NEW HMRC VAT GUIDANCE ISSUED ON LAND, BUILDINGS & CONSTRUCTION

This month, HMRC have issued a consolidated VAT Notice relating to the treatment of VAT in respect of this somewhat thorny & extremely technical topic.


It is slightly fascinating that they have chosen a time in the economic cycle when construction other than for the 2012 Olympics is fairly much flat lining to issue the technical note.

The guidance (VAT Notice 708) is 120 pages long but may affect anyone involved in construction & building generally..

The guidance can be found here

HMRC turn their attention to Colleges & Lecturers

HMRC has now issued Section 16 notices to colleges and education providers to request disclosure of all tutors and lecturers who are paid off the main payroll. It is without doubt time to consider if a disclosure under the Tax Catch Up Plan is worthwhile.

Section 16 notices force the recipient, in this case a college, to provide information to HMRC. In this instance they are using them to obtain the details of all private tutors and coaches that are being used by colleges. This is already causing concern with the colleges as they are being asked for three years information and will face penalties if they do not provide it within a specified period. There is an expectation that HMRC will inevitably raise status enquiries from this and again colleges may face penalties if they have not undertaken sufficient work to establish correct status.

Whilst Stage One is aimed at the education providers, there is inevitably a trawl of tutors and lecturers to follow which will no doubt identify unpaid tax and National Insurance.

Our View:
If you are a lecturer or tutor working in a college and being treated as Self Employed or you are a session lecturer working restricted hours but not paying tax through the payroll then now is the time to consider disclosure to HMRC before they knock on the door. Seek advice early.

The Winner Takes it All - Well Almost

Claimants who successfully won their cases for mis-sold payment protection insurance (PPI) will now have to pay tax on any part of the cash which represents interest earned, according to HM Revenue & Customs.

Billions of pounds have been set aside by banks after the FSA won a judicial review forcing them to pay out on mis-sold PPI claims.  HMRC have said that any repayments constitute a compensation element and interest. The latter would normally be taxed at 20% before crediting an individual.

Individuals need to check whether the banks had automatically deducted tax on interest.  In most cases interest will have been paid gross leaving a liability.

Walker Thompson’s view:
Now that HMRC are aware of the issue it would not be a surprise for HMRC to ask banks for lists of recipients in order to assess tax due.

Another Attempt at Simplification for businesses

The Deputy Prime Minister Nick Clegg has spoken out with regard to the burden of legislation and regulation in respect of SME businesses.

In a recent interview he was quoted as saying "One Government after another has made it worse - which rules do SME's think get in the way of business? - Tell us what's wrong with Tax compliance - we will listen and we will help.".  Mr Clegg went on to say, "The need for a measured approach is essential.".  He suggests that SME's use the Office for Tax Simplification as a reporting point.

Our View:
SME's are already circularised by numerous bodies such as the Institute of Directors, Chambers of Commerce, Federation of Small Businesses etc and the results of their surveys are already known.  Perhaps the answer lies not in Mr Clegg saying what he would like and how it might be best achieved via another Quango but that he opens his eyes to what is already known, after all in his own words he wants to reduce a burden not add to it.

Walker Thompson Newsletter 49

The latest Walker Thompson Newsletter has been released.  Please follow any of the headings below for more information.

HMRC LAUNCH THE TAX CATCH UP PLAN

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

PLAN TO BOOST THE ECONOMY

The Institute of Directors (IoD) has proposed a new economic growth plan which aims to improve business investment and development.

HMRC EXTEND BUSINESS RECORDS CHECKS

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

MAKE SURE YOUR EMPLOYEE INFORMATION IS CORRECT

HMRC are reminding employers of the importance of correct employee information and have updated the questions on the introduction of Real Time Information (RTI).

NATIONAL INSURANCE NUMBERS - BY LETTER

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

HMRC ISSUE UPDATED GUIDANCE FOR EMPLOYEES ON CHILDCARE

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

IMPORTING AND EXPORTING GUIDE

HMRC have issued a 'Guide to Importing & Exporting - Breaking down the Barriers'.
Keep in touch on:
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Twitter: @WalkerThompsonL

Upgrading Sage

For those of you thinking of upgrading your Sage package, or purchasing Sage here are some of the basic technical requirements for running the latest version of Sage.

General Technical requirements
10Gb free disk
2Ghz processor or higher
1Gbps network (minimum 100Mbps)

Memory (RAM)
1Gb RAM – Windows XP
2Gb RAM – Windows Vista, 7, Server 2003, Server 2008, Small Business Server 2011
4Gb RAM – For all PCs running a 64-bit operating system

Operating System
All 32-bit and 64-bit variants of the below operating systems with the latest Microsoft Updates and Service Packs.
Windows XP
Windows Vista
Windows 7
Windows Server 2003 *
Windows Server 2008 *
Windows Small Business Server 2011 *

* Running software like Microsoft Exchange or Microsoft SQL Server on a Small Business Server will reduce the performance of Sage 50 Accounts

Annual PAYE reconciliation process causes another media storm

The current news headlines are once again full of horror stories claiming millions of people have underpaid tax through the Pay As You Earn (PAYE) system, while others are due repayments. The real issue relates to how many of these under and over payments have been caused by errors and glitches in HMRC’s new computer system, rather than the tax system operating as intended with HMRC undertaking reconciliations of taxpayer’s positions after the end of the tax year?

The 2010/11 PAYE reconciliation process is currently underway. We understand that all 2010/11 repayments have been dealt with; there were 2.3m of them and the average tax repaid to taxpayers was £297.

HMRC is now concentrating on the underpayments. 1.2m of these have been identified and the average tax underpaid is £512, about half of the underpaid tax identified in the 2009/10 process. For 2010/11, HMRC is using a de minimis of £50, below which it will not reclaim underpaid tax shown up by the reconciliation process. The de minimis for 2009/10 was £300.

HMRC has always endeavoured to reconcile individual taxpayers’ PAYE records, comparing the tax deducted under PAYE with other data which HMRC holds about that person’s income. Some years ago, before everything was computerised, this was done manually and was extremely labour intensive, taking many months. HMRC inevitably struggled to keep up and fell behind as the organisation was downsized.

HMRC finally installed its new NPS (National Insurance and PAYE service) computer system in summer 2009, with the aim of improving the operation of PAYE. The PAYE system has never catered well for people with more than one employment or pension, and this was not helped by having different employments/pensions dealt with by different tax offices which did not always communicate. The NPS brings together all a taxpayer’s records and so makes sure that allowances and tax rates are operated correctly across all employment or pension income sources.

The NPS has the ability to perform automated end-of-year reconciliations and send out calculation forms, P800, to those taxpayers who have under or over payments of tax for that year.