Monday, 31 October 2011
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.
Thursday, 27 October 2011
How can you afford a house like that?
Ever wondered how business people can afford large mortgages when their business results are not, on the face of it, able to support the repayments let alone other general living costs. Well now HM Revenue & Customs are starting to ask the same question.
From 1 September 2011, HMRC have joined with mortgage lenders in a new Mortgage Verification Scheme. They say that this is all about combating fraud. HMRC will be able to comment if asked to on the income figures declared on mortgage applications.
People who have self certified their income for mortgages may well find themselves facing HMRC questions such as: "You disclosed your income under Self Assessment as £12,000, but put £52,000 on your mortgage application - why should we not tax you on £52,000?".
Of course, the alternative is for a taxpayer to admit to a fraudulent mortgage application!
Our tip -
"Think carefully about what you disclose to a mortgage provider. Try to cheat the system and it is likely to come at the price of a tax enquiry."
From 1 September 2011, HMRC have joined with mortgage lenders in a new Mortgage Verification Scheme. They say that this is all about combating fraud. HMRC will be able to comment if asked to on the income figures declared on mortgage applications.
People who have self certified their income for mortgages may well find themselves facing HMRC questions such as: "You disclosed your income under Self Assessment as £12,000, but put £52,000 on your mortgage application - why should we not tax you on £52,000?".
Of course, the alternative is for a taxpayer to admit to a fraudulent mortgage application!
Our tip -
"Think carefully about what you disclose to a mortgage provider. Try to cheat the system and it is likely to come at the price of a tax enquiry."
Friday, 30 September 2011
Latest Newsletter
Walker Thompson Newsletter 48
Walker Thompson's Monthly Newsletter is now available. There are as usual a number of interesting points to consider, and keep in mind. Especially pertinent is the increase in the National Minimum Wage which comes in in October 2011.
Follow the links below for more information, as well as links to the relevant government website.
NATIONAL MINIMUM WAGE RATES
ADVISORY FUEL RATES FOR COMPANY CARS
AGREEMENT WITH SWITZERLAND TO SECURE BILLIONS IN UNPAID TAX
UNEMPLOYMENT FIGURES
HMRC REMINDER ON NEW TAX RETURN PENALTIES
SCHOOL CHARITIES - GIFT AID AND PAYROLL GIVING GUIDE
REVISED CONSTRUCTION INDUSTRY PENALTIES
HMRC REPORT INCREASE IN PHISHING SCAMS
INSOLVENCY UPDATE
Walker Thompson's Monthly Newsletter is now available. There are as usual a number of interesting points to consider, and keep in mind. Especially pertinent is the increase in the National Minimum Wage which comes in in October 2011.
Follow the links below for more information, as well as links to the relevant government website.
NATIONAL MINIMUM WAGE RATES
ADVISORY FUEL RATES FOR COMPANY CARS
AGREEMENT WITH SWITZERLAND TO SECURE BILLIONS IN UNPAID TAX
UNEMPLOYMENT FIGURES
HMRC REMINDER ON NEW TAX RETURN PENALTIES
SCHOOL CHARITIES - GIFT AID AND PAYROLL GIVING GUIDE
REVISED CONSTRUCTION INDUSTRY PENALTIES
HMRC REPORT INCREASE IN PHISHING SCAMS
INSOLVENCY UPDATE
Thursday, 22 September 2011
HMRC Announce Latest Campaigns and Targets
Some advance notice of HMRC's latest campaigns.
Professionals - Private Tuition
(starting Autumn 2011)
This looks at professionals who are able to profit from providing tuition or coaching as either a main or secondary income, but have chosen not to tell HMRC about it. This can include those providing private lessons, whether they have a teaching qualification or not, and could include fitness / dance / lifestyle coaches as well as national curriculum subject tutors, for example.
Organisations/individuals wishing to contribute to the PT&C voluntary disclosure campaign design, please follow link to HMRC Campaigns.
E Marketplaces
(starting 2012)
This aims to find those who are using e-marketplaces to buy and sell goods as a trade or business, and fail to pay the tax owed. It will not be targeting people who sell a few items, and who are not traders, as they are unlikely to be liable to pay tax.
Organisations / individuals wishing to contribute to the campaign design please follow this link to HMRC Campaigns.
Trades - 2nd Campaign
(starting 2012)
Following on from the plumbers' campaign, HMRC will be looking to give an opportunity to another group of tradespeople to come forward and declare unpaid tax.
Organisations / individuals wishing to contribute to the campaign design please follow this link to the HMRC Campaigns.
Professionals - Private Tuition
(starting Autumn 2011)
This looks at professionals who are able to profit from providing tuition or coaching as either a main or secondary income, but have chosen not to tell HMRC about it. This can include those providing private lessons, whether they have a teaching qualification or not, and could include fitness / dance / lifestyle coaches as well as national curriculum subject tutors, for example.
Organisations/individuals wishing to contribute to the PT&C voluntary disclosure campaign design, please follow link to HMRC Campaigns.
E Marketplaces
(starting 2012)
This aims to find those who are using e-marketplaces to buy and sell goods as a trade or business, and fail to pay the tax owed. It will not be targeting people who sell a few items, and who are not traders, as they are unlikely to be liable to pay tax.
Organisations / individuals wishing to contribute to the campaign design please follow this link to HMRC Campaigns.
Trades - 2nd Campaign
(starting 2012)
Following on from the plumbers' campaign, HMRC will be looking to give an opportunity to another group of tradespeople to come forward and declare unpaid tax.
Organisations / individuals wishing to contribute to the campaign design please follow this link to the HMRC Campaigns.
Tuesday, 19 April 2011
New Bribery Laws to start - Begin planning NOW!
After much delay and heavy international criticism, the UK Government has at last confirmed that the Bribery Act 2010 will commence on 1st July 2011.
The start date was delayed to await the publication of guidance by the Ministry of Justice. The guidance was published on Wednesday 30th March and can be found on their website at www.justice.gov.uk/guidance/bribery.htm.
The Act is aimed at modernising outdated anti-corruption laws. One highlight is the new corporate offence of failing to prevent bribery by persons working on behalf of a business. As well as employees, this may extend to agents both in the UK and overseas. This will cause a degree of concern for those organisations seeking to develop their business in expanding economies, such as those in the Far East where use of Agents is normal practice.
The corporate offence carries potential penalties of unlimited fines and possible exclusion from any public contract works for any convicted organisation. Companies will also of course be concerned at the damage to their reputations, if they do find themselves appearing in court.
Any company will have a defence if it can prove that it had in place 'adequate procedures' to prevent bribery taking place. This will include suitable and adequate policies and procedures to deter employees or agents from paying bribes to improperly influence others, such as customers or potential clients.
Companies are advised within the guidance to undertake due diligence when dealing with other businesses to ensure they are not exposed to the corporate offence by association. This will include requesting a copy of the anti-bribery policies of those organisations with which they have a business relationship or are looking to enter into such agreements with. It is expected that a request for such policies will become the norm in tendering processes, particularly but not exclusively those in the public sector.
The Act also creates personal criminal liability for the directors or senior management. They could face up to 10 years in prison if their business becomes involved in bribery with their consent, or where they have turned a blind eye to its existence.
The start date was delayed to await the publication of guidance by the Ministry of Justice. The guidance was published on Wednesday 30th March and can be found on their website at www.justice.gov.uk/guidance/bribery.htm.
The Act is aimed at modernising outdated anti-corruption laws. One highlight is the new corporate offence of failing to prevent bribery by persons working on behalf of a business. As well as employees, this may extend to agents both in the UK and overseas. This will cause a degree of concern for those organisations seeking to develop their business in expanding economies, such as those in the Far East where use of Agents is normal practice.
The corporate offence carries potential penalties of unlimited fines and possible exclusion from any public contract works for any convicted organisation. Companies will also of course be concerned at the damage to their reputations, if they do find themselves appearing in court.
Any company will have a defence if it can prove that it had in place 'adequate procedures' to prevent bribery taking place. This will include suitable and adequate policies and procedures to deter employees or agents from paying bribes to improperly influence others, such as customers or potential clients.
Companies are advised within the guidance to undertake due diligence when dealing with other businesses to ensure they are not exposed to the corporate offence by association. This will include requesting a copy of the anti-bribery policies of those organisations with which they have a business relationship or are looking to enter into such agreements with. It is expected that a request for such policies will become the norm in tendering processes, particularly but not exclusively those in the public sector.
The Act also creates personal criminal liability for the directors or senior management. They could face up to 10 years in prison if their business becomes involved in bribery with their consent, or where they have turned a blind eye to its existence.
Wednesday, 23 March 2011
2011 Budget Highlights
The facts below are extracts from the Budget Speech delivered by Chancellor George Osborne. No responsibility can be accepted for anyone taking or refraining from taking actions based upon the notes below. The Budget will be ratified later in the year through the Finance Act.
The Chancellor promised not to rattle through growth figures - he said average quarterly growth will be higher than forecast - but the annual forecast will be revised down to 1.7%.
Going through the new forecasts from the Office for Budget Responsibility, he said growth is predicted to be 1.7% for 2011, 2.5% next year, 2.9% in 2013, 2.9% in 2014 and 2.8% in 2015.
Mr Osborne said inflation is expected to be between 4% and 5% this year - dropping to 2.5% next year and 2% in two years' time.
Borrowing is expected to fall to £122bn next year, the Chancellor reported, and will continue to fall until it reaches £29bn in 2015/6.
Mr Osborne says the government will consult on merging National Insurance and Income Tax. The goal, he says, is to simplify them - not to increase taxes. It will make the tax system "fit for the modern age", he said, but it will take years to implement.
Corporation Tax is to be cut by 2% - more than the 1% previously announced. It will be the lowest in the G7.
Income Tax relief on the Enterprise Investment Scheme will increase from 20% to 30% in April 2011. The clear aim seeming to be reinforcing the UK as a centre for entrepreneurial investment.
The top 50% tax rate was regarded as a "temporary measure" but it is to remain for the time being. "We are all in this together." said Mr Osborne.
The "non-domiciled" charge is being increased to £50,000 for those who have been in the country 12 years - raising more than £200m.
Profits from the bank levy will fund a new £250m shared equity scheme for first-time buyers - which will help 10,000 families get onto the housing ladder for the first time.
To support the construction industry further and reinforce the culture of enterprise, there will be 21 "enterprise zones".
The small business rate relief holiday is being extended by one year to October 2012, at a cost of £370m, the Chancellor said.
To assist the young unemployed, 40,000 extra apprenticeships will be funded by Government.
Tax avoidance has been addressed whereby three forms of stamp duty land tax avoidance will be shut down.
There'll be help for families "who do pay their taxes but who struggle with the daily cost of living", Mr Osborne said - outlining measures such as the council tax freeze and more child tax credit for lower income families and a "pay lift" for public servants on less than £21,000.
In an attempt to help charities who have suffered lower donations during the last two years, it was announced that if people leave 10% of their Estate to charities then the rate of Inheritance Tax will be reduced by 10%.
The Chancellor confirms a rise in the personal tax allowance, which had been widely discussed. A two year staged rise will take the personal allowance first to £7475 and then to £8105 for 2012/13.
Finally, the Chancellor turned to Fuel Duties - it had been due to go up by 1p a litre above inflation next week, but Mr Osborne said a government has to "listen and respond" when oil prices rise. While revenues go up when the oil price rises, other tax intake falls, he says. He dismissed a proposal to cut the VAT rise on fuel - which went down well with his colleagues. He said a "fair fuel stabiliser" will be introduced from Thursday, which will raise an extra £2bn. The money will be used to delay the duty rise until next year.
A more detailed summary along with tax rates will be available shortly through our website www.walkerthompson.co.uk.
The Chancellor promised not to rattle through growth figures - he said average quarterly growth will be higher than forecast - but the annual forecast will be revised down to 1.7%.
Going through the new forecasts from the Office for Budget Responsibility, he said growth is predicted to be 1.7% for 2011, 2.5% next year, 2.9% in 2013, 2.9% in 2014 and 2.8% in 2015.
Mr Osborne said inflation is expected to be between 4% and 5% this year - dropping to 2.5% next year and 2% in two years' time.
Borrowing is expected to fall to £122bn next year, the Chancellor reported, and will continue to fall until it reaches £29bn in 2015/6.
Mr Osborne says the government will consult on merging National Insurance and Income Tax. The goal, he says, is to simplify them - not to increase taxes. It will make the tax system "fit for the modern age", he said, but it will take years to implement.
Corporation Tax is to be cut by 2% - more than the 1% previously announced. It will be the lowest in the G7.
Income Tax relief on the Enterprise Investment Scheme will increase from 20% to 30% in April 2011. The clear aim seeming to be reinforcing the UK as a centre for entrepreneurial investment.
The top 50% tax rate was regarded as a "temporary measure" but it is to remain for the time being. "We are all in this together." said Mr Osborne.
The "non-domiciled" charge is being increased to £50,000 for those who have been in the country 12 years - raising more than £200m.
Profits from the bank levy will fund a new £250m shared equity scheme for first-time buyers - which will help 10,000 families get onto the housing ladder for the first time.
To support the construction industry further and reinforce the culture of enterprise, there will be 21 "enterprise zones".
The small business rate relief holiday is being extended by one year to October 2012, at a cost of £370m, the Chancellor said.
To assist the young unemployed, 40,000 extra apprenticeships will be funded by Government.
Tax avoidance has been addressed whereby three forms of stamp duty land tax avoidance will be shut down.
There'll be help for families "who do pay their taxes but who struggle with the daily cost of living", Mr Osborne said - outlining measures such as the council tax freeze and more child tax credit for lower income families and a "pay lift" for public servants on less than £21,000.
In an attempt to help charities who have suffered lower donations during the last two years, it was announced that if people leave 10% of their Estate to charities then the rate of Inheritance Tax will be reduced by 10%.
The Chancellor confirms a rise in the personal tax allowance, which had been widely discussed. A two year staged rise will take the personal allowance first to £7475 and then to £8105 for 2012/13.
Finally, the Chancellor turned to Fuel Duties - it had been due to go up by 1p a litre above inflation next week, but Mr Osborne said a government has to "listen and respond" when oil prices rise. While revenues go up when the oil price rises, other tax intake falls, he says. He dismissed a proposal to cut the VAT rise on fuel - which went down well with his colleagues. He said a "fair fuel stabiliser" will be introduced from Thursday, which will raise an extra £2bn. The money will be used to delay the duty rise until next year.
A more detailed summary along with tax rates will be available shortly through our website www.walkerthompson.co.uk.
Friday, 4 February 2011
Midlands Excellence Awards
We are delighted to announce that Walker Thompson were presented with a Highly Commended award at the annual Midlands Excellence Awards held on the evening of the 3rd February 2011 at the International Convention Centre, Birmingham.
The award, presented by Sir Ranulph Fiennes OBE in front of over 1100 guests, recognises the significant attainment of quality which our business has achieved.
The award, presented by Sir Ranulph Fiennes OBE in front of over 1100 guests, recognises the significant attainment of quality which our business has achieved.
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