New PAYE penalties
The new penalties for late payment of PAYE and CIS will come into force on 5 April 2010, and will affect the PAYE due on 19 May 2009.
In essence the penalties will arise if you are late in making any payments of PAYE, but if there is only one late payment in the year then the penalty will be waived.
The penalty increases with each default up to a maximum of 4% of the PAYE paid late.
Virtually every employer will be affected, so you need to make sure that your procedures are changed to make the payments on time.
We will be working with our clients over the coming months to help you make these payments by BACS on the exact day that they are due.
In the meantime, we are urging employers to make sure that everything to do with employment, contractors and PAYE is fully up to date well ahead of the deadline.
The precise rules, and the very limited grounds for appeal against penalties, are detailed here.
Labels: Staff, Tax
Scam email
If you receive an email that looks like this, please ignore it as it is a scam to obtain your credit card details. (I have removed the hyperlink)
-------
From: HM Revenue and Customs [no-reply@hmrc.gov.uk]
Taxpayer ID: tom-00000222351832UK
Tax Type: INCOME TAX
Issue: Unreported/Underreported Income (Fraud Application)
Please review your tax statement on HM Revenue and Customs (HMRC) website (click on the link below):
review tax statement for taxpayer id: tom-00000222351832UK
HM Revenue and Customs
Labels: Tax
New Minimum Wage rates
From 1 October 2009, the following minimum pay rates will apply:
| NMW Rate | Current rate | New rate |
| Main rate for workers aged 22 and over | £5.73 | £5.80 |
| Rate for workers aged 18-21 | £4.77 | £4.83 |
| Rate for workers aged 16-17 and over compulsory school age | £3.53 | £3.57 |
| Accommodation offset rate(Weekly maximum) | £31.22 | £31.57 |
| Accommodation offset rate(Daily) | £4.46 | £4.51 |
If you need help or advice on implmenting the NMW, then please contact Sue.Labels: Staff, Tax
iXBRL compliance
The new format for compulsory filing of Corporation Tax returns from 1 April 2011 will be in iXBRL.
We are proud to be able to confirm that we are already iXBRL compliant and will be able to file all corporate tax returns electronically from that date.
We already file over 90% of Returns electronically, with only Charitable companies and some newly incorporated companies not being filed in that matter.Labels: Our Practice, Tax
Annual Investment Allowance
The Budget has seen the re-introduction of first year allowances (FYAs) for purchases of qualifying plant and machinery. Allowances of 40% will be available to companies, partnerships and individuals carrying on qualifying activities in excess of the annual investment allowance (see below) subject to the following:
- the expenditure must be incurred in the year to 31 March 2010 (for companies) and 5 April 2010 (partnerships and individuals).
- the expenditure must not relate to specific proscribed assets, including for example, long life assets, cars and assets for leasing.
Unusually, there appears to be no restriction on the amount of the expenditure or the size of business incurring the costs.
The annual investment allowance (AIA), introduced last year, allows businesses (or groups, where related businesses carry on similar activities) to claim a 100% deduction from taxable profits for £50,000 of expenditure on eligible plant and machinery.
Confusingly, the definition of eligible plant and machinery for AIA purposes differs quite significantly from that for qualifying plant and machinery for FYAs.
Labels: Tax
Inland Revenue bank accounts
During 2009 the Bank of England will no longer handle the Inland Revenue transactions.
The bank accounts will in future be operated by the Royal Bank of Scotland and by Citibank.
If you make electronic payments to the Inland Revenue, you will need to update your records to ensure that the payment goes to the correct bank account.
Full details will be being issued in the near future.
Labels: Tax
Employer compliance review - CIS
We have recently been involved in a dispute with the Inland Revenue over the non-deduction of CIS by a contractor when paying a supplier.
The Inland Revenue asserted that the supplier was a sub-contractors in terms of the legislation and consequently CIS deductions should have been applied.
The Inland Revenue were seeking the tax that should have been deducted as well as interest and penalties.
By quoting specific legislation, we were able to show that to the satisfaction of the Inspector, as the amounts had been fully declared in the accounts of the 'subcontractors', that our client had no additional liability.
Contractors are advised to be aware of their responsibilities in this area, to avoid problems arising in the first place.
Labels: Companies, Tax
Seafarers Earnings Deduction
The following letter was received from the Inland Revenue this week:
Following representations, I want to clarify what we are doing in revising our guidance and the treatment of claims.
SED has never been available for people working on 'offshore installations' rather than ships. Broadly, the legislation provides that there are two tests both of which must be met for a vessel to be an 'offshore installation'. A vessel must be involved in the exploration or exploitation of mineral resources and standing or stationary whilst doing so. Construction, construction support, well service and dive support vessels that do not meet either of these tests will continue to be ships for the purposes of SED.
HMRC's revised guidance will reflect discussion with stakeholders about the interpretation of the Pride South America decision to ensure that it is implement in a clear and practical manner. HMRC will publish revised guidance in February 2008.
HMRC appreciates that some people may wonder whether they must submit their 2007-08 tax returns before we publish our revised guidance. All 2007-08 tax returns must be filed within the relevant deadlines.
Anyone who decides that they want to see HMRC's revised guidance before deciding whether they are entitled to claim SED can submit their return without a claim to SED. They can then amend their 2007-08 tax return in the usual way to include a claim to SED. People have 12 months from 31 January after the end of the tax year to correct their tax return. For the 2007-08 return, people have until 31 January 2010 to make an amendment.
If someone wishes to consider making a claim to SED for 2007-08 before the guidance is revised they can refer to the legislation on which HMRC's guidance for SED is based. It is publicly available as follows:
Labels: Foreign tax, Seafarers, Tax
Mini-Budget changes
The impact of the removal of the 10% tax rate has led the Chancellor of the Exchequer to announce that the Personal Allowance will be increased by £600, but the higher rate threshold has been reduced to compensate for this.
New software updates, tax coding notices and reprinted tax tables will be on the way to employers in time to implement the changes in October.
The revised limits are shown below.
| Before | After |
| Personal Allowances | £5,435 | £6,035 |
| Basic rate tax band | £36,000 | £34,800 |
| Higher rate tax threshold | £41,435 | £40,835 |
Labels: Tax
Increase in National Minimum Wage
From October 2008, the National Minimum Wage will increase from £5.52 to £5.73 (up by 3.8%).
The rate for 18-21 year olds will increase from £4.60 to £4.77 and for those under 18 from £3.40 to £3.53.Labels: Tax
Capital Gains Tax
The Treasury have today announced that the 18% flat-rate of Capital Gains Tax will be reduced to 10% on lifetime gains of up to £1m.
Whilst the loss of taper relief is significant for those selling their business, the lifetime limit of £1m should mean that few people in the Western Isles will reach this threashold, and will be unlikely to face the 18% rate.
At present it is unclear if the limit is lifetime or only from 1 April 2008, and if it is the former then there are opportunities for tax planning before that date.
Taxpayers should remember that all gains from all sources will be affected by this limit, and should take advice accordingly.
Labels: Tax
Corporation Tax inquiries
The period for opening an investigation into a Corporation Tax return will be changed with effect from 31 March 2008.
Returns filed on time will have an inquiry window that expires 12 months after the date on which the Return is filed, rather than 12 months after the latest date for filing. This is to encourage earlier filing.
The rules for late submissions are unchanged. The inquiry window remains open until the next quarter day (31 March, 30 June, 30 September or 31 December) 12 months after the date of submission of the Return.
Labels: Companies, Tax
VAT Penalties
In the past, if the honest tax payer made an error in excess of £1m VAT, or an amount which represented 30% or more of the correct tax for the return period, they were liable to a misdeclaration penalty. The taxpayer was automatically exculpated in full if they voluntarily disclosed the error to HMRC or if they had a ‘reasonable excuse’.
The joining of the revenue and VAT arms of HMRC has seen the introduction of a single set of penalties to cover income tax, PAYE, corporation tax, VAT and NI contributions. This was included in the finance bill 2007 and will shortly become law, coming into operation for return periods commencing after 31 March 2008. At the same time, we will see the introduction of the ‘compliance spectrum’, which grades error according to the behaviour of the taxpayer.
Taxpayers will have to convince an HMRC officer that their error is innocent to which no penalty should be charged. This puts a lot of power in the hands of the officer responsible for supervising the taxpayer’s affairs. I will leave you to decide whether this is a good thing. If this fails, taxpayers can no longer achieve automatic exculpation by having made a voluntary disclosure. Also the ‘reasonable excuse’ statutory defence disappears altogether. For professional advisors this means the end of settled case law.
It is expected that not many officers will accept mistakes as innocent errors. Additionally under the new starting point for negligent penalties is 30% of the amount of tax due (an increase from the old misdeclaration penalty of 15%), following which the taxpayer can plead that the penalty should be mitigated down - again not great news for taxpayers.
These changes mean taxpayers who makes a full unprompted disclosure of an error no longer has an automatic nil liability to a misdeclaration penalty. Inevitably there will be litigation on issues such as an officer’s decision on where the taxpayer’s conduct falls under the ‘compliance spectrum’ or the level of mitigation to be allowed following a disclosure in order to re-establish the scope of what is reasonable.
The regime captures VAT registered businesses regardless of the size or the error. While there will be rights of appeal, many will lament the loss of a system where honest errors were only penalised if significant and full disclosure or reasonable excuse defences meant even those penalties could be readily avoided.
Labels: Tax, VAT
Residential Renovations and VAT
Nicolson, Chartered Accountants, are reminding those who are renovating houses that they may be eligible to have building works charged at 5%, rather than the full 17.5% rate.
You may wish to draw your builders attention to VAT Notice 708 which has the full detail, but the key points are summarised below:
➢ The supply (is charged at the 5% rate), in the course of the renovation or alteration of qualifying residential premises, of qualifying services related to the renovation or alteration.
➢ The supply of building materials (is charged at the 5% rate)
if the materials are supplied by a person who, in the course of the renovation or alteration of qualifying residential premises, is supplying qualifying services related to the renovation or alteration, and
those services include the incorporation of the materials in the premises concerned or their immediate site.
A qualifying building is one that is a single household dwelling that has not been lived in for the past three years.
The building materials which can be supplied by your builder at 5% include most fittings' incorporated' into the building is such a way that its fixing or removal would either require the use of tools, or would result in the need for remedial work to the building, or would result in substantial damage to the good themselves. This can include fitted wardrobes, boilers, storage heaters, flooring (but not carpets), as well as the more usual supplies. You cannot obtain a reduced rate on materials you buy and install yourself, nor on 'white goods' or carpets.
Labels: Tax, VAT
New CIS scheme - contractors need support
Nicolson, Chartered Accountants, are leading the way in providing support to businesses needing assistance with the new CIS scheme.
Sue Nicolson said, "We act for many businesses who are either Contractors or Sub-Contractors and we quickly became aware of the difficulties posed by the new CIS scheme. We have researched the situation thoroughly and we have already assisted clients in setting up the proper arrangements to ensure that they comply with the numerous requirements of the Inland Revenue."
"Getting it wrong is not an option - the penalties are potentially horrendous. We are in a position to help all those who will be impacted by this scheme, providing telephone support, on-line verification on behalf of Contractors, and assistance in lodging returns on time to ensure that the risks are minimised."
"Contractors who want to benefit from our expertise can phone us to discuss what we can do for them - and avoid all the hassle."
Labels: Staff, Tax
Chancellor abolishes zero-rate band for Corporation Tax
In his recent pre-Budget report, the Chancellor, Gordon Brown, signaled the abolition of the zero-rate band for Corporation Tax. Previously the first £10,000 of profits were effectively tax-free, now they face a tax charge of 19%.
Let's face it, this perk was just too good to be true, and it was only a matter of time before the Revenue realised just how much it was costing them.
But incorporation can still be highly beneficial to sole traders, as the following table shows:
| Profits | Limited - Old rules | Limited - New rules | Sole trader * |
| £10,000 | NIL | £1,900 | £1,334 |
| £20,000 | £2,375 | £3,800 | £4,334 |
| £30,000 | £4,750 | £5,700 | £7,334 |
| £40,000 | £7,125 | £7,600 | £10,448 |
| £50,000 | £9,500 | £9,500 | £14,548 |
| £100,000 | £19,000 | £19,000 | £35,048 |
* Assumes an individual under 60 on basic allowances only, and includes Class 4 NIC, but not Class 2. Based on 2005 rates.
The table clearly demonstrates the potential savings that can arise from incorporation, but you are advised to take specific advice before making any decisions.
Labels: Companies, Tax
Is it a car? Is it a van?
The rules for taxation of cars and vans have been set for some time, but with the merger of Customs and the Inland Revenue, they have been clarified in an attempt to bring more vehicles within the charge to tax, and to reduce the number of vehicles where input VAT can be recovered. The rules are complex for some vehicles, so what follows is a general summary of the position.
All vehicles are cars, unless:
-
They have a payload of over 1 tonne
-
There is seating in the load area, which does not affect the predominant use of the vehicle as being for the carriage of goods
-
They are clearly vans e.g. have no rear seats, metal side panels to the rear of the front seats, a load area which is unsuitable for carrying passengers.
The problem clearly arises with "car derived" vehicles, such as crew cab pick-ups. With a payload of less than 1 tonne they are cars and liable to punitive taxation; above that and they are vans, and have a benefit in kind of £500 per annum. All VAT on the purchase of a van can be recovered. No VAT can be recovered on the purchase of a car.
Customs are developing a list of qualifying car-derived vans. Unfortunately, this is not yet available, and the latest guidance is here.
Labels: Tax
Nicolson, CA, unveil unique tax investigation insurance scheme
A firm of Stornoway Chartered Accountants has launched the first ever scheme to provide tax investigation insurance to all its clients.
Unveiling the scheme, Angus Nicolson said, "This is an opportunity for clients to obtain very low cost cover against all the fees they might incur in defending a tax, VAT or PAYE investigation up to a maximum of £75,000. We have been looking for such a scheme for a long time, and have already offered it to every client. Today, we are publicising the scheme, and offering new clients the opportunity to cover themselves against one of the most stressful events that can happen to a taxpayer."
Sue Nicolson added, "After a long hard look at the market, we were able to identify a scheme that allows us to offer a flat rate premium to every client, based not on their turnover, but on the type of taxpayer they are. We have been able to offer this - at less than a fifth of the cost of preparing an average Tax Return - because of the insurers view of the quality, consistency and nature of our operation, and consequently the risks for our clients.
The scheme is only open to clients of the firm. All existing clients have been offered the policy at a special reduced rate, and new clients will pay a standard annual charge of under £50 for individuals, directors and partners and under £150 for limited companies and partnerships.
Said Angus Nicolson, "We continue to offer new and innovate approaches to business advice, whilst never losing sight of our clients' core needs."
Note:
Further details of the scheme is available on request. The policy does not cover any penalties or underpaid tax arising from an investigation.
Labels: Our Practice, Tax
European decision will cost island business plenty
Western Isles businesses are expected to pay an extra 16p per litre of petrol used by employees as a result of a case won by the European Commission in the European Court of Justice in March 2005. In essence, the decision will no longer allow employers to reclaim VAT on the fuel element of mileage allowances paid to employees.
Until now, UK businesses have been able to reclaim VAT on fuel used by employees for business travel. However, the European Court of Justice has decided that UK practice is in breach of European law and that businesses are not able to reclaim VAT on fuel used by employees for business travel.
Angus Nicolson of Nicolson, Chartered Accountants, says: "The decision is a serious blow to any business paying mileage allowances for employees, and shows a complete failure to understand how small business work.
"Businesses should immediately consider alternative arrangements to mileage allowances when meeting business fuel costs. This ECJ decision will cost UK businesses hundreds of millions of pounds a year in irrecoverable VAT.
"Until Customs announce their reaction to the decision and the action they will take, businesses are entitled to rely upon Customs current guidance."Labels: Tax
