Tax doesn't need to be taxing - especially if you have a Premium Rate Phone Number

Delays in answering phone calls to HM Revenue and Customs cost callers £136m last year, it has been estimated.

The National Audit Office (NAO) has calculated that members of the public spent £33m on call charges whilst “on hold” with HMRC phone lines in 2011-12, wasting time worth £103m to them.

HMRC uses Cable & Wireless for its 0845 rate services - More …….

http://www.bbc.co.uk/news/uk-politics-20766494

RTI Penalties Announced

Draft Finance Bill 2013 clauses set out new RTI and PAYE late payment filing penalties that won’t come into effect until April 2014

But penalties for filing accuracy will come into force as soon as the Finance Bill receives Royal Assent.

Earlier this month, tax professionals were dismayed at the government’s determination to levy such penalties and concerned that they would have a significant impact upon small businesses.

The Finance Bill amendments may appear to give more leeway to those who take time getting used to the new PAYE filing system.

A relaxation of some of the penalties is really welcome, but the penalties for incorrect returns, which will come into force straight away, don't give small businesses the time they need to adjust to the system.

We believe that the package overall will afford businesses time to come to terms with the system in the first year and identify problems with HMRC

The government said the legislation will encourage compliance with RTI and ensure that non-compliant businesses don't benefit.

There will of course be new late filing penalties for RTI returns including changes to current late payment penalties to ensure they can be charged in-year. The size of the late filing penalties will be based on the size of the PAYE scheme, rather than filing defaults and will include one un-penalised default, whereby the first filing default every 12 months will not attract a penalty.

For penalties relating to inaccuracies, the law is to be amended to allow a tax year to be treated as a tax period under Schedule 24 to Finance Act 2007. For its part HMRC argued the change would reduce the number of separate penalty assessments issued when errors are found.

Other changes to the penalties and late filing regime include: 

• one penalty per month, even if the employer defaults more than once
• charging penalties quarterly (to get money in more quickly)
• considering an easement for new employers who find filing their first returns difficult due to delays registering with HMRC (they procrastinate so why should businesses pay?)
• legislating for an additional tax-geared penalty to apply for returns outstanding more than three months
• considering an assessing tolerance where a small difference in amounts paid for a tax period compared to amount due to be paid as reported on RTI returns will not trigger a payment default (small difference not defined)
• applying interest to late RTI penalties.

According to the documentation, work on secondary law for the new late filing penalties is continuing and will be published for consultation next year.

Newsletter 62

Headlines from our latest newsletter.  Please click on any of the links below for more information :

THE AUTUMN STATEMENT
On 5 December George Osborne delivered his Autumn Statement to the House of Commons.

CHANGES TO VAT ONLINE SERVICES
HMRC have announced various changes to their online services including the introduction of the VAT online registration service which was promised earlier this year.

HMRC CLOSE IN ON ‘TAX CHEATS’
HMRC have launched an advertising campaign warning ‘tax cheats’ to declare all their income before it is too late.

HMRC ANNOUNCE LATEST TARGETS
HMRC have launched new taskforces to tackle ‘tax cheats’

UPDATED APPROACH TO BUSINESS RECORDS CHECKS
HMRC have announced an updated approach to business records checks.

VAT REGISTRATION THRESHOLD NO LONGER DUE TO THOSE NOT ESTABLISHED IN THE UK
A decision in the European Court of Justice has confirmed that only businesses established in a Member State can benefit from its domestic VAT registration threshold.

PARTIES FOR EMPLOYEES
With the season for office parties fast approaching we thought it would be a good idea to remind you of the tax implications.

SIMPLER HEALTH AND SAFETY GUIDANCE
The Health and Safety Executive (HSE) has launched an online 'Health and Safety Toolbox' aimed at smaller, low-risk businesses.

MORE FLEXIBILITY IN THE LEAVE AVAILABLE TO PARENTS
Deputy Prime Minister Nick Clegg has announced that parents will be able to share up to 12 months leave after the birth of a child from 2015.

PAYROLL RTI SYSTEM ‘UNREALISTIC'
The Institute of Chartered Accountants in England and Wales (ICAEW) has warned that the RTI reporting system will be ‘at best unrealistic and at worst impossible’ for small employers.

IMPROVING GENDER DIVERSITY IN BOARDROOMS
The CBI commented on proposals from the European Commission, aimed at achieving a better gender balance in the boardrooms of some European companies.The proposals apply to companies listed on stock exchanges in EU's Member States.

PROPOSAL TO REMOVE RED TAPE ON BUILDING EXTENSIONS The government has announced proposals to make it quicker and cheaper to make improvements to homes and business premises.

Newsletter 61

Headlines from our latest newsletter.  Please click on any of the links below for more information.

INSOLVENCY - PLAN TO AVOID IT!

Statistically speaking and according to the Department for Business Innovation & Skills, insolvencies in the business world are at their lowest level since the UK went into recession.

HIGH INCOME CHILD BENEFIT CHARGE LETTERS

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

TOO LATE FOR ‘PAPER’ SELF ASSESSMENT TAX RETURNS

For those individuals who have previously submitted ‘paper’ self assessment tax returns the deadline for the 2011/12 return was 31 October 2012.

PLANS FOR A NEW TYPE OF EMPLOYMENT CONTRACT

Chancellor George Osborne has announced a new type of employment contract to be known as an employee-owner.

RTI – CLOSING PAYROLL SCHEMES

HMRC are about to write to employers who they believe have a payroll scheme which is not being used.

GUIDANCE ON RECLAIMING NATIONAL INSURANCE CONTRIBUTIONS PAID IN ERROR

HMRC have issued guidance to cover the situation where vocational or recreational trainers may be entitled to claim a refund of National Insurance contributions.

HEALTH AND SAFETY EXECUTIVE FEE FOR INTERVENTION

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

RETIREMENT FUNDS SET TO FALL

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

HMRC CHECKLIST FOR EC VAT REGISTRATION NUMBERS

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

Whistleblower leaks Jersey Bank Details to HMRC

The Daily Telegraph has reported that HMRC is this week studying a list of more than 4,000 people holding accounts worth nearly £700m with HSBC in Jersey.


An HMRC spokesman has confirmed that the department had received the data and was studying the list, which was reportedly passed to it by a whistleblower. Around half of those named are said to be UK taxpayers.

HMRC win on Penalties

THE TAXMAN has won a landmark ruling to claim several months' worth of fines from a late PAYE filer.  The company, Hok, will have to pay accumulated fines for the late filing of an employer's PAYE return to HMRC, after the upper-tier tribunal on a legal technicality overturned an earlier tribunal ruling stating only the first month's fine was applicable.

Hok had failed to issue its PAYE employer's return by the May deadline.  The company's one employee ceased employment midway through the year and Hok was unaware a return still needed to be filed at the year end.  However, HMRC did not send the penalty notice until October, which allowed the fine to accumulate.

The judge at the first tribunal was clear in pointing the finger at HMRC’s lack of process and its reliance on not keeping companies informed of potential penalties.

The latest decision is seen by many as being one rule for HMRC and a different rule for taxpayers.  Anyone who filed late may now receive notices of accumulated penalties where they may not have been aware of them being liable in the first place.

Walker Thompson still supporting Young People Charity 10 Years on

In 2002, Walker Thompson began working with Coventry Foyer Trust, a charity which provides a secure living and learning space for up to 63 vulnerable young people. Based in Lower Holyhead Road, the Foyer provides a living space for each of its residents but in addition provides life skills support ensuring that they are as prepared as possible for moving on into independent tenancies.

To read more click here

Pensions - Advice for Employees

The Government has just taken out advertising with Independent Television channels to promote the soon to be launched Pension Schemes where employees have an auto enrolment or an opt out.

The adverts are causing many employees to bombard their employers with questions.

Walker Thompson in collaboration with a leading firm of financial advisors have produced a simple guide for employees which can be found here

Companies House launches mobile app

Companies House has recently launched a free mobile phone app which enables users to view thousands of basic UK company details. The app is currently available as an Apple download but an android version is due to be launched shortly.

Further information can be found by clicking here

French to tax foreign second-home owners

UK citizens who own homes in France may have to pay substantially more in tax in that country, under proposals announced last week.

Capital gains tax, and income tax on rental income, will rise substantially for foreigners, to levels paid by French citizens.

Several hundred thousand UK citizens own, and let, homes in France.

At the moment, French capital gains tax is levied on the sale of a home at 19%, plus 15.5% as a "social charge" to pay for state benefits.

Likewise, tax on rental income is levied at 20% plus 15.5% social charge.

The social charges are not currently paid by foreigners who own homes in France, but under latest plans, they will be.

The extra taxes have been outlined in a supplementary budget which should become law by the end of July, and which will apply immediately.

It is possible the extra taxes to be paid by foreigners may be challenged legally.

Nevertheless, it is thought that the moves will inevitably make second homes and rental properties in France far less attractive to UK residents.

Walker Thompson sponsors Ice Hockey Tournament

On 17 June 2012 Coventry Blaze Ice Hockey Academy hosted its annual Godiva Cup Tournament.


We are proud to have been involved in the sponsorship of the event which attracted emerging young Ice Hockey players from Milton Keynes, Oxford and Peterborough, as well of course, as the Coventry Under-14 Academy.


The event provided some 6 hours of non stop, and at times frenetic, ice hockey comprising some nail biting qualifying rounds leading up to the final which was won by Oxford.

The teams which comprise both boys and girls at the under 14 level can only get the experience required at tournaments with the sponsorship of local businesses and on this occasion we were only too pleased to be able to help.

We are looking forward to 2013 and hopefully a Coventry Blaze win.

Retail Premises available for rent - Earlsdon, Coventry

We have recently been made aware of some retail premises available for rent or possible outright purchase in Earlsdon Coventry

Lock-up Retail Shop Premises with security shutter/alarm Broomfield Road Coventry

• Ancilliary Rear Accommodation with external Store/Workshop
• Retail sales area 32.61m (313 sq ft) approx
• Property is considered suitable for a variety of A1 retail uses and has been most recently used as a cafe/coffee shop
• Inner lobby. Customer toilet/handbasin area approx 8ft x 8ft
• Back room approx 14ft x 8ft, with two double sockets and strip light
• Shower/toilet/handbasin off back room approx 3ft x 9ft
• Attached conservatory with a single drainer stainless steel sink unit & separate small sink. Two double sockets, strip light Approx 17ft x 6ft
• Rear store/workshop approx 22ft x 10ft with 9 double sockets & 5 strip lights
• Timber shed(was used as an office) approx 8ft x 10ft with double socket and strip light
• Rental subject to negotiation around £900 exclusive

Anyone considering purchase – there are 3 self contained flats above generating rents of £860 pcm

Interested parties should contact mchrismurphy@hotmail.com or tel 07958 932 896

Headlines from our latest newsletter.  Please click on any of the links below for more information.

Real Time Information - get ready

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

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.

Working beyond state pension age

The Office for National Statistics has published a report looking at those working beyond state pension age.

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.

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.

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.

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.

Please click on any of the headings below for more information about the topics.


Sickness

There seems to be the usual illnesses and infections doing the rounds at this time of the year.

Advisory fuel rates for company cars

New company car advisory fuel rates have been published to take effect from 1 June 2012.

HMRC warn of e-mail scam

HMRC have issued a warning about possible fake or ‘phishing’ e-mails sent out by fraudsters.

HMRC's Basic PAYE Tools update

HMRC have released a new version of the Basic PAYE Tools which reflect the Budget 2012 changes.

Enterprise research centre

The government has announced proposals to introduce a new independent £2.9 million Enterprise Research Centre which will look at investment strategy for SMEs.

Tax credits renewal deadline

Tax credits are state benefits which are generally available to lower income families.
P11D Errors
The forms P11D, and where appropriate P9D, which report benefits and expenses for both employees and directors for the year ended 5 April 2012, are due for submission to HMRC by 6 July 2012.
HMRC Bereavement Service
HMRC have created a new dedicated telephone helpline and address for individuals who have suffered a bereavement and who need to contact them about PAYE and self assessment matters relating to bereavement.
Small donations to charities

It has been confirmed in the Queen’s Speech that charities will be able to claim top-up payments on up to £5,000 of small donations without needing to obtain Gift Aid declarations.

HMRC issue guidance on IR35
HMRC have released guidance setting out their risk-based approach to checking compliance with IR35.

Unpaid VAT

Small businesses should be aware that HMRC is taking a much more proactive stance at recovering unpaid VAT.  HMRC is also less prepared than it was a year ago to allow businesses to defer tax payments under its "Time to Pay" scheme, so businesses really do need to get their payments in order or they could face the real risk of having their assets repossessed.

HMRC had previously reserved its use of distraint proceedings to recover unpaid payroll tax.  However, since the recession it has been far more active in recovering other types of unpaid tax, most notably value-added tax.

IR35 Business Entity Tests

HMRC has started the process of overhauling its operation of the IR35 regime for personal services companies with new guidance issued in May 2012 that sets out basic risk factors which they say will potentially increase a contractor's chance of being investigated.

This overhaul is clearly designed to facilitate an increase in IR35 investigations.  As expected following leaks last month, the 12 business entity tests set out in HMRC's 47-page intermediaries legislation guidance notes are illustrated by six example scenarios.  HMRC said the tests are designed to build up a picture of how a contractor's business works and how they provide their services.  The tests include the following:

• Business premises test - Does the business utilise business premises separately from the contractor's home or end client's premises.
• PII test - Does the contractor need professional indemnity insurance
• Efficiency test - Has the business had the opportunity in the past two years to increase its revenue by working more efficiently?
• Assistance test - Does the business employ any workers who bring in at least 25% of annual turnover?
• Advertising test - Has the business spent over £1,200 on advertising in the past year; entertainment does not count as advertising?
• Previous PAYE test - Has the end client engaged the Director during the previous 12 months with no obvious changes in the working arrangements?
• Business plan test - Does the company have a business plan with a regularly updated cash flow forecast, and does it have a separate bank account?
• Repair at own expense test - Does the business have to bear the cost of rectifying any mistakes?
• Client risk test - During the past two years, has the business been unable to recover payment amounting to more than 10% of yearly turnover.
• Billing test - Does the business invoice for work carried out before being paid and negotiate its payment terms?
• Right of substitution test - Does the business have the right to send a substitute?
• Actual substitution test - Has the business hired anyone in the previous two years to do the work it has taken on?

The HMRC guide explains that the tests are not set in stone, and are an extension of the risk-based approach it extends to all of its investigations.

The business entity tests are something against which you should be able to self-assess to see how you scored by their internal rating.  But HMRC aren't revealing what the detailed risk criteria are because of the fear people might arrange their affairs accordingly.

In any event the business entity tests are just a diagnostic tool.  The actual application of IR35 will always come down to employment status factors that must be tested against case law going back over 40 years and will always take into account contractual terms.

HMRC is apparently seeking to appoint specialist IR35 teams at offices in 3 areas of the UK to pilot the new diagnostics.

Anyone with concerns about the tests and the risk of investigation can contact us.

Queen's Speech

The Queen's Speech sets out to address legislation in the next twelve months.

The only Bill which reflects upon business is seemingly -

A wide ranging Enterprise and Regulatory Reform Bill covering competition, employment disputes, director's pay and regulatory reform.  Competition enforcement will be strengthened by merging the Competition Commission and parts of the Office of Fair Trading.  A Green Investment Bank will be established to promote private sector investment in a greener economy.  Reforms in the employment tribunal system will be achieved by providing more options for the early resolution of disputes through Acas.  On Director's pay, shareholders will be allowed a binding vote on the remuneration of directors.

This Bill applies to the whole of the UK, but with some parts relevant to England, Wales or Scotland only.

Walker Thompson Newsletter 55

We are delighted to welcome a new member of staff to Walker Thompson. Sharan Bansal has joined our bookkeeping and payroll department working alongside Tamar Smith. The recruitment is helping us to meet the needs of our expanding portfolio of clients and is part of our ongoing strategy. We feel she is going to make a great addition to our staff.

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.

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.’

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.

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.

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.

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.

CHARITABLE GIVING - CAP ON TAX RELIEF

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

Setting up a business with a partner

Going into business with a partner?  Forming a limited company and each having 50% of the shares would seem reasonable.  It sounds fair but could lead to a deadlock if you ever disagree over something serious. 

Common causes of disputes include:

• disagreements over strategy
• power struggles and poor personal relationships
• conflicts of interest, and dealings between the company and a private business owned by one of the directors
• concern as to whether the board is meeting its legal responsibilities
• concern over financial issues and potential insolvency
• service contracts and remuneration
• a change in personal circumstances of one of the key parties

If the company can't make a decision it could lead to the collapse of the company or being stuck in a company you can't get out of.  Resolving these issues can be a long and costly process, especially if you have to get legal counsel, bring in outside experts or go to mediation or arbitration.

The solution:  Get a well drafted shareholders' agreement in place, and before you fall out.

Walker Thompson Newsletter 54

Have you visited our new website yet? If not, please have a look and let us know what you think: http://www.walkerthompson.co.uk/

We are now keeping clients up to date with regular articles on Facebook, Twitter and Linkedin.

Please follow any of the links below for more information on each topic.

BUDGET 2012

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

INCREASED PERSONAL ALLOWANCE FOR 2012/13

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

AGE ALLOWANCES

It was announced in the Budget that from 2013/14 the higher age related personal allowances will not be increased and their availability will be restricted.

CHILD BENEFIT

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

CORPORATION TAX RATES

A further reduction in the main rate of corporation tax has been announced.

STAMP DUTY LAND TAX (SDLT)

A new rate of 7% will be introduced where the chargeable consideration for a residential property is more than £2 million.

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.

REIMBURSING ADDITIONAL HOUSEHOLD EXPENSES

From 6 April 2012 HMRC are increasing the guideline rate which employers can use to reimburse employees for additional household expenses incurred because they have to work from home to £4 per week (currently £3 a week).

ADVISORY FUEL RATES FOR COMPANY CARS

New company car advisory fuel rates have been published to take effect from 1 March 2012.

UPDATED GUIDANCE ON GIFT AID AND NEW DECLARATIONS

HMRC have updated their guidance on Gift Aid declarations and provided new model declarations.

NATIONAL MINIMUM WAGE RATES

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

NATIONAL LOAN GUARANTEE SCHEME

The Chancellor George Osborne has launched the National Loan Guarantee Scheme (NLGS), which is designed to help ‘smaller businesses’ across the UK access cheaper finance.

Fact or Fiction

Without facts at your fingertips it is difficult to take the right business decisions.  Don't expect brilliant insights if you haven't collected the right information in a useable format.

Do you actually know which of your products, services or markets generate the largest revenues?

In an uncertain world, the more information directors have, the more confident they should be about their decisions.

Businesses are often swamped with data but those that can quickly decide what is important will strengthen their performance.

Make sensible decisions about which information you need to collect and how to categorise it.

Collect the right information in an easy to use format.

2012 Budget - The Aftermath

The facts below are extracts taken from a wide variety of professional & trade press articles following the Budget of Chancellor George Osborne. The proposals set out within the Budget speech will be ratified in due course through The Finance Act 2012 although some measures were introduced as part of the previous announcements.

In most peoples opinions it is probably fair to say that when the cosmetic appearance was stripped away, the 2012 Budget was somewhat neutral overall. There are certain areas which have caused controversy and others which have caused comedy. 2012 will in our view always be remembered as the Pasty, Pie & Pensioners Budget.

When the country is looking to emerge from an economic recession, are we really employing civil servants with the sole aim of further complicating already complex VAT legislation against a background of a Parliament keen to reduce red tape & encourage business entrepreneurship? Moreover are we concerned whether Mr Osborne has ever eaten a sausage roll from Greggs?
Income Tax rates were almost a non event as they were announced in 2011. A 5% drop in the higher 50% rate was announced but only effective from April 2013.

For Inheritance Tax purposes there was no change in limits but a 4% tax discount will be applied if the estate is over £325,000 & over 10% is left to a registered charity. A nice idea given that charitable donations have been hit by the recession but for higher rate tax payers who are minded to give to charity anyway, a lifetime donation would seem to have more benefit.

Various Benefits including State Pension & Jobseekers Allowance are increased in line with the Consumer Price Index set in September 2011 at 5.2%. Pensioners however are still mainly affected by the low rates of investment returns which affect their day to day lives and were planned to top up pensions through retirement.

The most controversial change in this area was in respect of Working Tax Credit where couples with children must work 24 hours per week instead of 16 hours and that one person must work at least 16 hours. We believe that this will have a short term impact upon businesses who have arranged part time staffing around the original rules and may now face employee requests to change their hours. Failure of an SME employer to be able to respond could see increasing movement of employees with the consequent associated costs.

On the periphery of the Budget, businesses are still struggling to obtain finance from a banking system which claims to be releasing credit in line with expectations. Whose expectations these are we cannot say as in the SME sector it is fairly clear that banks are only lending where the level of security available not only from the business but from owners personal guarantees is up to 4x the amount of borrowings. Suffice to say that Government statistics announced on 11 April showed that British firms were not investing in capital which would enable them to pull clear of recession & that they might struggle to do so. – If they cannot borrow to invest then perhaps the idea of a nationally owned business bank is the way forward? We still see banks visiting businesses, not to lend money but to sell Life Assurance & Pensions.

Finally it is worth commending our Chancellor on his astute awareness of the tax system over which he has stewardship. As recorded in an interview with the Daily Telegraph:

“Chancellor George Osborne has expressed shock after looking at 20 anonymised tax returns of multi-millionaires which demonstrated they have exploited tax loopholes to legally reduce their tax bills.”

HMRC Relents on Multiple P35 Penalties

HMRC has agreed a new approach to PAYE late filing penalties with professional tax bodies to lessen the number of companies receiving notices for £400+ fines in September each year.

As part of its initiative to improve service standards, the tax department worked with the bodies to tackle some of the most aggravating issues, one of which was the way companies were hit by hefty fines out of the blue.

The issue has become increasingly sensitive as tribunals have taken to dismissing penalty levies where the judge thinks HMRC's approach amounts to revenue-raising rather than enforcing the deadline, as documented during the past year in AccountingWEB's Reasonable Excuse scorecard.

To encourage employers to comply with the 19th May PAYE filing deadline, Taxation reported a statement from HMRC and the tax bodies which said it will undertake to:

• Change the notification date for 2011/12 P35 annual returns from mid-February to mid-March 2012, so that employers will receive it much nearer to the end of the tax year.
• Annual return reminders will be sent out from 28th April 2012, where HMRC thinks there are outstanding P35s for the year.
• From 31st May 2012, HMRC will introduce a "P35 Interim Penalty Letter" that will go to employers within a month of the filing deadline.  The letter will tell employers they have incurred a late return penalty and explain what to do to avoid it increasing.
• Improve online guidance for submitting P35s online, including specific advice about the test-in-live service to reduce the number of employers who believe their test submission is the live submission.  "The on-screen messages within the HMRC online product will also make it much clearer that even when a successful test transmission has been made, a live transmission is still required.
• Instruct Employer Helpline staff to tell employers about filing dates when setting up new employer schemes, to help them avoid a penalty.
• For next year, improve the information on the P35 and the reminders to include a warning that the first penalty notice will cover four months.

"Taken together, these measures should help employers to avoid incurring unnecessary penalties and significantly reduce the number of cases where penalties in excess of £100 are charged." HMRC said.

VAT and the Channel Islands

Attempts to stop the introduction of more stringent VAT rules on low value goods sent from the Channel Islands have been averted.

The Chancellor had announced last November the removal of the Low Value Consignment Relief (LVCR), which had allowed goods shipped from the Channel Islands worth less than £15 to ship VAT free.

Its abolition, from 1st April, was challenged by the Jersey and Guernsey governments, which said the move was discriminatory and illegal.

However, Law Lord Mr Justice Manning said the Treasury was within its rights to end the relief.

"This is a victory for common sense in what has become something of a case of David v Goliath," said Forum of Private Business senior policy adviser, Phil McCabe.  "But the judiciary has today reaffirmed what George Osborne said in November, that LVCR  is tax abuse and avoidance, plain and simple, and has to stop."

"Unfortunately it is too late for countless small firms which went to the wall, unable to compete with giants such as Amazon and Tesco, who have been able to unfairly use this loophole to avoid paying billions in tax and undercut their small rivals by significant margins."

"Had the government's decision been overturned there would have been serious consequences for high streets across the UK."

The real question is now whether the big companies will put up their prices by 20% or whether they will absorb the cost in the short term.

Staff Using Social Network sites

ACAS have just issued new guidance to assist employers with this increasingly thorny problem.

It is now widely accepted that staff no longer need an employer's PC Network to access social media sites.  The emergence of many and varied mobile devices means that employers no longer have control regarding access to such sites during the working day.  This can lead to time lost or at worst, the posting by staff of inappropriate comments about colleagues.

The latest guidance deals with a list of issues, dangers and benefits and then advises the appropriate way forward.

www.acas.org.uk/index.aspx?articleid=3381

Inheritance Tax Planning

The current tax year comes to an end in a little over one months time.  Don't overlook some simple planning points on Inheritance Tax.

Basically the 7 year gifts rule applies, where any gifts made fall completely out of Inheritance Tax charge after that time has passed.

Put simply, if your estate would have been worth £425,000 today had you not gifted £100,000 7 years ago, then instead of being liable for a £40,0000 IHT charge, the whole estate now worth £325,000 is tax free.

If you have the ability to make gifts and your estate is likely to exceed £325,000, then it is always worth considering making £3,000 worth of gifts each tax year which are tax free.

Assuming that a married couple are able, and of course wish to, use the annual exemption, it is worth remembering that they each have £3,000 to utilise which can save £2,400 per annum in potential IHT.

There are also separate small gift exemptions of up to £250 per recipient and gifts upon marriage of up to £5,000.

Finally, always keep a note of any gifts and preferably retain it with your copy Will.  Oh you haven't made a Will yet?  Memo to self then - make arrangements to have one drawn up.

Walker Thompson Newsletter 53

Please click on any of the headings below for more information about each subject.

ONLINE VAT RETURNS

From April 2012, businesses (with very few exceptions) will have to file their VAT Returns online and pay their liability electronically. If you are not already online, now is the time to set it up.

EU COOKIES

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

PENSIONS AUTO ENROLMENT DATES DEFERRED FOR SMALLER EMPLOYERS

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

NEW APPROACH TO RECORDS CHECKS FROM HMRC

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

PAY UP ON TIME

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

HMRC LATEST TARGETS

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

CLEAN UP YOUR PAYROLL DATA

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

SELF ASSESSMENT STATISTICS

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

BUDGET FOR GROWTH

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

PENALTIES FOR FAILING TO FILE PAYROLL FORMS ONLINE

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

Processing in the new tax year

From 6th April the new emergency tax code will be 810L.

If you receive a new tax code for an employee, this must be used from the next payroll date.

If no tax code is received and the employee's current tax code has a suffix of L, then add 63 to the existing tax code for the first payroll after 6th April.

The new bands for the tax year starting 6th April 2012 are as follows:

PAYE threshold will be £156 per week / £675 per month
20%  £1-£34,370
40%  £34,371 - £150,000
50%  £150,001 and above.

NIC LEL will be £107 per week / £464 per month

Please note there are also pension changes which will take effect from 6th April.

Payroll Year End

The 5th April is approaching fast and with it the Payroll Year End.  P35 End of Year Returns along with all attached forms have to be submitted to the Revenue by 19th May at the latest.

So ...  A few things to remember for the Year End procedures ...

• Almost all returns have to be submitted online this year, so if you are not yet registered to file online, now is the time to do it.
• A P35 must be completed for each company who has employees for whom a P11 is required
• A P14 must be submitted for each employee for whom a P11 is required.
• If you are not required to submit a P35 for the year (and you have a PAYE scheme set up), you must notify HMRC.
• Compare total PAYE & NIC due for the year against the amounts actually paid.
  If a balancing payment is due - this needs to be paid to the Revenue by 19th April
  If a refund is due - an amount of less than £500 will be allocated against the following year.  A refund can be requested for amounts over £500 once the return has been filed and checked.
• A P60 needs to be issued to each employee by 31st May

Royal Mail - VAT changes

Following the Postal Services Act 2011, the VAT status on a number of Royal Mail products have changed.

Please follow the link below for more information as to:

• Products which are already liable for VAT
• Products which will be liable to VAT from 2nd April 2012
• Products which will remain VAT exempt

http://www.royalmail.com/customer-service/terms-and-conditions/vat-changes

Walker Thompson advise shareholders in sale of major local travel agency

Walker Thompson is pleased to have been involved recently in the sale of Carrick Travel Ltd to its Directors, Tina Nason and Tracey Carter, as part of a Management Buy Out.

Award winning travel agency Carrick Travel has been trading for over 35 years and has numerous offices throughout Warwickshire, the Cotswolds and the M40 corridor.

The company operates eight Travel Agencies, a Corporate Travel Division and an Australasia Division.  It has retail outlets in Leamington Spa, Cheylesmore in Coventry, Kenilworth, Stratford-upon-Avon, Bourton-on-the-Water, Chipping Norton, Evesham and Pershore.

Sherod Williams, a Director at Walker Thompson, represented the Carrick family in relation to the sale and worked alongside Lodders Solicitors of Stratford-upon-Avon who dealt with the Sale and Purchase documentation.

Sally Carrick will continue her work locally as a Director of Shakespeare Country, an organisation promoting tourism in the Stratford and South Warwickshire area.

Sherod said, "In the current environment people still want a quality service which cannot be delivered through the internet or larger travel agencies.  Anyone seeking the personal involvement of a travel advisor with specialist knowledge should give Carrick Travel a call.".

Carrick can be contacted through their website http://www.carricktravel.com/.

Vacancy

We currently have a vacancy for a part time / full time payroll and bookkeeping clerk.

The person would ideally have experience of Sage accounting and payroll software. They would be expected to organise a portfolio of up to 30 payrolls for various clients in a wide variety of sectors. Experience of VAT Return preparation would be advantageous, as would a working knowledge of Excel.

Competitive Salary

Application with up to date CV by e-mail to kim.knowles@walkerthompson.co.uk or by letter to Empress House, 43a Binley Road, Coventry, CV3 1HU

Online VAT Returns

From April 2012, businesses (with very few exceptions) will have to file their VAT Returns online and pay their liability electronically.  If you are not already online, now is the time to set it up.

HMRC strongly recommends you sign up to using the online service before April 2012, so that you have time to get familiar with the new service. It has also proved useful to set up online filing, and the associated direct debit mandate, some time before the first return needs to be submitted, to avoid delays in either the submission or payment of your first return.

When you submit your VAT Returns online, you must also pay any VAT due electronically. Paying electronically will normally give you to up to seven extra calendar days to submit your return and pay your VAT, unless you make annual returns or payments on account. The extended due date will be shown on your online return and you must ensure that cleared funds reach HMRC's bank account by this date. If your payment clears later than this, you may be liable to a surcharge for late payment.

Moving to online filing

T-7 and counting ...

Time is ticking away and with only 7 calender days left, the 31st January will be here before we know it.

All Self Assessment Tax Returns for the year ended 5th April 2011 must be filed online by 31st January 2012.  (The deadline for most paper returns is long gone.)

If you have received a notification from HMRC that they are expecting a self assessment return from your, or you have had any assessable income during the tax year, you need to file a tax return by the deadline date.

More on PAYE Filing Penalties

Recent Tribunal decisions on penalties for PAYE returns that are filed late are inconsistent, and the taxman should issue penalty notices to taxpayers more promptly after a deadline is missed, a senior tax accountant said.

As HMRC prepares to challenge a tribunal ruling that criticized its practice of allowing fines to accumulate before issuing penalty notices, recent tribunals have reached different verdicts on the increasingly controversial subject.

Chas Roy-Chowdhury, head of taxation at the ACCA accountancy institute, said tribunal decisions on penalties were "all over the place".

The taxman should be more understanding if businesses make an honest mistake when submitting end-of-year P35 returns - which show employees' income tax and national insurance contributions - Roy-Chowdhury added.

For example, some businesses, or their tax advisers, may mistakenly send a "test version" of their P35, wrongly believing that they have completed the return.

In Croydon North Conservative Association v commissioners for HMRC - heard in the first-tier tribunal last November - the association appealed against an "unfair" £800 penalty for a P35 return that was filed late.

The employer filed their P35 online on 30 March 2011 - more than ten months after the 19 May 2010 deadline for sending the return.

The association appealed against the fine, arguing that its treasurer had no experience of PAYE. It also said that HMRC had taken eight months to notify it about the fine and that an earlier call or letter explaining that the P35 was late would have solved the problem.

The tribunal ruled in favour of the taxman, concluding that penalty notices were not intended to serve as reminders and that burden was on the taxpayer to establish a reasonable excuse for late returns.

In another case about tax penalties - Global Legalisation Services Limited v the commissioners for HMRC - heard in the first-tier tribunal last August - a company successfully appealed against a £800 penalty for a P35 form that was sent late.

The company's tax adviser said that it believed it had filed the return successfully.

After sending the the P35 return online the agent received an email from HMRC confirming receipt but warning that if the submission was a "test submission" the form should be resent using the "live transmission" in order to be processed.

HMRC said that sending a "test submission" requires the employer to "actively access test mode on the system" - meaning that the employer does not have a reasonable excuse for sending the form late.

Roy-Chowdhury said that the taxman should be prepared to reduce tax penalties to encourage people to file late returns quickly.

"When HMRC issues penalties [for late filing of a P35 form] it could say there is a £500 penalty but if you file within 30 days you will pay £100," he said.

A plan to collect income tax and national insurance contributions from employees' pay packets in "real time" rather than annually should make it easier for HMRC officials to send tax reminders and penalties quicker. The new system is due to start from April 2013.

Under real-time PAYE, employers will send HMRC information about tax and other deductions from employees' pay when, or before they make the salary or wage payment to the employee, rather than sending returns at the end of the year under the current system.

HMRC missing a deadline - surely not?

HM Revenue and Customs has missed a key deadline which required it to create teams of cyber crime investigators and launch initiatives to counter the increased threat of web attacks on the authority's system and customers.

In its structural reform plan progress report for December 2011, HMRC said that work on the project should have been completed by November 2011, but recruitment activity is still ongoing and the scheme will now not be completed until February.

This serves to prove that despite unemployment rates spiralling, the country does not have the appropriate people trained and capable of fulfilling this vitally important role in protecting taxpayers data.  Perhaps they will impose financial penalties on themselves as they do so readily with taxpayers who miss deadlines or do HMRC believe that they have a "reasonable excuse"?

The rules on being late with PAYE & NIC payments

We have become aware that some businesses are wrongly interpreting the rules regarding late settlement of monthly or quarterly PAYE payments.  HMRC expect that deductions made from employees for tax and NI in one month should be correctly accounted for and paid over by 22nd of the subsequent month.  The penalties regime was extended to include late PAYE returns in 2009/10 and many late penalties of up to £400 were publicised in the press recently.

There does however seem to be some confusion regarding an HMRC concession which states that for one payment only each year, if it is made late, they will not seek to impose a penalty.  This means that HMRC still expect the payment to be made within reasonable time NOT as some people seem to believe, that a whole month's payment can be deferred until month 12 without a penalty as long as all other payments are made on time.

HMRC deadlines contains further details.

Self Assessment Returns

More than 1,000 taxpayers submitted their self assessment returns on Christmas Day, HMRC figures have revealed.

The figures also show that 102 people saw in the new year at their computer completing their tax returns.  In total, 11,648 filed on New Year's Eve, while 8,935 people battled hangovers to submit on New Year's Day.

It is no surprise that HMRC can collect this type of data yet cannot spend the necessary time to get basic PAYE codes correct or indeed many of the other processes which create worry and concern for taxpayers.

Walker Thompson Newsletter 51

WELCOME TO 2012

On 15 December 2011 Walker Thompson were successfully re-assessed against the Investors in Excellence Standard, first achieved by the firm in 2007 and again two years later.
PENSIONS AUTO ENROLMENT

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

ADVISORY FUEL RATES FOR COMPANY CARS

New company car advisory fuel rates have been published to take effect from 1 December 2011.

CAPITAL ALLOWANCES IN ENTERPRISE ZONES

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

SEED ENTERPRISE INVESTMENT SCHEME

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

STATUTORY RESIDENCE TEST

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

SELF ASSESSMENT DEADLINE FAST APPROACHING

HMRC are reminding taxpayers that the deadline for filing self assessment tax returns is fast approaching.

THE PORTAS REVIEW

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

HMRC TO ACCEPT FASTER PAYMENTS

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

2012/13 STATUTORY PAYMENTS

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

Welcome to the Great New Year NIC Giveaway

The take up of the National Insurance Holiday scheme that formed a key part of Chancellor George Osborne's first Budget is still way below the Treasury's initial estimates, the government has confirmed.

Exchequer secretary to the Treasury David Gauke released figures about the scheme to Parliament recently.  Just over 10,000 companies have taken up the scheme since June 2010.  The government had hoped for a take-up of 132,000 a year when it was announced by Osborne.

The holiday exempts qualifying new businesses in eligible regions from up to £5,000 of employer national insurance contributions for each of the first ten employees hired in the first 12 months of business.

It has received criticism because it is only available in certain regions.

Professionals have call for the scheme to be rolled out across the country.  HM Revenue & Customs say that they have sent around 140,000 personalised letters to all businesses that have registered for a PAYE scheme since June 2010 at a cost of around £90,000 in October.

The Exempted areas are:
Greater London (all)
The Eastern Region comprising:
The counties of Bedford, Cambridgeshire, Central Bedfordshire, Essex, Hertfordshire, Norfolk and Suffolk.
Luton, Peterborough, Southend-on-Sea and Thurrock.
The South East Region comprising:
The counties of Buckinghamshire, East Sussex, Hampshire, the Isle of Wight, Kent, Oxfordshire, Surrey and West Sussex.
Bracknell Forest, Brighton and Hove, Medway, Milton Keynes, Portsmouth, Reading, Slough, Southampton, West Berkshire, Windsor and Maidenhead and Wokingham.

Self-employment National Insurance Contributions

Making sure you don't overpay self-employment National Insurance contributions.

If you expect to be both employed and self-employed you may be able to 'defer' some of your Class 2 and/or Class 4 National Insurance contributions.  You'll pay what's due after the end of the tax year when the actual amount has been worked out.  Doing this will make sure you don't pay too much National Insurance on any self-employment income.

Go to form CA72B  Application for deferment of payment of Class 2 and/or Class 4 National Insurance contributions.

Walker Thompson's view:  It is advisable to check and if in doubt apply as soon as possible.  Deferment cannot be made retrospectively.