Are you ready for your first RTI year end?
Basically you will need to:
- Prepare P60′s (but no P14 and P35) by 31st May
- Submit your final FPS or EPS
- Update your Payroll Software for the New Tax Year
You can order your P60′s for free from HMRC http://www.hmrc.gov.uk/payerti/forms-updates/forms-publications/onlineorder.htm
Here is a great video from HMRC
HM Revenue & Customs (HMRC) plans to make its Basic PAYE Tools product for the 2014-15 tax year available on 3 April 2014.
The 2014-15 version of Basic PAYE Tools will be provided as an update to the existing version rather than a separate download, so existing users do not need to go to the HMRC website to get the update.
steve@bicknells.net
VAT Returns may soon be monthly…
From January 2017 the European Commission would like to make VAT returns monthly in all member states. Currently most UK businesses file quarterly, they only file monthly if they get regular refunds.
The European Commission see this as cutting red tape, but I am not sure how going from 4 returns to 12 returns cuts red tape?
The Commission say they have received complaints from companies who do business across Europe about confusion over the frequency of returns.
The EC is hoping to introduce a single format return, with just five mandatory boxes. This will include:
- input VAT;
- output VAT;
- net VAT payable;
- value of input transactions; and
- value of output transactions.
and there could be a concession for small businesses allowing them to continue to do quarterly returns.
Do you think monthly returns would be better or worse for UK Business?
steve@bicknells.net
Do you think National Insurance should be merged with Income Tax? it could happen soon
The Tax Payer’s Alliance have been campaigning and it looks like the Chancellor, George Osborne, has agreed that the first step is to re-name National Insurance as “Earnings Tax”. The change is to be proposed in legislation this week.
This story was reported in the Telegraph on 23rd February. There is also an interesting article on Tax Research UK (Richard Murphy).
You pay National Insurance contributions to build up your entitlement to certain state benefits, including the State Pension.
You pay National Insurance if you’re:
- 16 or over
- an employee earning above £149 a week
- self employed and making a profit over £7,755 a year (Class 4) plus £2.70 per week Class 2 NI (you may not have to pay any Class 2 NI if your profits are below £5,725)
If you’re employed, you stop paying Class 1 National Insurance when you reach the State Pension age.
If you’re self-employed you stop paying:
- Class 2 National Insurance when you reach State Pension age (or up to 4 months after this to pay off any contributions you owe)
- Class 4 National Insurance from the start of the tax year after the one in which you reach State Pension age
Income Tax is whole different ball game. Whilst I can see its simpler to have one tax the changes that would be required to achieve it would be huge!
Is it worthwhile?
steve@bicknells.net
It’s a good day when the sun shines!
How many of us are thrilled that the sun is finally starting to put in an appearance. I certainly am!
Don’t we feel better about our businesses when the sun shines?
But what tangible effect does the weather really have on most of our companies?
Unless you are involved in tourism, swimming pool construction, or possibly seasonal clothing, there is really no reason for sudden optimism when the weather is good – the economy is unlikely to change overnight just because it isn’t raining. Nor are customers, which weren’t there yesterday, suddenly going to materialise today because they won’t get wet coming to your office – although being in Somerset they might have more luck getting to you once the floods a gone!
And yet we do feel more positive and can often see a change in our business fortunes. Whether this is because, in feeling better about the world, we are more open to opportunities or because good weather encourages us to take a more proactive view, is difficult to say.
Actually it does not matter. In my view anything which encourages us to get out of bed with a spring in our step, ready to face the challenges we will inevitably face in our working week, is a good thing.
So maximise the benefits of this positivity: walk to meetings where possible; take a stroll at lunchtime so you can re-energise; and generally get out! We Brits know the sunshine won’t last for ever so make the most of it whilst it’s here.
Fiona 🙂
Limited Liability Partnerships
Limited Liability Partnerships came under closer scrutiny in the Budget 2013. The aim is to target LLPs which use the structure to hide the employment relationship of the partners and those with Corporate partners who divert business profits to the corporate partners in order to avoid tax.
Although the following measures come in to play from 6th April this year, the anti-avoidance measures make it effective from 5th December 2013. This is to prevent partnerships changing their arrangements in order to avoid the new rules.
The two main areas of focus are salaried or fixed profit share partners which is referred to as disguised employment, and profit and loss sharing arrangements within mixed partnerships.
LLP partners with fixed profit share
HMRC believe that many members of an LLP should be taxed as employees, because they don’t see them is true partners.
A new test has been brought in which has three conditions. Where the member tested meets all three conditions then he or she must be treated as an employed salaried member and be brought within the PAYE system with tax and class I NIC applied to any earnings, which had previously been Taxed as profit share.
This also means that if a vehicle is provided for the members use by the partnership this will be taxed as a benefit in kind. As such the member will have to pay tax and NIC and the LLP will have to pay Class 1a NIC on the benefit.
HMRC does actually accept that employment tax rules are imposed on the individual but that in fact the individual has no employment rights. This is because he is not actually an employee for employment law purposes.
The test is as follows. The provision is triggered when all conditions A to C are met:
Condition A: The Member is performing services for the LLP in his capacity as a member of the partnership and it’s reasonable to expect as a result of these arrangements that any amounts paid to him in respect of his services will be wholly or substantially wholly a disguised salary. In other words if his reward package is comparable to that received by an employee, either a fixed salary or a variable bonus based on performance rather than profit share.
Condition B: The Member doesn’t have significant influence over the affairs of the partnership.
Condition C: The Member’s capital contribution to the LLP is less than 25% of the total amount of his disguised salary which would be expected to be paid in the relevant tax year by the LLP in respect of the members performance of services as a member. Normally the relevant time would be the beginning of the new tax year.
These tests must be reviewed each tax year.
Corporate LLP Members
This applies to partnerships who have members which are not subject to UK income tax for example this might be a limited company. The problem here is that HMRC believes these structures are used to avoid tax on a very large scale. Where for example an individual member introduces his Ltd company as a corporate member, and which then receives a profit share that would otherwise have been paid to the individual member. If the Member then has the power to enjoy the fund which had been paid to his company then:
- The individual member will be treated as a salaried member.
- The amount paid to the company will be treated as employment income paid to the individual member.
There are anti-avoidance rules are in place to catch anyone trying to put measures in place to counteract these new rules.
fiona@grant-jonesaccountancy.com
Maximising Gift Aid Donations
The end of the tax year is just a few weeks away.
Gift Aid donations are regarded as having basic rate tax deducted by the donor. Charities or CASCs take your donation – which is money you’ve already paid tax on – and reclaim the basic rate tax from HM Revenue & Customs (HMRC) on its ‘gross’ equivalent – the amount before basic rate tax was deducted.
Basic rate tax is 20 per cent, so this means that if you give £10 using Gift Aid, it’s worth £12.50 to the charity.
A Gift Aid declaration must include:
- your full name
- your home address
- the name of the charity
- details of your donation, and it should say that it’s a Gift Aid donation
If you pay higher rate tax, you can claim the difference between the higher rate of tax 40 and/or 45 per cent and the basic rate of tax 20 per cent on the total ‘gross’ value of your donation to the charity or CASC.
For example, if you donate £100, the total value of your donation to the charity is £125 – so you can claim back:
- £25 – if you pay tax at 40 per cent (£125 × 20%)
- £31.25 – if you pay tax at 45 per cent (£125 × 20%) plus (£125 × 5%)
You can make this claim on your Self Assessment tax return
If you are a higher rate tax payer donations made in 2013/14 will save tax at 45 percent, but in 2012/13 the rate was 50 per cent.
You can ask for Gift Aid donations to be treated as being paid in the previous tax year if you paid enough tax that year to cover both any Gift Aid gifts you made that year and the ones you want to backdate.
So if you want to donate now (before the end of the tax year) you could claim back extra tax by carrying it back into the previous tax year.
steve@bicknells.net
Why would you liquidate a solvent company?
If you have a company which is no longer needed you have the following options:
- You can just keep it as a Dormant company
- You could strike it off at Companies House
- You could carryout a Members Voluntary Liquidation
If the company has assets the shareholders will want to release the assets and get hold of the money, so keeping it Dormant isn’t going to help.
Since March 2012, in the case of Strike Offs, ESC C16 has allowed the distribution of up to £25,000 as a Capital Distribution rather than as Income.
However, if you have assets in excess of £25,000 distributions can only be treated a Capital if the distributions are made through a formal liquidation.
With Entrepreneur’s relief, money paid to shareholders will only be subject to tax at 10% on the capital gain.
There could also be other benefits too.
steve@bicknells.net
Doctor help my Travel Expense has been disallowed
On the 16th December 2013 Dr Samad Samadian v HMRC had his appeal on Travel heard by The honourable Mr Justice Sales and it was decided to uphold the previous decision of the First Tier Tribunal.
After an enquiry lasting more than seven years and three tribunal hearings, the First-tier Tribunal led by Judge Kevin Poole acknowledged Dr Samad Samadian had a dedicated office in his home which was necessary for his professional activity.
So in summary:
- Home to Hospitals – Disallowed
- Hospital to Hospital – Disallowed as Business Expenses (but could be allowed against Employment)
- Visits to Patients – Allowed
Now would be a good time to check your tavel mileage claims to makesure they are valid.
steve@bicknells.net
Karren likes the Employment Allowance – £2000 will be very NIC(E)
This is what Karren Brady said…..
She has a point, £2,000 will be a big help to many SME’s.
The Employment Allowance is available from 6 April 2014. If you are eligible you can reduce your employer Class 1 NICs by up to £2,000 each tax year.
You can claim the Employment Allowance if you are a business or charity (including Community Amateur Sports Clubs) that pays employer Class 1 NICs on your employees’ or directors’ earnings.
If your company belongs to a group of companies or your charity is part of a charities structure, only one company or charity can claim the allowance. It is up to you to decide which company or charity will claim the allowance.
You can only claim the £2,000 Employment Allowance against one PAYE scheme – even if your business runs multiple schemes.
You cannot claim the Employment Allowance, for example if you:
- employ someone for personal, household or domestic work, such as a nanny, au pair, chauffeur, gardener, care support worker
- already claim the allowance through a connected company or charity
- are a public authority, this includes; local, district, town and parish councils
- carry out functions either wholly or mainly of a public nature (unless you have charitable status), for example:
- NHS services
- General Practitioner services
- the managing of housing stock owned by or for a local council
- providing a meals on wheels service for a local council
- refuse collection for a local council
- prison services
- collecting debt for a government department
You do not carry out a function of a public nature, if you are:
- providing security and cleaning services for a public building, such as government or local council offices
- supplying IT services for a government department or local council
Personal and Managed Service Companies who pay contract fees instead of a wage or salary, may not be able to claim the Employment Allowance, as you cannot claim the allowance for any deemed payments of employment income.
Service companies can only claim the allowance, if you pay earnings and have an employer Class 1 NICs liability on these earnings.
You can use your own payroll software (see your software provider’s instructions), or HM Revenue and Customs’ (HMRC’s) Basic PAYE Tools to claim the Employment Allowance.
When you make your claim (using the software of your choice), you must reduce your employer Class 1 NICs payment by an amount of Employment Allowance equal to your employer Class 1 NICs due, but not more than £2,000 per year.
You can read the full guidance here
Will the Employment Allowance be NICE for your business?
steve@bicknells.net
Have you claimed capital allowances on your building? time is running out…
FA2008 introduced a new classification of integral features of a building or structure, expenditure on the provision or replacement of which qualifies for WDAs at the 10% special rate. The new classification applies to qualifying expenditure incurred on or after 1 April 2008 (CT) or 6 April 2008 (IT).
http://www.hmrc.gov.uk/manuals/camanual/CA22300.htm
The rules on integral features apply where a person carrying on a qualifying activity incurs expenditure on the provision or replacement of an integral feature for the purposes of that qualifying activity. Each of the following is an integral feature of a building or structure –
- an electrical system (including a lighting system),
- a cold water system,
- a space or water heating system, a powered system of ventilation, air cooling or air purification, and any floor or ceiling comprised in such a system,
- a lift, an escalator or a moving walkway,
- external solar shading
Only assets that are on the list are integral features for PMA purposes; if an asset is not one of those included in the list, the integral features rules are not in point.
However, Plant and Machinery includes….
other building fixtures, such as shop fittings, kitchen and bathroom fittings
Many businesses have never claimed capital allowances for these items.
Paragraph 13 of Schedule 10 FA2012 introduced transitional provisions for making claims.
The provisions mean that where the current owner incurs expenditure on acquiring fixtures from a past owner before 1 (or 6) April 2014 and the past owner has not claimed allowances or pooled their expenditure in respect of a qualifying fixture, the current owner may claim PMA on the part of the price the paid which is attributable to that fixture….. CA26470
It is possible for the buyer to use apportionment of the sale price (usually done by an RICS Surveyor) to determine the value of the fixtures. But this risks clawback of balancing charges for the seller.
A alternative option is to claim a Section 198 election which can be entered into within 2 years of the date of the property sale. It must be signed by the buyer and the seller and must identify the items covered. The elected value can be between £1 and the price paid, but makesure you undertand the implications of the price choosen.
As a Section 198 requires agreement you may wish to take legal advice.
The Section 198 needs to made in writing to HMRC.
The following can’t claim a Section 198:
- Property Traders
- Developers
- Pension Funds
- Charities
But if you can claim you need to claim now as there are only a few weeks left until April 2014.
steve@bicknells.net
Business Accountant 