Browsing articles in "Latest News"

VAT Registration, New HMRC Task Force, Electronic Records and VAT on Company Cars

Oct 1, 2014   //   by Ralph   //   Latest News  //  Comments Off on VAT Registration, New HMRC Task Force, Electronic Records and VAT on Company Cars

The warm dry summer is now drawing to a close and for those with seasonal businesses perhaps a time of reflection on how successful it has been. This reflection should include a consideration of the tax implications too.

VAT registration

For those businesses that are near the VAT registration threshold the better summers of the last two years may mean that on a rolling calendar year basis the registration limit may be exceeded. The registration limit is now £81,000. Monitor carefully so you don’t get caught out.

New HMRC North Wales taskforce

There has been another taskforce launched by HMRC targeting the property sector in North Wales and the North West. The taskforce will be using information from the Valuation Office Agency to catch those failing to disclose income from property.  This is up and running and I know HMRC are comparing records of the Stamp duty returns to that of self-assessment returns to check whether property income is being under-declared. Even if you don’t make a profit from it the information should still be disclosed to HMRC.

Random enquiry by HMRC – unlikely

The taxman has had a valuable aid in deciding which returns to enquire into since 2009. The system is called Connect. It obtains data from 28 separate sources and compares it to the return submitted and highlights differences or shows that a return should have been submitted. In 2012/13 over three quarters of enquiries were triggered by the Connect system. If a letter drops through your door it is increasingly less likely to be because your name was picked out of the taxman’s hat.  Therefore you need to be conscientious when completing your return. Remember to consider the tax consequences of a transaction before you undertake it and not after.

Keeping you accounting records electronically

Due to increases in the use of electronic invoices HMRC is no longer insisting that there is a piece of paper for every transaction. The taxman has issued updated rules and guidance which runs to fifteen pages. In essence though, if you use invoicing software rather than your own design you will be ok. You can also scan purchase invoices then destroy them, as long as it is a scan of the original and not converted into a text file. You must still keep hard copies of bank interest certificates and dividend vouchers though.

Reclaiming the VAT on a company car

It is a long established principle that the VAT can be reclaimed on commercial vehicles, subject to certain conditions being met. For those who trade through a limited company, the VAT can be reclaimed on a car too as long as it is a “pool car”. To prove this you must demonstrate that any private use is minimal and incidental. To aid your case, employee and director contracts must state that there should be no private use of the vehicle. It should also be kept at the business premises overnight, not at or near the home of an employee. A detailed mileage log should be kept too, detailing who used the car and where they went. This may seem a lot of bother but in a new mid -range car there may be £4,000 VAT, so it is worth considering. Remember too, that if the business is not buying new, there is no VAT in the purchase of a used car, unless it is VAT qualifying. The dealer will tell you, but probably only if you ask.

Annual tax statements

From this month (October) HMRC will start to send out annual tax statements for the first time. These will be sent to those who are under self-assessment or receive PAYE tax codes. These will cover the year 2013/14 and require no action. Howeveryou should be able to check that your national insurance record is up to date and that you will be on target to have the necessary 35 years contributions (applicable after April 2016) to qualify for the full state pension.

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

 

Petition, VAT Proof, Employed or not? Trusting Trusts and Keeping Records

Sep 1, 2014   //   by Ralph   //   Latest News  //  Comments Off on Petition, VAT Proof, Employed or not? Trusting Trusts and Keeping Records

Petition against proposals to take tax direct from bank accounts

You may recall I mentioned a while ago about the taxman’s draconian proposals to raid taxpayers bank accounts to recover unpaid tax. This would not be so bad if HMRC had a better track record at accuracy and dealing with matters swiftly.  If you wish to support the campaign to call for these proposals to be withdrawn for the 2015 Finance Bill it can be found at http:/bit.ly/1szPr5n.  I’m not a great one for expressing opinions but I would urge you to sign it.

When a valid invoice and proof of payment aren’t enough to reclaim VAT

The recent Airtours case highlighted the principle that in order to reclaim the VAT not only must you have the necessary valid VAT invoice, proof of payment, but also you must receive the goods or services supplied.  In essence, PwC provided reports to the financial institutions that had lent Airtours money, but Airtours were responsible for the fees charged by PwC.  Although the contract was between PwC and Airtours, it was for the supply of the reports to the financial institutions.  Therefore as Airtours were not being supplied with the services provided by PWC they were not entitled to reclaim the VAT charged to them.  The same principle applies to valuation fees paid where a bank requires a report on the value of security, a property, or some land, for example, provided to it.

Out of control?

A security guard supplied other security guards to building sites.  The tax inspector agreed that they were not employees, but agency workers, and as such should have tax and national insurance deducted.  The taxpayer argued that they should be treated as self-employed.  The tribunal accepted that as the taxpayer was never on site with the worker and they were all qualified security guards he did not have control over them and therefore they were self-employed.  In conclusion, this may be a way of circumventing the auto-enrolment rules that are coming in.

Can trusts be trusted?

Two months ago I mentioned that HMRC were proposing that a single nil rate band were to apply to multiple trusts therefore effectively decreasing the amount of money that can be put into trust without incurring an Inheritance Tax charge.  This is specifically designed to make trusts unattractive and particularly where they are used to avoid inheritance tax.  The changes only affect trusts set up after 7th June 2014, however some changes do affect those set up prior.  If you are thinking about your inheritance tax position it might be worth considering alternatives to avoid it.

Keeping a record

In a recent tax tribunal case the taxpayer successfully argued that the residential elements of a property renovation should be zero rated.  The reason he was successful was that he had documented the work and had pictures of the property in question being virtually completely demolished apart from the facades which were required to be retained as a condition of the planning permission.  A valuable lesson to those undertaking work of this nature where it is difficult to prove what has gone on once the new structure is in place.

Ralph Robson can be contacted at his office at TA Gittins & Company Chartered Accountants on 01978 26484601978 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

Assisting with Enquiries, Update, New VAT options and Tax Credit Deadline

Aug 1, 2014   //   by Ralph   //   Latest News  //  Comments Off on Assisting with Enquiries, Update, New VAT options and Tax Credit Deadline

Assisting with enquiries no longer an option.

Taxpayers facing a code of practice 9 investigation will no longer be able to deny any wrongdoing and still co-operate with HMRC. Where fraud is suspected HMRC issue a COP9 notice. This gave the taxpayer three options: 1) Admit the fraud and co-operate. 2) Deny the fraud and co-operate or 3) Deny the fraud and not co-operate. With the new rules from 1st July 2014 option 2 has been removed so taxpayers can only admit and co-operate or deny and be non co-operative. It is considered that this is likely to cause higher penalties for taxpayers who would have co-operated and a much greater likelihood of criminal prosecution. If you are the subject of a vexatious report to HMRC this does make it more difficult to deal with.

The disappearing PAYE overpayment – an update

You may recall last month I related the tale of the amendment by HMRC of information provided to them to agree to the amounts paid. I am pleased to say that following representations to HMRC the position has been corrected, HMRC have paid our fees for dealing with their error and made an ex-gratia payment to the directors of the company as a goodwill gesture. A satisfactory result – but only achieved through persistence.

VAT – option to file returns on paper or by telephone

If like me your internet connection is not as quick as it could be on occasion, or as my mother, you have never used a computer, then HMRC have amended the VAT Regulations to set out the circumstances that will allow VAT registered businesses to file their returns by telephone or by paper. The new rules came into force on the 1st July 2014. This is as a result of the decision in LH Bishop Electrical and Others where the failure of the regulations to take into account a person’s ability to comply due to age, disability, or not being computer literate was a contravention of the European Convention on Human Rights. The regulation that has been amended is SI 1995/2518.

More HMRC errors

HMRC have mistakenly issued interim penalty letters to some employers for 2013/14 even though they have met their obligations for that year. If you do receive one and have submitted your form it can be ignored, but it would be best to check to ensure that incorrect penalties are not pursued.

An electronic reminder

HMRC are to issue letters electronically to those employers who have not paid all of their PAYE by the due date.  If the amount paid was more than £100 less than the liability then the letters which remind you to make full payment on time will be issued. Interest is now charged for late in year payments and although late payment penalties are not being levied in 2014/15 they will be for persistent late payers in the future.  Penalties for late reporting however do commence from October 2014.

Changes to Transfer of Going Concern Rules for leases

Following the Robinson Family decision there are changed to how HMRC view the granting and surrenders of leases. This is a fairly detailed subject and the rules relating to it are too complex to go through in detail here but you should check with your tax advisor of the implications should you be granting or surrendering a lease or acquiring a completed residential or charitable development as part of a transfer of a going concern.

Tax credit deadline – don’t forget losses

Although many of you will not have chance to read this until after 31st July, I thought I would mention that it is the deadline for submitting tax credit renewal forms before payments cease. Also remember that losses made on certain types of income can be offset against profits on others or PAYE income so that the amount of tax credits paid is maximised.

Ralph Robson can be contacted at his office at TA Gittins & Company Chartered Accountants on 01978 26484601978 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

Disappearing PAYE overpayments, trusts and dog food?

Jul 1, 2014   //   by Ralph   //   Latest News  //  Comments Off on Disappearing PAYE overpayments, trusts and dog food?

The strange case of the disappearing PAYE overpayment

A client of mine had a PAYE overpayment for 2012/13, due to making payments earlier than the 6th of the month so that they were incorrectly allocated by the Collector of Taxes. Rather than the overpayment being reallocated to the current year the Employers Office of HMRC altered the end of year figures to mean that the overpayment was no longer shown and it appeared that my client had paid the correct amount for the year. When checking we found the error and contacted HMRC to request the repayment. It took four telephone calls and a letter to HMRC who then reversed their amendment to the correct figures, after initially denying that there was an overpayment. This is not an isolated occurrence and was stated by HMRC as being common practice. Whilst appreciating that the public purse needs to be protected from the unscrupulous, surely it cannot be right that HMRC amends the figures submitted without first ascertaining that the amendment is correct. If there was an underpayment then I very much doubt that HMRC would reduce the figures to remove the underpayment and not pursue the tax considered due! In order to gain the trust of the taxpayer HMRC need to act with probity and transparency – certainly not something that has happened here.

Single nil rate band to apply to multiple trusts

For those lucky enough to have an inheritance tax problem, the liability may have increased significantly since 6th June. HMRC are proposing just one nil rate band to apply during an individual’s lifetime to cover multiple trusts. The Taxman gives an example of a couple aged 40 who under the current rules could give away £3.25 million to trust by the age of 75 will under the proposed rules be limited to £650,000.

Cheaper dog food?

HMRC lost its appeal in the Skinner case. A taxpayer sold dog food formulated for working dogs, but it was also suitable for pets. As the food was “animal feeding stuffs” it was argued that it should be zero rated for VAT purposes rather than the standard rate of 20%. HMRC argued that it was pet food and therefore VAT should apply. As the marketing and customer base was considered the fact that it could also be pet food was not found to be of such significance to make the 20% VAT rate apply. To save some money perhaps your pedigree pal should get to work.

Deadline for 2013/14 employee benefit declarations (P11D’s)

The deadline for submission of the employee benefit return forms is 5th July so you’ll need to be quick. The national insurance on the value of the benefits due needs to be paid by the employer by the 19th July too. It is also a requirement that a copy of the form is provided to the employee.

Taxman training for landlords

HMRC are offering computer based tutorials for landlords to help them to understand how to calculate the tax due and when it should be paid. As almost all property is now registered with the land registry it would be a fairly simple task for HMRC to trawl through these records to obtain the details of potential landlords.  The training includes information about when letting starts, the different types of property income – eg. Furnished, unfurnished, holiday lets, rent a room and how they are taxed, record keeping, tax consequences and the return filing obligations. HMRC have also started to write to 40,000 landlords about their tax. HMRC’s well-intentioned training is a statement of how to comply with the rules of course rather than proactive advice, and should not be regarded as such.

Tax could be taken directly from bank accounts

As I highlighted in my account of the disappearing overpayment above, HMRC are not infallible when stating a liability. They are now proposing powers to take funds directly from a taxpayer’s bank account if they do not pay voluntarily. While the correct amount of tax should of course be paid, we should not allow an organisation with a proven history of making errors have this power, there are sufficient powers already in place, such as those available to anyone who owes a debt via the courts system, which has independent review.

Ralph Robson can be contacted at his office at TA Gittins & Company Chartered Accountants on 01978 26484601978 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

 

Paying your PAYE bill

Jun 5, 2014   //   by Ralph   //   Latest News  //  Comments Off on Paying your PAYE bill

 

If you have employees, you are more than likely quite well used to filing your wages online with Real Time Information (RTI).  The filing of these weekly/monthly reports to H M Revenue and Customs(HMRC) is  relatively straightforward, though slower, and apart from at year end, HMRC appears to have coped with the volume of submissions reasonably well.

The same cannot unfortunately be said for the way their computers have coped with the payments.  An organised employer, wanting to make their PAYE payments as soon as they are aware of the amount due, pays early.  He later finds himself owing money on this year while overpaid on the previous one.  An employer with arrears makes additional payments to clear the arrears.  He then finds that he is overpaid on the current year while being charged interest on the old debt because nothing has been allocated to the arrears.

Following the rules below should ensure that you don’t get caught out by either of these scenarios and hopefully keep you on track:

1. Always quote your Accounts Office Reference

If you have a payslip booklet, this is the long reference in the top right hand box.

It will look something like this:  123XX12345678

If you are not sure what it is check with your accountant or with the tax office.

2. Make your payments on time

If your payment covers the quarter to the 5th July, the payment needs to be cleared at the tax office by the 19thJuly, or the 22ndJuly, if paid electronically.  Make your payment between the 6th July and the due date to ensure that it is allocated to the month/quarter of July.

3. If you have to pay early or late use the 4 digit extension that tells the tax office the period you are paying.

The extension is made up of two parts – the year you are paying and the month your payment relates to.

To use the example above, you are making a payment for the quarter to 5th July 2014.

The year you are paying is the tax year 2014/2015, so you use the year end – which is 15.

The period you are paying is the period ending 5th July so July is the tax month your payment is for:

PAYE month PAYE reference
6th April to the 5th May 01
6th May to the 5th June 02
6th June to the 5th July 03
6th July to the 5th August 04
6th August to the 5th September 05
6th September to the 5th October 06
6th October to the 5th November 07
6th November to the 5th December 08
6th December to the 5th January 09
6th January to the 5th February 10
6th February to the 5th March 11
6th March to the 5th April 12

So in this example the reference would be 123XX12345678 1503.

4. If your online/telephone banking system will not allow you to input the reference as in point 3 pay by cheque, as in point 5.

5. If you pay by cheque, make sure that you send your cheque in time, allowing at least three days for clearing. If you are sending to your accountant to forward on, you need to allow time for the post to them and the post to the tax office too.  Ensure that your PAYE reference is written on the back and make sure that you mark your cheque stub so you know what you have paid and when.  If you prefer, photocopy the cheque and payslip so you have a copy of it as evidence.

6. If you do pay late, remember there may be interest accruing on the late payment so you whilst you think you have settled the debt later there may still be interest to pay. Ring the tax office to see what remains on the account.

7. Keep a record of how much the PAYE liabilities are and ,more importantly, a note of when each one has been paid.

8. If you think you may have missed one or more payments, or you are struggling to pay ring the accounts office on 0300 2003812 as soon as you can to arrange a payment plan

Under 16s, David Cameron, PAYE Allocation, Tax Credits, Lorry Drivers, Not for Profits and Tax Avoidance

Jun 5, 2014   //   by Ralph   //   Latest News  //  Comments Off on Under 16s, David Cameron, PAYE Allocation, Tax Credits, Lorry Drivers, Not for Profits and Tax Avoidance

Workers under 16 and Real Time Information reporting

HMRC have changed their stance and it is now not mandatory to put workers under 16, who earn less than the personal allowance, on to an existing payroll for reporting purposes under RTI. This will come as a relief for those business that employ junior staff at the weekends and evenings.

Is David Cameron’s letter to employers correct?

Many of my clients have received letters from David Cameron urging them to use the £2,000 employment allowance as an incentive to take on extra staff. The problem is that many of those organisations that have received the letter will not be able to claim the £2,000 anyway. Two million letters have been sent but less than two-thirds of those will qualify. There are eleven pages of guidance to see who can claim and who cannot. Claiming is a simple matter usually by indicating that you are eligible on your payroll software. As this allowance is set to continue then there are opportunities for multiple claims to be made for couples with more than one unconnected business, subject to the ownership being split correctly.

Making sure PAYE payments allocated correctly.

HMRC appears to have coped well with the first end of year using RTI. The same however cannot be said of the allocation of payments. If payments are made early (prior to the 6th of the month) then they are allocated to the earlier month. This can lead to overpayments in one period and letters being sent by HMRC chasing payments considered outstanding for a later period with the possibility of interest being charged, despite them having been paid the correct amount. We have detailed on our website an eight point guide as to how the amounts due should be paid, when, and how they should be referenced to ensure the correct allocation of the amount paid.

Tax credit claims

As from 6th April 2014 HMRC are using real time information to calculate tax credit awards. The renewals notices will show the total gross pay for the year and may include more than one employment (for those with more than one job).  If there are losses suffered in self-employment in the year these need to be deducted from the salaried income figures and you will need to contact HMRC to correct the position.

Lorry drivers’ nights out allowance

I understand that around ninety percent of all goods transported within the UK are transported by road as can be seen by the number of lorries on our roads. HMRC have agreed with the Road Haulage Association that the current rate will continue. They are £26.20 per night for a vehicle with a sleeper cab and £34.90 per night for those without.

European Court decision to help not-for profit sports clubs

In the case of Bridport and West Dorset Golf Club Ltd where the European Court of Justice has agreed with the club that, as well as the subscriptions of members being exempt, the green fees paid by non-members should also be exempt. After initially refusing the claim, and it working its way right up to the CJEC, the club is due a refund of £140,000. This is of course not limited to golf clubs and, due to the four year time limit for submitting claims, as HMRC have still not issued guidance, a protective claim should be made if these or similar circumstances apply to your club.

Opening a conversation about tax avoidance

As has been reported on television and in the national press, Gary Barlow and others have been required to repay the tax previously avoided under the Icebreaker scheme. I suppose that the Take That star will not be using this to “break the ice” when meeting Chris Moyles (well known DJ and less well known car dealer!)

Llangollen resident 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

Personal Allowances, VAT Limits, Investment Allowances, R&D, Tax Free Savings and an Opportunity!

May 5, 2014   //   by Ralph   //   Latest News  //  Comments Off on Personal Allowances, VAT Limits, Investment Allowances, R&D, Tax Free Savings and an Opportunity!

As I promised last month, in this month’s article I will give the edited highlights of this year’s budget and also some unintended consequences.  Some of the measures had already been announced in 2013 but only come into effect from 6th April 2014. Of course those are the good ones so they can get the credit twice. The less favourable ones are usually only announced on the day.

Personal allowances

As trumpeted last year (see what I mean about getting the credit twice?) the personal allowance is going up to £10,000 for 2014/15 (meaning your tax code should be 1000L) with it going up to £10,500 for 2015/16 which is the same as the age related allowance.

Not as good for higher rate taxpayers.

Despite the Chancellor’s claim to be passing on the full allowance increase to higher rate tax payers, which he hasn’t done in previous years, he hasn’t this year either! The basic rate allowance is going down by £80. This gives a much smaller benefit to higher rate taxpayers than was implied. It was reported in sections of the press that the Chancellor announced to his stunned colleagues that people liked paying higher rate tax as it made them feel that they were successful. Of course as we often hear those who are successful pay hardly any tax.

VAT registration limits

The registration and deregistration limits from 6th April 2014 have increased by £2,000 to £81,000 and £79,000 respectively.

Doubling of Annual Investment Allowance

If we were to plot the increases and decreases in the annual investment allowance down on a piece of paper it would look like a slalom ski course. The chancellor announced a doubling of the current limit to £500,000, with it reducing to £25,000 on 1st January 2016, unless a further alteration is made.  Due to the frankly odd and seemingly unfair transitional rules a company with a March year end can spend £381,250 on 31st December 2015 and get full relief, assuming no other purchases in the period but only a day later the relief would only be £6,250. Surely that wasn’t intended? It is important that you contact your tax advisor prior to making large capital commitments.

Research & Development tax credit increase

The R&D payable tax credit has increased from 11% to 14.5% from 1st April 2014. If you are an innovative company make sure that you document properly any R&D work and make sure your tax advisor knows about it as the tax credit is worth nearly a third of the expenditure.

Tax-free savings

From the 1st July 2014 ISA’s will be transferred into a new product called a NISA (is the chancellor sponsored by a convenience store?) standing for New Individual Savings Account.  The new limit will be £15,000 per annum (due to the date of the increase £11,520 in 2013/14). This increased limit can also be entirely in cash, and in the future peer to peer lending will be able to be done through a NISA

Unintended consequences and a tax planning opportunity

There have been far reaching proposed changes to pension schemes that are likely to be applicable from 2015/16. These will allow those with a defined contribution scheme to withdraw as much or as little from their pension funds as they wish at their marginal rate of tax.  Yes this gives freedom but is this suitable for everyone? Your financial advisor may be able to help you with that one.

Changes to the “small pension pots” limits mean that there is a tax planning opportunity to significantly increase the return on your investment. You could get sizeable returns on a no risk investment. The rates vary depending if you are a higher rate basic rate or non-taxpayer aged between 60 and 74 inclusive.

There are many other measures and these are just a few of the ones that affect us.

Llangollen resident 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

 

PAYE, CIS, Entrepreneurs Relief, Floods, Scams & Tax Avoidance

Apr 5, 2014   //   by Ralph   //   Latest News, Scam Warnings  //  Comments Off on PAYE, CIS, Entrepreneurs Relief, Floods, Scams & Tax Avoidance

PAYE on YouTube

HMRC have published a three-step guide to help employers submit their final 2013/14 PAYE submission successfully on YouTube. I imagine it will be easy to find as PAYE generally does not provide much entertainment.

Quicker CIS repayments for Limited Companies?

Ever since the processing and repayment of tax deducted under the Construction Industry Scheme for limited companies was centralised in 2010/11 it has been a long drawn out process to obtain repayment from HMRC. It improved little in the following two years. HMRC due to the introduction of RTI can now commence repayments earlier and a target of fifteen days to process claims is now considered achievable

Entrepreneurs relief – don’t lose it

When you sell your business you want to obtain a Capital Gains Tax rate of 10% rather than the usual rates of 18% and 28%. This can result in huge tax costs if it is not dealt with properly. Common mistakes include rent being charged to the limited company for assets held outside the company; the company having significant investment assets; holding shares that do not qualify as they are not ordinary shares and do not carry voting rights. Of course the claim must be made on time, which is one year after the 31st January in the year after the tax year in which the disposal has been made.

HMRC’s flood helpline launched

HMRC have set up a helpline to assist those affected by the floods. We were very lucky here but in case you were affected the number is 0800 90479000800 9047900. HMRC will agree instalment arrangements, give practical advice where business records have been lost, suspend debt collection and cancel penalties. How long this will last given the current good weather I don’t know but it may be worth contacting them if you have suffered as a result of the floods.

Bogus emails from HMRC

If you get an email claiming to be from the tax office telling you that you have a tax refund awaiting your claim it will be a scam. HMRC never advise of tax refunds by email, only ever by letter. If you do receive one of these it should be sent to phishing@hmrc.gsi.gov.uk and you should then delete it permanently.

Are you a really a car dealer?

It seems difficult to believe that someone though that a tax avoidance scheme involving registering as a car dealer as a “side-line” and selling vehicles for minimal profit to show that capital of up to £10,000 was required would work. The finance costs for this loan of up to £10,000 were £5 million

(yes that’s right I said £5 million) creating a huge loss which was offset against other income, therefore obtaining a substantial tax advantage. The finance costs were described by the Judge as “absurd”. The details of the case are far more intricate, and above is just a summary, but surely it is best sometimes just to stick to playing records.

Ralph Robson can be contacted at his office at TA Gittins & Company Chartered Accountants on 01978 26484601978 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

Mar 5, 2014   //   by Ralph   //   Latest News  //  Comments Off on Auto Enrolment

As some of our regular website visitors are no doubt aware, I am Treasurer of the Llangollen Chamber of Trade and Tourism. An august organisation that endeavours to provide a collective voice for the traders and businesses of our fine town. It was the AGM on Monday 3rd March and, I presented a brief outline of the finer details of the compulsory pensions auto-enrolment for employers. I thought that I would give a summary below of the main points I covered. These are by no means exhaustive as the legislation is complex.

What is Auto-enrolment (AE)?

This is a form of compulsory, (well nearly, but more of that later), contribution to a pension scheme for the majority of employees. Employers will also need to contribute. This is to try and help reduce the increased pension costs on the state as the population lives longer.

When will it come into effect?

For the largest of employers auto-enrolment started in October 2012 but for many smaller employers such as we have here in Llangollen the staging date will be sometime in mid-2015 through to mid-2017.

It’s a long way off, why think about it now?

As I said in my introduction the legislation surrounding AE is complex. The administrative burdens placed upon the smaller employer are onerous and therefore costly and can be penalised if not strictly adhered to. There is a draconian penalty regime with a fixed penalty of £400 and from £50 per day for non-compliance. The process commences eighteen months prior to the staging date when you need to think about which pension provider you will choose, (already many pension companies are struggling to keep up with the demand for new schemes) and advise the pensions regulator who in your organisation will be responsible for AE.

How much will it cost?

The costs do depend how you implement AE. However in the first year after your staging date there will be a requirement for a contribution of 1% by the employee and 1% by the employer of relevant earnings. This will cost in the region of a maximum of £7 per week per employee for the employer. However in year two the contribution escalates to 2% for the employee and 3% (currently a maximum of £21) for the employer in year two and 3% and 5% (currently a maximum of £35) respectively in year three onwards. This is an extra cost, which along with the administration costs, will of course eat into profits. There have already been articles stating that this is not enough, and that the percentages must rise above those already planned, to make a meaningful inroad into the “pensions crisis” as politicians refer to it. We shall see, but I think it will only be going one way!

Is it compulsory?

In short, yes, it is compulsory. Employees may opt out of AE, but this cannot be a condition of employment nor can a financial inducement be given to the employee for them to opt out.

What should I do to keep costs down?

The reason for thinking about AE while it is such a long way off is that the costs of administration of AE will be high due to the complexity of the legislation. For example when employees change AE category, due to an alteration in earnings, then it is a statutory requirement to send letters to them detailing the position etc. Future pay rises over the next year or two, or lack of them, perhaps can take these extra costs into consideration. Salary sacrifice is another way of providing a national insurance saving for both employer and employee, although for employees on the minimum wage this is not available. Perhaps look at reducing administration costs by having a flat rate deduction for all employees on all their earnings, rather than on their Pensionable pay, as it may be a better option for both.

Hopefully the above has given you a flavour of what is to come on an issue that, unfortunately, cannot be ignored.

Llangollen resident Ralph Robson can be contacted at his office at TA Gittins & Company Chartered Accountants on 01978 26484601978 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

Capital Gains, NI, RTI, Uniforms and Bad Excuses

Feb 5, 2014   //   by Ralph   //   Latest News  //  Comments Off on Capital Gains, NI, RTI, Uniforms and Bad Excuses

As I write this I am wading through tax returns in the traditional January rush of making sure that client’s returns are submitted by the end of the month to avoid a penalty, which is now charged even if there is no liability for the year. Last month I said I would in this month’s article mention some salient points from George Osborne’s Autumn statement , so a couple of the more relevant one’s are given below.

Reduction in time available to sell your home once you have moved out

Since 1991 after moving out of your main residence there has been a three year time limit to enable it to be sold before there are any capital gains tax implications. The Chancellor must be thinking that the rest of the country is in the same state as the property market in the capital as this has now been reduced to 18 months, with effect from 6th April 2014. For the majority of people this will not make any difference of course as most people move once they have sold their house. However it can have consequences for those who let out their home once they have moved. There are exceptions such as those who have to go into nursing care and if this applies to you or a relative then professional advice should be sought.

National Insurance Savings

From 6th April 2015 employers will no longer be required to pay employers national insurance on those employees under 21. This is intended to help young people find employment more easily. Also in 2014/15, as announced in the budget in March 2013, there will be a £2,000 saving on employers’ national insurance, which can be deducted from the payments made to HMRC. If you are a “one –man” company it may be worth increasing your salary to the personal allowance limit, rather than the more popular national insurance limit, to obtain increased tax relief on the larger salary.

Real Time Information – extension of deadline for compliance for micro businesses

It seems to be that every month I seem to mention a change in some way to the new RTI regime applicable to PAYE schemes. HM Revenue & Customs have stated that existing employers with less than ten employees will be given more time to adjust to the new regime. They will be allowed to report PAYE information on or before the last payday in the month up until April 2016. This does not apply to new employers, registering after 5th April 2014, to whom the new regime will apply in full.

Claiming tax relief on cleaning your company uniform

Last month I mentioned the availability of flat rate trade allowances to those working in certain industries and professions. If you are provided with a uniform by your employer, or clothing that has a logo on it, you can claim a flat rate of £60 per year for cleaning it. Simply write a letter to your employer’s tax office quoting the reference on your P60 and your national insurance number. The letter will need to state what uniform or clothing your employer provides, a statement that you are required to clean it and that you are required to wear it while working. You will need to have paid income tax for the year in question. You can claim up to four years plus the current year so it is worth writing before the end of the tax year. Various firms advertise that they will do this for you but of course they charge for this and it is easy enough to do yourself.

Tax returns filed on Christmas day.

This year 1,566 people filed their tax returns on Christmas day. I know the television programmes aren’t what they were but…

Excuses for late submission of tax returns

The taxman has released some of the more bizarre excuses given for late submission of tax returns. They range from a taxi driver whose back was too bad to go upstairs to fetch his return to a hairdresser whose husband told her the deadline was the 31st March, and my personal favourite from a man in the south-east who was too busy traveling the world in his yacht and could only collect his post when he reached dry land.

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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