Newsletter – May 2017

Enews – May 2017

In this month’s eNews we report on the short Finance Act which has been rushed through Parliament in advance of the General Election. We also include details of changes to the off payroll working rules that exclude some businesses from being unintentionally caught by the provisions. We also consider changes to the timing of issuing PAYE coding notices and the P11D deadline together with the launch of the latest National Savings and Investment Bond.

General Election and tax law

With the announcement of a snap General Election on 8 June the time available for scrutinising proposed legislation was short so the Finance Act was rushed through Parliament. Many clauses have not made it to the final legislation due to time constraints. These include the provisions to enable Making Tax Digital, changes for Non Domiciled individuals and corporate losses.

The clauses are likely to be reinstated after the General Election, when, hopefully, there will be more time to debate the measures in greater detail. The clauses that will make it through to the Finance Act are contained in the version of the Finance Bill introduced into the House of Lords.

Anita Monteith, tax manager at ICAEW said:

‘Making Tax Digital plans remain controversial and need more scrutiny by those who will be affected, and most importantly proper parliamentary debate – a clear roadmap as to how MTD will work in practice is needed.’

‘MTD is not coming into effect until April 2018, and the announcement of the general election on 8 June 2017 provided an opportunity to withdraw these clauses and schedule from the Finance Bill which will be debated today and likely to be enacted on 27 April.’

‘These seminal clauses and schedule can be reintroduced after the election which will allow more time for proper scrutiny.’

Internet links: ICAEW news Parliamentary Bill

Business response to General Election on 8 June

In response to the announcement of a General Election on 8 June Carolyn Fairbairn, CBI Director-General, said:

‘With a snap General Election now called, businesses will be looking to each political party to set out their plans to support economic stability and prosperity over the next Parliament in a way that is fair and sustainable for communities across the UK. ‘Distraction from the urgent priorities of seeking the best EU deal and improving UK productivity must be kept to a minimum.’

‘Firms will want to hear commitments from all parties to work in close partnership with business and back a new Industrial Strategy to make the UK economy the most competitive in the world by 2030.’

‘It is essential to get the UK’s foundations right, from building a skills base for the next generation, to investing in infrastructure, energy and delivering a pro-enterprise tax environment.’

‘As EU negotiations now get underway, firms are clear about the serious risks of failing to secure a deal and falling into World Trade Organisation rules. It is vital that negotiators secure some early wins and all parties should commit to working to ensure businesses can continue to trade easily with our EU neighbours, while seeking new opportunities around the world.’

‘Whoever forms the next Government, they should seek to build a partnership between business and government that is the best in the world, based on trust and shared interest.’

Internet link: CBI News

Off payroll working in the public sector rules amended

From 6 April 2017, new tax rules were introduced which potentially affect individuals who provide their personal services via their own companies (PSCs) to an organisation which has been classified as a ‘public authority’. Amendments have now been made to the definition of a public authority.

Where these rules apply:

  • the public authority (or an agency paying the PSC) calculates a ‘deemed payment’ based on the fees the PSC has charged for the services of the individual
  • the entity that pays the PSC for the services must first deduct PAYE and employee National Insurance contributions (NICs) as if the deemed payment is a salary payment to an employee
  • the paying entity will have to pay to HMRC not only the PAYE and NICs deducted from the deemed payment but also employer NICs on the deemed payment
  • the net amount received by the PSC can be passed onto the individual without paying any further PAYE and NICs.

The rules were intended to cover those engaged by public sector organisations including government departments and their executive agencies, many companies owned or controlled by the public sector, universities, local authorities, parish councils and the National Health Service.

However, prior to this amendment, private sector retail businesses including high street pharmacies and opticians would have inadvertently been within the scope of the off payroll working in the public sector measure. As a result, such businesses would have been required to consider whether the new rules applied to all contractors working for them through an intermediary. This was not the intention of this policy and the rules have been amended.

The rules operate in respect of payments made on or after 6 April 2017. This means that they are relevant to contracts entered into before 6 April 2017 but where the payment for the work is made after 6 April 2017.

If you would like any help with these new rules contact us.

Internet link: GOV.UK amendment

P11D deadline approaching

The forms P11D which report details of benefits and some expenses provided to employees and directors for the year ended 5 April 2017, are due for submission to HMRC by 6 July 2017. 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, generally via a PAYE coding notice adjustment or through the self assessment system. Significant changes were introduced to the rules for reporting expenses from 6 April 2016.

Some employers payrolled the benefits and in this case the benefits do not need to be reported on forms P11D but employers should advise employees of the amount of benefits payrolled.

In addition, regardless of whether the benefits are being reported via P11D or payrolled 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. The deadline for payment of the Class 1A NIC is 19th July (or 22nd for cleared electronic payment). As 22nd July is a Saturday it may be appropriate to ensure cleared payment is made by Friday 21st July unless you can arrange for faster payment.

HMRC produce an expenses and benefits toolkit. The toolkit consists of a checklist which may be used by advisers or employers to check they are completing the forms correctly.

If you would like any help with the completion of the forms or the calculation of the associated Class 1A NIC please get in touch.

Internet links: HMRC guidance Toolkit

VAT fuel scale charges

HMRC have issued details of the updated VAT fuel scale charges which apply from the beginning of the next prescribed VAT accounting period starting on or after 1 May 2017.

VAT registered businesses use the fuel scale charges to account for VAT on private use of road fuel purchased by the business.

Please do get in touch for further advice on this or other VAT matters.

Internet link: GOV.UK fuel scale charges

Investment Bond launched

National Savings and Investments (NS&I) has recently launched a government-backed Investment Bond. The main details of the Bond are as follows:

  • minimum deposit of £100
  • balances on the account must be between £100 – £3000
  • applications can only be made online and up to April 2018
  • applicants must be aged 16+ years
  • fixed interest rate of 2.2% for three years paid yearly and without tax deduction
  • early withdrawals incur a penalty equal to 90 days’ interest on the amount cashed in.

According to Moneyfacts, the NS&I offering is a market leader on the interest rate with similar three-year fixed term bonds having an average interest rate of 1.24%. Competitors’ minimum investment thresholds are generally higher, typically starting upwards from £1,000 and caps on the maximum capital invested are significantly higher than the NS&I limit of £3,000.

Internet links: GOV.UK news NS&I Moneyfacts

Changes to the PAYE Tax system using Real Time Information

HMRC have announced that from the end of May 2017 they will be using Real Time Information (RTI) to make adjustments to employee tax codes in-year as and when the need arises.

HMRC states that this change in procedures will:

  • offer more certainty to employers and their employees
  • reduce the instances of unexpected tax bills arising
  • ensure that more employees end the tax year having paid the right amount of tax.

Details of the change in procedures can be found in the HMRC Policy Paper briefing ‘Changes to our PAYE Tax System – helping customers pay the right amount of tax on time’. Further information about the changes can be found on page 4 of the Employer Bulletin April 2017 (Issue 65).

The Policy Paper confirms that individuals will be issued with a new tax code if their circumstances change. This brings about a marked change from the current system which deals with adjustments after the tax year end and codes any underpayment out via a coding notice adjustment in a subsequent tax year.

Affected employees should shortly be in receipt of tax code notices explaining the changes to the system and what they can do if they need help and support to manage their taxes.

Under the new procedures, once HMRC are aware that an employee’s circumstances have changed, they will amend the individual’s tax code and follow it up with a notification of the amendment to the employee. A copy notification will also be sent to the employer. It is important for employers and employees to ensure that HMRC are made aware of any changes in an individual’s circumstances as soon as possible.

Employers are advised to expect, from 1 June onwards, some employee enquiries relating to tax code changes. In the longer term, HMRC envisages reduced contact from employees regarding under or overpayments of tax.

If you would like help with Payroll or checking your tax code please contact us.

Internet links: GOV.UK Briefing Employer Bulletin 65

Newsletter – June 2016

Henry Cooper is walking 2016 km in the year 2016!

Henry is walking 2016 km in the year 2016, to raise some funds for the Thames Valley Air Ambulance.

Please click below, to sponsor him – thank youJustGiving - Sponsor me now!

Advisory fuel rates for company cars

New company car advisory fuel rates have been published which took effect from 1 June 2016. The guidance states: ‘You can use the previous rates for up to one month from the date the new rates apply’. The rates only apply to employees using a company car.

The advisory fuel rates for journeys undertaken on or after 1 June 2016 are:

Engine size Petrol
1400cc or less 10p
1401cc – 2000cc 13p
Over 2000cc 20p
Engine size LPG
1400cc or less 7p
1401cc – 2000cc 9p
Over 2000cc 13p
Engine size Diesel
1600cc or less 9p
1601cc – 2000cc 10p
Over 2000cc 12p

The guidance states that the rates only apply when you either:

  • reimburse employees for business travel in their company cars
  • require employees to repay the cost of fuel used for private travel

You must not use these rates in any other circumstances.

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

Internet link: GOV.UK AFR

PAYE 3 days grace and risk based penalties to continue

HMRC have confirmed, in their updated guidance, that the three day easement and risk assessed approach to issuing penalties will continue to apply for 2016/17. As a result employers will not incur penalties for delays of up to three days in filing PAYE information during the 2016/17 tax year.

Late filing penalties will continue to be reviewed on a risk-assessed basis rather than be issued automatically.

Employers are required to file a Full Payment Submission (FPS) on or before each payment of wages is made to employees. Limited exceptions apply to this deadline which are set out at https://www.gov.uk/running-payroll/fps-after-payday’.

HMRC will not charge a late filing penalty for delays of up to three days after the statutory filing date, however employers who persistently file late, will be monitored and may be contacted or considered for a penalty.

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

Internet link: GOV.UK Penalties

VAT Flat Rate Scheme guidance updated

HMRC have issued updated guidance on the operation of the VAT Flat Rate Scheme which allows taxpayers to calculate the VAT payable by applying a flat rate percentage to their VAT inclusive turnover, rather than netting off output and input VAT due on sales and purchases.

The revision in the guidance follows a number of unsuccessful visits to the First Tier Tribunal (FTT). HMRC has issued a revised version of VAT notice 733 Flat Rate Scheme to update their guidance in accordance with the FTT decisions.

The previous version of the notice listed a number of trades and professions (at paragraph 4.4 of the guidance) and indicated the relevant sectors and percentages that these types of business should choose. These had a higher percentage than the 12% rate which applies to ‘business services not listed elsewhere’.

The FTT was critical of HMRC in their rigid interpretation of their own guidance. Although this section of the guidance has not been removed, taxpayers are now advised to ‘use ordinary English’ and choose the sector which ‘most closely describes what your business will be doing in the coming year’. The new guidance confirms that HMRC will not change a business’s choice of sector retrospectively as long as the choice was reasonable.

Please contact us if you would like any advice on VAT matters.

Internet link: VAT Notice 733

NAO report says HMRC’s customer service quality ‘collapsed’

According to a report by the National Audit Office (NAO) the quality of service at HMRC ‘collapsed’ over an 18 month period between 2014 and 2015.

The report found that average call waiting times tripled in 2014/15 and in the first seven months of 2015/16. Call waiting times for self assessment tax returns peaked at 47 minutes last autumn, which resulted in HMRC having to bring in 2,400 extra staff for their tax helpline.

Using HMRC’s own criteria, the NAO valued people’s time at an average of £17 an hour, and, as a result, calculated that callers would have wasted a total of £66 million while waiting on the phone, £21 million while actually talking to HMRC and £10 million on the cost of the call itself.

The NAO report blames the poor performance on HMRC’s decision to cut 11,000 staff between 2010 and 2014 in the move to persuade more people to complete their tax returns online. The report claims that HMRC ‘misjudged the cumulative impact of its complex transition and released too many customer service staff before completing service changes’.

In other words, it greatly underestimated how many call centre staff would still be required to help taxpayers with self assessment queries.

Amyas Morse, head of the NAO, said:

‘HMRC’s overall strategy of using digitally enabled information to improve efficiency and deliver service in new ways make sense to the NAO. This does not change the fact that they got their timing badly wrong in 2014, letting significant numbers of call handling staff go before their new approach was working reliably.

This led to a collapse in service quality and forced a rapid expansion of headcount. HMRC needs to move forward carefully and get their strategy back on track while maintaining, and hopefully improving, service standards.’

HMRC said its service levels had improved since the period analysed in the NAO report, and that, over the last six months, call waiting times had averaged six minutes.

Ruth Owen, HMRC’s director general for customer services, said:

‘We recognise that early in 2015 we didn’t provide the standard of service that people are entitled to expect and we apologised at the time. We have since fully recovered and are now offering our best service levels in years.’

Internet links: NAO press release HMRC news

HMRC update phishing scam advice

HMRC have updated their guidance to taxpayers on how to spot phishing scam emails.

Phishing is the fraudulent act of emailing a person in order to obtain their personal/financial information such as passwords and credit card or bank account details. These emails often include a link to a bogus website designed to encourage the unwary to enter their personal details.

The HMRC guidance is designed to help taxpayers to recognise genuine contact from HMRC, and how to tell when an email/text message is phishing/bogus.

Internet link: HMRC guidance

HMRC urges claimants to renew tax credits online

HMRC are urging people to renew their tax credits claim well before the 31 July deadline.

HMRC have made improvements to the online renewal service and recommend claimants renew their claim online once they receive their renewal pack which is issued between April and June. The online service can now accommodate all changes in circumstances (working hours, childcare costs or income) which affect the amount of someone’s entitlement.

Nick Lodge, HMRC’s Director General, Benefits and Credits, said:

‘Our online service means that you can renew at any time of the day or night, and on any device, without having to call us. Online help can also answer most queries you may have and a web chat facility will be available to support people renewing online. We urge everyone who can to go online.

Our customers should check their details and renew early to ensure they get the right money. The sooner people renew their claim, the sooner we can check payments are correct, meaning we avoid paying too little money, or too much, which claimants then have to pay back.

This year, claimants renewing online will be able to access further information, including viewing their next payment, through their own online Personal Tax Account.

Internet link: Press release

P11D deadline approaching

The forms P11D, and where appropriate P9D, which report details of expenses and benefits provided to employees and directors for the year ended 5 April 2016, are due for submission to HMRC by 6 July 2016. 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. The deadline for payment of the Class 1A NIC is 19th July (22nd for cleared electronic payment).

HMRC produce an expenses and benefits toolkit. The toolkit consists of a checklist which may be used by advisers or employers to check they are completing the forms correctly.

If you would like any help with the completion of the forms or the calculation of the associated Class 1A NIC please get in touch.

Internet links: HMRC guidance Toolkit

Newsletter – May 2015

May 2015 Enews

In this month’s eNews we report on a number of issues including recent warnings over pension scams, guidance on the things to avoid when completing forms P11D and the latest labour market statistics. We also include links to the latest Pensions Regulator auto enrolment guidance for employers with no workers and the updated VAT fuel scale charge rates.

Please contact us if you would like further information.

Parliamentary processes

With the political parties campaigning well underway in anticipation of the General Election on 7 May and Parliament having been prorogued there are few Government announcements to report this month. However by the time we issue next month’s eNews we will have a new Parliament.

For details of the relevant dates and formal procedures visit the following link.

Internet link: GOV.UK news

Latest labour market statistics

The Office for National Statistics has issued the latest labour market data for the three months to February 2015 which show that unemployment fell by 76,000 to 1.84 million.

Neil Carberry, CBI Director for Employment and Skills said:

‘It’s great to see 248,000 more people in work, the fastest rise in employment in just under a year – thanks to our flexible jobs market.

With real wage growth rising people have a little more money in their pockets. But we need to see a recovery in productivity before wages can rise faster.’

Internet links: ONS statistics CBI news

Warning over pension scams

Those approaching retirement are being urged to be aware of a rise in pension scams, as criminals seek new ways to defraud pensioners.

Savers have been urged to be aware of a rise in pension scams, as criminals seek new ways to defraud pensioners. A report produced by Citizens Advice looked at 150 cases where pensioners had fallen victim to fraudsters. The report identified common types of scams which include:

  • encouraging pensioners to move their savings into a ‘new’ pension
  • fake investment opportunities and
  • offering apparently ‘free advice’ and support which actually costs money.

In some cases pensioners are charged a fee for a service that isn’t required, while others are encouraged to part with personal information and bank details, either by email or phone.

Gillian Guy, Chief Executive of Citizens Advice said:

‘Scammers see pensioners as a prime target….‘There are many people looking to benefit from the new pension rules, including scammers. Fraudsters can ruin people’s retirement plans by taking a portion or all of a victim’s pension pots.’

The Pensions Regulator (TPR) has recently launched a campaign to alert people to the danger posed by fraudsters.

From 6 April 2015 individuals have more flexibility as to how they use their pension pot, including the option to choose to take all their savings as a cash lump sum. TPR has warned that scammers are exploiting this change by enticing those about to retire with promises of ‘one-off investments‘ or ‘pension loans’ or ‘upfront cash’, most of which are bogus.

Individuals who believe they are being targeted by a pension scam should contact the Pensions Advisory Service on 0300 123 1047. The Financial Conduct Authority’s website also has a list of known scams. Visit scamsmart.fca.org.uk.

Internet links: Citizens Advice publications Press release

TPR guidance for small employers with no ‘staff’

The Pensions Regulator (TPR) has updated its guidance on pensions auto enrolment including what businesses need to do when they have no workers.

If you would like help with auto enrolment please do get in touch.

Internet link: TPR guidance

Lack of awareness of VAT rules

According to research 36% of the UK’s smallest businesses are unaware of the rules governing VAT thresholds.

A third of the UK’s smallest businesses are unaware of the rules governing VAT thresholds, recent research has revealed.

This lack of understanding could mean that approximately 780,000 businesses are at risk of being fined by HMRC.

Meanwhile, according to the research, 9%% of small businesses intentionally limit their trading in order to avoid reaching the VAT threshold.

Under the current rules, where a taxable person (for example an individual, company or partnership) has VAT taxable turnover of more than the current registration threshold of £82,000 in a rolling 12 month period or where turnover is expected to exceed the registration threshold in the next 30 day period then they must register for VAT.

It is important to monitor turnover, as there is a penalty for late registration in addition to the tax payable.

Please contact us if you would like advice on VAT issues.

Internet links: icaew news GOV.UK news

P11D forms – don’t get them wrong

HMRC have published a list of common errors in the completion of forms P11D. The information is part of the latest Employer Bulletin and we have reproduced the guidance below.

  • Submitting duplicate P11D information on paper where P11D information has already been filed online to ensure ‘HMRC have received it’. These duplicates can cause processing problems.
  • Using a paper form that relates to the wrong tax year – check the top right hand corner of the first page.
  • Not ticking the ‘director’ box if the employee is a director.
  • Not including a description or abbreviation, where amounts are included in sections A, B, L, M or N of the form.
  • Leaving the ‘cash equivalent’ box empty where you’ve entered a figure in the corresponding ‘cost to you’ box of a section.
  • Completing the declaration on the final FPS/EPS submission accurately (for those employers whose software package requires them to be completed) or question 6 in section A of RT 4 form to indicate whether P11Ds are due.
  • Not advising HMRC either by paper form P11D(b) or electronic submission that there is no Benefits in Kind & Expenses return to make.
  • Where a benefit has been provided for mixed business and private use, entering only the value of the private-use portion – you must report the full gross value of the benefit.
  • Not completing the fuel benefit box/field where this applies. This means an amended P11D has to be sent in.
  • Incorrectly completing the ‘from’ and ‘to’ dates in the ‘Dates car was available’ boxes. For example entering 06/04/2014 to 05/04/2015 to indicate the car was available throughout that year. If the car was available in the previous tax year, the ‘from’ box should not be completed and if the car is to be available in the next tax year, the ‘to’ box should not be completed.

If you would like help with the completion of the forms P11D please contact us.

Internet link: Employer Bulletin 53

VAT fuel scale charges

HMRC have issued details of the updated VAT fuel scale charges which apply from the beginning of the next prescribed VAT accounting period starting on or after 1 May 2015.

VAT registered businesses use the fuel scale charges to account for VAT on private use of road fuel purchased by the business.

Please do get in touch for further advice on VAT matters.

Internet link: GOV.UK news

VAT recovery on car-derived vans and combi vans

HMRC have issued a list of makes and models of car derived vans and combi vans which VAT registered businesses can use to determine if the VAT paid on the purchase can be reclaimed as input tax.

The issue is that VAT will normally be claimable in full on the purchase of a commercial vehicle. However if the vehicle purchased is a passenger car VAT is not recoverable unless it is used ‘exclusively for the purposes of a business’. Generally cars are therefore VAT ‘blocked’ and no input VAT is recoverable.

The VAT guidance states

‘Motor car means any motor vehicle of a kind normally used on public roads which has three or more wheels and either:

a) is constructed or adapted solely or mainly for the carriage of passengers; or

b) has to the rear of the driver’s seat roofed accommodation which is fitted with side windows or which is constructed or adapted for the fitting of side windows’

Whether or not a vehicle is commercial is not specifically defined but instead the definition of a car excludes:

  • vehicles capable of accommodating only one person or suitable for carrying twelve or more people including the driver
  • vehicles of more than three tonnes unladen weight;
  • caravans, ambulances and prison vans
  • special purpose vehicles such as ice cream vans, mobile shops, hearses, bullion vans and breakdown and recovery vehicles
  • vehicles constructed to carry a payload of one tonne or more.

Many car-derived vans are not cars for VAT purposes as they have no rear seats, have metal side panels to the rear of the front seats and a load area which is highly unsuitable for carrying passengers etc.

HMRC have issued the clarification due to developments in the car-derived van market as some vehicles with a payload of less than one tonne, have ‘blurred’ the distinction between cars and vans.

If you would like help with this or any other VAT issue please contact us.

Internet link: GOV.UK news

 

Newsletter – May 2014

In this month’s enews we update you on pertinent announcements from HMRC for employers. We also look at issues relevant to businesses.

Please contact us if you would like any further information.

 

 

More HMRC guidance on the Employment Allowance

The Employment Allowance of up to £2,000 is available to most employers from 6 April 2014. Employers can reduce the amount of National Insurance contributions (NICs) they pay for their employees by up to £2,000. This is called the ‘Employment Allowance’.

Employers generally won’t have to pay any employer National Insurance contributions at all if they usually pay less than £2,000 a year.

HMRC has updated the guidance on eligibility for the Employment Allowance.

For help with payroll matters please do contact us.

Internet link: Employment allowance eligibility  Employment allowance key facts

P11D forms don’t get them wrong

HMRC have published a list of common errors in the completion of forms P11D and guidance that medical benefits for lower paid employees are not reportable. The information is part of the lengthy Employer Bulletin so we have reproduced the guidance below.

Common Mistakes

The following is a list of common errors which are easily avoidable but can delay processing and cause problems with employees’ tax codes each year:

  • Submitting duplicate P11D information on paper where P11D information has already been filed online to ensure ‘HMRC have received it’. These duplicates can cause processing problems
  • Using a paper form that relates to the wrong tax year – check the top right hand corner of the first page
  • Not ticking the ‘director’ box if the employee is a director
  • Not including a description or abbreviation, where amounts are included in sections A, B, L, M or N of the form
  • Leaving the ‘cash equivalent’ box empty where you’ve entered a figure in the corresponding ‘cost to you’ box of a section
  • Not correctly completing the declaration on the final FPS/EPS submission (for those employers operating PAYE in ‘real time’) or the box in Part 5 of form P35 (Employers Annual Return) to indicate whether or not P11Ds are due
  • Where a benefit has been provided for mixed business and private use, entering only the value of the private-use portion – you must report the full gross value of the benefit
  • Not completing the fuel benefit box/field where this applies. This means an amended P11D has to be sent in
  • Incorrectly completing the ‘from’ and ‘to’ dates in the ‘Dates car was available’ boxes. For example entering 06/04/2013 to 05/04/2014 to indicate the car was available throughout that year. If the car was available in the previous tax year, the ‘from’ box should not be completed and if the car is to be available in the next tax year, the ‘to’ box should not be completed i.e. left blank.’

The Employer Bulletin also includes guidance on a common error relating to the incorrect completion of a form P9D in relation to private medical insurance provided to lower paid employees. The HMRC guidance states:

Are You Completing P9D’s Needlessly for Employees in Receipt of Medical Benefit?

Do you know that if your employees earn less than the rate of £8,500 AND you arrange and pay the provider directly for the treatment or insurance a P9D does NOT need to be completed.

For more information go to www.hmrc.gov.uk/payerti/exb/a-z/m/medical-treatment.htm

If you would like any help with the completion of the forms or the calculation of the associated Class 1A National Insurance liability please get in touch.

Internet link: www.hmrc.gov.uk/payerti/exb/forms.htm

Shared Parental Leave

The current system of statutory pay and leave entitlements for employed parents is to be reformed for babies due (or adopted children placed) on or after 5 April 2015. The following guidance in contained in the lengthy Employer Bulletin so we have reproduced it in full.

The Government is reforming the statutory pay and leave entitlements available to employed parents. For babies due on or after 5 April 2015 a new entitlement of Shared Parental Leave (SPL) will replace Additional Paternity Leave and Pay. The parents of babies due on or before 4 April 2015 will continue to be eligible for Additional Paternity Leave and Pay.

SPL gives families greater choice over how they arrange childcare in the first year, by allowing working mothers the option to end their maternity pay and leave early and to share untaken leave and pay with their partner. An adopter will similarly be able to bring their adoption leave and pay to an early end to opt into Shared Parental Pay (ShPP) and Leave.

It is intended to enable fathers to take a greater role in caring for a child, and to help both parents to better balance childcare responsibilities with staying in work. For businesses, this helps them keep their best talent and allows employers to recruit with confidence that their women employees will be less likely to drop out of the workforce when they have children.

How does it work?

Current entitlement to 52 weeks statutory maternity/adoption leave, 39 of which is paid, and 2 weeks of statutory paternity leave and pay is all unchanged. The first six weeks of Statutory Adoption Pay will increase to 90% of average weekly earnings.

Working parents of a baby due or an adoptive child placed on or after 5 April 2015 may be eligible for SPL and ShPP. Under SPL, mothers/adopters will be able to choose to end their maternity/adoption leave and pay early (at any point from 2 weeks after the birth/placement), and share their untaken pay and leave with their partner. Shared parental leave and pay can be stopped and started and parents can be off at the same time, if they wish.

Parents will be able to take their leave in phases, for example 20 weeks for the mother/adopter, followed by 20 weeks for the father/partner, followed by 10 weeks for the mother/adopter. So it may be the case that statutory parental pay is paid over one or two discontinuous periods. Parents must notify their employers of their plans under SPL 8 weeks before they become eligible for it, and all shared leave and pay must be taken between the birth/placement and the child’s first birthday.

What do employers need to do?

We expect the first notifications of intention to take SPL to arrive with employers from February 2015. The Government will provide an online form for parents to use. Some employers may wish to create their own requirements for how their employees notify them.

We anticipate that employers will need to update payroll systems where relevant to accommodate providing statutory parental pay to employees taking SPL, and to enable these payments to be paid discontinuously where necessary.

The Government will provide online tools to check eligibility, and publish detailed guidance on the rules around SPL. A key part of SPL is the discussion between employer and employee to agree the phasing of SPL and the return to work, and ACAS will also publish guidance to support this process.’

We will update you when further information is released. Please do get in touch if you would like further guidance on this area.

Internet links: Employer Bulletin

Icebreaker tax avoidance scheme rejected by HMRC

In a high profile decision HMRC has won a case in which the Icebreaker partnership schemes were shut down, after the tribunal ruled it was set up to shelter more than £120m in tax.

The wealthy members of the scheme, which included Gary Barlow and two of his former Take That band mates, claimed to be active partners trading in the creative industries, selling, for example, the rights to a song or an idea for a book. They claimed tax relief on greater losses than they invested in the partnerships. The return on the partners’ ‘investment’ was the tax relief, which was considerably larger than their cash contribution.

A HMRC spokesperson said:

‘HMRC has put in place generous reliefs to support genuine business investment and our tax reliefs for the creative industries work well, enabling the UK’s world-class film, television and video production companies to compete on the global stage.

But we will not tolerate abuse of the system by people trying to dodge their tax obligations. HMRC will continue to challenge in the courts and anyone who engages in tax avoidance schemes risk not only the high cost of these schemes but also lay themselves open to penalties and, potentially, prosecution.’

The scheme was rejected by a First-tier Tribunal.

Internet link: News  Tribunal

Pay your PAYE on time or face in-year interest on late payments

HMRC have issued further guidance on late payment interest on PAYE and CIS payments for 2014/15 onwards and how to avoid it.

HMRC now charges interest on any late PAYE and Construction Industry Scheme (CIS) payments.

To avoid an interest charge employers should pay by the due date, the difference between the following:

  • what they report on their Full Payment Submission(s) (FPS) received by the 19th of the month following the end of the tax month it relates to, together with any CIS charges for that tax month
  • any deductions reported on an Employer Payment Submission (EPS), again received by the 19th of the month following the end of the tax month it relates to.

Any corrections made to wages reported on an FPS that HMRC receives after the 19th of the month following the end of the tax month it relates to will be included in the following month’s charge. In these circumstances, the amount payable for the tax month is the amount actually reported by the 19th (rather than the corrected amount).

Interest charges

HMRC will charge interest daily, from the date a payment is due and payable to the date it is paid in full.

Accruing Interest and the Business Tax Dashboard

Employers will be able to see an estimate of the interest building up on the Business Tax Dashboard.

Please be aware that HMRC have stated:

‘Accrued interest is only a guide to what may be due. HMRC will only seek payment of interest when the amount due is settled.

The Business Tax Dashboard will only show interest as accruing in the current month, regardless of when the payment was due.

It will show interest as accruing from the 19th of each month, regardless of how the employer pays. Employers who pay electronically should not worry if they see an accrued interest entry between 19th and 22nd of a month. Once the electronic payment is received, the calculation will correctly use the 22nd as the due date, and any interest charge generated between the 19th and 22nd will be cancelled.

Currently, there is an HMRC systems error which results in the Business Tax Dashboard showing interest accruing despite the employer having submitted an EPS that clears the original charges. This error will be corrected shortly. In the meantime, HMRC will not pursue this charge and employers do not need to contact HMRC about this.’

Please do get in touch if you would like help with payroll issues.

Internet links: News

VAT update and fuel scale charges

HMRC have issued guidance on a number of VAT changes including confirmation of the updated VAT Fuel scale charges which apply from the beginning of the next prescribed VAT accounting period starting on or after 1 May 2014.

Please do get in touch for further advice on VAT matters.

Internet link: VAT update  VAT fuel scale charges

Proposed new rules for easier prosecution of offshore tax evaders

The government will consult on plans to introduce a new strict liability criminal offence for individuals who hide their money offshore.

HMRC would no longer need to prove that individuals who have undeclared income offshore intended to evade tax, in order for the offence to be a criminal conviction.

Currently HMRC have to demonstrate that even when someone failed to declare offshore income that the individual intended to evade tax. This change will mean HMRC only has to demonstrate the income was taxable and undeclared meaning it will be easier to secure successful prosecutions of offshore tax evaders.

As well as introducing the new criminal offence, the government will consult on a range of options building on the existing penalties to make sure they act as a clear and effective deterrent.

Chancellor of the Exchequer, George Osborne, said:

‘The government has taken significant steps to clamp down on those hiding their money offshore. HMRC has brought in over £1.5billion over the last two years and, through our leadership at the G8, we have taken significant steps towards greater transparency and tax information sharing.

But there can be no let up and we will continue to pursue offshore tax evaders. Those who continue to believe they can hide wealth offshore should know that there is no safe haven and that serious consequences await them.’

Internet links: News

Late payments to smaller businesses on the increase

According to a recent survey by the Forum of Private Business (FPB) almost one in four smaller businesses experienced an increase in the number of late payments during 2013.

Approximately a third of businesses surveyed reported an increase in the average number of days beyond the payment deadline that payments were made. FPB Chief Executive Phil Orford commented that more than £30 billion still remains ‘tied up in late payments’.

Internet link: Press release

Newsletter – April 2014

In this month’s enews we report on pensions announcements and other issues pertinent to employers with many deadlines approaching.

Please contact us if you would like any further information.

 

 

HMRC guidance on new pension flexibility

Following the Budget announcements regarding pension flexibility HMRC have now issued some guidance for those individuals who may wish to review their pension options.

New rules are being introduced to ensure that people do not lose their right to a tax-free lump sum if they would rather use the new flexibility this year or next, instead of buying a lifetime annuity.

Internet link: Pensions flexibility

Employers no longer able to reclaim SSP

The Percentage Threshold Scheme (PTS), which allows employers to reclaim Statutory Sick Pay (SSP) in certain circumstances, is abolished from 6 April 2014.

Under PTS employers have been able to reclaim SSP where the SSP paid is more than 13% of the Class 1 NIC due for the month. Employers are not entitled to recover any of the SSP paid to their employees unless they qualify for the reimbursement scheme.

The following example explains how the scheme worked for a tax month:

SSP paid = £630.00
Gross NI £3,704.29 x 13% = £481.56
SSP recoverable: (£630 – £481.56) = £148.44

From 6 April 2014 employers are unable to recover SSP however they will continue to be able to recover unclaimed SSP for previous years until 5 April 2016. Do contact us if you think this may apply to your business.

The government has announced that the current PTS funding will be moved into a new scheme to help employees who have been incapacitated for four weeks or more get back to work as part of the government’s Health Work and Wellbeing Initiative.

Internet link: Employer bulletin

Disclosure facility for those with undisclosed second incomes

The Second Incomes Campaign is an opportunity open to individuals in employment who have an additional untaxed source of income.

The new facility allows those with untaxed income to get up to date with their tax affairs in a simple, straightforward way and take advantage of the best possible terms.

If you would like any advice on this area please do get in touch.

Internet links: Second incomes campaign  Guide to disclosure

More guidance on Class 3A NIC

Further guidance has been issued on Class 3A National insurance contributions (NIC).

In the autumn of 2013 the Government announced plans to introduce a scheme to allow pensioners to top up their Additional State Pension by paying a new class of voluntary National Insurance contribution, to be known as Class 3A.

‘The scheme will open in October 2015 and will be available to all pensioners who reach State Pension age before the introduction of the new State Pension in April 2016. The scheme is expected to run for 18 months.’

‘Class 3A will give pensioners an option to top up their pension by up to £25 a week in a way that will protect them from inflation and offer protection to surviving spouses. In particular, it could help women, and those who have been self-employed, who tend to have low additional State Pension entitlement.’

Internet link: Publication

More HMRC guidance on the Employment Allowance

The Employment Allowance of up to £2,000 is available to most employers from 6 April 2014. Employers can reduce the amount of National Insurance contributions (NICs) they pay for their employees by up to £2,000. This is called the ‘Employment Allowance’.

Employers generally won’t have to pay any employer National Insurance contributions at all if they usually pay less than £2,000 a year.

HMRC has issued more guidance on the practicalities of claiming the allowance which can be found by visiting the link below.

For help with payroll matters please do contact us.

Internet links: Employment allowance detail  Employment allowance key facts

Tax-free childcare

Details of the new Tax-Free Childcare scheme which is to be launched in autumn 2015 have been announced.

The scheme will be worth a maximum of £2,000 per child per year. The maximum amount due is calculated on 20% of the costs of childcare (up to a total of childcare costs of £10,000 per child per year).

The scheme will be launched in autumn 2015. All children under 12 within the first year of the scheme will be eligible. To qualify for Tax-Free Childcare all parents in the household must:

  • meet a minimum income level based on working eight hours per week at the National Minimum Wage (around £50 a week at current rates)
  • each earn less than £150,000 a year, and
  • not already be receiving support through Tax Credits or Universal Credit.

Self-employed parents will be able to get support with childcare costs in the Tax-Free Childcare scheme, unlike the current employer supported childcare scheme. To support newly self-employed parents, the Government is introducing a ‘start-up’ period. During this period a newly self-employed parent will not have to earn the minimum income level.

The current system of employer supported childcare will continue to be available for current members if they wish to remain in it or they can switch to the new scheme. Employer supported childcare will continue to be open to new joiners until the new scheme is available.

It is proposed that parents register with the Government and open an online account. The scheme will be delivered by HMRC in partnership with National Savings and Investments, the scheme’s account provider. The Government will then ‘top up’ payments into this account at a rate of 20p for every 80p that families pay in.

Internet link: News

Increase in NMW rates

The Government has approved a rise in the National Minimum Wage rates which will come into effect on 1 October 2014:

  • a 19p (3%) increase in the adult rate (from £6.31 to £6.50 per hour)
  • a 10p (2%) increase in the rate for 18 to 20 year olds (from £5.03 to £5.13 per hour)
  • a 7p (2%) increase in the rate for 16 to 17 year olds (from £3.72 to £3.79 per hour)
  • a 5p (2%) increase in the rate for apprentices (from £2.68 to £2.73 per hour.

The rise will take effect in October 2014, as Business Secretary Vince Cable has accepted in full the independent Low Pay Commission’s recommendations for 2014, including plans for bigger increases in future than in recent years.

The Low Pay Commission (LPC) has said the rise, the first real terms cash increase since 2008, is manageable for employers and will support full employment.

Business Secretary Vince Cable said:

‘The recommendations I have accepted today (12 March 2014) mean that low paid workers will enjoy the biggest cash increase in their take home pay since 2008. This will benefit over 1 million workers on National Minimum Wage and marks the start of a welcome new phase in minimum wage policy.’

Meanwhile HMRC have revealed some of the excuses given for not paying the NMW.

Internet links: Press release  HMRC NMW excuses

Advisory fuel rates for company cars and fuel benefit charge

Where private fuel is provided by the employer for a company car then a separate benefit is assessable on the employee. This benefit charge is calculated by applying the same percentage figure used to calculate the company car benefit to a fixed figure which for 2014/15 is set at £21,700. The percentage is linked to the car’s CO2 emission figures.

Now is a good time to consider whether this benefit is value for money for both the employee and employer.

The alternative is to reimburse the employee for business miles using the company car advisory fuel rates. The current rates are:

Engine size Petrol
1400cc or less 14p
1401cc – 2000cc 16p
Over 2000cc 24p

 

Engine size LPG
1400cc or less 9p
1401cc – 2000cc 11p
Over 2000cc 17p

 

Engine size Diesel
1600cc or less 12p
1601cc – 2000cc 14p
Over 2000cc 17p

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

P11d deadline approaching

The forms P11D, and where appropriate P9D, which report details of expenses and benefits provided to employees and directors for the year ended 5 April 2014, are due for submission to HMRC by 6 July 2014. 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 updated their expenses and benefits toolkit for 2013/14 and record keeping for 2014/15. The toolkit consists of a checklist which may be used by advisers or employers to check they are completing the forms P11D correctly.

If you would like any help with the completion of the forms or the calculation of the associated Class 1A National Insurance liability please get in touch.

Internet links: http://www.hmrc.gov.uk/payerti/exb/forms.htm  Toolkit

Newsletter – April 2013

In this month’s enews we report on changes to the tax rules for loans to participators and other issues pertinent to employers with many deadlines approaching.

Please contact us if you would like any further information.

Loans from a company to shareholders

Draft legislation has been published which confirms an announcement made in Budget 2013 and which has effect from 20 March 2013.

A close company (which generally includes an owner managed company) may be charged to tax in certain circumstances where it has made a loan or advance to individuals who have an interest or shares in the company (known as participators). Loans and advances are also caught where they are made to an associate of the individual such as a family member.

The corporation tax charge is 25% where the loan is outstanding nine months after the end of the accounting period.

The new law will prevent the practise of avoiding the payment of the tax charge by repaying the loan before the tax is due (nine months after the end of the accounting period) and then effectively withdrawing the same money shortly after. This change may also prevent refunds of the 25% tax already paid where loans are redrawn shortly after.

This change may affect a number of owner managed companies and we will be happy to discuss this with you.

Internet links: Press release HMRC TIIN

Increase in NMW rates

The Government has announced increases in the NMW rates which will come into effect on 1 October 2013:

  • the adult rate will increase by 12p to £6.31 an hour
  • the rate for 18-20 year olds will increase by 5p to £5.03 an hour
  • the rate for 16-17 year olds will increase by 4p to £3.72 an hour
  • the apprentice rate will increase by 3p to £2.68 an hour and
  • the accommodation offset increases from the current £4.82 to £4.91.

Katja Hall, CBI Chief Policy Director, said:

‘Pay restraint has been crucial in creating jobs in this tough economic climate.’

‘The LPC has struck a careful balance in setting the rates given sluggish growth, particularly in recommending a cautious approach to youth pay.’

‘The LPC will need to monitor the impact of raising the adult rate very carefully. Given average earnings this year are already lower than expected, we must make sure the minimum wage doesn’t limit jobs in key sectors, by outstripping pay across the rest of the workforce.’

‘The law is clear that employers must pay apprentices the legal minimum wage. It is right that ministers tighten up compliance and enforcement.’

Internet links: Press release CBI press release

HMRC launch Managing Serious Defaulters (MSD)

Following on from Managing Deliberate Defaulters (MDD) programme, under MSD HMRC will closely monitor the tax affairs of more individuals and businesses who have deliberately evaded tax for up to five years.

From 1 April 2013, HMRC is also extending the close monitoring of the tax affairs of those who deliberately choose not to pay what they owe. MSD replaces and expands the MDD scheme.

David Gauke, Exchequer Secretary to the Treasury, said:

‘Increasingly, evaders are using contrived insolvency to evade tax, either through liquidation of a business or bankruptcy of an individual. It is only fair that someone who has deliberately tried to evade tax should face extra scrutiny from HMRC.’

‘This measure, along with those announced in the Budget, demonstrates that we will crack down on people who don’t pay what they owe.’

Internet link: Government news

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 2013, which this year falls on a Sunday.

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.

With the introduction of RTI for the majority of employers from 6 April 2013 this will be the final P35 submission for many.

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

Employment Particulars

The government has updated the template of written employment particulars.

The template is an example of a written statement of employment particulars which meets the requirements of employment law.

Where an employee is employed for more than a month the employer must give them a written statement of employment particulars.

Internet link: Government Publications

P11d deadline approaching

The forms P11D, and where appropriate P9D, which report employees and directors benefits and expenses for the year ended 5 April 2013, are due for submission to HMRC by 6 July 2013. 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 which can delay processing and cause problems with employees’ tax codes:

  • Not ticking the ‘director’ box if the employee is a director.
  • Not including a description or abbreviation, where amounts are included in sections A, B, L, M or N of the form.
  • Leaving the ‘cash equivalent’ box empty where you’ve entered a figure in the corresponding ‘cost to you’ box of a section.
  • Not correctly completing the box in Part 5 of form P35 (Employers Annual Return) or the declaration on the final FPS/EPS submission (for those employers operating PAYE in ‘real time’) to indicate whether or not P11Ds are due.
  • Where a benefit has been provided for mixed business and private use, entering only the value of the private-use portion – you must report the full gross value of the benefit.
  • Not completing the fuel benefit box/field where this applies. This means an amended P11D has to be sent in.
  • Incorrectly completing the ‘from’ and ‘to’ dates in the ‘Dates car was available’ boxes. For example entering 06/04/2012 to 05/04/2013 to indicate the car was available throughout that year. If the car was available in the previous tax year, the ‘from’ box should not be completed and if the car is to be available in the next tax year, the ‘to’ box should not be completed.

Correct P11D completion is complex. 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: http://www.hmrc.gov.uk/paye/exb/index.htm Employer Bulletin

Scottish rate of income tax

On 14 February 2013 Scottish and UK ministers agreed the final text of the Memorandum of Understanding between HMRC and the Scottish Government covering the Scottish rate of income tax.

The Scottish rate will commence from a date to be set by the UK Government, expected to be April 2016.

Internet links: HMRC What’s New FAQs

328 sleeps to Christmas!

According to my IPad app (other devices are available!), today (31st January 2013) there are just 328 sleeps until Christmas, which I guess means there should be 365 sleeps until this day in 2014.  So, why should I care about that then, I hear you ask?

Well, yesterday (30th January – 1 day early), we submitted our final tax return to HMRC to continue our 100% record to meet the annual 31st January HMRC tax return deadline.  I want to say a big thank you to our clients for working with us to achieve the deadline.

It always interests me, how our clients, some of who, have been with us for many years, always follow the same patterns.  We get the keen ones, who bring in the information as soon as possible after 6th April, so that they can be in the smug satisfaction of knowing that all is taken care of, for another year, well in advance and then we get the others who like to leave it until the last moment, so that they can enjoy the thrill of the chase, as we rush to complete everything in time, and of course all of the others in between.

Now, I have to say, that I do quite enjoy the final push to the deadline, it’s very satisfying watching the percentage of completed tax returns increasing as we get nearer to the date, coupled with the worry of “can we do it?”, it can become quite a buzz!

So, why have I decided to start chasing our clients much earlier for their information this year, am I looking to have a holiday in January or something (not sure about Wales in January!), or is there some more sinister reason?

Well, lets look at the benefits of getting your tax return done early:

  • the smugness of being able to relax in the satisfaction of knowing that “tax doesn’t have to be taxing” and you are all compliant for another year, so can relax, one less worry
  • by getting your tax return done early, we can calculate any liability and give you much more warning of what you will have to pay the following January, which can lesssen the shock, which sometimes occurs, when you have had a particularly good year
  • similarly, if we calculate that you are due a tax refund (particulalrly might apply to CIS sub-contractors), you will have the refund much earlier
  • it will, avoid you getting lots of e-mails and phone calls from us, chasing you, for your information – it will get us off your back for another year!
  • perhaps I could have that long-awaited holiday in Wales in January!

So – how soon COULD you get your information in to us:

  • if you are self-employed, with no PAYE income as well, as soon as possible after your year end date
  • If you are on PAYE, either 31st May, if you receive no benefits, or end July if you do (these are the deadlines for your employer to give you your P60/P11d)

So, in reality then, bearing in mind the latest date above is 31st July, if we could have all of the information in by then, why dont we say that providing we do, we’ll get all of our clients tax returns done by 31st October and we can all relax once the clocks go back, safe in the knowledge, that we are all compliant, knowing exactly what our liabilities are.

Which means, I can finally have that 2 week holiday in Wales in January, my family will be so pleased!

So, will this happen?  Who knows, we’ll see what happens.  If you are worried, check back next year to see how we did and, in the meantime, can I be the first to wish you a Happy Christmas 2013, safe in the knowledge that you won’t be worrying about that pesky tax return.

 

 

 

Newsletter – June 2012

In this month’s enews we update you on the changes to payroll reporting procedures for Real Time Information.

Please do get in touch if you would like more information on any of the articles.

 

Real Time Information – get ready

In April 2013 HMRC are introducing a new way of reporting PAYE information, known as Real Time Information (RTI).

‘Real Time Information’ means that employers, or their agents, will tell HMRC about employees’ pay and deductions on or before the time they are paid to the employees as part of their payroll process. Payroll software will be used to collect the necessary information and send it to HMRC electronically.

It had previously been announced that most employers will be legally required to report payroll information in ‘real time’ from April 2013, with all employers doing so before October 2013. HMRC will advise employers when they need to start reporting under RTI.

HMRC are currently trialling the RTI using a pilot scheme for a small number of employers. According to the latest press release:

The pilot is….. ‘on track and going well. It is early days and we are cautiously optimistic.’

‘HMRC also remain on track for all micro, small and medium-sized employers and most large employers and payroll bureaux to begin sending payroll information to HMRC in real time in April 2013, and for all employers to be routinely reporting PAYE in real time from October 2013.’

‘HMRC will be contacting some of the largest employers and payroll bureau shortly to discuss opportunities for them to start reporting PAYE in real time early to avoid end-of-year reporting for 2012/13.’

It appears that many employers will need to be ready for RTI from April 2013. If you would like any further information regarding RTI or would like help with your payroll please do get in touch.

Internet link: HMRC RTI news

Six new taskforces launched by HMRC

HMRC have announced that they have launched six new taskforces which will target traders who do not pay the right amount of tax. The taskforces will tackle:

  • Indoor and outdoor markets in London
  • Taxi firms in Yorkshire and East Midlands
  • Property rentals in East Anglia, London, Yorkshire and the North East
  • Restaurants in the Midlands

HMRC Taskforces are specialist teams which look into specific high risk trade sectors in targeted areas of the UK. The teams will visit businesses and examine their records and carry out other checks and investigations.

David Gauke, the Exchequer Secretary, said:

‘HMRC is on target to collect more than £50m as a result of the taskforces launched in 2011/12.’

‘We have made it clear that we will not tolerate tax evasion – everyone needs to pay the taxes they owe in full. We are determined to crack down on the minority who choose to break the rules. It is not fair that at a time when most hard-working people are paying the right tax, others are trying to get out of paying what they should.’

HMRC’s Mike Eland, Director General Enforcement and Compliance, said:

‘These six new taskforces will bring together specialists from across HMRC to tackle tax dodgers. If you have paid all your taxes you have nothing to worry about. But deliberately evading tax you should be paying can land you with not only a heavy fine but possibly a criminal prosecution as well.’

‘This is not an empty threat – HMRC can and will track you down if you choose to break the rules.’

Internet link: Press release

Working beyond state pension age

The Office for National Statistics has published a report looking at those working beyond state pension age. The report, ‘Older Workers in the Labour Market – 2012’ includes some interesting statistics:

  • The number of people of state pension age and above in employment has nearly doubled over the past two decades, from 753,000 in 1993 to 1.4 million in 2011.
  • Older workers are far more likely to be self-employed than their younger counterparts: 32% compared with 13%.
  • Around two-thirds of the older workers are part-time but they are generally doing this shorter role with the same employer. Eight in every 10 of older workers have been with their employer for five years or more.
  • Men working later in life tend to stay on in higher skill roles while women tend to stay on in lower skill roles.
  • Just over a half (51%) of older workers are in small organisations of fewer than 25 employees.

To read more access the link below.

Internet link: Office for National Statistics

End of Employment Settlement

The CBI have commented on the Business Secretary, Vince Cable’s plans to introduce simplified settlement agreements, designed to enable employers and employees to agree mutually acceptable terms for ending employment.

Neil Carberry, CBI Director for Employment & Skills, said:

‘Today’s announcement will simplify the process of ending an employment relationship in a way which is acceptable to both sides.’

‘Simplified settlement agreements will give firms the confidence to have a frank conversation about ending employment on fair terms, without the fear of a drawn-out and costly tribunal claim.’

‘The CBI has long taken the view that simpler and more legally certain settlement agreements would be more effective for employees and businesses, especially smaller firms.’

Internet link: Press release

P11D deadline looming – avoid rejections

HMRC are reminding employers that the forms P11D, P9D and P11D(b) which detail expenses and benefits provided to employees for the tax year 2011/12 are due for submission to HMRC by 6 July 2012.

HMRC are warning employers to ensure the forms meet their quality standards.

HMRC are advising:

‘HMRC will reject P11Ds that don’t meet the standard. This means:

  • for online submissions you’ll need to correct any problems before being able to file successfully
  • for paper forms we’ll return the forms to you and you’ll need to correct and re-send them.’

‘If you have already told us you don’t need to complete P11D, P11D(b) or P9D then you don’t need to take any further action.’

‘If you have already made a nil P35 return but ticked the ‘P11D(b) to follow’ box you should file it now.’

‘If you need to make an adjustment to the Class 1A National Insurance contributions on the P11D(b), remember not to complete Box C. You should tick the checkbox and then complete Section 4 of the form P11D(b).’

For further guidance on the correct completion of the forms and how to avoid rejections please use the links below.

Please do contact us if you require any help with the completion of the forms.

Internet links: HMRC P11D quality standard HMRC guidance on completing form P11D(b)

No cap on reliefs for charitable giving

Following representation from interested parties the government has announced that it no longer intends to proceed with the proposed capping of some tax reliefs including charitable giving.

Plans to cap tax relief on charitable donations have been scrapped by Chancellor George Osborne in a reversal of one of the measures announced in the Budget.

The cap, which was designed to limit relief at £50,000 or 25% of income, was proposed in the Budget but resulted in protests from charities who were concerned that they could lose a significant proportion of their income.

The government has confirmed that it will be pressing ahead with the cap on income tax reliefs for wealthy people which do not relate to charitable donations.

Since the Budget announcement, the Treasury has been holding discussions with charities and major donors to discuss the scale of impact which they believed the cap could have on charitable giving.

John Low, Chief Executive of the Charities Aid Foundation, said:

‘We are delighted that the Government has responded to the challenging calls from philanthropists and charities across the country and taken the bold decision to exempt charitable donations from the cap on tax relief.’

‘We realise the Government is responding to truly exceptional financial circumstances and is having to make tough decisions about public finances. We acknowledge and welcome the Chancellor’s decision to do the right thing and exempt charity donations from the cap. We thank Ministers for the support they have shown to charities large and small, which are so vital to the health of our country.’

Internet links: BBC news CAF press release

No VAT increase on pasties

In the Budget it was announced that the government proposed to charge standard rated VAT on certain hot food items such as pasties.

After campaigns by interested parties the government has now decided not to proceed with this change. The letter from David Gauke, the Exchequer Secretary, details the government’s revised approach.

The letter also details the government’s proposal to charge 5% VAT on static caravans rather than the original intention of 20% standard rated VAT.

VAT is a complex issue, if you would like any help in this area please do get in touch.

Internet link: Letter

Newsletter – April 2012

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.

 

 

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 – June 2011

In this month’s enews we report on HMRC’s plans to extend their ‘tax cheats’ campaigns.

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

 

 

HMRC extend ‘tax cheats’ campaigns

HMRC have announced that they will be launching new campaigns over the next year targeting VAT defaulters, private tutors and e-marketplaces.

HMRC will use more IT, such as ‘web robot’ software, to search the internet and find targeted information about specified people and companies. Using the software, HMRC feel that they can pinpoint more accurately people who have failed to pay the right tax. The software, used with HMRC’s Connect computer system, also helps find people who are trading without telling HMRC.

The Connect computer system alerts HMRC to previously invisible tax evasion by matching a vast amount of HMRC and third-party data. It can identify previously hidden relationships, uncovering anomalies between such elements as bank interest, property income and lifestyle indicators before homing in on unexplained inconsistencies.

HMRC announced last month that a campaign targeting VAT rule-breakers trading above the £73,000 turnover threshold but who have not registered for VAT will be launched in the summer.

Other campaigns to be launched in 2011/12 will focus on:

  • those who provide private tuition and coaching
  • e-marketplaces, which buy and sell goods as a trade or business
  • trades, which will build on HMRC’s plumbers’ campaign and give an opportunity to another group of ‘tradespeople’ to declare unpaid tax.

Mike Wells, HMRC’s Director of Risk and Intelligence, said:

‘We want to make sure HMRC listens to as many informed views as possible for our future campaigns. We want the views and experience of people and organisations outside the department to play a fuller part in the campaigns that we design for customers.’

‘By being open about our areas of interest for the coming year we hope to maximise that exchange of information and ensure we reduce the tax gap and help customers pay what they owe.’

‘We will use the information we gather to pursue people who choose not to use the opportunities we provide for them to put their affairs in order on the best possible terms. It will be more expensive if we come and find people, so I urge them to come forward and disclose voluntarily.’

Internet link: News release

Another email scam warning from HMRC

HMRC are once again alerting taxpayers to a surge of fake ‘phishing’ emails sent out by fraudsters in the run-up to the tax credits renewal deadline.

The email informs the recipient they are due a tax rebate and provides a click-through link to a cloned replica of the HMRC website. The recipient is asked to provide their credit or debit card details. Fraudsters then try to take money from the account using the details provided.

Since the beginning of April 2011, when the first tax credits renewals forms were sent out to claimants, more than 46,000 phishing emails have been reported. During the same period of time HMRC helped shut down more than 150 scam websites.

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

‘We currently only ever contact customers who are due a tax refund in writing by post. We 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.’

HMRC strongly advises taxpayers to:

Internet links: News Release www.hmrc.gov.uk/security/index.htm

Workplace pensions reform

The government has introduced measures aimed at encouraging greater private saving which includes workplace pension reforms. New legal obligations will require employers to automatically enrol their eligible jobholders into a qualifying pension scheme.

A new workplace pension scheme called NEST (National Employment Savings Trust) will be one of the qualifying schemes and will be open to any employer who wants to use it to meet their obligations.

The initial roll out of the scheme will be October 2012 but this will impact on employers with 120,000 employees or more. For those with a more modest workforce the start date varies; for example, those with less than 500 employees the date is 1 January 2014 and for those with less than 50 employees the earliest start date is 1 March 2014.

Employees eligible for automatic enrolment will be:

  • those who are not already active members of a qualifying scheme
  • are aged at least 22 years and below the State Pension age, and
  • earn over £7,475 gross a year.

The qualifying scheme may be the existing employer pension scheme if it meets certain conditions or if an employer does not have a qualifying scheme, they will have to set one up or use a NEST pension scheme.

Minimum contributions levels for qualifying schemes are as follows:

Minimum Contribution Employee Pays Tax Relief Minimum Employer Contribution
8% 4% 1% 3%

Employees will be able to opt out of the scheme if they so wish. However, for those employees within the scheme it is expected that the employer will have to contribute at least 3% of ‘qualifying’ earnings. These earnings are the employees’ basic salary plus commissions, bonuses and overtime between £5,035 and £33,540 a year (in 2006/07 terms but to be uprated). Pension contributions are to be phased in.

A great deal more information is starting to be released and can be viewed via The Pensions Regulator website.

Internet links: The Pensions Regulator website Basic employers guide

Consultation on residency

Over recent weeks, HMRC have issued numerous consultation documents totalling hundreds of pages.

One of these details how individuals will be judged to be resident or not resident in the UK for tax purposes.

The government proposes to introduce a statutory residence test (SRT) to take into account both the amount of time the individual spends in the UK and the other connections they have with the UK.

There are parts of the test where a distinction will be made between:

  • arrivers – defined as individuals who were not UK resident in all of the previous three tax years; and
  • leavers – defined as individuals who were resident in one or more of the previous three tax years.

The SRT will:

  • determine tax residence for individuals but not companies
  • apply for the purposes of income tax, capital gains tax and inheritance tax
  • not apply for non-tax purposes (including national insurance contributions), and
  • supersede all existing legislation, case law and guidance for tax years following its introduction.

The SRT will have three parts:

  • Part A contains conclusive non-residence factors that would be sufficient in themselves to make an individual not resident.
  • Part B contains conclusive residence factors that would be sufficient in themselves to make an individual resident.
  • Part C contains other connection factors and day counting rules which will only need to be considered by those whose residence status is not determined by Part A or Part B.

The above is part of a consultation process at present. HMRC intend to implement the measures from 6 April 2012.

We will keep you informed of developments but please do contact us if you have any concerns in the meantime.

Internet link: Press release

The Bribery Act

The Bribery Act 2010 comes into force on 1 July 2011. The new Act replaces, updates and extends the existing UK law against bribery and corruption. This important new legislation:

  • introduces a corporate offence of failure to prevent bribery by persons working on behalf of a business. A business can avoid conviction if it can show that it has adequate procedures in place to prevent bribery;
  • makes it a criminal offence to give, promise or offer a bribe and to request, agree to receive or accept a bribe either at home or abroad. The measures cover bribery of a foreign public official; and
  • increases the maximum penalty for bribery from seven to 10 years imprisonment, with an unlimited fine.

The introduction into law of the new corporate offence of failure of commercial organisations to prevent bribery is an important development that essentially requires all businesses to consider the requirements of the new Act. This new corporate offence is coupled with a defence where, if the business can show that it had ‘adequate procedures’ in place to prevent bribery, it can be protected from committing the new criminal offence.

All businesses should familiarise themselves with the statutory guidance and assess the risk of bribery occurring in the business. The extent of any further action will be dependent on the results of this risk assessment.

The Act also requires the government to produce guidance on what constitutes ‘adequate procedures’ and the Ministry of Justice has produced this. This can be found using the links below.

Internet links: Bribery Act 2010 guidance Quick start guide

Tax credits renewal deadline

Tax credits are state benefits which are generally available to lower income families. However, entitlement to the credits is significantly increased where individuals pay for childcare or suffer a drop in normal levels of income perhaps due to incurring trading losses or redundancy.

Individuals who have already claimed tax credits for 2010/11 have to finalise their provisional award, which would have originally been based on their 2009/10 income, and advise HMRC of any changes in their circumstances for 2011/12. This procedure is known as the renewals process. The deadline for the submission of tax credit renewals is generally 31 July 2011.

HMRC have been busily advertising the renewals process in the national press and on their website. Claimants need to be aware that the payment of tax credits will stop at the end of July if they have not renewed their applications by that date. There are significant changes to the income limits and claw back of entitlements for 2011/12 so you may wish to review the HMRC guidance. Alternatively if you need any help with the completion of your form or any advice on tax credits generally please do get in touch.

Internet links: HMRC tax credit deadlines HMRC Tax credit changes

Changes to the law to protect Patent and Design rights

The government has announced that it expects small and medium sized businesses to benefit from a new law which gives them easier access to justice to protect their patent and design rights. The introduction of a damages cap of £500,000 for claims made in the Patents County Court (PCC) means smaller businesses seeking damages up to that amount are less likely to have to resort to the High Court which could prove more costly.

The Patents County Court (Financial Limit) Order 2011 sets out to create a clearer definition of what disputes can be heard in the PCC and which ones should go to the High Court. Under the previous system businesses with a legal case worth less than £500,000 could face litigation in either court. This potentially exposed them to unknown levels of financial risk.

According to the press release:

‘The change in law will ensure that lower value, less complex cases, which would typically involve small businesses, will automatically fall within the jurisdiction of the lower, cheaper PCC. Therefore the risk of having costly disputes over where the case should be heard will be reduced. In the past some companies were put off protecting their rights due to the uncertainty of how much it would cost.’

Minister for Intellectual Property, Baroness Wilcox said:

‘Maintaining an effective and efficient intellectual property framework for businesses is not enough to drive innovation. We must offer businesses a more accessible justice system for them to enforce their rights. By making it easier for small firms and entrepreneurs to use the legal processes it will give them more time to concentrate on business activities.’

‘These changes will help small businesses and encourage them to innovate. It will also provide clarity over the legal processes, certainty over the risks and give small enterprises the confidence to stand on an equal footing with financially stronger companies.’

Internet link: News release

P11D deadline looming

The forms P11D, and where appropriate P9D, which report benefits and expenses for both employees and directors for the year ended 5 April 2011, are due for submission to HMRC by 6 July 2011.

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 12.8% (for 2010/11) on the provision of most benefits. The calculation of this liability is detailed on the P11D(b) form. For those employers who submit paper forms P11D these should all be sent to the address detailed in the link at the end of this article.

If you would like any help with the forms P11D or the calculation of the Class 1A liability please get in touch.

Internet links: HMRC P11D guidance HMRC advice HMRC new address for paper forms P11D