Category Archives: Newsletters

Newsletter – April 2012

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eNEWS – April 2012

In this month’s enews we report on some issues pertinent to employers and employees.

Please contact us if you would like any further information.

 

eNEWS quicklinks
P11D deadline looming Rising employment statistics
Employer end of year forms Outstanding self assessment tax returns
HMRC issue guidance on RTI to employers VAT on hot food
Charitable giving – cap on tax relief  

 

P11D deadline looming

The forms P11D, and where appropriate P9D, which report employees and directors benefits and expenses for the year ended 5 April 2012, are due for submission to HMRC by 6 July 2012. The process of gathering the necessary information can take some time, so it is important that this process is not left to the last minute.

Employees pay tax on benefits provided as shown on the P11D, either via a PAYE coding notice adjustment or through the self assessment system. In addition, the employer has to pay Class 1A National Insurance Contributions at 13.8% on the provision of most benefits. The calculation of this liability is detailed on the P11D(b) form.

HMRC have issued some guidance as to common errors on the forms in the latest Employer Bulletin. These include the following:

  • Not ticking the director box if the employee is a director
  • Not including a description or abbreviation where amounts are included in box A, B, L, M or N of the form
  • Leaving the cash equivalent box empty
  • Failing to report the full gross value of the benefit where it is provided for mixed business and private use
  • Not reporting a fuel benefit where one is due.

Correct completion of forms P11D can be a complex issue. If you would like any help with the forms P11D or the calculation of the associated Class 1A National Insurance liability please get in touch.

Internet links: HMRC P11D guidance Employer Bulletin

Rising employment statistics

According to the latest statistics issued by the Office of National Statistics:

‘The unemployment rate was 8.3% of the economically active population, down 0.1 on the quarter. There were 2.65 million unemployed people, down 35,000 on the quarter. This is the first quarterly fall in unemployment since the three months to May 2011.’

Dr Neil Bentley, CBI Deputy Director-General, said:

‘It’s good news that 53,000 more people are in work now than three months ago, which shows that the private sector is gradually regaining confidence to hire.’

‘While this is the best jobs news we’ve had in a year, the Government must step up its welfare reform programme. Worryingly, over a third of those unemployed have been out of work for more than 12 months.’

‘With youth jobless numbers still stubbornly high, helping young people find jobs must remain a joint priority for businesses and government.’

Internet links: CBI press release ONS Bulletin

Employer end of year forms

HMRC are reminding employers that in order to avoid penalties they must file the Employer Annual Return (P35 and P14s) online and on time. The vast majority of employers must file electronically and the deadline for submission of the forms is 19 May 2012, which this year falls on a Saturday.

Where employers do not file their annual return by 19 May they incur a penalty of £100 per 50 (or fewer) employees for every month (or part month) that their return is late.

HMRC have been criticised for failing to make employers aware that they were incurring penalties on a timely basis. In a change to procedure HMRC will now issue employers, who they believe have yet to make a return, with an ‘Employer Annual Return Reminder’ from the end of April.

From the end of May HMRC will issue ‘P35 Interim Penalty Letters’ to relevant employers.

If you are unsure whether you need to complete a return this year please do get in touch.

Internet links: HMRC end of year guidance Employer Bulletin

Outstanding self assessment tax returns

HMRC are urging anyone who has still not completed their 2010/11 self assessment tax return to send it online before the end of April, or be charged daily penalties from 1 May.

Anyone whose return is more than three months late will be charged a further £10 penalty for each day it remains outstanding, up to a maximum of 90 days. This penalty is in addition to the £100 late filing penalty they have already received.

HMRC are advising that if an individual receives a late filing penalty but does not think that they need to complete a return, they should call HMRC on 0845 900 0444. Alternatively contact us so that we can help, as it may be possible to cancel the penalty if HMRC agree that the return is not due.

HMRC’s Stephen Banyard said:

‘We want the returns and not penalties. So, if you haven’t sent us your 2010/11 return, you need to do one of two things urgently – either send it online by 30 April, or call us if you think you shouldn’t have to complete one.’

Internet link: Press release

HMRC issue guidance on RTI to employers

HMRC have updated their guidance on Real Time Information (RTI). This new system of monthly PAYE returns is to be piloted from April 2012 and is expected to be compulsory for all employers from October 2013.

If you would like to read more about the new system please follow the link below. If you would like help with payroll matters please do get in touch.

Internet link: HMRC FAQs

VAT on hot food

HMRC are consulting on changing the rules on hot takeaway food to ensure that all food (with the exception of freshly baked bread) that is above ambient air temperature when provided to the customer is standard rated.

Currently the rules are complex as if food is hot because it has just been cooked, such as freshly baked pies or roasted chicken, these items may in certain circumstances be zero rated for VAT purposes.

We will let you know the outcome of the consultation.

Internet link: HMRC consultation

Charitable giving – cap on tax relief

The government is proposing to restrict tax reliefs available to individuals such as charitable giving.

Currently individuals can offset their entire income against income tax reliefs, and as a result may pay no income tax at all. It was announced in the Budget 2012 that from 6 April 2013 there will be limits to the amount of income tax relief individuals can claim.

This cap will apply only to reliefs which are currently unlimited. This cap will be set at 25% of income (or £50,000, whichever is greater).

HMRC propose to issue a consultation document on the detail of the policy, including the implications for philanthropic giving, in the summer. We will keep you informed of developments.

Internet link: HMRC press release

Newsletter – March 2012

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eNEWS – March 2012

In this month’s enews we report on the Budget. You may have already read some information following Budget Day but we have included details of the key announcements.

Please contact us if you would like any further information.

 

eNEWS quicklinks
Budget 2012 Increased personal allowance for 2012/13
Age allowances Child Benefit
Corporation tax rates Stamp duty land tax (SDLT)
Employer end of year forms Reimbursing additional household expenses
Advisory fuel rates for company cars Updated guidance on Gift Aid and new declarations
National Minimum Wage rates National Loan Guarantee Scheme

 

Budget 2012

George Osborne presented his third Budget on Wednesday 21 March 2012.

The Chancellor started by reaffirming the need for stability in the UK economy and finished in Churchillian style with phrases such as:

‘No people will strive as the British will strive.’

‘No country will adapt as the British will adapt.’

‘This country borrowed its way into trouble. Now we’re going to earn our way out.’

The main Budget proposals announced are:

  • A further increase in the personal allowance but with a reduction in the basic rate band from April 2013.
  • A reduction in the additional rate of income tax from 50% to 45% from April 2013.
  • A phasing out of the age related personal allowances.
  • Details of how Child Benefit will be taxed on those with income in excess of £50,000.
  • An additional 1% cut in the main rate of corporation tax to 24% from April 2012.
  • Increased Stamp Duty Land Tax on high value residential properties.

Details of the announcements and supporting documentation can be found on the Treasury website using the link below.

Internet link: Treasury Website Budget page

Increased personal allowance for 2012/13

For those aged under 65 the personal allowance will be increased by £630 to £8,105. This increase is greater than the minimum required and is part of the plan of the government to ultimately raise the allowance to £10,000.

The personal allowance is reduced by £1 for every £2 of adjusted net income over £100,000. So for 2012/13, the allowance ceases at adjusted net income in excess of £116,210.

Tax band and rates 2012/13

The basic rate of tax is currently 20%. The band of income taxable at this rate is being reduced to £34,370 so that the threshold at which the 40% higher rate of tax applies will remain at £42,475.

The 50% additional rate of tax currently applies where taxable income exceeds £150,000.

If dividend income is part of total income this is taxed at 10% where it falls within the basic rate band, 32.5% where liable at the higher rate of tax and 42.5% where liable to the additional rate of tax.

Changes for 2013/14

The personal allowance is to increase to £9,205. The band of income taxable at this rate is being reduced to £32,245 so that the threshold at which the 40% band applies will reduce to £41,450.

For 2013/14 the 20% basic rate and 40% higher tax rates remain unchanged. However the 50% additional rate tax will be reduced to 45%. A rate of 37.5% will be payable on dividends liable to the additional rate of tax.

There had been widespread speculation that the 50% top rate of tax would be abolished.

Internet link: HMRC Budget information

Age allowances

It was announced in the Budget that from 2013/14 the higher age related personal allowances will not be increased and their availability will be restricted to people born on or before:

  • 5 April 1948 for the £10,500 allowance
  • 5 April 1938 for the £10,660 allowance.

This has been labelled the ‘granny tax’ by many as the increased allowances will no longer be available to those reaching age 65 and 75 respectively.

Internet link: HMRC Budget information

Child Benefit

Legislation will be introduced to impose a new charge on a taxpayer who has adjusted net income over £50,000 in a tax year where either they or their partner are in receipt of Child Benefit for the year. Where both partners have adjusted net income in excess of £50,000 the charge will apply to the partner with the higher income.

The 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. The charge on taxpayers with income above £60,000 will be equal to the amount of Child Benefit paid.

Child Benefit claimants will be able to decide not to receive Child Benefit if they or their partner do not wish to pay the new charge.

This charge will have effect from 7 January 2013 and for 2012/13 will apply to the Child Benefit paid from that date to the end of the tax year. The income taken into account will be the full income for 2012/13.

The removal of Child Benefit from households containing a higher rate taxpayer had been announced previously. However the detail of the way in which the restriction would apply had been subject to speculation. The following HMRC example shows how the charge will be calculated:

The Child Benefit for two children amounts to £1,752 and the taxpayer’s adjusted net income is £54,000.

The income tax charge will be £700.80 which is calculated as £17.52 for every £100 above £50,000.

For a taxpayer with adjusted net income of £60,000 or above the income tax charge will equal the Child Benefit.

Internet link: HMRC Budget information

Corporation tax rates

A further reduction in the main rate of corporation tax has been announced. The planned 1% decrease announced to take effect from 1 April 2012 is now to be a 2% decrease with the rate moving from 26% to 24%. Further 1% reductions to 23% and 22% are to take place from 1 April 2013 and 1 April 2014 respectively. The small company rate will remain at 20%.

Internet link: HMRC Budget information

Stamp duty land tax (SDLT)

A new rate of 7% will be introduced where the chargeable consideration for a residential property is more than £2 million. This will have effect where the effective date (normally the date of completion) is on or after 22 March 2012, unless the contract was entered into before that date.

An even higher rate of 15% will apply to such residential properties if the purchaser is a ‘non natural person’, for example a company. This will have effect where the effective date of the transaction is on or after 21 March 2012.

In addition the government will consult on the introduction of:

  • a SDLT annual charge where properties over £2 million are owned by non natural persons
  • a CGT charge on residential property owned by non resident, non natural persons.

Both these measures will apply from April 2013.

The intention of the 15% charge is to stop or reduce the number of schemes which claim to allow a property to be transferred without SDLT. The charges to be introduced in 2013 are aimed at charging properties already in companies which are used as residential accommodation.

Internet link: HMRC SDLT Budget changes

Employer end of year forms

HMRC are reminding employers that in order to avoid penalties they must file the Employer Annual Return (P35 and P14s) online and on time. The vast majority of employers must file electronically and the deadline for submission of the forms is 19 May 2012 which this year falls on a Saturday.

To avoid unnecessary late filing penalty notices being issued, where no return is necessary, it is important to advise HMRC that no return is due. This can be done using the link below.

If you are unsure whether you need to complete a return this year please do get in touch.

Internet links: HMRC guidance No P35 online form

Reimbursing additional household expenses

From 6 April 2012 HMRC are increasing the guideline rate which employers can use to reimburse employees for additional household expenses incurred because they have to work from home to £4 per week (currently £3 a week). To find out more about the circumstances when these expenses can be reimbursed please do get in touch.

Internet link: HMRC expenses and benefits

Advisory fuel rates for company cars

New company car advisory fuel rates have been published to take effect from 1 March 2012. HMRC’s website states:

‘These rates apply to all journeys on or after 1 March 2012 until further notice. For one month from the date of change, employers may use either the previous or new current rates, as they choose. Employers may therefore make or require supplementary payments if they so wish, but are under no obligation to do either.’

The advisory fuel rates for journeys undertaken on or after 1 March 2012 are:

Engine size Petrol Diesel LPG
1400cc or less 15p   10p
1401cc – 2000cc 18p   12p
Over 2000cc 26p   18p
1600cc or less   13p*  
1601cc – 2000cc   15p  
Over 2000cc   19p*  

Please note that only two of the diesel rates have changed. These two rates marked * have both increased by one pence per mile.

Other points to be aware of about the advisory fuel rates:

  • Employers do not need a dispensation to use these rates.
  • Employees driving employer provided cars are not entitled to use these rates to claim tax relief if employers reimburse them at lower rates. Such claims should be based on the actual costs incurred.
  • The advisory rates are not binding where an employer can demonstrate that the cost of business travel in employer provided cars is higher than the guideline mileage rates. The higher cost would need to be agreed with HMRC under a dispensation.

If you would like to discuss your car policy, please contact us.

Internet link: HMRC fuel advisory rates

Updated guidance on Gift Aid and new declarations

HMRC have updated their guidance on Gift Aid declarations and provided new model declarations. They have also developed a new checklist of the minimum information to be included in a declaration if a charity decides to create and use its own declaration form.

Internet link: HMRC Charities Gift Aid

National Minimum Wage rates

The government has accepted the Low Pay Commission’s recommendations for National Minimum Wage rates from 1 October 2012.

From 1 October 2012:

  • the adult minimum wage rate will increase from £6.08 to £6.19 an hour
  • the youth development rate will remain at £4.98 an hour
  • the 16-17 year old rate will remain at £3.68 an hour and
  • the apprentice rate will increase from £2.60 to £2.65 an hour.

The Chair of the Low Pay Commission David Norgrove said:

‘Our recommendations this year are, as ever, based on extensive economic evidence and take account of the prospects for the UK economy. Although the economy is forecast to grow through 2012 and 2013, the expected pace of growth is uncertain and is likely to be low. We believe our recommendations for October 2012 balance the needs of low-paid workers against the challenges facing businesses, particularly small businesses.’

Internet link: Press release

National Loan Guarantee Scheme

The Chancellor George Osborne has launched the National Loan Guarantee Scheme (NLGS), which is designed to help ‘smaller businesses’ across the UK access cheaper finance. The loans will be available to businesses with an annual group turnover of up to £50 million.

According to the press release:

‘The government is using the UK’s budget credibility in financial markets to provide up to £20 billion of government guarantees on unsecured borrowing by banks, enabling them to borrow at a cheaper rate. Around £5 billion in guarantees will be made available in the first tranche.’

Businesses that take out an NLGS loan will receive a discount of 1% compared to the interest rate that they would otherwise have received from that bank outside the scheme.

George Osborne said:

‘The government promised to help small businesses get access to lower interest rates. Today, we deliver on that promise with a nationwide scheme. It’s only because we’ve earned credibility with our deficit reduction plan that we have low interest rates, and it’s only because of this scheme that we can pass the benefits of those low rates onto businesses.’

Internet link: Press release

Budget Statement 21 March 2012

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Budget 2012

George Osborne presented his third Budget on Wednesday 21 March 2012.

The Chancellor started by reaffirming the need for stability in the UK economy and finished in Churchillian style with phrases such as:

‘No people will strive as the British will strive.’
‘No country will adapt as the British will adapt.’
‘This country borrowed its way into trouble. Now we’re going to earn our way out.’

Towards the end of last year the Government issued the majority of the clauses, in draft, of Finance Bill 2012 together with updates on consultations. The publication of the draft Finance Bill clauses is part of the Government’s improvements in the way tax policy is developed, communicated and legislated. The Budget updates some of these previous announcements and also proposes further measures. Some of these changes apply from April 2012 and some take effect at a later date, so the timing needs to be carefully considered.

Our summary focuses on the issues likely to affect you, your family and your business. To help you decipher what was said we have included our own comments.

If you have any questions please do not hesitate to contact us for advice.

Main Budget proposals

A further increase in the personal allowance but with a reduction in the basic rate band from April 2013.

  • An additional 1% cut in the main rate of corporation tax to 24% from April 2012.
  • A reduction in the additional rate of income tax from 50% to 45% from April 2013.
  • Details of how Child Benefit will be taxed on those with income in excess of £50,000.
  • Proposals for tax simplification for smaller businesses.
  • Consultation on the introduction of a general anti-abuse rule.
  • Increased Stamp Duty Land Tax on high value residential properties.

Previous announcements

Some of the changes detailed in this summary have been the subject of earlier announcements. Here is a reminder of some of the more important ones:

  • The introduction of a Statutory Residence Test
  • Changes for non-domiciled individuals
  • Reduced rates of inheritance tax for charitable individuals
  • Introduction of the Seed Enterprise Investment Scheme
  • Reduction of the Annual Investment Allowance from April 2012
  • Changes to the relief available for Research and Development expenditure.

The Budget proposals may be subject to amendment in a Finance Act. You should contact us before taking any action as a result of the contents of this summary.

Personal Tax

The personal allowance for 2012/13

For those aged under 65 the personal allowance will be increased by £630 to £8,105. This increase is greater than the minimum required and is part of the plan of the Coalition Government to ultimately raise the allowance to £10,000.

The personal allowance is reduced by £1 for every £2 of adjusted net income over £100,000. So for 2012/13, the allowance ceases at adjusted net income in excess of £116,210.

Comment

Planning should be considered where adjusted net income is expected to exceed £100,000. This figure is calculated after giving a deduction against income for pension contributions and Gift Aid payments. Consider whether these could be made to protect some or all of the personal allowance.

Tax band and rates 2012/13

The basic rate of tax is currently 20%. The band of income taxable at this rate is being reduced to £34,370 so that the threshold at which the 40% higher rate of tax applies will remain at £42,475.

 

The 50% additional rate of tax currently applies where taxable income exceeds £150,000.

 

If dividend income is part of total income this is taxed at 10% where it falls within the basic rate band, 32.5% where liable at the higher rate of tax and 42.5% where liable to the additional rate of tax.

Changes for 2013/14

The personal allowance is to increase to £9,205. The band of income taxable at this rate is being reduced to £32,245 so that the threshold at which the 40% band applies will reduce to £41,450.

For 2013/14 the 20% basic rate and 40% higher tax rates remain unchanged. However the 50% additional rate tax will be reduced to 45%. A rate of 37.5% will be payable on dividends liable to the additional rate of tax.

Similar changes will be made to the rates which apply to trusts.

Comment

There had been widespread speculation that the 50% top rate of tax would be abolished.

Age allowances

From 2013/14 the higher age related personal allowances will not be increased and their availability will be restricted to people born on or before:

  • 5 April 1948 for the £10,500 allowance
  • 5 April 1938 for the £10,660 allowance.

Child Benefit

Legislation will be introduced to impose a new charge on a taxpayer who has adjusted net income over £50,000 in a tax year where either they or their partner are in receipt of Child Benefit for the year. Where both partners have adjusted net income in excess of £50,000 the charge will apply to the partner with the higher income.

The 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. The charge on taxpayers with income above £60,000 will be equal to the amount of Child Benefit paid.

Child Benefit claimants will be able to decide not to receive Child Benefit if they or their partner do not wish to pay the new charge.

This charge will have effect from 7 January 2013 and for 2012/13 will apply to the Child Benefit paid from that date to the end of the tax year. The income taken into account will be the full income for 2012/13.

Comment

The removal of Child Benefit from households containing a higher rate taxpayer had been announced previously. However the detail of the way in which the restriction would apply had been subject to speculation. The following example shows how the charge will be calculated.

Example

The Child Benefit for two children amounts to £1,752.

The taxpayer’s adjusted net income is £54,000.

The income tax charge will be £700.80.

This is calculated as £17.52 for every £100 above £50,000.

For a taxpayer with adjusted net income of £60,000 or above the income tax charge will equal the Child Benefit.

Cap on unlimited tax reliefs

Legislation will be introduced to apply a cap on income tax reliefs claimed by individuals from 6 April 2013. The cap will only apply to reliefs which are currently unlimited. For anyone seeking to claim more than £50,000 in reliefs, a cap will be set at 25% of income (or £50,000 if greater).

Statutory Residence Test

The Government is proposing to introduce a Statutory Residence Test (SRT) which will come into effect in April 2013. Detailed proposals have already been the subject of consultation and further consultation will take place before the rules are finalised. It is likely that a series of tests will be introduced which will enable an individual to arrive at a definitive answer to the question ‘Am I resident in the UK?’.

Comment

There is currently no definition of ‘residence’ in UK tax law and yet the liability to income tax and capital gains tax (CGT) rests on knowing an individual’s UK residence status for a tax year. Currently the determination of residence is based on old case law and, as a recent Supreme Court decision has shown, it can lead to significant uncertainty and large tax liabilities.

Ordinary Residence

The Government is also proposing to remove the concept of ‘ordinary residence’ for tax purposes from 6 April 2013. Certain employees who work abroad may be treated as not ordinarily resident. As such they are liable to UK tax only on employment income derived from time in the UK. Someone with duties which are carried out both inside and outside the UK is entitled to deduct a proportion of their earnings which relate to time spent outside the UK. This is referred to as ‘overseas workday relief’ but currently has no statutory basis. This relief will be brought into legislation.

Comment

The new SRT will make the concept of ordinary residence effectively redundant. The main tax areas likely to be affected by the change will be CGT and the remittance basis.

Changes for non-domiciled individuals

Individuals who are not domiciled in the UK or who are not ordinarily resident may be able to benefit from the remittance basis of taxation in respect of overseas income and gains. Two significant changes are made to these rules from 6 April 2012:

  • the remittance basis charge (currently £30,000 for those resident for seven out of the nine preceding years) will be increased to £50,000 where an individual has been resident in the UK for 12 out of the preceding 14 tax years
  •  if an individual remits funds to invest directly or indirectly in a UK trading company then that remittance will be tax free if the remittance basis is claimed (although the remittance basis charge will still be payable). The investment must be in a company but can be in the form of shares or loans. Certain activities will not constitute trading, for example, letting residential property. When the investment is realised, it will be necessary for the individual to either reinvest the funds in another qualifying venture or remove the funds from the UK. The reinvestment or removal of the funds needs to be within 45 days of the date on which funds are received.

Some administrative changes in the remittance basis rules will also be introduced.

Business Tax

Corporation tax rates

A further reduction in the main rate of corporation tax has been announced. The planned 1% decrease announced to take effect from 1 April 2012 is now to be a 2% decrease with the rate moving from 26% to 24%. Further 1% reductions to 23% and 22% are to take place from 1 April 2013 and 1 April 2014 respectively. The small company rate will remain at 20%.

Enterprise Investment Scheme (EIS)

Changes announced in 2011 are due to come into effect on 6 April 2012. These are:

  •  the maximum amount that an individual can invest in total in a tax year rises from £500,000 to £1m
  •  the size of a company that can benefit from EIS (subject to meeting all the qualifications) is increased to £15m gross assets and fewer than 250 employees.

Other changes announced include:

  •  the maximum annual amount that can be invested in an individual company under either EIS or the Venture Capital Trust is to be increased from the current £2 million limit to £5 million
  •  to receive EIS relief the individual cannot be ‘connected’ to the company. The rules are to be relaxed by removing limits on loan capital that is provided by an EIS investor to the company.

Comment

The income tax relief given to an EIS investor is 30% of their investment. The new SEIS relief below will give an increased rate of tax relief but with a significant reduction in the maximum amount of the total annual investments that will qualify.

Seed Enterprise Investment Scheme (SEIS)

This is a new relief to start from 6 April 2012. The tax breaks for the investor are:

  •  income tax relief at 50% in respect of qualifying SEIS shares up to an annual maximum investment (in all SEIS companies) of £100,000
  •  a capital gains tax (CGT) exemption where SEIS shares are sold more than three years after they are issued (as for EIS)
  •  a further CGT exemption where an individual makes a capital gain in 2012/13 and reinvests the proceeds in qualifying SEIS shares before 6 April 2013.

The investor can be a director of the company (if the investor is not a director, they cannot be a current employee but can previously have been an employee).

However, like EIS, the investor must not be connected to the company (broadly, this means they must not directly or indirectly control more than 30% of the share capital).

There are significant restrictions on the company including:

  • the maximum amount which can be raised by a company through SEIS is £150,000 and this is an overall total not an annual limit
  •  the gross assets of the company must not exceed £200,000 immediately before the shares are issued
  • the issuing company must have less than the equivalent of 25 full time employees immediately before the shares are issued
  •  the company must exist to carry on a new qualifying trade.

The original proposals also specified that the company must have been incorporated within two years of the date on which the qualifying shares are issued. Following consultation, one key change is that a company will be eligible by reference to the age of any trade rather than to the age of the company. A company with subsidiaries can also now qualify.

In addition, there are copious anti-avoidance rules which are largely drawn from the EIS regime.

Comment

The aim of the relief is to encourage business angels to invest in small enterprises and obtain a tax refund of half their investment. It remains to be seen whether the mountain of restrictions on the company will inhibit the use of the regime.

Annual Investment Allowance (AIA)

The AIA is a capital allowance available for many businesses on most purchases of plant and machinery, long-life assets and integral features. Relief is given on the full cost up to an annual maximum allowance. As previously announced, the allowance is to be reduced to £25,000 from £100,000 with effect from 1 April 2012 for companies and 6 April 2012 for unincorporated businesses.

Where a business has an accounting period that straddles the date of change the allowances have to be apportioned on a time basis. For example a company with an accounting period ending on 30 September 2012 will have an allowance of £62,500 (£100,000 x ½ + £25,000 x ½). However it should be noted that for expenditure incurred after the 1/6 April, the maximum allowance that can be attributed to that expenditure is a fraction of £25,000. The fraction will be the amount of the £25,000 that is included in the calculation of the overall AIA for the accounting period.

Comment

Planning the timing of purchases of significant items of plant becomes very important to ensure that the maximum available AIA can be secured.

Suppose the company with the 30 September year end wishes to buy new plant costing £35,000. If they had bought it in February 2012 they will be able to claim an AIA on the full £35,000 but if they buy it in June 2012 they will only be able to claim an AIA of £12,500 (£25,000 x 6/12 ). They would actually then be better off if they waited until October when they will have a full £25,000 available.

Writing Down Allowances (WDA)

As previously announced, WDA rates reduce from 1/6 April. The main rate of 20% will be reduced to 18% and the lower rate of 10% which applies to integral features and long-life assets will reduce to 8%. It will be necessary to calculate hybrid rates where the accounting period straddles 1/6 April which will give a rate between 20% and 18% (or between 10% and 8%) for that period.

Capital allowances on cars

The 100% first year allowance (FYA) available on new low emission cars purchased (not leased) by a business is revised and extended with effect from 1 April 2013. The current rule is that a 100% FYA is generally available where a car’s emissions do not exceed 110 grams per kilometre (gm/km) until 31 March 2013. The availability of a 100% FYA is to continue for a further two years for purchases from 1 April 2013 but only where emissions do not exceed 95gm/km.

Cars with emissions between 111-160gm/km inclusive currently qualify for main rate WDA (18% from April 2012).The threshold is to be revised down to 130gm/km for additions from 1 April 2013 for businesses within the charge to corporation tax and 6 April 2013 for businesses in the charge to income tax.

Capital allowances in Enterprise Zones

Over the past year the Government has designated a number of very specific areas as Enterprise Zones. Businesses in these areas enjoy certain reliefs, for example, a relief from business rates. From 1 April 2012, 100% capital allowances will be available for parts of some of the Enterprise Zones known as ‘designated assisted areas’. Some of these areas have already been announced and the Chancellor announced further designated sites in his Report.

The relief is only available to companies and is subject to a number of detailed conditions including:

  •  the plant must be new
  •  the plant must not represent a replacement of existing plant.

Capital allowances: fixtures

As announced in Budget 2011, legislation will be introduced in Finance Bill 2012 to make the availability of capital allowances to a purchaser of a fixture subject to certain conditions.

Following consultation, changes have been made to help ensure fair application of the legislation.

Enhanced capital allowances: energy saving technologies

100% FYAs are given on certain energy saving capital expenditure. The categories of qualifying expenditure will be updated by Treasury Order in summer 2012, subject to State aid approval. The main change will be the inclusion of a new technology category: heat pump driven air curtains.

Tax credits for expenditure on environmentally beneficial plant or machinery

Legislation will be introduced in Finance Bill 2013 to extend the availability of first year tax credits, for a further five years from 1 April 2013. These credits are available for companies surrendering losses attributable to their expenditure on designated energy-saving or environmentally beneficial plant or machinery.

Research and development expenditure (R&D)

There are currently a number of restrictions which effectively limit the scope of this relief and it is planned to remove these broadly from 1 April 2012. The proposals include:

  • removing the rule limiting a company’s payable R&D credit to the amount of PAYE and NIC it pays
  • removing the £10,000 minimum expenditure condition
  • increasing the additional deduction for R&D expenditure by SMEs by a further 25% making the total deduction 225% of actual expenditure.

It has also been announced that there will be an ‘above the line’ R&D tax credit to encourage R&D activity with a minimum rate of 9.1% before tax. It is planned for inclusion in Finance Bill 2013 following consultation.

Patent Box

The concept of a Patent Box has been the subject of consultation by HMRC for the past couple of years and legislation is now being brought forward to apply from 1 April 2013.

The essence of the legislation will be to allow companies to elect to have a 10% rate of corporation tax on all profits attributable to qualifying intellectual property (IP). This will cover patents granted by the UK or the European Patent Office. Some other rights will be included by Treasury Order.

The reduced rate applies to a proportion of the profits derived from:

  • the licensing or sale of the patent rights, or
  • the sale of the patented invention or products which incorporate the patented invention.

Profits derived from routine manufacturing, development or exploitation of brands and marketing intangible assets are excluded.

A company qualifies for the Patent Box if the company satisfies the ‘development condition’. This means it has made a significant contribution to:

  • the creation or development of the item protected by the patent, or
  • a product incorporating this item.

A company which does not own the patent rights but has been given exclusive rights throughout an entire national territory will qualify for the Patent Box as long as it satisfies the ‘development condition’ in relation to those rights.

The full benefit of the regime will be phased in over the first four financial years following commencement on 1 April 2013. In the first year the proportion of relevant profits to which the 10% rate will apply is 60% and this will then increase annually to 100% from April 2017.

Corporation tax reliefs for the creative sector

The Government will introduce corporation tax reliefs for the production of culturally British video games, television animation programmes and high end television productions. Consultation will take place over the summer. Legislation will be in Finance Bill 2013 and ill take effect from 1 April 2013, subject to State aid approval.

Comment

The Chancellor made the comment in his speech that he wanted to ensure that Wallace and Gromit stay in this country.

Controlled Foreign Companies (CFCs)

The CFC regime can apply to a UK company which has a subsidiary operating in a country with a low rate of corporation tax. Under the regime a UK company may be charged to corporation tax on relevant profits of the subsidiary. As the rules have been in place for 25 years they needed an overhaul to better fit with more recent developments in both UK and global corporate tax.

The aim of the proposed new regime is to target only those circumstances that result in the artificial diversion of UK profits.

Under the proposals a CFC charge can arise only if:

  • a foreign company is controlled from the UK (ie a CFC), and
  • the CFC passes through an initial ‘gateway’ and has ‘chargeable profits’ as defined by detailed tests, or
  • none of the entity level exemptions apply.

The initial gateway consists of qualitative tests to ensure the rules only apply to profits that have been artificially diverted from the UK. So, for example, trading profits will not be chargeable profits if the control or management of a CFC is not carried on to a significant extent in the UK.

Even if the initial gateway is passed, the CFC may not have chargeable profits as detailed in various quantitative tests.

Alternatively a charge can be removed by using the entity level exemptions. These include for example:

  • the low profits exemption (broadly, the accounting (pre-tax) profits are not more than £50,000 or not more than £500,000 and non-trading income is not more than £50,000 per 12 month period)
  • where the tax paid under the law of the CFC’s territory of residence in respect of its profits is at least 75% of the corresponding UK tax.

The new rules are to apply to CFCs with accounting periods which begin on or after 1 January 2013.

Comment

A company does not have to consider the gateway test first. If a specific entity level exemption applies, a CFC charge will not arise in the relevant accounting period.

Tax simplification for the small business

A voluntary cash accounting basis for calculating tax for small unincorporated businesses (up to the VAT registration threshold) is to be consulted on with a view to introducing legislation in Finance Bill 2013. The aim is to assist the small business by making it easier to calculate their tax.

Other plans include considering a simplified expenses system and a disincorporation relief.

Employment Issues

Company car tax rates

Legislation will be introduced in Finance Bill 2012 to increase the appropriate percentage of the list price subject to tax for cars with CO2 emissions of more than 75gm/km by 1% up to a maximum of 35% in 2014/15.

Further changes are proposed in 2015/16 and 2016/17 whereby the appropriate percentages of the list price subject to tax will increase by 2% per annum up to a maximum of 37% in both years.

Other changes

  • From April 2015 the five year exemption for zero emission cars and the lower rate of 5% for ultra low emission (1-75gm/km) cars will come to an end.
  • The percentage for zero emission and all low emission petrol cars emitting less than 95gm/km of CO2 will be 13% in 2015/16, rising to 15% in 2016/17.
  • The percentage for low emission (95gm/km) diesel cars in 2015/16 will be 16% as it will include the 3% diesel supplement.

From April 2016 the Government will remove the 3% diesel supplement so that diesel cars will be subject to the same level of tax as petrol cars.

Car and van fuel benefit charges

Employees and directors who are provided with a company car and who also receive free private fuel from their employers are subject to the fuel benefit charge. The benefit charge is determined by multiplying a set figure by the appropriate percentage for the car based on its CO2 emissions.

The car fuel benefit charge multiplier will be increased from £18,800 to £20,200 with effect from 6 April 2012. The multiplier will increase by 2% above the rate of inflation (based on RPI) in 2013/14.

The van fuel benefit charge multiplier will remain frozen at £550 for 2012/13 and will increase by inflation in 2013/14.

Real Time Information (RTI)

HMRC have produced draft legislation to introduce probably the most significant change in the PAYE system since its introduction in 1944. Under the RTI scheme, employers will electronically provide monthly information to HMRC related to wages and salaries paid to employees. Once the scheme is ‘bedded in’ employers will no longer have to complete year end returns such as the P35 and P14.

Volunteer employers are to pilot the new scheme from 6 April 2012. The intention is that it will apply to employers on a phased basis from 6 April 2013 so that all employers are operating the system by October 2013.

It was announced in Budget 2012 that HMRC will consult before the summer on new models for late payment and late filing penalties under RTI. Legislation will be included in Finance Bill 2013.

Comment

This really is a major change but the success or otherwise of the scheme will depend on the ability of the HMRC computer system to cope. History suggests that this could be the problem.

Income tax and NICs reform

The Government announced in Budget 2011 that it would consult on the options, stages and timing of reforms to integrate the operation of income tax and NICs. Since then, the Government has issued a call for evidence, published a response and set out an indicative timetable for reform. Following work with interested parties over recent months, the Government will consult shortly after Budget 2012 on a broad range of options for employee, employer and self-employed NICs.

Personal service companies and IR35

The Government is bringing forward a package of measures to tighten up on avoidance through the use of personal service companies and to make the existing IR35 legislation easier to understand. HMRC will strengthen specialist compliance teams and simplify the way IR35 is administered. HMRC will consult on proposals which would require office holders/controlling persons who are integral to the running of an organisation to have PAYE and NICs deducted at source.

Enterprise Management Incentives (EMI)

EMI are share option schemes which allow small and medium-sized businesses to grant tax-advantaged share options to employees. The limit on the value of shares over which options may be held by an employee under the scheme will be increased from £120,000 to £250,000. This will have effect in respect of options granted on or after the date set out in a Statutory Instrument, which subject to State aid approval, the Government intend to implement as soon as possible.

Additionally the Government will make reforms to the EMI scheme in Finance Bill 2013, subject to State aid approval, to ensure that gains made on shares acquired through exercising EMI options on or after 6 April 2012 will be eligible for capital gains tax Entrepreneurs’ Relief.

The Government will consult on ways to extend access to EMI for academics who are employed by a qualifying company.

Tax advantaged employee share schemes

The Government will consider the recommendations of the Office of Tax Simplification’s review of tax advantaged share schemes and will consult shortly on how to take a number of these proposals forward. Legislation will be included in future Finance Bills.

Pensions tax relief

Legislation will be introduced in Finance Bill 2013 to amend the rules which currently allow employers to pay pension contributions into their employees’ family members’ pensions as part of their employees’ remuneration package to remove the tax and NICs advantages from these arrangements.

A regulation making power will also be introduced to allow changes to be made to the lifetime allowance fixed protection legislation. Technical improvements will also be made to the annual allowance rules through secondary legislation.

Capital Taxes

CGT rates

The rates of CGT remain at 18% to the extent that any income tax basic rate band is available and 28% thereafter. The rate for disposals qualifying for Entrepreneurs’ Relief (ER) is 10% with a lifetime limit of £10m for each individual.

Comment

The ER limit is very generous and owners of businesses should ensure that they meet all the conditions necessary to secure the relief throughout the twelve months up to the date of a disposal.

CGT annual exemption

The CGT annual exemption has been frozen at £10,600 for 2012/13.

Foreign currency bank accounts

Bank accounts denominated in a currency other than sterling are chargeable assets for CGT. There is an exemption where the account is held by an individual and is used to meet personal expenditure abroad. This means that every withdrawal technically constitutes a disposal for CGT purposes and a gain or loss can arise by reference to movements of exchange rates.

It is now proposed that the exemption from CGT will apply to all foreign currency bank accounts held by individuals, trustees of settled property and personal representatives of deceased persons. This exemption will apply for all withdrawals made on or after 6 April 2012.

Inheritance tax (IHT) nil rate band

The IHT nil rate band remains frozen at £325,000 until 6 April 2015.

Reduced rate of IHT for the charitable

The Government will introduce a reduced rate of IHT for an estate where a minimum level of legacy has been left by the deceased to charity. The actual legacy to charity remains exempt from IHT and it is the rate of tax on the balance of the estate that would be reduced to 36% from 40%.

The reduced rate will apply where charitable bequests satisfy a 10% test. A comparison will be made between:

  • the total value of charitable legacies for IHT purposes and
  • the value of the net estate as reduced by:

– any available nil rate band

– the value of assets passing to the surviving spouse or civil partner and

– other IHT reliefs and exemptions for example Business Property Relief but excluding relief for the charitable donations.

If the first figure is at least 10% of the second then the balance of the estate will qualify for the reduced IHT rate of 36%.

Special rules apply if the estate includes either:

  • property which is jointly owned which passes automatically on death to the other joint owner(s) under survivorship rules (in England Wales and Northern Ireland) or their local equivalent
  • settled property which forms part of the estate because the deceased held a qualifying interest in possession in the assets.

The changes will apply to estates where the individual dies on or after 6 April 2012.

Comment

Because the benefit of the reduced IHT rate will be dependent on whether or not the amount of the charitable legacy is sufficient for the estate to pass the 10% test, there will be a ‘cliff edge’ effect.

Where the amount of the charitable legacy is close to the critical 10% point, a small difference to the amount of the legacy could have a much larger impact on the estate’s IHT liability. There are no plans to apply any taper or other mechanism to mitigate this.

IHT – other matters

The Government will consult on two areas for inclusion in Finance Bill 2013:

  • simplifying the calculation of IHT ten year charges and exit charges for trusts
  • increasing the IHT exempt amount that a UK domiciled individual can transfer to their non UK domiciled spouse or civil partner.

Other Matters

VAT – anomalies and loopholes

Legislation will be introduced to address long-standing VAT anomalies and loopholes, with effect from 1 October 2012. The changes are:

  • applying VAT to approved alterations to listed buildings to bring them into line with the VAT treatment of alterations to non-listed buildings, and repairs and maintenance for all buildings
  • providing consistency of treatment between self-storage and other forms of storage
  • applying VAT, in the minority of cases where it does not already apply, to hot food and to sports drinks
  • putting beyond doubt the fact that VAT applies to the rental of hairdressers’ chairs
  • ensuring that the purchase of holiday caravans is taxed consistently at the standard rate.

Stamp duty land tax (SDLT)

A new rate of 7% will be introduced where the chargeable consideration for a residential property is more than £2 million. This will have effect where the effective date (normally the date of completion) is on or after 22 March 2012, unless the contract was entered into before that date.

An even higher rate of 15% will apply to such residential properties if the purchaser is a ‘non natural person’, for example a company. This will have effect where the effective date of the transaction is on or after 21 March 2012.

In addition the Government will consult on the introduction of:

  • an SDLT annual charge where properties over £2 million are owned by non natural persons
  • a CGT charge on residential property owned by non resident, non natural persons.

Both these measures will apply from April 2013.

Comment

The intention of the 15% charge is to stop or reduce the number of schemes which claim to allow a property to be transferred without SDLT. The charges to be introduced in 2013 are aimed at charging properties already in companies which are used as residential accommodation.

General anti-abuse rule (GAAR)

The Government commissioned an independent report from a leading tax lawyer on whether or not it would be appropriate to introduce a GAAR into the UK tax system.

The reviewer recommended that a moderate rule targeted at abusive arrangements would be beneficial to the UK tax system. Such a GAAR would apply for income tax, CGT, corporation tax and NIC. It would not apply to ‘responsible tax planning’.

The Government accepts the recommendation and will consult this year with a view to legislation being introduced in Finance Bill 2013. It will extend the GAAR to SDLT.

Comment

This is a route that has been used in a number of other countries.

This summary is published for the information of clients. It provides only an overview of the main proposals announced by the Chancellor of the Exchequer in his Budget Statement, and no action should be taken without consulting the detailed legislation or seeking professional advice. Therefore no responsibility for loss occasioned by any person acting or refraining from action as a result of the material contained in this summary can be accepted by the authors or the firm.

Newsletter – February 2012

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eNEWS – February 2012

In this month’s enews we report on guidance which has been issued on cookies together with several HMRC announcements. Please contact us if you would like any further information.

 

eNEWS quicklinks
EU Cookies Pensions Auto Enrolment Dates deferred for smaller employers
New approach to records checks from HMRC Pay up on time
HMRC latest targets Clean up your payroll data
Self Assessment statistics Budget for growth
Penalties for failing to file payroll forms online

 

EU Cookies

The Information Commissioner’s Office (ICO) has published guidelines on the business use and storage of cookies.

The law which applies to how businesses use cookies and similar technologies for storing information on a user’s equipment such as their computer or mobile device changed on 26 May 2011. The ICO guidance on the new cookies Regulations sets out the changes to the cookies law and explains what steps businesses need to take to ensure they are complying.

Following an EU Directive, businesses are now obliged by law to obtain the explicit consent of each of their websites’ visitors before storing any data on their device. Websites must also provide ‘clear and comprehensive information’ about the purposes of the storage.

The UK actually introduced the amendments on 25 May 2011 through The Privacy and Electronic Communications Regulations 2011. However, website owners have been given until May 2012 to make their websites compliant with the new legislation.

It remains to be seen how strictly this law will be enforced, but the ICO have already introduced a maximum penalty of £500,000.

Internet link: ICO cookie guide

Pensions Auto Enrolment Dates deferred for smaller employers

The timetable for the introduction of Pensions Auto Enrolment has been revised for smaller employers.

Employers have been aware for some time now that the government is to introduce legislation designed to encourage more people to save for their retirement.

Under the rules employers must:

  • ‘auto-enrol’ eligible employees into a pension scheme
  • make employer pension contributions for them, and
  • make deductions of employee pension contributions from the employees pay.

The rules come into force from October 2012. However they only impact on the largest employers from that date, as few employers have a workforce of more than 120,000. For those employers with a more modest number of employees the start dates have been amended. This was previously announced and has been confirmed in a written ministerial statement.

Steve Webb, the Minister of State, Department for Work and Pensions confirmed:

‘On 28th November 2011, the Government announced that the timetable for the implementation of automatic enrolment will be adjusted so that small businesses are not affected by the reforms during this Parliament. This will provide them with some additional breathing space to prepare for the reforms whilst operating in tough economic times.’

‘I can now confirm that under the revised timeline, all employers with an existing staging date of on or before 1st February 2014 are unaffected. This means that no large employer will have to make any changes to their plans – which are in many cases already advanced.’

Medium sized employers will be re-allocated automatic enrolment dates between 1st April 2014 and 1st April 2015. This means that the implementation dates of some of these employers will be up to nine months later. However, this still means that around 70% of eligible workers will be automatically enrolled before the end of this Parliament compared with around 75% under previous arrangements.’

‘Small employers will be allocated automatic enrolment dates between 1st June 2015 and 1st April 2017.’

The guidance contains a table of revised implementation dates for small and medium employers, by size. We will keep you informed of further announcements.

More information on employers’ obligations is available on the Pensions Regulator website or please do contact us.

Internet links: Pensions Regulator website Statement

New approach to records checks from HMRC

HMRC have announced that they intend to make changes to their business records checks programme following a review of the pilot scheme.

HMRC will now postpone making any new business records check appointments until the revamped approach is launched early in 2012/13. The delay is to allow further consultation with representative bodies on the implementation of the recommendations in the review and on some details of the new approach.

HMRC’s Director of Local Compliance, Richard Summersgill, said:

‘Four out of ten businesses had an issue with their business records, and of those that required a follow-up visit, we found that some 90% subsequently improved their record-keeping.’

‘However, after reviewing the pilot programme and listening to the views of businesses and representative bodies, we acknowledge the need for a fresh approach to business records checks.’

Internet link: News Release

Pay up on time

A new guide ‘Get Paid!’ has been published. The guide which is aimed at smaller businesses contains tips and advice from both suppliers and customers. The guide covers advice on invoicing and developing a robust credit policy.

The government is asking businesses and public organisations to pay suppliers on time and for small businesses to pursue those who put them at risk by delaying payment.

Prompt payment is vital for SMEs, with many businesses not able to survive the cashflow problems that late payments create.

The government is encouraging SMEs to:

  • proactively agree payment terms before delivering orders.
  • sign up to the government’s Prompt Payment Code, run by the Institute for Credit Management
  • raise complaints over late payment from Code signatories and use legislation already in place to help companies pursue late payers
  • use electronic invoicing where possible.

Internet links: BIS press release Get Paid guide

HMRC latest targets

HMRC have announced that they will turn their attention to those involved in home improvement trades and direct selling (online market sellers) in their next round of Tax Catch Up Plans.

HMRC have previously offered Tax Catch Up Plans to Plumbers, Dentists and Tutors amongst others. According to the press release their latest campaigns will target:

‘Missing returns. This will contribute to wider HMRC activity tackling failure to complete tax returns. It will initially focus on those who fail to complete tax returns and who are liable to pay tax at the highest rates.’

‘Home improvement trades. This will build on campaigns aimed at plumbers and electricians, and will include several 100,000 tradespeople in construction and building work such as roofing, window fitting, bricklaying, carpentry and joinery.’

‘Direct selling. This will target customers who ought to be paying tax on income they earn from buying and selling goods direct to others, or from the commission on these sales.’

‘As with previous campaigns, the focus of the new campaigns will be on providing those in the selected groups, who may not be paying the tax they owe, a chance to put their affairs in order on the best possible terms.’

HMRC have announced that they will be using new technology to identify traders in both sectors with unpaid taxes.

Marian Wilson of HMRC said:

‘We are offering all the people targeted the opportunity to come forward. Penalties will be higher if we come and find people after the opportunity.’

Please do get in touch if you have any concerns in these areas.

Internet links: News release HMRC website

Clean up your payroll data

HMRC have launched a new online video to help employers reduce the problems caused by inaccurate employee data.

Every year HMRC receive thousands of employer returns which contain the details of millions of employees, including their names, dates of birth and National Insurance numbers. HMRC are keen to point out that whilst the vast majority of the employee data is correct, in some cases dummy, incomplete or incorrect information is included. According to the press release:

‘…a recent study of employer returns found that 128 staff were entered as Mr, Ms or Mrs Dummy, while 824 employees had the surname ‘Unknown’.’

‘Another 40 employees, according to their dates of birth, were aged over 200.’

The short YouTube video discusses how inaccurate employer returns can affect employees, employers and HMRC and offers advice on how employers can help reduce errors.

Jim Harra, HMRC’s Director of Customer Operations, said:

‘It’s really important that employers get their employees’ information right, so that HMRC can match it to the right tax records. Otherwise, it can lead to more contact from staff, trying to sort out their tax, and from HMRC, trying to sort out the data issues.’

‘So, if you’ve got a spare few minutes, watch the video and see what you can do to help your organisation get things right, for you, your employees and HMRC.’

If you would like any help with payroll issues please do get in touch.

Internet links: Press release Video

Self Assessment statistics

According to HMRC a record 9.45 million self assessment tax returns were filed on time this year and a record 7.65 million (80.9% of them) were filed online.

Although the 31 January 2012 deadline was unchanged, HMRC announced that no penalties would be issued for online returns received by midnight on 2 February, due to industrial action at HMRC contact centres.

The busiest day for online returns was 31 January, when HMRC received nearly 445,000 returns. Apparently the ‘rush hour’ occurred between 4pm and 5pm on 31 January, when 37,460 returns (more than one every 6 seconds) were received by HMRC.

David Gauke, Exchequer Secretary to the Treasury, said:

‘I’m delighted so many people filed their tax returns online this year. The record number proves that it’s quick, easy and secure to do.’

‘HMRC have always been clear that they want returns not penalties, so it is good news that over 90% of all returns were submitted on time.’

If you have not yet completed your self assessment tax return and would like some help please do get in touch.

Internet link: Press release

Budget for growth

The CBI is calling for a Budget to help businesses. To read more information on the CBI’s recommendations visit the link below.

‘The CBI called on the Chancellor to use his March Budget to score the growth and investment policy goals he put forward in his Autumn Statement and give the UK economy and jobs a real boost.’

‘In its submission to the 2012 Budget, the CBI also urged changes to the UK tax system which it believes could help persuade businesses to invest in the UK and further stimulate growth.’

The Chancellor will present his Budget on Wednesday 21 March 2012. We will update you with significant announcements.

Internet link: CBI

Penalties for failing to file payroll forms online

HMRC have confirmed in the latest Employer Bulletin that they intend to impose penalties on all employers who fail to send their payroll starter and leaver forms online from April 2012.

During the 2011/12 tax year HMRC issued penalty notices to employers with 50 or more employees when they submitted more than two paper forms in a quarter. The penalties issued ranged from £100 to £3000 depending on the number of paper forms received in the quarter.

Since April 2011 small employers (with 50 or less employees) have been required to file their in year starter (P46) and leaver (P45) forms online. However, small employers who submitted paper forms between 6 April 2011 and 5 January 2012 were only issued with warning letters. This action was taken to try and help small employers to get this right.

From 6 April 2012 penalties will be issued when the employer fails to file their starter and leaver forms online in the period 6 January 2012 to 5 April 2012 and onwards.

If you would like any help with payroll issues please do get in touch.

Internet link: Employer Bulletin

Newsletter – January 2012

Posted on by

eNEWS – January 2012

In this month’s enews we report that HMRC have announced they will not charge penalties on Self Assessment returns filed up to two days late! We also include several articles on employment related issues. Please contact us if you would like any further information.

 

eNEWS quicklinks
Self Assessment deadline and penalties Online VAT returns and electronic payments
PAYE tax codes HMRC now able to accept Faster Payments
Gangmasters and temporary workers for the Olympics HMRC introduce new procedures for civil fraud
Agency Workers Regulations Unemployment high

 

Self Assessment deadline and penalties

HMRC have announced that they will not impose late filing penalties on taxpayers who file their Self Assessment returns on 1 and 2 February 2012. The announcement has been made amongst fears that taxpayers would not be able to get through to HMRC’s call centres on 31 January 2012 where strike action by some employees is anticipated.

HMRC have also advised that:

‘The SA deadline remains midnight on 31 January. But HMRC will treat all returns that come in by midnight on 2 February as though they were submitted by 31 January. No customer will have to pay interest on payments due on 31 January that are paid on 1 or 2 February.’

Acting Director General Personal Tax, Stephen Banyard, said:

‘We’ve always been very clear that we want the returns – not the penalties. For that reason, we don’t want anyone who can’t get through for help and advice on 31 January to be disadvantaged in any way.’

 

Internet link: HMRC press

Online VAT returns and electronic payments

Since April 2010 most VAT registered businesses have been required to submit their VAT Returns online and pay any VAT due electronically. From 1 April 2012 all VAT registered businesses will be required to meet these requirements, apart from a very small number who will be exempt.

Exemptions from doing your VAT online

Businesses may not have to comply with the requirement if:

  • they are subject to an insolvency procedure – but if the business is subject to an approved Voluntary Arrangement, administration or trust deed, an online submission may be made
  • HMRC is satisfied that the business is run by practising members of a religious society, whose beliefs prevent them from using computers.

If you believe either of these exemptions apply then it is important to confirm the position with HMRC and not assume that the exemption applies.

Paying your VAT electronically

Businesses which submit their VAT Returns online, must also pay any VAT due electronically. This generally gives businesses up to seven extra calendar days to submit their return and pay their VAT. There are some exceptions to this rule, for example businesses which file annual returns and make payments on account.

HMRC advise:

‘The extended due date will be shown on your online return and you must ensure that cleared funds reach HMRC’s bank account by this date. If your payment clears later than this, you may be liable to a surcharge for late payment’.

‘There are various ways to pay including by Direct Debit, online and telephone banking. You can also pay by cheque at a bank or building society using a Bank Giro paying-in slip which can be obtained from HMRC. Since some of these methods can take a little time to set up, you should choose which method you want to use, and set it up, well in advance of the filing and payment deadline’.

If you would like any help with your VAT return please do get in touch.

Internet links: HMRC VAT online guidance VAT online helpsheet

PAYE tax codes

HMRC are issuing PAYE tax codes for 2012/13. These new coding notices, which are due to be issued between January and March 2012, will be used against employees pay from April 2012 onwards. It is important that these coding notices are checked carefully as an incorrect code will result in too little or too much tax being deducted from pay or pension payments.

If you are unsure that your coding notice is correct and would like some further guidance please do get in touch.

Good news for many

The majority of taxpayers will see an increase in their tax code as the personal allowance for those under 65 increases from £7,475 to £8,105.

Those individuals with simple tax affairs (just one employer with no reliefs or benefits or tax underpayments brought forward) will generally not receive a coding notice. Their current coding of 747L will be automatically uplifted to 810L following general instructions to employers.

Although the personal allowance is increasing, the point at which taxpayers start to pay the higher rate of 40% tax on their taxable income is decreasing (from £35,000 to £34,370). This means that basic or higher rate taxpayer will generally benefit from the same tax saving of £126.

The withdrawal of the personal allowance for those with income over £100,000 income limit applies for 2012/13. The reduction in the personal allowance is by £1 for every £2 of adjusted net income above the income limit. Adjusted net income for these purposes is broadly all income after adjustment for pension payments, charitable giving and relief for losses. Individuals with adjusted net income of at least £116,210 will not be entitled to a personal allowance for 2012/13.

Internet links: HMRC news HMRC guidance on tax codes

HMRC now able to accept Faster Payments

HMRC have announced that they are now able to accept payments made using the Faster Payments Service. This will allow you to make faster electronic payments, typically via internet or telephone banking, enabling them to be processed on the same or next day.

HMRC advise that those wishing to make payments using this method should contact their bank or building society before making a payment to confirm:

  • the service available to you
  • whether there are any single transaction or daily limits on the amount you can pay
  • their latest cut off times for making a payment.

HMRC are also reminding taxpayers to ensure that they always use the correct bank account details and reference number.

Internet link: HMRC news

Gangmasters and temporary workers for the Olympics

HMRC are warning employers who plan to take on more staff for the Olympic and Paralympic Games to check their ‘labour providers’. These ‘labour providers’ are agencies that supply temporary workers to meet seasonal and market demand and are sometimes called ‘gangmasters’.

Businesses which may be affected include those in catering, food processing, construction, hotels, leisure and security.

HMRC has warned there is a risk that employers could unknowingly hire workers who are in the UK illegally or are earning below the National Minimum Wage. This could result in enquiries by HMRC and costs for the business, damaged reputation and even prosecution.

Marie-Claire Uhart, Director of Specialist Investigations, said:

‘HMRC has found problems with fraud and unpaid taxes in the labour provider field and this might increase as companies employ more casual labour for the Games. HMRC routinely tackles attempts to defraud the Exchequer, including the use of false invoices and hijacked VAT registrations.’

‘Businesses that use labour providers can help prevent these forms of tax abuse – and avoid involvement in fraudulent supply chains – by being alert and asking the right questions.’

The following link includes a list of questions which businesses should ask before using the services of a gangmaster.

Internet link: News release

HMRC introduce new procedures for civil fraud

As part of the government’s commitment to tackle fraud, HMRC’s new Contractual Disclosure Facility (CDF) will be launched on 31 January 2012.

HMRC will contact a taxpayer, in writing, to inform them that they are suspected of serious tax fraud and offer them the opportunity to enter into a contract to disclose that fraud within 60 days. In return, HMRC will agree not to criminally investigate, removing the risk of prosecution by HMRC.

Taxpayers who are not under investigation but who want to admit to tax fraud, may fill out a form to voluntarily request that HMRC consider their suitability for a CDF contractual arrangement.

Launching the CDF, Exchequer Secretary to the Treasury, David Gauke, said:

‘This new facility is a valuable tool which will help HMRC in its fight against fraud. HMRC will set out clearly what is expected of taxpayers, and what will happen to fraudsters who choose not to disclose their crimes.’

Internet link: HMRC news release

Agency Workers Regulations

Under the Agency Workers Regulations, workers supplied by an agency become entitled to receive pay and basic working conditions equivalent to any directly employed employees after a 12 week qualifying period.

The rules came into effect from 1 October 2011 so the 12 week period commenced from 1 October 2011 for existing agency workers. Where these workers are still engaged by the hirer, they now qualify to receive pay and basic working conditions equivalent to directly employed employees.

Where an agency worker is at the entity for less than 12 weeks, a minimum break of more than six weeks between assignments with the same employer will be necessary for the rights not to be available.

Guidance on the Agency Workers Regulations can be found on the BIS website.

Internet link: BIS guidance

Unemployment high

The Office for National Statistics has released the latest employment statistics.

For September to November 2011:

  • The employment rate for those aged from 16 to 64 was 70.3%, down 0.1% on the quarter.
  • There were 29.12 million people in employment aged 16 and over, up 18,000 on the quarter.
  • The unemployment rate was 8.4% of the economically active population, up 0.3% on the quarter.
  • There were 2.68 million unemployed people, up 118,000 on the quarter.
  • The unemployment rate has not been higher since 1995 and the number of unemployed people has not been higher since 1994.

Doctor Neil Bentley, CBI Deputy Director-General, said:

‘These figures show that unemployment continues to be a major concern and is particularly worrying for young people.’

‘Notwithstanding the gravity of the situation, over half of the headline rise in unemployment over the last quarter represents people who were previously economically inactive switching to actively look for work.’

‘The only way to resolve unemployment in the short-term is to pull out all the stops to get the economy moving and businesses growing. Specialist help for our young people, like the new ‘Youth Contract’, will help support them to make the difficult transition into work.’

‘But over the longer term, the Government must look at how our schools prepare people for working life through better careers advice, guidance, and skills that employers need.’

Internet links: ONS report CBI press release

Newsletter – December 2011

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eNEWS – December 2011

In this month’s enews we report on some further announcements made following the Autumn Statement.

Please browse through this month’s articles using the links below and contact us if any issues or questions arise.

With best wishes for 2012.

 

eNEWS quicklinks
Pensions Auto Enrolment Advisory fuel rates for company cars
Capital allowances in Enterprise Zones Seed Enterprise Investment Scheme
Statutory Residence Test Self assessment deadline fast approaching
The Portas Review HMRC to accept Faster Payments
2012/13 Statutory Payments

 

Pensions Auto Enrolment

The Government has confirmed that pensions auto enrolment will commence in Autumn 2012 and all employers will remain within the scope of the rules.

However small businesses, those with less than 50 employees, will be given additional time to prepare for the implementation. The government have confirmed that no small employers are affected by the reforms before the end of this Parliament.

Minister for Pensions Steve Webb said:

‘Our society and economy needs to be based on a foundation of saving, not debt. Automatic enrolment will help millions save, and to not act will leave people poorer in retirement. That is why I am confirming today that automatic enrolment will start on time and all employers will be part of it.

We recognise that small businesses are operating in tough economic times so we are softening the timetable for implementation to give them some additional breathing space. This is a sensible step that ensures long term pension issues are addressed while meeting the short and medium term needs of small business.

We are committed to ensuring the employees of these small businesses get the chance to save and that is why no one will miss out.

Under the revised timeline, small business would begin automatically enrolling their staff in May 2015, instead of the current timing of April 2014. Half of all workers will still be automatically enrolled before the end of this Parliament.’

It is expected that further details will be announced in January 2012 and we will keep you informed of developments.

Internet link: DWP press release

Advisory fuel rates for company cars

New company car advisory fuel rates have been published to take effect from 1 December 2011. HMRC’s website states:

‘These rates apply to all journeys on or after 1 December 2011 until further notice, allowing them to reflect fuel prices more quickly. For one month from the date of change, employers may use either the previous or new current rates, as they choose. Employers may therefore make or require supplementary payments if they so wish, but are under no obligation to do either.’

The advisory fuel rates for journeys undertaken on or after 1 December 2011 are:

Engine size

Petrol

Diesel

LPG

1400cc or less

15p (15p)

10p (11p)

1401cc – 2000cc

18p (18p)

12p (12p)

Over 2000cc

26p (26p)

18p (18p)

1600cc or less

12p (12p)

1601cc – 2000cc

15p (15p)

Over 2000cc

18p (18p)

Please note that most rates have not changed. However the rate for LPG cars has reduced for those with an engine size of 1400cc or less.

Other points to be aware of about the advisory fuel rates:

  • Employers do not need a dispensation to use these rates.
  • Employees driving employer provided cars are not entitled to use these rates to claim tax relief if employers reimburse them at lower rates. Such claims should be based on the actual costs incurred.
  • The advisory rates are not binding where an employer can demonstrate that the cost of business travel in employer provided cars is higher than the guideline mileage rates. The higher cost would need to be agreed with HMRC under a dispensation.

If you would like to discuss your car policy, please contact us.

Internet link: HMRC advisory fuel rates

Capital allowances in Enterprise Zones

Following the Autumn Statement at the end of November 2011, more information is now available in respect of the proposal to give 100% first year allowances on plant and machinery expenditure for use in some Enterprise Zone areas.

  • The relief will only be available to trading companies.
  • The plant must be new and represent an investment not a replacement of existing plant.
  • The plant must be used primarily in designated assisted areas within Enterprise Zones.
  • The allowance will apply for purchases made from 1 April 2012 up to 31 March 2017.
  • Some businesses and some types of expenditure are specifically excluded from the provisions.

Internet link: Draft rules CA Enterprise Zones

Seed Enterprise Investment Scheme

The government has released more information on the new Seed Enterprise Investment Scheme (SEIS) aimed at smaller companies. The proposals include the following:

  • The relief will initially run from 6 April 2012 until 5 April 2017 but may continue after that date.
  • Income tax relief on a qualifying investment will be 50%.The relief is available to be set against any income tax liability that is due, whether at basic, higher or additional rate.
  • Income tax relief will be withdrawn in certain circumstances including a disposal of the shares within three years.
  • There will be an annual limit of £100,000 investment by an individual.
  • A director may make a qualifying investment but not an employee or an associate of an employee.
  • An individual may not hold more than 30% of the shares in the company.
  • The issuing company must have been incorporated within two years of the date on which the qualifying shares are issued.
  • The company must exist to carry on a qualifying trade.
  • The gross assets of the company (including a proportion of assets of companies which hold at least 25% of the shares in the issuing company) must not exceed £200,000 immediately before the shares are issued.
  • The issuing company must not have more than the equivalent of 25 full-time employees immediately before the shares are issued.
  • The maximum amount which can be raised by a company through SEIS is £150,000 and this is an overall total not an annual limit.
  • Subject to conditions, the disposal of SEIS shares will be exempt from CGT.
  • Where an individual makes a capital gain in 2012/13 and invests an amount which is at least equal to the gain in qualifying SEIS shares before 6 April 2013 then the gain will be exempt from CGT. If the shares fail to meet the qualifications for SEIS for three years then the exemption will be withdrawn.

If you are interested in this new relief and wonder if it may be relevant to you or your business please do get in touch.

Internet link: Treasury SEIS

Statutory Residence Test

The government has been consulting on introducing a Statutory Residence Test (SRT). The test which was expected to be introduced from 2012 has been delayed until 6 April 2013. More details are expected to be announced in the 2012 Budget.

There is currently no definition of ‘residence’ in UK tax law and yet the liability to income tax and capital gains tax (CGT) rests on knowing an individual’s UK residence status for a tax year. Currently the determination of residence is based on old case law and, as a recent Supreme Court decision has shown, it can lead to significant uncertainty and large tax liabilities.

The SRT is expected to be based on three parts and an individual would consider each part in turn. If a definite answer on their residence status is found on the first part then there is no need to proceed further. Similarly if the second part gives a definitive answer there is no need to move to the third part. That final test then provides a definitive answer.

The parts and the conditions are as follows:

Part A – satisfy any one of three conditions and the individual is conclusively non-resident in the year.

Part B – satisfy any one of three conditions and the individual is conclusively resident for the year.

If no definite answer under Part B then proceed to Part C

Part C – here the rules combine the time spent in the UK and a number of connection factors which are deemed to link an individual to the UK.

Some individuals who are currently outside the UK, particularly those working abroad, will need to note that the new rules could change their residence status and they may wish to review plans for visits back to the UK and the impact of any potential connecting factors.

Please contact us if you have any concerns in this area.

Internet link: Treasury consultation on residence

Self assessment deadline fast approaching

HMRC are reminding taxpayers that the deadline for filing self assessment tax returns is fast approaching. According to their website:

‘You must send your online tax return by midnight on Tuesday 31 January 2012.

The deadline is only later than this if you received your tax return, or the letter telling you to complete a tax return, after 31 October 2011. In this case you’ll have three months from the date you received that letter.

If your online tax return is late, you’ll have to pay a penalty. This applies even if you have no tax to pay or if you pay all the tax you owe on time.’

The following illustrates that missing the deadline and failing to submit the return online may result in significant penalties.

‘What happens if you miss the deadline?

If you miss the 31 January deadline for online tax returns, you will have to pay a penalty.

The penalty is £100. You’ll still have to pay this even if

  • your return is just a day late
  • you have no tax to pay
  • you pay all the tax you owe before 31 January 2012.

The longer you delay, the more you’ll have to pay. If your tax return is three months late, you’ll have to pay a penalty for each additional day it is late. If it’s six months late, you’ll have to pay a further penalty and another final penalty if it’s 12 months late. Together these could add up to a penalty of £1,600 or more.

Don’t send a paper tax return now – the deadline was 31 October 2011. You’ll have to pay a £100 penalty straight away if you do and the daily penalties above will start even earlier. Send it online instead.’

If you require any help with your tax return please do get in touch.

Internet link: HMRC news

The Portas Review

The CBI commented on a report by Mary Portas on the future of the high street.

Dr Neil Bentley, CBI Deputy Director-General, said:

‘Retail represents about 10% of our economy, and the high street is a vital part of this.

The Portas Review makes some sensible suggestions about how we can inject life back into town centres, including increased use of Business Improvement Districts and relaxing planning restrictions on the high street, in particular on change of use.

More importantly, she recognises the growing burden business rates are placing on companies right across the country at a critical time.

We need to make sure the UK remains attractive to investors, as it’s their decisions that will ultimately lead to regeneration of our town centres. Any changes to the planning and business rate regimes must therefore encourage investment in the broadest sense, and not just rob Peter to pay Paul.’

Internet links: BIS press release with access to report CBI press release

HMRC to accept Faster Payments

HMRC have announced that they will now accept payments made using the Faster Payments Service. This will allow taxpayers to make faster electronic payments, typically via internet or telephone banking, enabling them to be processed on the same or next day.

HMRC advise that if you want make payments using this method you should contact your bank or building society to confirm the following:

  • the services available to you
  • whether there are any single transaction or daily limits on the amount you can pay
  • their latest cut off times for making a payment.

They are also stressing that when making a payment to HMRC it is important to ensure that you are using the correct bank account details and reference number.

Internet link: HMRC news

2012/13 Statutory Payments

HMRC have announced the following statutory payment rates which are due to take affect for 2012/13. These rates are still subject to Parliamentary approval and HMRC will confirm the rates before 1 April 2012.

Statutory Maternity Pay (SMP) £135.45 per week

Ordinary Statutory Paternity Pay £135.45 per week

Additional Statutory Paternity Pay £135.45 per week

Statutory Adoption Pay (SAP) £135.45 per week

Statutory Sick Pay (SSP) £85.85 per week

Please contact us if you would like any help with payroll issues.

Internet link: HMRC statutory payment rates

Newsletter – November 2011

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In this month’s enews we report on various issues including the Chancellor’s Autumn Statement and HMRC’s latest targets. Please contact us if you would like any further details on any of the issues covered.

 

eNEWS quicklinks
Autumn Statement New HMRC Taskforces
VAT and duty on shopping Parties for employees
Consultation – have your say Fighting Customs and Excise fraud and tax evasion
Unemployment rises to 2.62 million EU VAT registration letter scam

 

Autumn Statement

On Tuesday 29 November the Office for Budget Responsibility (OBR) published its updated forecast for the UK economy. Chancellor George Osborne responded to that forecast in a statement to the House of Commons later on that day.

The Chancellor emphasised that the OBR does not predict a recession in Britain but they have revised down their short term growth prospects for the country. He also made clear that the OBR central forecast assumes ‘the euro finds a way through the current crisis’.

The Autumn Statement sets out the actions the government will take in two main areas:

  • protecting the economy and
  • building a stronger economy for the future.

In order to maintain economic stability and meet its fiscal rules, the government will:

  • set plans for public spending in 2015/16 and 2016/17 in line with the spending reductions over the Spending Review 2010 period
  • raise the State Pension age to 67 between April 2026 and April 2028
  • set public sector pay awards at an average of 1% for each of the two years after the current pay freeze comes to an end.

The growth plans include the publication of a National Infrastructure Plan 2011. The plan sets out a pipeline of over 500 infrastructure projects.

Other announcements include:

Credit easing

In order to free up lending to business, the government is launching a package of measures worth up to £21 billion to ease the flow of credit to businesses. This includes up to £20 billion for the National Loan Guarantee Scheme and £1 billion for the Business Finance Partnership.

Small business rate relief holiday

The government will extend the current small business rate relief holiday for a further six months from 1 October 2012 and also give businesses the opportunity to defer 60% of the increase in their 2012/13 business rate bills.

Employment regulations

In an attempt to make it easier to ‘hire and fire’, the government intends to:

  • look for ways to provide a quicker and cheaper alternative to a tribunal hearing in simple cases by introducing a ‘Rapid Resolution’ scheme
  • complete a call for evidence on the impact of reducing the collective redundancy process for redundancies of 100 or more staff from the current 90 days to 60, 45 or 30 days.

Youth Contract

A number of measures under the heading of a ‘Youth Contract’ will be introduced including government funding of:

  • wage incentives for 160,000 young people to make it easier for private sector employers to take them on
  • at least 40,000 incentive payments for small firms to take on young apprentices.

Seed Enterprise Investment Scheme (SEIS)

This is a new tax relief which will be introduced from 6 April 2012. It will provide income tax relief at 50% in respect of investment in a small company whose total assets before the investment are less than £200,000. The relief will be limited to investments of up to £150,000 in each company and a maximum of £100,000 investment for an individual. In addition an individual who makes a capital gain in 2012/13 and reinvests some or all of the gain in a SEIS company in the same year will obtain exemption from capital gains tax for the sum invested.

Tax treatment of asset-backed pension contributions

Rules are to be introduced from 29 November 2011 to limit tax relief for employers who enter into arrangements to make asset-backed contributions into their pension schemes. The new rules will ensure that the tax relief obtained more accurately reflects the actual costs to the employer.

Further announcements expected

It is also expected that large amounts of draft legislation for the Finance Bill 2012 will be issued for consultation on 6 December 2011.

We will update you on significant announcements in next month’s enews.

Internet link: Treasury website

New HMRC Taskforces

Five new taskforces have been set up to tackle tax evasion in different areas of the country. The new HMRC taskforces will target:

  • scrap metal dealers in Scotland
  • construction traders who are self employed or run their own company who suppress sales or over-claim expenses in the North West and North Wales
  • taxpayers not submitting their statutory returns across Corporation Tax, Income Tax Self Assessment, PAYE and VAT in the South East
  • fast food outlets deliberately falsifying their records and mis-declaring their true sales levels to avoid paying the correct taxes in Scotland, and
  • landlords – owning or renting three or more properties – evading their tax responsibilities in North West and North Wales.

Internet link: Press release

VAT and duty on shopping

Angela Shephard, Head of Customs Policy, HMRC is warning individuals not to get caught out by ‘unexpected charges when you are shopping for Christmas bargains this year’.

‘If you are going abroad to do Christmas shopping, or buying goods online from non-EU countries, you need to know how much you can buy before you have to pay import duty or VAT.’

‘We know many people like to go abroad at this time to buy their Christmas gifts, or buy online from non-EU countries, and think that the ‘cheaper’ price they see is always the price they finally pay. HMRC is keen to remind the general public how much they can actually bring back from abroad or buy from an online overseas seller without having to pay import duty or VAT.’

‘You don’t want to be faced with unexpected extra charges, when you thought you had found a bargain.’

HMRC advise that:

  • Arriving in the UK by commercial sea or air transport from a non-EU country, you can bring in up to £390 worth of goods for personal use without paying customs duty or VAT (excluding tobacco and alcohol, which have separate allowances, and fuel). Detailed information on the non-EU limits can be found at http://www.hmrc.gov.uk/customs/arriving/arrivingnoneu.htm
  • Should you buy goods over the internet or by mail order from outside the EU, you will have to pay VAT if the value of the package is over £15.
  • If the goods are over £135 in value, customs duty may also be due, although this will depend on what they are and where they have been sent from. Where, however, the actual amount of duty due is less than £9, this will not be charged.
  • If someone sends you a gift from outside the EU, import VAT will only be due if the package is valued at over £40. To qualify as a gift, the item must be sent from one private individual to another, with no money changing hands.
  • Please note that excise duty is always due on all alcohol and tobacco products purchased online or by mail order.
  • The spirits or tobacco products, there are no limits on the amounts of duty and tax paid goods you can bring back personally from another EU country, as long as they are for your own use.

Internet link: Press release

Parties for employees

With the season for office parties fast approaching we thought it would be a good idea to remind you of the tax implications. The good news is that, unlike entertaining customers, the costs of entertaining employees are generally allowable against the profits of the business.

But what about the tax consequences for the employees themselves? Is it a perk of their jobs and will they have to pay tax on a benefit?

Generally, as long as the total costs of all employee annual functions in a tax year are less than £150 per attendee (VAT inclusive) there will be no tax implications for the employees themselves. In considering this limit make sure you have included all the costs, which may include not only the meal itself but also any drinks, entertainment, transport and accommodation that you provide.

If the costs are above the £150 limit then the full cost will be taxable on the employee. In that case do get in touch so we can advise you how best to deal with them.

Internet link: HMRC guidance

Consultation – have your say

The government has launched a consultation, ‘Modernising the administration of the personal tax system’. They would like to hear interested parties views on a number of issues regarding the personal tax system.

‘This consultation seeks feedback and ideas for how the administration of the personal tax system could be improved to achieve better understanding and make it easier for taxpayer to deal with it.’

To have your say visit the link below.

Internet link: HMRC consultation

Fighting Customs and Excise fraud and tax evasion

HMRC are asking for information to help them tackle Customs and Excise fraud and tax evasion.

The HMRC guide explains ‘how you can help HMRC by either telling them about your suspicions, or give information that will help stop people committing fraud, bringing goods into the UK that they shouldn’t or deliberately not paying tax’.

For more information visit the link below.

Internet link: HMRC reporting fraud

Unemployment rises to 2.62 million

The CBI commented on official data showing unemployment rose by 129,000 to 2.62 million in the three months to September 2011, including a rise in youth unemployment to over a million.

John Cridland, CBI Director-General, said:

‘These figures underline why we need urgent action to help our young people take their first steps in the labour market. A generation risks being scarred by the devastating effects of long-term unemployment.

We are calling for action for jobs now, with a clear plan to get the UK working, focusing on our young people.’

Internet links: BBC news CBI press release

EU VAT registration letter scam

HMRC are warning of a new scam letter which is being sent to businesses. The letter requests payment of a fixed fee by credit card and provides a website address to activate VAT registration.

HMRC are advising that these letters are not issued by HMRC and the registration should not be completed or payment made.

Internet links: HMRC security examples Copy scam letter

Chancellors 2011 Autumn Statement 29 November 2011

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On Tuesday 29th November the Office for Budget Responsibility (OBR) published its updated forecast for the UK economy. Chancellor George Osborne responded to that forecast in a statement to the House of Commons later on that day.

In the period since the Budget in March a number of consultation papers and discussion documents have been published by HMRC. Draft legislation relating to many of these areas will be published on 6 December 2011. Some of these proposals are summarised here. We will provide an update for you if significant changes are announced on 6 December.

This summary also provides a reminder of other key developments which are to take place from April 2012.

The Chancellor’s statement

The Chancellor emphasised that the OBR does not predict a recession in Britain but they have revised down their short term growth prospects for the country. He also made clear that the OBR central forecast assumes ‘the euro finds a way through the current crisis’.

General measures

The Autumn Statement sets out the actions the Government will take in two main areas:

  • protecting the economy and
  • building a stronger economy for the future.

In order to maintain economic stability and meet its fiscal rules, the Government will, for example:

set plans for public spending in 2015/16 and 2016/17 in line with the spending reductions over the Spending Review 2010 period

  • Raise the State Pension age to 67 between April 2026 and April 2028
  • set public sector pay awards at an average of 1% for each of the two years after the current pay freeze comes to an end.

The growth plans include the publication of a National Infrastructure Plan 2011. The plan sets out a pipeline of over 500 infrastructure projects including:

introducing a new approach to financing infrastructure, by obtaining £20 billion of private investment from pension funds

  • investing over £1 billion to tackle areas of congestion and improve the national road network
  • investing more than £1.4 billion in railway infrastructure and commuter links
  • investing £100 million to create up to ten ‘super-connected cities’ across the UK, with 80-100 megabits per second broadband and city-wide high-speed mobile coverage.

Comment

The proposal to raise the state pension age is expected to save around £60 billion in today’s prices between 2026/27 and 2035/36.

The aim of the National Infrastructure Plan is to kick start the economy by accelerating infrastructure projects with a view to job retention/creation. Time will tell how successful the new strategy is.

NON-TAX MEASURES FOR SMEs

Credit easing

In order to free up lending to business, the Government is launching a package of measures worth up to £21 billion to ease the flow of credit to businesses. This includes up to £20 billion for the National Loan Guarantee Scheme and £1 billion for the Business Finance Partnership.

Comment

The hope is that credit easing will encourage bank lending and enhance the demand for credit by reducing the price of loans for eligible businesses.

Small business rate relief holiday

The Government will extend the current small business rate relief holiday for a further six months from 1 October 2012 and also give businesses the opportunity to defer 60% of the increase in their 2012/13 business rate bills.

Employment regulations

In an attempt to make it easier to ‘hire and fire’, the Government intends to:

  • look for ways to provide a quicker and cheaper alternative to a tribunal hearing in simple cases by introducing a ‘Rapid Resolution’ scheme
  • complete a call for evidence on the impact of reducing the collective redundancy process for redundancies of 100 or more staff from the current 90 days to 60, 45 or 30 days.

The Government will begin a call for evidence on two proposals for reform of UK employment law. They will:

  • seek views on the introduction of compensated no-fault dismissal for micro-businesses with fewer than 10 employees
  • look at how it could move to a simpler, quicker and clearer dismissal process, potentially including working with ACAS to make changes to their code or by introducing supplementary guidance for small businesses.

Youth Contract

A number of measures under the heading of a ‘Youth Contract’ will be introduced, including Government funding of:

wage incentives for 160,000 young people to make it easier for private sector employers to take them on

  • at least 40,000 incentive payments for small firms to take on young apprentices.

Planning reform

The Government has announced a series of changes to the planning regime. Changes will include:

  • introducing a 13-week maximum timescale for the majority of non-planning consents
  • building more flexibility into the new major infrastructure planning process, particularly in the pre-application phase
  • reviewing the planning appeals procedures to make them faster and more transparent
  • consulting on proposals to allow existing agricultural buildings to be used for other business purposes such as offices, leisure and retail space.

Comment

These changes are designed to speed up building projects. ‘Red tape’ has been cited as a major reason for UK infrastructure development being more expensive than in other European countries.

Housing

In an attempt to increase house building, stabilise the housing market and enable more people to own their own home, the Government will:

  • introduce a new build indemnity scheme under which home buyers will be able to purchase new build houses and flats with a 5% deposit, with house builders and the Government helping to provide security for the loan
  • reinvigorate the ‘Right to Buy’ to help social tenants buy their home
  • launch a new £400m ‘Get Britain Building’ investment fund, which will support firms in need of development finance
  • support new development, which could include modern garden cities and urban and village extensions.

PERSONAL TAX

The personal allowance for 2012/13

For those aged under 65 the personal allowance will be increased by £630 to £8,105. This increase is greater than the minimum required and is part of the plan of the Coalition Government to ultimately raise the allowance to £10,000.

The personal allowance is reduced by £1 for every £2 of adjusted net income over £100,000. Next year the allowance ceases at adjusted net income in excess of £116,210.

Comment

Planning should be considered where adjusted net income is expected to exceed £100,000. This figure is calculated after giving a deduction against income for pension contributions and gift aid payments. Consider whether these could be made to protect some or all of the personal allowance.

 

Tax band and rates 2012/13

The basic rate of tax is currently 20%. The band of income taxable at this rate is being reduced to £34,370 so that the threshold at which the 40% band applies will remain at £42,475.

The 50% band currently applies where taxable income exceeds £150,000.

If dividend income is part of total income this is taxed at 10% where it falls within the basic rate band, 32.5% where liable at the higher rate of tax and 42.5% where liable to the additional rate of tax.

Tax credits

The child element of Child Tax Credit will rise by £135 per year in 2012/13 which is in line with the inflation increase but the additional increase above inflation of £110 which was planned has been dropped.

The disability elements of tax credits will be uprated by the increase in the Consumer Price Index of 5.2% but there is to be no uprating of the couple and lone parent elements of Working Tax Credit.

 Integration of the operation of income tax and NIC

Following an invitation for people to express views on a proposed integration of the operation of income tax and NIC the Government has decided to continue with the review. The Government will establish a number of working groups with stakeholders to explore options for integration. Depending on the results of the working groups, further rounds of consultation will proceed after Budget 2012. It is unlikely that there will be any substantive change in reality before 2017.

Junior ISAs

Provisions to allow these accounts were introduced this tax year. At present there is not a wide availability of these accounts although some building societies have launched products. The key features of the accounts are:

  • the accounts are available to any child who does not qualify for a Child Trust Fund
  • all returns will be tax free
  • funds placed in the account will be owned by the child and would be locked in until the child reaches adulthood although they can manage the account from the age of 16 years
  • investments will be available in cash or stocks and shares
  • annual contributions will be capped at £3,600
  • there will be no Government contributions into the account.

Comment

These accounts provide a way of increasing the tax free income available to a family in addition to the use of adult ISAs for the parents.

Child Trust Funds

These ceased to be available for children born on or after 1 January 2011 although existing accounts remain in place and can be added to by parents and family members. The maximum annual contribution has been increased to £3,600 to keep in line with the Junior ISA. No further Government contributions will be made to any account.

Furnished holiday lettings

From 6 April 2012 the tests which determine whether a property can qualify for treatment as a furnished holiday let will change. The number of days for which the property is available for letting increases from 140 days to 210 days and the number of days actually let increases from 70 to 105 days.

If an individual can show there was a genuine intention to meet the letting conditions but has been unable to do so they will be able to make an election to continue to treat the property as a furnished holiday let. This will protect the special tax treatment that such properties receive.

Statutory Residence Test

There is currently no definition of ‘residence’ in UK tax law and yet the liability to income tax and capital gains tax (CGT) rests on knowing an individual’s UK residence status for a tax year. Currently the determination of residence is based on old case law and, as a recent Supreme Court decision has shown, it can lead to significant uncertainty and large tax liabilities.

The Government published a consultation document in summer 2011 on the introduction of a Statutory Residence Test (SRT) which would come into effect in April 2012. The SRT is based on three parts and an individual would consider each part in turn. If a definite answer on their residence status is found on the first part then there is no need to proceed further. Similarly if the second part gives a definitive answer there is no need to move to the third part. That final test then provides a definitive answer.

The parts and the conditions are as follows:

  • Part A – satisfy any one of three conditions and the individual is conclusively non-resident in the year:
  • an individual with no UK residence in the three previous tax years spends less than 45 days in the UK
  • an individual who has been UK resident in one of the three previous tax years spends less than ten days in the UK
  • an individual goes to work abroad in a full time employment or self- employment and spends less than 90 days in the UK and has less than 20 working days in the UK.
  • If no definite answer under Part A then proceed to Part B
  • Part B – satisfy any one of three conditions and the individual is conclusively resident for the year:
  • an individual spends 183 days or more in the UK
  • an individual has their only home in the UK or if they have more than one home all are in the UK
  • an individual works full time in the UK for a continuous period of at least nine months and not more than 25% of duties are outside the UK.
  • If no definite answer under Part B then proceed to Part C
  • Part C – here the rules combine the time spent in the UK and a number of connection factors which are deemed to link an individual to the UK. Five connection factors have been identified:
  • spouse and/or minor children are resident in the UK at any time in the year
  • the individual has accessible accommodation in the UK and uses it in the year
  • the individual spends at least 40 working days in the UK
  • in either of the two previous tax years the individual spent at least 90 days in the UK
  • the individual spent more time in the UK than in any other single country in the tax year.
  • Part C then provides for a combination of factors and time which will make an individual resident in the UK.

A day will count as being in the UK if the individual is physically present in the UK at midnight unless they satisfy specific rules for those in transit through the UK.

There are a number of issues which have been raised in the consultation process on which clarification has been sought and it is hoped that these will be clarified in the draft legislation. It is intended that the new rules will apply from 6 April 2012. From that point they will supersede all existing case law and practice. However residence status for years up to 2011/12 is determined using the present rules.

Comment

The proposed rules do seem to work to give a definitive answer to the question ‘Am I resident in the UK?’ The answer may not be the one that you want but it should then be possible to identify the factors which need to change in order to achieve the desired result.

Individuals planning a move into or out of the UK after 6 April 2012 should be taking the new rules into account in their planning. They should also note that they are going to need to keep comprehensive records not just of their time in the UK but also, where relevant, their working days in the UK and the time they spend in each other country that they may visit.

Some individuals who are currently outside the UK, particularly those working abroad, will need to note that the new rules could change their residence status and they may wish to review plans for visits back to the UK and the impact of any potential connecting factors.

Changes for non-domiciled individuals

Following changes in 2008 all UK resident individuals are taxable on overseas income and gains overseas arising in the tax year. Individuals who are not domiciled in the UK or who are not ordinarily resident can make a claim to be taxed only on sums actually remitted to the UK in the year. These rules, known as the ‘remittance basis rules’ are complex but can mean a significant tax saving.

There are currently two downsides to making a remittance basis claim:

  •  the individual automatically loses their personal allowance for income tax and their annual exempt amount for CGT unless the remittances amount to almost all of the overseas income and gains arising
  • an individual who has been resident in the UK for at least seven out of the preceding nine UK tax years must pay a remittance basis charge of £30,000 in addition to the tax actually due.

Two significant changes are planned in the remittance basis rules from 6 April 2012:

  • the remittance basis charge will be increased to £50,000 where an individual has been resident in the UK for 12 out of the preceding 14 tax years
  • if an individual remits funds to invest in a UK business then that remittance will be tax free if the remittance basis is claimed (although the remittance basis charge will still be payable). A consultation paper has proposed a wide definition of business and indicates that the business vehicle can be a company or an unincorporated business. When the investment is realised it will be necessary for the individual to either reinvest the funds immediately in another qualifying venture or remove the funds from the UK within 14 days otherwise they will be treated as a remittance for that year.

Some administrative changes in the remittance basis rules will also be introduced.

BUSINESS TAX

Corporation tax rates

In accordance with the plans announced in March the main rate of corporation tax will fall from 26% to 25% from 1 April 2012. The small company rate is 20% and there has been no announcement of the rate for next year.

Enterprise Investment Scheme (EIS)

Changes announced in the March Budget are due to come into effect on 6 April 2012. These are:

  • the maximum amount that an individual can invest in total in a tax year rises from £500,000 to £1m.
  • the maximum funds that a company can receive under EIS rises from £2m to £10m
  • the size of a company that can benefit from EIS (subject to meeting all the qualifications) is increased to £15m gross assets and fewer than 250 employees.

A number of other changes were announced in the Autumn Statement:

  • the rules which identify individuals who are deemed to be connected to the company are to be relaxed in some circumstances
  • the £1m per company limit that currently applies for Venture Capital Trusts will be removed
  • anti-avoidance rules will be introduced  to exclude companies set up for the purpose of obtaining the relief, and to exclude the purchase of shares in another company
  • investment in Feed-in-Tariffs will be excluded.

Seed Enterprise Investment Scheme (SEIS)

This is a new relief which will be introduced from 6 April 2012. It will provide income tax relief at 50% in respect of investment in a small company whose total assets before the investment are less than £200,000. The relief will be limited to investments of up to £150,000 in each company and a maximum of £100,000 investment for an individual. In addition an individual who makes a capital gain in 2012/13 and reinvests some or all of the gain in a SEIS company in the same year will obtain exemption from CGT for the sum invested.

Comment

This relief will encourage business angels or perhaps family members to invest in small enterprises and obtain a tax refund of half their investment. The details of the conditions which the recipient company will have to meet are not yet known.

Annual Investment Allowance (AIA)

The AIA is a capital allowance available for many businesses on most purchases of plant and machinery, long-life assets and integral features. Relief is given on the full cost up to a current maximum allowance of £100,000 for a full year. This allowance is to be reduced to £25,000 with effect from 1 April 2012 for companies and 6 April 2012 for unincorporated businesses.

Where a business has an accounting period that straddles the date of change the allowances have to be apportioned on a time basis. For example a company with an accounting period ending on 30 September 2012 will have an allowance of £62,500 (£100,000 x ½ + £25,000 x ½). However it should be noted that for expenditure incurred after the 1/6 April, the maximum allowance that can be attributed to that expenditure is a fraction of £25,000. The fraction will be the amount of the £25,000 that is included in the calculation of the overall AIA for the accounting period.

Comment

Planning the timing of purchases of significant items of plant becomes very important over the next year to ensure that the maximum available AIA can be secured.

Suppose the company with the 30 September year end wishes to buy new plant costing £35,000. If they buy it in February 2012 they will be able to claim an AIA on the full £35,000 but if they buy it in June 2012 they will only be able to claim an AIA of £12,500. They would actually then be better off if they waited until October when they would have a full £25,000 available.

Writing down allowances

Writing down allowances are to be reduced from April next year. The normal rate of 20% will be reduced to 18% and the lower rate of 10% which applies to integral features and long-life assets will reduce to 8%. It will be necessary to calculate hybrid rates where the accounting period straddles 1/6 April which will give a rate between 20% and 18% (or between 10% and 8%) for that period.

Capital allowances in Enterprise Zones

Over the past year the Government has designated a number of very specific areas as Enterprise Zones. Businesses in these areas enjoy certain reliefs, for example, a relief from business rates. The Chancellor has announced that 100% capital allowances will now be available for the Zones in the Black Country, Humber, Liverpool, North East, Sheffield, and the Tees Valley.

Compulsory pooling

The Government is considering whether to introduce a requirement that businesses should pool their expenditure on fixtures within a short period after acquisition in order to qualify for capital allowances.

Research and development expenditure (R&D)

There are currently a number of restrictions which effectively limit the scope of this relief and it is planned to remove these for expenditure incurred on or after 1 April 2012. The proposals include:

  • removing the rule limiting a company’s payable R&D credit to the amount of PAYE and NIC it pays
  • removing the £10,000 minimum expenditure condition
  • changing the rules governing the provision of relief for work done by subcontractors under the large company scheme
  • increasing the additional deduction for R&D expenditure by SMEs by a further 25% making the total deduction 225% of actual expenditure.

The Chancellor has announced a consultation next year on the introduction of an ‘above the line’ tax credit in 2013 for larger companies.

Controlled Foreign Companies (CFCs)

The CFC regime can apply to a UK company which has a subsidiary operating in a country with a low rate of corporation tax. The rules have been in place for 25 years but are seen as complex and in some cases disadvantageous to business. Some interim changes were made in 2011 but a major overhaul is planned for 2012. The aims of the new rules will be:

  • to target and impose a CFC charge on artificially diverted UK profits, so that UK activity and profits are taxed fairly
  • to exempt foreign profits where there is no artificial diversion of UK profits
  • to not tax profits arising from genuine economic activities undertaken offshore.

General Anti-avoidance Rule (GAAR)

The Government commissioned an independent report from a leading tax lawyer on whether or not it would be appropriate to introduce a GAAR into the UK tax system. This is a route that has been used in a number of other countries.

The reviewer has just presented his report to the Government and recommends that a moderate rule targeted at abusive arrangements would be beneficial to the UK tax system. Such a GAAR would apply for income tax, CGT, corporation tax and NIC. It would not apply to ‘responsible tax planning’.

It is now likely that the Government will undertake a consultation process in this matter but legislation is not likely until 2013 at the earliest.

High risk tax avoidance schemes

Certain types of tax avoidance schemes are currently subject to a disclosure regime which requires the scheme promoter to disclose details of the scheme to HMRC and for the users of the scheme to indicate their involvement on their tax return. Such schemes are usually challenged by HMRC but this procedure can take many years with Tribunal and Court hearings being required. If the scheme is blocked the scheme users have to pay the tax due but HMRC is concerned that the delay can still give them a significant cash-flow advantage.

HMRC is currently consulting on a proposal to introduce an additional charge on scheme users where the scheme fails. A user will be able to prevent this charge by paying the disputed tax to HMRC ahead of the challenge.

Tax treatment of asset-backed pension contributions

Rules are to be introduced from 29 November 2011 to limit tax relief for employers who enter into arrangements to make asset-backed contributions into their pension schemes. The new rules will ensure that the tax relief obtained more accurately reflects the actual costs to the employer.

EMPLOYMENT TAX

Employer-provided cars

From 6 April 2012 the CO2 emissions bands used to work out the taxable benefit for an employee who has use of an employer-provided car will be shifted downwards by 5gm/km. This will have the effect of increasing the charge for each vehicle.

In addition, the current graduated table of employer-provided car bands will extend down to a 10% band and will apply to cars with CO2 emissions between 76 and 99gm/km. As a result ‘qualifying low emission cars’ will no longer exist as a separate category.

In summary the new rules from 6 April 2012 will be:

  • no emissions                              0%
  • 75gm/km or less                        5%
  • 99gm/km or less                      10%
  • 100gm/km                               11%
  • graduated increases of 1% per 5gm/km up to a maximum, including diesel supplement, of 35%

Real Time Information (RTI)

HMRC have produced draft legislation to introduce probably the most significant change in the PAYE system since its introduction in 1944. Under the RTI scheme, employers will electronically provide monthly information to HMRC related to wages and salaries paid to employees. Once the scheme is ‘bedded in’ employers will no longer have to complete year end returns such as the P35 and P14. The new system will also see the end of the use of the P45 when an employee leaves an employment.

Volunteer employers are to pilot the new scheme from 6 April 2012. The intention is that it will apply to employers on a phased basis from 6 April 2013 so that all employers are operating the system by October 2013.

Comment

This really is a major change but the success or otherwise of the scheme will depend on the ability of the HMRC computer system to cope. History suggests that this could be the problem.

CAPITAL TAXES

CGT rates

The current rates of CGT are 18% to the extent that any income tax basic rate band is available and 28% thereafter. The rate for disposals qualifying for Entrepreneurs’ Relief (ER) is 10% with a lifetime limit of £10m for each individual.

No announcement has been made of the rates for next year.

Comment

The ER limit is very generous and owners of businesses should ensure that they meet all the conditions necessary to secure the relief throughout the twelve months up to the date of a disposal.

CGT annual exemption

The CGT annual exemption has been frozen at £10,600 for 2012/13.

Inheritance tax (IHT) nil rate band

The IHT nil rate band remains frozen at £325,000 until 6 April 2015.

Reduced rate of IHT for the charitable

The Government will introduce a reduced rate of IHT for an estate where a minimum level of legacy has been left by the deceased to charity. The actual legacy to charity remains exempt from IHT and it is the rate of tax on the balance of the estate that would be reduced to 36% from 40%.

The intention is that the reduced rate will apply where charitable bequests satisfy a 10% test. A comparison will be made between:

  • the total value of charitable legacies for IHT purposes and
  • the value of the net estate as reduced by:
  • any available nil rate band
  • the value of assets passing to the surviving spouse or civil partner and
  • other IHT reliefs and exemptions for example Business Property Relief.

If the first figure is at least 10% of the second then the balance of the estate will qualify for the reduced IHT rate of 36%.

The changes will apply to estates where the individual dies on or after 6 April 2012.

Comment

Because the benefit of the reduced IHT rate will be dependent on whether or not the amount of the charitable legacy is sufficient for the estate to pass the 10% test there will be a ‘cliff edge’ effect. Where the amount of the charitable legacy is close to the critical 10% point, a small difference to the amount of the legacy could have a much larger impact on the estate’s IHT liability. There are no plans to apply any taper or other mechanism to mitigate this.

OTHER TAXES

VAT – Low value consignment relief (LVCR)

LVCR is an administrative simplification to reduce the costs for businesses, Royal Mail and other carriers and consumers all of whom would otherwise be involved in the collection and/or payment of small amounts of VAT on large numbers of low value packages coming into the UK from outside the EU. It is the main reason that suppliers of DVDs and CDs often use a base in the Channel Islands from which to ship their products.

The amount at which LVCR was to apply was reduced from £18 to £15 from 1 November 2011.

The Government recently announced that the relief is to be abolished from 1 April 2012 for goods imported as part of a distance selling transaction from the Channel Islands.

VAT cost sharing exemption

The Government is to introduce an EU VAT exemption for organisations that wish to share costs between themselves on a non-profit basis. The exemption can be used, amongst others, by organisations such as charities, universities and higher education colleges and housing associations wanting to make efficiency savings by working together to achieve economies of scale.

Under current UK legislation a VAT cost can arise creating a barrier to the sharing of services. The exemption once implemented would also, in certain circumstances, remove this VAT barrier.

Stamp Duty Land Tax (SDLT) holiday for first time buyers

Currently first-time buyers do not have to pay SDLT on house purchases where the cost is no more than £250,000. This relief is due to expire at midnight on 24th March 2012.

Air Passenger Duty (APD)

The Government intends to proceed with the introduction of APD to flights taken aboard business jets from 1 April 2013.


Disclaimer – for information of users

This summary is published for the information of clients. It provides only an overview of the Autumn Statement and previous announcements. No action should be taken without consulting the detailed legislation or seeking professional advice. Therefore no responsibility for loss occasioned by any person acting or refraining from action as a result of the material contained in this summary can be accepted by the authors or the firm.

Newsletter – October 2011

Posted on by

In this month’s enews we report on HMRC’s latest disclosure opportunity. Please contact us if you would like any further details on any of the issues covered.

 

eNEWS quicklinks
HMRC launch the Tax Catch Up Plan Plan to boost the economy
HMRC extend Business Records Checks Make sure your employee information is correct
National Insurance Numbers – by letter HMRC issue updated guidance for employees on childcare
Importing and Exporting Guide

 

HMRC launch the Tax Catch Up Plan

HMRC have launched a campaign to target private tutors and coaches who have undeclared tax liabilities.

The Tax Catch Up Plan (TCUP) is aimed at individuals who provide private lessons, or who profit from tuition and coaching, as a main or secondary income where the correct tax has not been paid. The types of tuition, instruction or coaching covered by the TCUP include tuition of traditional academic subjects, fitness and dance instruction, musical instrument tuition, art, services provided by life coaches and others.

Under the TCUP, tutors and coaches have until 31 March 2012 to advise HMRC about their outstanding tax for the years up to 5 April 2010, and pay what they owe. HMRC have confirmed that those who come forward by the deadline are likely to receive the best possible terms for paying the tax owed. If they have to pay a penalty, it is unlikely to be more than 20%.

Those who wait for HMRC to come to them will find that they have to pay much higher penalties (as much as 100% and may even face criminal prosecution). After 31 March 2012, using information pulled together from different sources, HMRC will investigate those who have chosen not to come forward.

Marian Wilson, Head of HMRC Campaigns, said:

‘Our campaigns are designed to ensure tax is paid so that the money is available to spend on public services used by everyone. We are making it as easy as possible for people offering tuition and coaching to use this unique opportunity to put their tax affairs in order by making a full disclosure, and benefit from the best possible terms.

We are using various intelligence sources to identify and then target those who do not take advantage of this opportunity to declare their full income. The message is clear: contact us before we contact you.’

The Tax Catch Up Plan has two stages:

  • From 10 October 2011 to 6 January 2012, tutors/coaches/instructors must register with HMRC to ‘notify’ that they plan to make a voluntary tax disclosure.
  • By 31 March 2012 those who have registered to notify must tell HMRC what they owe and pay the tax, interest and penalties due.

People can register online by completing a notification form which can be accessed using the link below or by calling HMRC on 0845 601 8817.

Please do get in touch if you have any concerns in this area.

Internet links: Press release TCUP guidance

Plan to boost the economy

The Institute of Directors (IoD) has proposed a new economic growth plan which aims to improve business investment and development. ‘The Route Back to Growth’ contains several recommendations including:

1. Monetary policy – Quantitative easing; launch QE2 in October with an initial £50 billion
2. Fiscal rules – A new 35% of GDP public spending target by 2020
3. Taxation – Remove the 50% top rate of income tax
4. Taxation – Extended corporation tax cuts to 15% by 2020
5. EU policy – Use future Treaty and/or budget negotiations to repatriate key employment powers
6. Infrastructure – Ring-fence transport, energy and ITC infrastructure spending
7. Energy policy – Do no harm – don’t sacrifice UK competitiveness for green credentials
8. Education – Further expand free school provision with profit incentives
9. Taxation – End the £100,000 personal allowance anomaly
10. Competition policy – Intensify competition policy both domestically and within the EU
11. Regulation policy – Radical civil service reforms to promote de-regulation
12. Employment Law – Nine major changes to free up the labour market
13. Planning – Incremental ‘Green Belt’ and developer rights to propose, and reduce political influence over infrastructure planning
14. Public sector performances – Greater decentralisation of public sector pay
15. Public sector performances – No watering down of reforms to unfunded public sector pensions

The IoD claims that if its suggestions are adopted by the government, it could make the UK one of the most advanced economies in the world.

Internet link: IoD plan

HMRC extend Business Records Checks

HMRC have announced that they are extending their Business Records Checks programme.

These checks were piloted earlier this year and involved checks on the adequacy of Small and Medium Sized Entities’ business records. The pilots apparently found that around 44% of businesses visited had issues with their record-keeping, while around 12% of those visited had seriously inadequate records.

HMRC are now extending this activity from mid-September to cover a number of key areas across the UK. As part of this, the number of full-time staff employed on the programme will rise from 30 to 120.

HMRC are planning to complete up to 12,000 checks by the end of the current financial year, with 20,000 provisionally planned for 2012/13. HMRC are increasing the number of visits so it can refine the process, before final decisions on a national roll-out are taken in the New Year. If you have any concerns in this area please contact us.

Internet link: Press release

Make sure your employee information is correct

HMRC are reminding employers of the importance of correct employee information and have updated the questions on the introduction of Real Time Information (RTI). They have issued a number of questions and answers stressing the importance of correct details in the run up to the introduction of RTI in 2012/13.

According to the advice which has been issued:

‘It has always been important to make sure the information that you send HMRC about your employees is accurate to help ensure that your employees pay the correct Income Tax and NICs. Improving the accuracy of the information you hold and send to HMRC will help match the information to the correct HMRC record. This could save you money by helping to reduce the number of employee enquiries you receive.

This is not just important for tax and NICs. From October 2013, RTI will support Universal Credit by providing the Department for Work and Pensions with up to date information about claimants’ employment income. Ensuring your employee information is correct will help to ensure they receive the right amount of Credit.

As part of the process for an employer joining RTI, HMRC will align the records of employees held on the NPS system and the records held by employers. HMRC will publish more information about the ’employer alignment’ process soon.

In the meantime HMRC recommends that you start to prepare for RTI by checking the information you hold.’

Over 80% of matching problems experienced by HMRC are caused by incorrect information about an individual’s name, date of birth or National Insurance number.

Please use the following link to read the guidance on the correct format for information.

Internet link: HMRC RTI FAQs

National Insurance Numbers – by letter

HMRC have for many years notified individuals of their National Insurance number (NI No) for the first time by sending them a plastic NI No card.

Last year, as part of the Government’s Spending Challenge, it was announced that HMRC would stop issuing NI No cards and send letters instead. The government estimate this will save approximately £1 million per annum.

Late last year HMRC introduced a system of notification by letter for those requesting a reminder of their NI No, and in July this year adults requesting a number for the first time will be issued with one by letter by Jobcentre Plus.

HMRC have confirmed that they will stop sending NI No cards altogether. Anyone needing a number (adults and juveniles approaching age 16) will now receive their NI No on a notification letter.

HMRC are advising employers that new employees may now have a letter or a card with their NI No information and that either is acceptable.

Internet link: HMRC NI news

HMRC issue updated guidance for employees on childcare

HMRC have updated their guidance on employers helping with childcare costs.

Leaflet IR155 which sets out the circumstances and the amounts of tax and National Insurance (NI) free childcare costs that an employer may provide has been updated.

The update reflects the change to the rules which mean that where a new claimant enters into a scheme from 6 April 2011 the amount of exempt childcare is restricted

  • for higher rate taxpayers to £28 a week, and
  • for additional rate taxpayers to £22 a week.

The amount available to basic rate tax payers and those in relevant schemes prior to 6 April 2011 remains at £55 a week.

If you would like any further information on tax and NI efficient childcare please do get in touch.

Internet link: IR155 leaflet

Importing and Exporting Guide

HMRC have issued a ‘Guide to Importing & Exporting – Breaking down the Barriers’. According to the introduction to the lengthy document:

‘This information pack is for anybody, whether already in business or not, who wishes to bring goods into the United Kingdom (UK) from outside the European Union (EU), or intends to send goods from the UK out of the EU.

The pack has been designed to help you get started on importing and / or exporting, and to help you better understand the procedures involved in these activities.’

If you have any queries or would like advice in this area please do get in touch.

Internet link: HMRC guidance

Newsletter – September 2011

Posted on by

In this month’s enews we report on increases to the NMW rates. Please contact us if you would like any further details on any of the issues covered.

 

eNEWS quicklinks
National Minimum Wage rates Advisory fuel rates for company cars
Agreement with Switzerland to secure billions in unpaid tax Unemployment figures
HMRC reminder on new tax return penalties School Charities – Gift Aid and Payroll Giving guide
Revised construction industry penalties HMRC report increase in phishing scams

 

National Minimum Wage rates

The adult rate of the National Minimum Wage (NMW) increases to £6.08 (£5.93) an hour from 1 October 2011. This is payable to those age 21 and over.

The rate for those aged 18 to 20 increases to £4.98 (£4.92) and for 16 and 17 year olds to £3.68 (£3.64) an hour.

The apprentice rate, for apprentices under 19 or 19 or over and in the first year of their apprenticeship, increases to £2.60 (£2.50) and hour.

Updated guidance available on the Business Link website includes specific situations such as those engaged on work experience or internships and their entitlement to the NMW. The guidance also includes a new worker checklist for employers and case study examples.

The press release confirms:

‘Entitlement to the NMW does not depend on a job title but on whether the arrangement they have with an organisation makes them a worker for NMW purposes. Where an individual is a worker – and no exemption applies – then they must be paid at least the NMW.’

Employment Relations Minister Edward Davey said:

‘Internships and work experience of all forms offer an excellent opportunity in helping to bridge the gap between education and the workplace. And for businesses it allows them access to a wide talent pool of some of our best and brightest who didn’t take the traditional route into a job.

Fairness though is absolutely paramount with all placements. When a worker is entitled to the minimum wage, they should be paid it and we will continue to enforce the law. Today’s publication will help clarify this for employers and will also make sure that all interns and those on work experience placements have a better understanding of their entitlement to the minimum wage.’

HMRC are able to charge penalties to those employers found to be in breach of the NMW rules.

If you have any queries on the NMW please do get in touch.

Internet links: NMW rates Business link guidance Press release NMW Penalties

Advisory fuel rates for company cars

New company car advisory fuel rates have been published to take effect from 1 September 2011. HMRC’s website states:

‘These rates apply to all journeys on or after 1 September 2011 until further notice. For one month from the date of change, employers may use either the previous or new current rates, as they choose. Employers may therefore make or require supplementary payments if they so wish, but are under no obligation to do either.’

The advisory fuel rates for journeys undertaken on or after 1 September 2011 are:

Engine size Petrol LPG
1400cc or less 15p (15p) 11p (11p)
1401cc – 2000cc 18p (18p) 12p (13p)
Over 2000cc 26p (26p) 18p (18p)
Engine size Diesel
1600 cc or less 12p (12p)
1601cc – 2000cc 15p (15p)
Over 2000cc 18p (18p)

Please note that only one rate has changed and that has been reduced and care must be taken to apply the correct rate after the one month period of grace.

Other points to be aware of about the advisory fuel rates:

  • Employers do not need a dispensation to use these rates.
  • Employees driving employer provided cars are not entitled to use these rates to claim tax relief if employers reimburse them at lower rates. Such claims should be based on the actual costs incurred.
  • The advisory rates are not binding where an employer can demonstrate that the cost of business travel in employer provided cars is higher than the guideline mileage rates. The higher cost would need to be agreed with HMRC under a dispensation.

If you would like to discuss your car policy, please contact us.

Internet link: HMRC advisory fuel rates

Agreement with Switzerland to secure billions in unpaid tax

The government has agreed measures with Switzerland to tackle offshore tax evasion. Under the terms of an agreement, existing funds held by UK taxpayers in Switzerland will be subject to a significant one-off deduction of between 19% and 34% to settle past tax liabilities.

From 2013, a new withholding tax of 48% on investment income and 27% on gains will ensure the effective future taxation of UK residents with funds in Swiss bank accounts. This will be accompanied by new information-sharing rules which will make it easier for HMRC to find out about Swiss accounts held by UK taxpayers. The new charges will not apply if the taxpayer authorises a full disclosure of their affairs to HMRC.

Internet link: Press release

Unemployment figures

The latest unemployment figures show the number of people out of work rose by 80,000 to 2.51 million in the three months to July 2011.

Neil Carberry, CBI Director for Employment Policy, said:

‘This rise in unemployment is troubling, particularly the growing number of young people out of work.

With one in five 16-24 year olds currently unemployed, tackling youth unemployment must be a priority. Businesses are eager to play their part through apprenticeships, training and work placements, but now the government must do all it can to create the right conditions for the private sector to create much-needed jobs.’

Internet link: Press release

HMRC reminder on new tax return penalties

HMRC are reminding individuals and businesses about new Self Assessment penalties for late returns and late payments, which come into effect this autumn.

The changes will apply to Self Assessment returns for 2010/11 which must be submitted by 31 January 2012. As stated on the HMRC website:

‘The new penalties for late Self Assessment returns are:

  • an initial £100 fixed penalty, which will now apply even if there is no tax to pay, or if the tax due is paid on time
  • after 3 months, additional daily penalties of £10 per day, up to a maximum of £900
  • after 6 months, a further penalty of 5% of the tax due or £300, whichever is greater; and
  • after 12 months, another 5% or £300 charge, whichever is greater. In serious cases, the penalty after 12 months can be up to 100% of the tax due.’

If you would like help or advice on your Self Assessment return please do contact us.

Internet links: Press release HMRC deadlines and penalties

School Charities – Gift Aid and Payroll Giving guide

HMRC have published a Gift Aid and Payroll Giving guide for School Charities.

The guide contains information and simple examples specifically related to funds received by school charities to help make the most of these donations and identify what qualifies for Gift Aid. The guidance covers the following scenarios:

‘Appeals to fund extra lessons

Non-uniform days

School fees

Appeals towards school running costs

Appeals to fund scholarships

Appeals to a general reserve fund

Educational school trips

Appeals to buy a minibus or other equipment

Sponsored events

Payments to e-Learning Foundations

Building appeals

Other fundraising events’

Internet links: HMRC website Guidance

Revised construction industry penalties

From October 2011 the late submission Construction Industry Scheme monthly returns will result in revised penalties. The penalties are as follows:

  • a basic penalty of £100 for failure to meet due date of the 19th of the month
  • where the failure continues after two months after the due date, a further penalty of £200 will be charged
  • after six months an additional penalty will be due, rising to the greater of 5% of the tax or £300
  • after 12 months a further penalty will again be due being the greater of £300 or 5% of the tax but, where the withholding of information is deliberate and concealed, it will be 100% of the tax (or £3,000 if greater) and where information is withheld deliberately 70% of the tax (or £1,500 if greater).

Please get in touch if you would like help or advice on the Construction Industry Scheme.

Internet link: HMRC guidance on CIS penalties

HMRC report increase in phishing scams

HMRC have confirmed that reports of fraudulent ‘phishing’ emails have risen by 300% over the past year. The figure for August 2011 was 24,000. HMRC are currently helping to shut down around 100 scam websites a month.

They are stressing that if anyone receives an email claiming to be from HMRC advising that they are due a tax repayment that they do not follow the email’s instructions.

The emails provide a ‘click-through link’ to a cloned replica of the HMRC website, where the recipient is asked to provide their credit or debit card details. HMRC advise that victims risk not only having their bank accounts emptied but also their personal details being sold on to other organised criminal gangs.

Joan Wood, Director of HMRC Online and Digital, said:

‘We only ever contact customers who are due a tax refund in writing by post. We currently don’t use telephone calls, emails or external companies in these circumstances. If anyone receives an email claiming to be from HMRC, please send it to phishing@hmrc.gsi.gov.uk before deleting it permanently.

The increase in reports is partly due to improved awareness of this scam. However, I have no doubt that more of these “phishing” emails are in general circulation than ever before.

HMRC will do everything possible to ensure those receiving this email know what steps to take to protect their information, and we are working closely with other law enforcement agencies to target the criminals behind this serious crime and see them brought to justice.’

Internet link: