Newsletter – April 2011

In this month’s enews we report on many employer related issues including the announcement of the new National Minimum Wage rates. Please do get in touch if you have any queries.

Real Time Information

HMRC are planning to introduce significant changes to the way in which PAYE information is submitted to HMRC. Currently employers send details of employees pay, tax and national insurance deductions at the end of the tax year (forms P35 and P14). The deadline for the submission of this year’s forms is 19 May 2011. There are penalties, which apply to broadly all employers, for failing to submit the forms on time and electronically, so please get in touch if you require any help in this area.

HMRC are planning to introduce Real Time Information (RTI) a system of monthly/weekly PAYE returns which would replace the annual end of year forms.

As detailed in the HMRC consultation document:

‘RTI will collect information about tax and other deductions automatically each time employers run their payroll. This information will be submitted automatically to HMRC at the same time the employees are paid. Where employers pay their employees via BACS, the RTI data will form part of the BACS submission.’

HMRC hope that this change to the system should mean that employees pay the right amount of tax and are paid the correct amount of state benefits where appropriate.

Following a consultation by HMRC, it has been confirmed that a pilot scheme will run from April 2012. The introduction of the scheme will be phased in and it is expected that all employers will move to RTI by October 2013. Large employers will be expected to use the system from April 2013.

The start date is slightly later than had been originally announced following a consultation with interested parties.

If you would like further information or guidance on payroll issues please do get in touch.

Internet link: Press release

Cheque Guarantee Card Scheme to end

It has been announced that the Cheque Guarantee Card Scheme will come to an end.

The closure of the Scheme means that it will no longer be possible to guarantee a ‘domestic’ cheque using a card after 30 June 2011. The decision to close the Scheme was taken by the Payments Council as guaranteed cheque use is in decline. The end of the Cheque Guarantee Scheme does not necessarily mean the end of cheques as businesses may continue to accept them if they choose to do so. However businesses that currently accept cheques with a guarantee card may wish to look into alternative payment methods.

Internet link: UK Payments article

Penalties on late payment of PAYE

HMRC have been warning employers for some time that they may have to pay a penalty if they do not pay their PAYE deductions on time. The penalties apply to PAYE deductions due for a period starting on or after 6 April 2010 include PAYE, Student Loan deductions, Construction Industry Scheme payments, Class 1 NICs, annual payments of employers’ Class 1A NICs and annual PAYE Settlement Agreements payments.

Deductions of PAYE, NICs, Student Loan deductions and Construction Industry Scheme payments are generally due by 19 of each month (or 22 if paid by electronic means and cleared into HMRC’s bank account). Small employers are able to pay quarterly.

Although the penalties apply from April 2010 notices will not be issued until after the end of the tax year and are expected to be issued in April or May 2011. For the majority of late payments the penalties start at 1% increasing to 4% depending on the number of late payments in the year. Extra penalties will be added where liabilities are outstanding for a further six and then 12 months.

Internet links: HMRC guidance on late payment HMRC alert

National Minimum Wage rates

The National Minimum Wage (NMW) is a minimum amount per hour that most workers in the UK are entitled to be paid. The rates are reviewed each year by the Low Pay Commission and from 1 October 2011:

  • the main rate for workers aged 21 and over will increase to £6.08 (currently £5.93)
  • the 18-20 rate will increase to £4.98 (currently £4.92)
  • the 16-17 rate for workers above school leaving age but under 18 will increase to £3.68 (currently £3.64)
  • the apprentice rate, for apprentices under 19 or 19 or over and in the first year of their apprenticeship will increase to £2.60 (currently £2.50).

Business Secretary Vince Cable said:

‘More than 890,000 of Britain’s lowest-paid workers will gain from these changes. They are appropriate – reflecting the current economic uncertainty while at the same time protecting the UK’s lowest-paid workers. I would like to thank the LPC for doing a good job in difficult circumstances.’

Chairman of the LPC David Norgrove said:

‘We welcome the Government’s acceptance of our recommendations. The Commission was again unanimous, despite all the economic uncertainties. We believe we have struck the right balance between the needs of low-paid workers and the challenges faced by businesses.’

Penalties for non compliance

Since April 2009 HMRC have been able to charge penalties to those employers found to be in breach of the NMW rules.

Automatic penalties are levied on employers where HMRC officers find NMW arrears. The penalties range from £100 to £5,000 with 50% prompt payment discounts for employers who settle within 14 days of notification.

The penalty is payable in addition to arrears owed to the workers.

In serious cases of non compliance the employer may be tried in a Crown Court and in those cases the fines are unlimited.

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

Internet links: Press release BIS NMW guidance

P11D deadline looming

The forms P11D, and where appropriate P9D, which report employees and directors benefits and expenses for the year ended 5 April 2011, are due for submission to HMRC by 6 July 2011. 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 12.8% (for 2010/11) on the provision of most benefits. The calculation of this liability is detailed on the P11D(b) form.

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

Internet link: HMRC P11D guidance

Online VAT returns

HMRC have confirmed that all businesses will have to complete online VAT returns and pay their VAT liabilities electronically from April 2012. Currently many businesses have to comply with these rules. However smaller businesses, registered prior to 1 April 2010 with an annual turnover of less than £100,000, can currently complete paper VAT returns and pay by non electronic means.

If you would like any help with VAT matters please do contact us.

Internet link: HMRC VAT guidance

Implementation date announced for the Bribery Act 2010

At the end of March 2011, the Justice Secretary, Kenneth Clarke announced that the Bribery Act 2010 will come 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 now familiarise themselves with the statutory guidance and begin to 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

Newsletter – March 2011

In this month’s enews we report on several employment related issues. Please browse through the articles and get in touch if you have any further queries or would like more information.

 

 

Budget Statement

George Osborne presented his second Budget on Wednesday 23 March 2011.

In his statement he said that the ‘Budget is about reforming the nation’s economy, so that we have enduring growth and jobs in the future’.

The Main Budget proposals

The government had previously announced changes which apply from April 2011. However the Statement also included several new announcements, some of the more significant of which are set out below:

An additional 1% cut in the main rate of corporation tax to 26% from April 2011.

  • Enhanced tax incentives for investment in higher risk companies and for SMEs investing in research and development.
  • Reintroduction of Enterprise Zones.
  • Entrepreneurs’ Relief limit doubled to £10 million.
  • An increase in the mileage rate payable to own car drivers.
  • Consultation on integrating income tax and national insurance contributions.
  • Reduced inheritance tax rates for those giving one tenth of their estate to charity.

Some of these items are covered in more detail in the following articles. To access the full Budget information visit the Treasury website using the link below.

Internet link: Treasury Website Budget

Enterprise Investment Scheme (EIS) and Venture Capital Trusts (VCTs)

EIS and VCTs are designed to encourage private individuals to invest in smaller unquoted trading companies which may be perceived as higher risk. While the EIS requires an investment to be made directly into the shares of the company, VCTs operate by indirect investment through a mediated fund.

Currently EIS investors may be given income tax relief at 20% on their investments of up to £500,000 a year. Legislation will be introduced to increase the rate of tax relief to 30% for shares issued on or after 6 April 2011, subject to State aid approval.

Future changes

Subject to State aid approval, legislation will be introduced to make the following changes to the EIS and for shares issued on or after 6 April 2012.

The thresholds for the size of the company which may benefit from both types of investment will be increased to fewer than 250 employees and £15 million gross assets before the investment.

The annual amount which can be invested in an individual company is to rise to £10 million.

The annual amount that an individual can invest through EIS is to increase to £1 million.

Internet link: Budget TIIN

Corporation tax rates

Legislation will be introduced in Finance Bill 2011 to reduce the main rate of corporation tax from 28% to 26% for the Financial Year commencing 1 April 2011 and then to 25% for the Financial Year commencing 1 April 2012. The main rate of corporation tax generally applies to companies with profits of more than £1.5 million. It had previously been announced that the main rate would reduce from 28% to 27% followed by further 1% graduated reductions until it reached 24% by 1 April 2014. Instead the main rate is set to reduce to 23% by 1 April 2014.

The small profits rate of corporation tax, which generally applies to companies with up to £300,000 of profits, is to reduce from 21% to 20% also with effect from 1 April 2011. This had already been announced.

The effective marginal corporation tax rate for profits between £300,000 and £1.5 million will be 27.5% from 1 April 2011.

Internet link: Budget TIIN

Approved mileage allowance payments (AMAP)

The AMAP rates can be used to claim the cost of business mileage in an employee’s own vehicle. The rates cover cars, vans, motorcycles and bicycles. Where an employer pays less than the published rates, employees can make a claim for tax relief for the shortfall.

With effect from 6 April 2011 the rate of the AMAP for cars and vans will be increased from 40p per mile to 45p per mile for the first 10,000 miles of business travel in the tax year. The rate for mileage above 10,000 miles will remain at 25p per mile.

This may mean that drivers receiving mileage allowances in excess of the AMAP will see a reduction in their tax and NICs liability. For those drivers who receive less than the AMAP their claim for tax relief on the shortfall will be increased.

An allowance for passenger payments currently in place for employees at 5p per passenger per mile will be extended to volunteers who carry passengers as part of their volunteering duties. This extension will apply with effect from 6 April 2011.

Internet link: Budget TIIN

Entrepreneurs’ Relief (ER)

ER was introduced in April 2008. Subject to satisfying certain conditions, including the current lifetime limit of £5 million, capital gains on qualifying business disposals by individuals and certain trustees are eligible for ER. Qualifying gains are liable to CGT at 10%.

The lifetime limit is applied to the aggregate of gains that benefit from ER, whatever the year in which the disposal took place. Any gains in excess of the lifetime limit are liable to CGT at the same rates as other chargeable gains.

The lifetime limit will increase to £10 million with effect for qualifying business disposals on or after 6 April 2011.

Where individuals or trustees make qualifying gains above the £5m limit before 6 April 2011, no additional relief will be allowed for the excess.

Internet link: Budget TIIN

Research and Development (R&D) Tax Credits

Subject to State aid approval, legislation will be introduced in Finance Bill 2011 to increase the rate of the additional deduction for expenditure on R&D for companies that are small or medium-sized enterprises (SMEs) from 75% to 100% for expenditure incurred on or after 1 April 2011, giving a total deduction of 200%. The rate of Vaccine Research Relief for SMEs will be reduced to 20% from the same date.

The government also plans to introduce further changes subject to consultation and State aid approval in Finance Bill 2012 in respect of expenditure incurred on or after 1 April 2012 as follows:

  • to abolish the rule limiting a company’s payable R&D tax credit to the amount of PAYE and NICs it pays
  • to abolish the £10,000 minimum expenditure condition
  • to change the rules governing the provision of relief for work done by subcontractors under the large company scheme
  • to increase the rate of the additional deduction for expenditure on R&D for SMEs by a further 25% to give a total deduction of 225%
  • Vaccine Research Relief will not be available for SMEs.

Internet link: Budget TIIN

Enterprise Zones

The government announced the location of ten new urban Enterprise Zones within the following Local Enterprise Partnership areas: Birmingham and Solihull; Leeds City Region; Sheffield City Region; Liverpool City Region; Greater Manchester; West of England; Tees Valley; North Eastern; the Black Country; and Derby, Derbyshire, Nottingham and Nottinghamshire. In addition, London will have an Enterprise Zone and be able to choose its site.

The government will make a range of policy tools available to all zones including:

  • a 100% business rate discount worth up to £275,000 over a five year period for businesses that move into an Enterprise Zone during the course of this Parliament
  • government and local authority help to develop radically simplified planning approaches in the zone.

It will consider, in a limited number of cases, the scope for introducing enhanced capital allowances.

Internet link: Treasury Budget document

£1.3 million tax credits identity thief jailed

Olaide (John) Taiwo, aged 35, has been jailed for his part in stealing the identities of at least 350 people and using the identities to submit over 300 fraudulent tax credit claims.

A woman who also took part in the fraud was also convicted. She will be sentenced in April.

Richard Young, Senior Investigating Officer for HMRC said:

‘This pair blatantly hijacked the identities of over 350 innocent people and stole from British taxpayers by submitting over 300 fraudulent tax credit claims between June 2004 and July 2008. They deliberately attacked and abused a system designed to provide financial help to the most vulnerable people in our society. The sentences given will be a warning to anyone considering committing this type of fraud – it will not be tolerated. HMRC will pursue, prosecute and reclaim the financial gain from those found to commit these types of crime. I urge anyone who has information about Tax Credits fraud, to call the National Benefit Fraud Hotline on 0800 854 440 and help us stamp this fraudulent activity out.’

Upon sentencing Taiwo, His Honour Judge Simon Davis said:

‘This is a fraud on a substantial scale. You lied and sought to manipulate with ease and confidence and with an arrogance that was astonishing. You were intimately connected with every aspect of the fraud, stealing real details of real people to commit identity fraud on the large scale.’

As part of the investigation, a search of his home uncovered evidence of the fraud taking place, including details of numerous bank accounts held in the defendants’ names and aliases, plus documentation which held hundreds of innocent people’s identities. HMRC investigators also seized £70,000, which is believed to be proceeds of the crime.

Internet link: Press release

HMRC launch business records tools

HMRC are making available on their website checklists and toolkits which they believe are suitable for the self employed, sole traders and small businesses. The tools have been released in advance of the launch of HMRC’s programme of Business Record Checks scheduled for later this year, which will impose penalties for significant record keeping failures.

Brian Redford, HMRC’s Acting Director, Business Customer Unit, said:

‘In these tough times, keeping good records makes sound business sense.’

‘It may seem like a challenge, particularly when you’re starting out, but keeping good records will bring real advantages to your business. Get a proper system in place and you’ll not only be confident that you are paying the right tax, but you’ll keep up-to-date with how much you owe suppliers and how much you are owed.’

‘Later this year, HMRC will start a programme of Business Records Checks that will look at the adequacy and accuracy of business records in SMEs to bring about a major improvement in the standard of record-keeping. Now is the time to invest a bit of effort to make sure your business records are perfect.’

The toolkits and checklists can be found on the Business Link website. However if you are unsure what records you should be keeping or would like a reminder please do get in touch.

Internet link: Press release

Plumbers Tax Safe Plan

HMRC have introduced the Plumbers Tax Safe Plan. This is the latest of HMRC’s disclosure opportunities and follows on from the doctors and dentists disclosure facility.

According to the HMRC website:

‘The Plumbers Tax Safe Plan (PTSP) is designed for people working within the plumbing industry who have not told HM Revenue & Customs (HMRC) about all their income in the past and who now want to get back on track. It is intended to cover people who work (or worked) in the plumbing, heating or gas installation trades and this includes anyone who installs and repairs pipes and fixtures for water, drainage or gas systems in a building.’

If you would like any more information on the PTSP please do get in touch.

Internet links: HMRC disclosures Guidance Pack

Fuel Prices

George Osborne presented his second Budget Statement and said:

‘Today’s Budget is about reforming the nation’s economy, so that we have enduring growth and jobs in the future.

And it’s about doing what we can to help families with the cost of living and the high oil price.

We understand how difficult it is for so many people across our country right now.

That we are able now to set off on the route from rescue to reform, and reform to recovery, is because of difficult decisions we’ve already taken.’

One of the measures announced was a cut in fuel duty by 1 pence per litre together with scrapping the escalator for the rest of this Parliament. Duty on fuel was due to rise by inflation plus 1 pence from 1 April 2011, which would have added around 5 pence in cost to each litre of fuel.

Internet link: BBC news

Help for small businesses

Another Budget announcement was that as part of a raft of measures to help small businesses the current business rates holiday will be extended until October 2012.

During his statement George Osborne said:

‘The last government planned that the current rate relief holiday for small businesses should end in October this year. I don’t think that would be right. So I can announce that, at a cost to the Exchequer of £370 million, I will extend the rate holiday for small businesses for another year – to October 2012.’

David Gauke, Exchequer Secretary to the Treasury, has also issued a letter to small businesses setting out the measures designed to support for enterprise and small business. To read more about the measures visit the link below.

Internet link: Business link letter

HMRC online services unavailable

HMRC are advising taxpayers that unfortunately their online services will be unavailable from Saturday 2 April until 06.00 Wednesday 6 April 2011. This is to allow for IT upgrades. All services will be affected including Corporation Tax, Self Assessment, PAYE and VAT.

Internet link: HRMC services unavailable

Standard rate of VAT- updated guidance

HMRC have updated their guidance on how to deal with the change in the standard rate of VAT which happened on 4 January 2011. The guidance covers such issues as deposits, credit notes and services which span the change in rate. If you would like any further information please get in touch.

Internet link: HMRC VAT guidance

Retirement and the removal of the Default Retirement Age

Acas have updated their guidance on the transitional arrangements which are in place to abolish the default retirement age (DRA).

According to the Acas website:

‘The new regulations now make it clear that the transitional arrangements apply to anyone who is 65 or over by 30 September 2011 regardless of when they reached the age of 65.

The new regulations also provide for the notice of retirement to be extended up to a maximum of 6 months if the employee requests this before 5 January 2012 and the retirement takes place on or before 5 October 2012’.

To read the updated employer guidance and the article visit the links below.

Internet links: Acas article Acas guidance