Browsing articles in "Latest News"

Tax Credits, Employment Allowance, Tax Tribunal Cases and Practical Issues

Jul 5, 2015   //   by Ralph   //   Latest News  //  Comments Off on Tax Credits, Employment Allowance, Tax Tribunal Cases and Practical Issues

Online renewal of tax credits

Tax credit claims need to be renewed by the 31st July. This can now be done online by any claimant regardless of any change in circumstances. Estimated time taken to renew a claim online is between six and twenty minutes, which is considerably less than the time it takes waiting for the telephone to be answered when they are busy. The website address is www.gov.uk/renewtaxcredits

Employment Allowance

Claims HMRC have stated that a scheme designed to exploit the employment allowance and claim it multiple times has been deemed ineffective. It involved the use of a payroll company to set up numerous small employers to provide services to the company by its former staff.
Employees’ tax checked. HMRC have begun the annual process of reconciling PAYE taxpayers for the year 2014/15. This should be completed by October and those who have underpaid or overpaid will be notified in the usual way by HMRC sending a copy of the tax calculation to the taxpayer. When one is received it should be checked as mistakes can occur, before any payment is made to HMRC.

Tax tribunal cases

Relying on your accountant. A taxpayer has recently won a case at the tax tribunal as the accountant who had in previous years always submitted the tax return on time was late with the 2012/13 return due to a change in personal circumstances. HMRC argued that the taxpayer should have checked with the agent and online that the return had been submitted. The tribunal ruled that by using the accountant that had been reliable previously he had taken reasonable steps to ensure that the return was submitted on time and the penalty was removed.

Expenses must be “wholly and exclusively” for business purposes. The actor Tim Healey, (remember him as Dennis in Aufwiedersehen Pet?), was taking part in a musical in London. As it was a long running production rather than stay in a hotel he decided to rent a conveniently located flat. The reason the claim for the rent as a tax deductible expense failed was because he rented a three-bedroom flat so there was sufficient accommodation for family and friends to stay. This meant that there was duality of purpose and therefore none of the expense was allowed.

Practical issues

National Minimum Wage – penalty increase. The amount that an employer can be penalised for breaches of the national minimum wage legislation has increased for pay periods commencing on or after 26th May 2015 from £20,000 per notice to £20,000 per worker.
Class 2 National Insurance included in self-assessment. From April 2015 the liability of the self-employed to pay class 2 National Insurance will be determined annually. You should ensure that if you paid by direct debit this has now been cancelled, with effect from 10th July 2015.
Taxman pays informants more than ever before. HMRC have made payments to tax informants of £605,000 in the year to 31st March 2015. Unfortunately it has not been disclosed how much tax was raised. In the United States there is a policy of paying up to 30% of the tax and penalties charged to the informants. The UK system has not received much publicity as HMRC hope that people will provide the information for free.
Ralph Robson can be contacted at his office at TA Gittins & Company Chartered Accountants on 01978 264846 or via email below. If you would like a particular issue covered in this article please contact Ralph on ralph.robson@tagittins.co.uk

Auto Enrolment, Tax Tribunals and VATMOSS

Jun 5, 2015   //   by Ralph   //   Latest News  //  Comments Off on Auto Enrolment, Tax Tribunals and VATMOSS

Since my last article we have had an election and a majority for the Conservatives. George Osborne has announced that he will be having a budget on the 8th July so we wait to see what will happen. I very much doubt there will be anything given away, but we will wait and see. Below are a few items of note from the tax tribunals and HMRC that have come to light recently.

New auto-enrolment tool proposed by The Pension Regulator

Due to costs to micro-businesses of having to comply with the auto-enrolment regulations the Pension Regulator is proposing that a free to use software is made available as there are currently none available. Most micro-businesses will not start until 2016 so it is hoped that it will be fully operational by then.

taxTax tribunal cases

Penalties payable. HMRC have recently won a tribunal case where the taxpayer appealed against penalties raised in relation to PAYE for 2012/13. The company had appealed on the grounds of cashflow difficulties, not being made aware of the penalties, and changes in company employees. The company offered no evidence to support the first point of cashflow problems. HMRC stated that it would have sent penalty notices and in any event “ignorance of the law was no defence”. Finally the change of the company’s employees did not mean that it didn’t have to meet its PAYE obligations. HMRC are adopting a tougher stance to charging penalties for non-compliance and this case reinforces that.
Approval must be in writing. A taxpayer lost an appeal against a VAT assessment imposed by HMRC after a visit to a seaside café. The café completed VAT returns on the basis that standard rated sales were 30% of turnover. Several visits were made by HMRC and the conclusion was made that the standard rated sales should be 90%. The basis of the appeal was that in a telephone conversation in 2004 HMRC had agreed the apportionment scheme based on the amount of standard rated purchase invoices. HMRC stated that the approval had to be in writing and as it wasn’t the café wasn’t entitled to operate an apportionment scheme. HMRC can issue assessments going back four years when a problem is identified.

Practical problems

Zero tolerance on VAT Moss? As I have mentioned in previous articles, since 1st January 2015 businesses selling electronic downloads to non-business customers within the EU must charge VAT at the rate applicable in the customer’s location. This VAT then must be accounted for using MOSS on quarterly return. Already you can see how much hassle this is for a small business trading successfully in the UK under the VAT registration threshold. Some of you may well wonder is it worth it? Unfortunately as the registration limit is ZERO, then it is of concern to avoid falling foul of the regulations. It is hoped that there will be an annual turnover limit imposed and action groups are campaigning for a limit in line with the VAT registration threshold but this is unlikely. Meanwhile due to the disproportionate administration costs many traders may choose to ignore the rules and hope that a sensible limit is introduced in the near future. Hopefully HMRC may be pragmatic but…
Ralph Robson can be contacted at his office at TA Gittins & Company Chartered Accountants on 01978 264846 or via email below. If you would like a particular issue covered in this article please contact Ralph on ralph.robson@tagittins.co.uk

Pensions, Tax Tribunal Cases and Pensions

May 5, 2015   //   by Ralph   //   Latest News  //  Comments Off on Pensions, Tax Tribunal Cases and Pensions

Spring is in the air as I enjoy looking at the April sunshine while I write this month’s article. There have been some subsequent changes to the budget announcements and the main one together with other developments and recent tax tribunal cases are mentioned below.

Post budget change – Income Tax

Trivial benefits in kind to be abolished. In last month’s article I stated that those involved in “close” companies will be able to receive up to £300 worth of trivial benefits in kind without need to report them on form P11d. This change now takes effect from the 6th April 2016, whereas the budget announcement was that it would commence on 6th April 2015. If you have put things in place to take advantage of this you will need to reverse them until next year.

Tax tribunal cases

Unprofitable farming. HMRC have recently won a tribunal case denying a taxpayer the right to offset losses suffered in his farming business against his income as a dentist. The taxpayer owning two farms and making meagre profits then purchased a third farm funded by a bank loan. He subsequently made losses which he wanted to offset to reduce the tax payable on his income as a dentist. The tribunal decided that “the anticipation of profit could not be foreseen by a competent person” when the third farm was purchased and therefore the claim to offset the losses were denied. This case highlights again the need to have a robust business plan to support the “expectation of profit” even if a loss is subsequently suffered.
Raze to the ground. A taxpayer lost a claim for VAT repayment using the DIY housebuilders claim scheme. The taxpayer demolished a bungalow apart from one internal cavity wall and then rebuilt it. A claim was made to recover the VAT on the costs which was refused by HMRC. The tribunal stated that for the legislation to apply the whole building had to be demolished.
crosskeyboardChurch is “business premises”. A company claimed business premises renovation allowance on the conversion of a derelict church to a restaurant. The claim was initially refused by HMRC who argued that the church was not carrying on a trade. The tribunal concluded that the vestry was used as an office and profit did not have to be the motive for being “in business”.

Changes to the tax rules on pensions.

I am no expert on pensions, there are those well qualified, including contributors to this magazine who can give suitable advice. However as has been widely reported in the press some can now access their pension funds early. The tax positon does need to be considered as although the first 25% of the fund is tax-free the remainder is taxable at your marginal rate. This depending upon the size of the funds and your other income could be 20% 40% or 45% (even 60% on the element between £100,000 and £121,200). You may also lose out on tax credits now being received as your income will spike upwards in the year of drawdown. The pension regulator has also warned of “scammers” who are targeting the over 55’s.
Ralph Robson can be contacted at his office at TA Gittins & Company Chartered Accountants on 01978 264846 or via email below. If you would like a particular issue covered in this article please contact Ralph on ralph.robson@tagittins.co.uk

Budget Update 2015

Apr 2, 2015   //   by Ralph   //   Latest News  //  Comments Off on Budget Update 2015

For the first time since I have been penning this article the Budget has been made (just) prior to the deadline for the April article.  Having read through the small print – the devil is always in the detail – there a few things worthy of note, which I have highlighted below.

Income Tax

Personal allowances. The personal allowance has been raised in line with previous announcements in order to reach £12,500 by 2020, with the higher rate threshold increasing to £50,000 by 2020.

Personal savings allowance From 6th April 2016 a personal savings allowance will be introduced making the first £1000 of a basic rate taxpayers savings and first £500 of a higher rate taxpayers savings untaxed. If you are an additional rate (45%) tax payer the allowance isn’t available.

Extension of farmers averaging. From April 2016 the period over which farmers and market gardeners can average their profits is extended from two to five years.

Capital allowances The annual investment allowance is due to reduce to £25,000 from 1st January 2016. Although no new rate was announced it was stated that it would be set at a much more generous rate. In order to take advantage of the current limit of AIA capital purchases should be considered prior to this date, and maybe combined with a change in accounting year end to ensure the maximum advantage is received.

Help to Buy Isa’s. These are to be introduced in Autumn 2015 for four years and the government will for every £200 saved, add a bonus of £50 up to a maximum bonus of £3000. There will be a four year period where the accounts are available but once opened there is no time limit.

Trivial benefits in kind to be abolished. Those involved in “close” companies will be able to receive up to £300 worth of trivial benefits in kind without need to report them on form P11d. This change takes effect from the 6th April 2015.

National Insurance. As from the 6th April 2015 class 2 national insurance contributions for the self-employed will be collected through the self-assessment collection mechanism rather than separately.  It is intended that both class 2 and class 4 NIC’s will be abolished in the next parliament.

Capital Gains Tax

Entrepreneurs’ relief and associated disposals. For the relief to be claimed on the disposal of a privately owned associated asset there must also be a material disposal of share capital in the company or in the share of the assets of the partnership. The amount to qualify as a material disposal is 5%. This applies to all disposals after 18th March 2015.

Wasting Assets Exemption. The existing CGT exemption for certain wasting assets will only be available on assets used in the sellers own business. These changes take effect from 1st April 2015 for companies and 6th April 2015 for individuals.

Inheritance Tax. The exemption for serving emergency personnel announced in the Autumn statement in 2014 will be extended to include serving and former police officers and personnel. If this affects you it could be worth considering the ownership of assets within a marriage or civil partnership.

Corporation Tax. Creative sector tax relief is to increase. Those involved in Film production, television show production or Orchestras or considering investing should look into this to see how the new reliefs may be applied.

Value Added Tax. The main change is the increase in the registration threshold to £82,000 from the 1st April 2015. There are also changes which allow for the refund of VAT to Charities that are involved in providing palliative care in relation to their non-business activities.

There are of course far more subtle changes and tweaks to the tax system as a result of the budget but the main points are summarised above.

Ralph Robson can be contacted at his office at TA Gittins & Company Chartered Accountants on 01978 264846 or via email below.  If you would like a particular issue covered in this article please contact Ralph on ralph.robson@tagittins.co.uk

 

Caravans, time limits, CGT, Disability Aids, Transferring ISA and Relief on Holiday Lettings

Mar 2, 2015   //   by Ralph   //   Latest News  //  Comments Off on Caravans, time limits, CGT, Disability Aids, Transferring ISA and Relief on Holiday Lettings

All of the tax returns are in, well apart from the 890,000 that have yet to be submitted, so now our attentions turn to the budget and the changes that may be made prior to the general election in May. Those that have submitted their returns electronically can view how much tax and national insurance they have paid and how it has contributed to public expenditure.

Latest decisions from tribunal cases

Caravan Veranda can be zero rated for VAT too. In a recent case it was established that the verandas sold with caravans were to be zero rated if the caravans were zero rated as the veranda was an ancillary supply to the caravan. If supplied separately the veranda is standard rated.

Must be paid within six months for a valid claim. In the case of Heanor Motor Company Ltd it was underlined that if claiming VAT on an invoice basis then the VAT must be repaid if the invoice remains unpaid after 6 months.

Hobby or business. Following on from “Racehorse falls at first hurdle” from my article last month there is another case of a “business” not meeting the criteria to allow losses to offset against other income. Mr Patel whilst working full time started supplying ingredients and running cookery workshops and later on also selling Indian art and photography. HMRC successfully argued that the activity was not undertaken on a commercial basis due to the taxpayer not having any idea of sales and not devoting sufficient time to it to make it a success.

Possible tax bill on sale of main residence

Most people are aware that there is no capital gains tax due on the sale of your main residence. However if you are in business and claim part of the home as exclusively for use in your business, such as a photographic studio or a gym or office then there could be a nasty surprise when you sell. In order to avoid this make sure that you use the room for personal things too, such as storing some personal items in your studio or gym.

Can my deaf-aid be tax deductible?

If you trade through a limited company then the company can pay for your deaf-aid, reclaim the VAT on it and obtain tax relief as long as it is to overcome a disability.  The main purpose of providing the benefit is to enable the employee to perform the duties of their employment, the benefit is provided under the disability discrimination act 1995, and the benefit is made available to all employees who are in similar circumstances.

Transferring ISA’s

Widowed spouses and partners will be able to have the amount of any ISA savings of their late partners without having to take it out of the ISA, and it will be added to their annual ISA allowance for the year of transfer only. It will not affect the normal annual allowance of the survivor.

Preserving entrepreneurs relief on furnished holiday lettings

With the increase in the occupation levels required to maintain a property as a furnished holiday let then entrepreneurs’ relief can be preserved on the property by “selling” it to a family member. This will preserve the uplift in the value at the lower tax rate of 10% rather than the standard rate of 18% and the higher rate of 28%. Whether this is a worthwhile course of action depends upon the gain in the property at the date of potential “sale” and the fact that tax would be due sooner than it ordinarily would be. If you are looking at your furnished holiday letting property or portfolio then you should consult a tax professional.

Ralph Robson can be contacted at his office at TA Gittins & Company Chartered Accountants on 01978 264846 or via email below.  If you would like a particular issue covered in this article please contact Ralph on ralph.robson@tagittins.co.uk

Tribunals, support for small business, racehorses, devolution and PAYE

Feb 5, 2015   //   by Ralph   //   Latest News  //  Comments Off on Tribunals, support for small business, racehorses, devolution and PAYE

Well as I write this I am nearly at an end of completing tax returns and for those of you who have yet to submit your 2014 returns it may be too late depending upon when you read this, and you will already have a £100 penalty. There are a few points that have come to light this month which are below.

Latest decisions from tribunal cases

Long term depression is an excuse. A case recently decided at the first tier tribunal has given a taxpayer who suffered from depression a successful outcome in his appeal against the penalties charged by HMRC for late submission of his tax return and payment of the tax liabilities.

More detail required. An invoice in support of expenditure on a property was insufficiently detailed to be allowed as an expense. The invoice detailed the works carried out but not the name or address of the taxpayer and the tribunal was therefore unable to establish that the expenditure had been incurred. Another lesson that detailed records need to be kept in support of expenditure.

Pilates isn’t educational. A taxpayer who taught pilates failed in her appeal to the tribunal that due to the educational nature of pilates, which differed it from dancing, yoga and the like meant it should be exempt from VAT. For those that teach it, it does need to be included in turnover calculations to see if VAT registration is required.

Help for small businesses

HMRC have re-launched Supporting Small Business, a digital service with interactive links to information on the employment allowance and the introduction of “your tax account”. This is so that taxpayers can manage their tax affairs in a single place online. It’s worth looking at as over 440,000 businesses already use it.

Racehorse falls at the first hurdle

HMRC rejected a claim for losses derived from the “business” of owning a racehorse. HMRC successfully argued that the taxpayer had not undertaken the “business” on a commercial basis, only one horse was owned, that the taxpayer “clearly derived pleasure” from the activity, and that the informality of the arrangements meant there was no commercial basis in them either.

Devolved Taxes for Wales

The Wales bill received royal assent on 17th December 2014 and gives powers to the Welsh Assembly to set the rates of landfill tax, stamp duty, land tax (SDLT) and an element of income tax, subject to a referendum. My concern is that great weight is attached to the “revenue raising” phrase so I suspect we will all have to dig deeper into our pockets but I may be wrong.

Pay As You Earn Matters

RTI penalties and appeals. Late filing penalties began on 6th October 2014 for business with over 50 employees. Penalty notices are issued quarterly by post and the first quarters’ notices will be issued at the beginning of February, Copies will not be sent to the accountant/payroll agent so they need to be advised immediately. Appeals against the penalties can be sent in electronically.

Personal allowance transfer. Those who can and do transfer £1060 of their personal allowance in 2015/16 will not see the transfer reflected in coding notices issued until after April 2015. This is a useful tax saving of up to £212 for those who have a spouse or civil partner who doesn’t utilise all of their personal allowance.

Should we transfer our business into a limited company?

This is a question I get asked quite often, particularly this time of year when reviewing the previous year’s position with clients. The answer is often, but by no means always, “yes”. This is becoming more so with the changes to the amount of interest taxed as savings rates and the changes to the pension legislation coming into effect in April 2015 mean it can be far more tax efficient than trading as a sole trader or partnership. This is in addition to the obvious benefit of limited liability for debts incurred thus protecting personal assets such as the house from creditors.

 

Stamp Duty, Tax Allowances, NI, IHT and Tax Relief

Jan 5, 2015   //   by Ralph   //   Latest News  //  Comments Off on Stamp Duty, Tax Allowances, NI, IHT and Tax Relief

Happy new year to you all dear readers. Hopefully you have had a good festive season and for me the new year will start as traditional (since 1997 anyway) with a month of burning the midnight oil completing tax returns. I said last month that I would be summarising the Chancellor’s Autumn Statement in this article so the main points are below

 

Stamp Duty Land Tax (SDLT)

All property purchases after 4th December 2014 are subject to the new rates of SDLT. This is now charged at a marginal rate instead of on the whole amount. The rates are nil on the part £0 – £125,000, 2% on the part from £125,001 to £250,000, 5% on the part from £250,001 to £925,000 and 10% on the part form £925,001 and £1,500,000 and 12% above £1,500,000. As the average house price in Llangollen based on the last 12 months is £162,000 then there is an SDLT saving of £880. On a property purchase of £250,000 there is actually no saving.

Personal tax allowance

As has been widely trailered the personal allowance is being increased on 2015/16 to £10,600 and the higher rate threshold will be £42,385 (it is currently £41,865) so the full increase in the personal allowance is not being passed on to higher rate tax payers.

National Insurance contributions –

Employers contributions

From April 2016 (yes that’s right 2016), employer contributions for apprentices aged under 25 paid up to the upper earnings limit will be abolished. This is not much of a giveaway really as most apprentices are paid very little anyway but every little helps. Perhaps it is worth considering what needs to be done for an employee to qualify as an apprentice?

Employment allowance

From April 2015 the employment allowance of £2,000 for employers contributions will be extended to those employers in the care industry.

Inheritance Tax (IHT) –

Exemption for medals and other awards

Current exemptions will be extended to all decoration and medals awarded to the armed services or emergency services personnel and awards made by the Crown for achievements and service in public life.

Emergency service and humanitarian workers exemption

For all deaths after 19th March 2014 there is an extension to the exemption for members of the armed forces to members of the emergency services and those humanitarian workers responding to emergency circumstances whose death is caused or hastened whilst on active service.

Tax relief on children’s television, and orchestras

A new corporation tax relief for the production of children’s television programmes will be available to companies from 1st April 2015. The relief will be available at a rate of 25% on qualifying production expenditure. HMRC will consult in early 2015 on the introduction of an orchestra tax relief from 1st April 2016.

Research & development tax credits

The rates of R&D tax credit relief has increased from 225% to 230% for SME’s from 1st April 2015, making this an even more attractive relief.  Although there are increased restriction on material costs.

Goodwill upon incorporation of a business

The tax relief available to a company upon the purchase of goodwill from a related party is abolished for all acquisitions after 3rd December 2014. This is when a sole trader or partnership transfers their business to a limited company.

Some good news for holidays

While we endure the cold, wet, and maybe snow and ice we look forward to the prospect of perhaps a holiday in the sun. As from 1st May 2015 children under 12 will be exempt from reduced rate air passenger duty (too late for Easter) and from 1st March 2016 (yes 2016 again!) Children under 16 will be exempt.

There are many other items in the Autumn statement but these are more technical points.

Ralph Robson can be contacted at his office at TA Gittins & Company Chartered Accountants on 01978 264846 or via email below.  If you would like a particular issue covered in this article please contact Ralph on ralph.robson@tagittins.co.uk

Overtime, Shared Parental Leave and Farming Tax Relief

Nov 25, 2014   //   by Ralph   //   Latest News  //  Comments Off on Overtime, Shared Parental Leave and Farming Tax Relief

Welcome to the “festive” edition of Accountants Corner. Hopefully we will all have time to enjoy the turkey, tinsel and traditions of Christmas, usually overindulgence, forced jollity and repeats on television.

There have been a couple of major changes in the world of employment relating to the rights of employees and I have summarised these below.

Overtime on holiday

As you may have heard in the national press in a case before the employment tribunal it has been ruled that overtime should count towards holiday pay. This has implications for businesses paying overtime, which is of course prevalent in seasonal businesses, mean that there could be a significant increase in costs.

The EU Working Time Directive states that payment for holidays shall be at the ‘worker’s normal rate of pay’ and that holiday pay is ‘therefore calculated on the basis of the worker’s normal hours of work’.  ‘Normal’ has been interpreted by the Tribunal as any additional remuneration that the employee could normally qualify for by working additional hours or achieving a certain target, and includes taxable payments made for time travelling to work (ie. a travel allowance).  Therefore where an employee works regular additional hours (such as overtime) or is paid regular additional payments (such as commission) these hours/payments should be included in the holiday calculation.  This is irrespective of whether any additional hours or work are voluntary.

As a result of this case, if you have employees who are paid regular overtime or additional payments and they have been given paid leave for their contracted hours only, they may consider a claim for underpayment of holiday pay.  The ruling by the Tribunal is that they can appeal if they do so within 3 months of an underpayment and they can do so for all earlier underpayments within 3 months of each other.

With this in mind, it is recommended that you change your holiday calculation process immediately to reflect the ruling.  As the ruling only relates to the EU Working Time Directive element of the UK Working Time Regulations it only applies to the first 4 weeks holiday (pro rata), as the further 1.6 weeks (pro rata), usually given as bank holidays, is an additional annual leave requirement for the UK only.

Shared parental leave

If your employee or their partner is due to have a baby or adopt a child after the 5th April 2015 they may be entitled to, and choose to take, Shared Parental Leave and/or Shared Parental Pay.  In order for your employee to start Shared Parental Leave/Pay any Statutory Maternity Pay or Adoption Pay must end early.  Any remaining weeks of maternity leave can then be shared between the two parents.  Shared parental leave may be taken in blocks of one week or more providing that sufficient notice is provided to the employer.  It is up to the employee to establish and calculate any entitlement and provide evidence of this to the employer.  A calculator should be available on the H M Revenue and Customs website for employees to do this from the beginning of December 2014.This legislation is far too complex to provide detailed guidance here, more information can be found at https://www.gov.uk/shared-parental-leave-and-pay/eligibility.

Farming tax relief could be lost

With increased diversification in our farming industry whilst concentrating on profits, the tax implications also need some thought too. The increase in the rental of land for solar panels and wind turbines turns this into an investment and the enhanced value of the land could be liable to inheritance tax. The value of these sites can be quite significant as the level of income can be good and the payment fixed for the long term. In order to qualify for agricultural or business property relief the assets must be used in the business and therefore if there are any dilapidated outbuildings ripe for conversion these should be utilised in the business to avoid a potential liability.

Next month I will be summarising the Chancellor’s Autumn Statement which will take place on the 3rd December. It just remains for me to wish you all a very Merry Christmas and a prosperous and tax efficient new year.

IMPORTANT UPDATE: Holiday Pay and Overtime

Nov 6, 2014   //   by Ralph   //   Latest News  //  Comments Off on IMPORTANT UPDATE: Holiday Pay and Overtime

The 4th November 2014 saw the ruling in the landmark case of Bear Scotland v Fulton which means a significant change to the way the majority of employers are interpreting holiday pay and entitlement.

The EU Working Time Directive states that payment for holidays shall be at the ‘worker’s normal rate of pay’ and that holiday pay is ‘therefore calculated on the basis of the worker’s normal hours of work’.  ‘Normal’ has been interpreted by the Tribunal as any additional remuneration that the employee could normally qualify for by working additional hours or achieving a certain target, and includes taxable payments made for time travelling to work (ie. a travel allowance).  Therefore where an employee works regular additional hours (such as overtime) or is paid regular additional payments (such as commission) these hours/payments should be included in the holiday calculation.  This is irrespective of whether any additional hours or work are voluntary.

As a result of this case, if you have employees who are paid regular overtime or additional payments and they have been given paid leave for their contracted hours only, they may consider a claim for underpayment of holiday pay.  The ruling by the Tribunal is that they can appeal if they do so within 3 months of an underpayment and they can do so for all earlier underpayments within 3 months of each other.

It is important at this point to note that the Tribunal has given permission for this judgement to be appealed to the Court of Appeal and any final decision (if an appeal is lodged) may still be some time away.

With this in mind, we recommend that you change your holiday calculation process immediately to reflect the ruling.  As the ruling only relates to the EU Working Time Directive element of the UK Working Time Regulations it only applies to the first 4 weeks holiday (pro rata), as the further 1.6 weeks (pro rata), usually given as bank holidays, is an additional annual leave requirement for the UK only.

EXAMPLE: If Employee A works 40 hours a week with regular overtime of 10 hours a week, his yearly entitlement will be as follows:

Employee Works: 40 hours + 10 hours a week

Holiday entitlement: 4 weeks @ 50 hours a week = 4 x 40 hours @ normal rate; 4 x 10 hours @overtime rate

Plus 1.6 weeks @ 40 hours a week only

Total hours holiday entitlement for the year = 224 hours @ normal rate and 40 hours @ overtime rate.

If your employee works different hours each week, the holiday should be calculated on an average of the last 12 weeks paid.

More information about the ruling can be found at www.acas.org.uk or by calling the ACAS helpline 0300 123 1100 or for advice specific to your business contact us on 01978 264846.

Self-Employment, Another HMRC Taskforce, Incorrect Tax Calculations, RTI Penalties and Electronic Returns

Nov 1, 2014   //   by Ralph   //   Latest News  //  Comments Off on Self-Employment, Another HMRC Taskforce, Incorrect Tax Calculations, RTI Penalties and Electronic Returns

Self-employment – Certainly

A tribunal case has confirmed the self-employed status of a contractor. The contractor worked exclusively for one firm and was paid upon the presentation of invoices that showed the hourly rate charged. The tribunal said that the contractor was self-employed as the firm did not exert control over the contractor once what needed to be done had been agreed. Additionally there was no guarantee of work for the firm and the contractor paid for his own equipment, safety clothing and training. He also carried the risk of the customer defaulting. Although the contractor only worked for one firm that firm didn’t have exclusive rights to the contractor’s services. This case, albeit at a first tier tribunal, does assist in defining self-employment and, depending upon your type of business, could be helpful to keep down costs. Although of course each case will need to be considered on its merits and professional advice should be sought.

Another new HMRC taskforce

I seem to be mentioning this every month (last month was a property task force in North Wales) but there has been another taskforce launched by HMRC targeting businesses that accept credit/debit card payments. HMRC are using the law to demand third party data which they then analyse to track down businesses that are evading tax. The information will relate to seasonal traders, and online businesses. If evasion is found then HMRC can review the last 20 years!

Incorrect 2013/14 tax calculations issued

The taxman has issued a large number of incorrect end of year calculations (forms P800) in the three weeks commencing 15th September. The error will provide in many instances an incorrect overpayment as only eleven months pay has been taken into account. Underpayments may be miscalculated too. HMRC advise that if you do receive one of these calculations with a cheque don’t cash it until you have checked if the repayment is correct. Also do not pay HMRC any underpayment demanded until this has been checked.

RTI Penalties

Although HMRC have stated that automatic penalties for those employers with less than 50 employees have been delayed until 6th March 2015 this does not mean that they cannot be applied it just means that they are not applied automatically. If HMRC decide to apply them then they are payable.

Electronic returns only please

By the time you read this, the opportunity to submit your 2014 self-assessment tax return form on paper will have passed. The 31st October was the final day that paper returns could be submitted. You will need to either use HMRC’s website to submit your return, or of course your accountant can do it for you. If you do not have one already, and you do want to submit the return using HMRC’s website, you will need an authorisation code. This can take a couple of weeks to arrive so do not leave it until the end of January, otherwise you may incur a penalty if your return can’t be submitted by the deadline.

Ralph Robson can be contacted at his office at TA Gittins & Company Chartered Accountants on 01978 264846 or via email below.  If you would like a particular issue covered in this article please contact Ralph on ralph.robson@tagittins.co.uk

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