issues covered.


High income child benefit charge letters

HMRC are about to write to taxpayers who they believe will be affected by the High Income Child Benefit Charge.

In Budget 2012, as part of the reforms to the welfare system, it was confirmed that Child Benefit will be withdrawn from households that include certain higher earners.

Although the change applies from January 2013 the calculation to decide whether or not a household is affected by the reform includes the full income for 2012/13.

The legislation imposes a new charge (the High Income Child Benefit Charge) on a taxpayer who has adjusted net income over £50,000 in a tax year where either they or their partner, if they have one, are in receipt of Child Benefit for the year. Where there is a partner and both partners have adjusted net income in excess of £50,000 the charge will apply to the partner with the higher income.

An income tax charge will apply at a rate of 1% of the full Child Benefit award for each £100 of income between £50,000 and £60,000, rounded down to the nearest pound. The charge on taxpayers with income above £60,000 will be equal to the amount of Child Benefit paid.

Further information on the changes and what steps those affected should take can be found at

Please contact us if you would like any advice in this area.

Internet link: Press release

Too late for ‘paper’ self assessment tax returns

For those individuals who have previously submitted ‘paper’ self assessment tax returns the deadline for the 2011/12 return was 31 October 2012. Returns submitted after that date must be submitted electronically or they will incur a minimum penalty of £100. The penalty applies even when there is no tax to pay or the tax is paid on time.

If you would like any help with the completion of your return please do get in touch.

Internet link: HMRC press release

Plans for a new type of Employment contract

Chancellor George Osborne has announced a new type of employment contract to be known as an employee-owner. Under the new contract employees will be able exchange some of their UK employment rights for shares in the business they work for. Gains on the disposal of the shares will be exempt from capital gains tax.

Companies of any size will be able to use this new kind of contract and employees will be given between £2,000 and £50,000 of shares. In exchange, they will give up their UK rights on unfair dismissal, redundancy, the right to request flexible working and time off for training, and will be required provide 16 weeks’ notice of a firm date of return from maternity leave.

Employee-owner status will be optional and legislation to bring in the new contract is expected to be introduced later this year so that companies can use the new type of contract from April 2013.

Internet link: Press release

RTI – Closing payroll schemes

HMRC are about to write to employers who they believe have a payroll scheme which is not being used. The letters are being sent in preparation for the introduction of RTI as HMRC are planning to close any payroll schemes which they believe are no longer needed.

If you receive a letter regarding a payroll scheme which you believe will be used in the future please do get in touch so that we can advise HMRC accordingly.

Internet link: Employer Bulletin

Guidance on reclaiming National Insurance contributions paid in error

HMRC have issued guidance to cover the situation where vocational or recreational trainers may be entitled to claim a refund of National Insurance contributions. The refunds are due following a change in guidance on charging national insurance contributions.

HMRC’s briefing states:

‘Refunds may be made by trainers or instructors, or those who engaged them, and where amounts of NICs were paid in error following HMRC’s guidance. This is primarily going to affect those engaged in the provision of vocational or recreational training as set out in HMRC’s guidance prior to repeal of the relevant provisions of the Regulations.’

‘Refunds are not due where educational training providers applied the Regulations. This is because there is no dispute or doubt that the Regulations prior to 6 April 2012 applied to the providers of educational training. In this context educational training provider means a school, college, university or any such similar educational establishment.’

‘Refunds are also not due where any trainer or instructor was engaged under an employment contract and Income Tax (PAYE) and Class 1 NICs were correctly accounted for.’

Please get in touch if you would like any help in this area.

Internet link: HMRC brief

Health and Safety Executive Fee for Intervention

The Health and Safety Executive has announced that it has implemented a Fee for Intervention (FFI) cost recovery scheme, which came into effect on 1 October 2012.

Under The Health and Safety (Fees) Regulations 2012, those who break health and safety laws are liable for recovery of HSE’s related costs, including inspection, investigation and taking enforcement action.

The HSE website advises:

‘The Fee for Intervention hourly rate for 2012/13 is £124. The many businesses that comply with their legal obligations will continue to pay nothing.’

For more information on how the new scheme works visit the link below.

Internet link: HSE website

Retirement funds set to fall

According to a report issued by the Saga Foundation, millions of Britons due to retire over the next few years risk seeing £11.5 billion wiped off their retirement funds.

The report factors in tax and benefit changes, which include the freezing of age related personal allowances from April 2013 and reduction in winter fuel payments, together with low interest rates.

Compiled by experts from the Centre for Economics and Business Research, the report comes to the conclusion that the changes will cost pensioners an average of £1,318 each by 5 April 2014.

Dr Ros Altmann, Director General of Saga, said:

‘Pensioners are being hammered. They didn’t cause our economic meltdown yet they have been paying a heavy price as we try to fix it and they face an even tighter financial squeeze in future.’

Internet link: Saga press release

HMRC checklist for EC VAT registration numbers

HMRC have issued a revised Notice 725, The Single Market, which includes a useful checklist (see section 16.19) to enable businesses to help spot incorrect VAT registration numbers at a glance.

Customer’s VAT registration numbers can be verified using the Europa website VIES or by contacting the VAT Helpline on 0845 010 9000.

Internet link: VAT Notice 725

Don’t let this happen to you!

I was recently visited by a potential client, who had enquired about the possibility of using our services.  We had the usual discussion about the type of business, what was needed and the current situation.

The first alarm bell rang when they told me that they had been disengaged by their previous advisor, due to non payment of fees, but then things got a whole lot worse!

There were issues with VAT registration, PAYE registration, P11D issues, current accounts being overdue by nearly six months, previous accounts submitted late and outstanding tax returns, amongst many other things.  The potential for penalties and interest were becoming very large at this stage.

This got me thinking, how on earth does one get into this mess?  I might argue that a previous accountant might shoulder part of the blame, for not picking up the lack of VAT registration, due to the amount of turnover, but I only had the potential clients word for that!  And, why did he leave it so long to try to get it sorted?

So – how can you avoid this happening to you?

  • Engage an accountant that has been recommended to you BEFORE you start out in business.
  • Discuss with the accountant ALL of the relevant facts relating to your business and your personal tax affairs – make sure they have ALL of the information they require.
  • Make sure you are clear from the outset as to what is required from you and what the accountant will be doing – this is usually done in the form of an engagement letter, if not, make sure you clarify.
  • Make sure you are clear about your VAT, PAYE, corporation tax and personal tax requirements.
  • Make sure you keep accurate and up to date records, from day one.
  • Make sure you keep your accountant notified of ANY correspondence from HMRC, Companies House and any other Government bodies – do this on the same day that you receive it – IGNORE NOTHING!
  • Keep in regular touch with your accountant, if you’re thinking of doing anything with the business, ask your accountant first, just to make sure it won’t affect anything that you are unaware of.
  • Make sure you are aware or made aware of ALL of the deadlines that are applicable to your business (there will be many!), if in doubt either ask for a list or ask your accountant to remind you – BEWARE, there are more and more penalties now for late or incorrect submissions and there will soon be more scope when PAYE Real Time Information and Pensions Auto-Enrolment kicks in!
  • Make sure your accountant is aware if you need something urgently for any reason, so that they can factor this into their workload.  Above all – PLEASE DON’T LEAVE ANYTHING UNTIL THE LAST MINUTE

Don’t forget there is also lots of FREE advice on the web, such as DirectGov, HMRC, Companies House, BIS and many more.  These can’t and shouldn’t  replace the accountants advice, but can help for further understanding or maybe even give you more questions to ask your accountant!

Once you have done all of the above for a while, it will become second nature – you will have a much less cluttered mind, fewer worries and will be able to concentrate on what you do best – running your business, let your advisors do the rest.  And finally don’t forget to consider what other advisors you might need – Legal, HR etc.

You know where we are when you need us!