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Tag Archives: HMRC
Is my website a fixed asset?
HMRC use the Analogy of a shop window….
The cost of a web site is analogous to that of a shop window. The cost of constructing the window is capital; the cost of changing the display from time to time is revenue. (BIM35870)
UITF Abstract 29
Set out 4 key areas of cost:
- Planning – P&L
- Application and infrastructure development – Tangible Fixed Asset
- Design costs – P&L
- Content costs – P&L
HMRC also have some useful information on software in CA23410
CAA01/S71
Computer software qualifies for PMAs if it is not already plant.
Computer software is not defined in the capital allowance legislation. You should treat computer programs of any type and data of any kind as computer software. Computer programs range from operating systems like Windows to games like Solitaire. There may be no physical asset because software is sometimes transferred by electronic means, for example it may be downloaded over the Internet. Software acquired that way is also plant.
A person may acquire a right to use or otherwise deal with computer software. If so, the right and the software to which it relates are plant. Treat the person as owning the plant while the person is entitled to the right.
Capital Allowances and the Annual Investment Allowance can be claimed against Plant including software.
steve@bicknells.net
Letters for under 21s
Changes for employees under 21
From 6th April 2015 employer national insurance contributions will be abolished for under 21s. If you employ anyone over 16 and under 21 years old you will need to use one of the new letters for under 21s in the national insurance category setting of your payroll software.
English: British National Insurance stamp. (Photo credit: Wikipedia)
Secondary contribution rates
This table shows how much employers pay towards employees’ National Insurance for tax year 2014 to 2015. The contribution rate calculated by your payroll software is set by the category letter.
| Category letter | £111 to £153
a week |
£153.01 to £770
a week |
£770.01 to £805
a week |
From £805.01
a week |
|---|---|---|---|---|
| A | 0% | 13.8% | 13.8% | 13.8% |
| B | 0% | 13.8% | 13.8% | 13.8% |
| C | 0% | 13.8% | 13.8% | 13.8% |
| D | 3.4% rebate | 10.4% | 13.8% | 13.8% |
| E | 3.4% rebate | 10.4% | 13.8% | 13.8% |
| J | 0% | 13.8% | 13.8% | 13.8% |
| L | 3.4% rebate | 10.4% | 13.8% | 13.8% |
National insurance categories
Most employees will have a category letter of A or D depending on whether or not they are in a contracted-out workplace pension scheme. There are categories for mariners and deep-sea fisherman; the more common categories are shown below:
Employees in a contracted-out workplace pension scheme
| Category letter | Employee group |
|---|---|
| D | All employees apart from those in groups E, C and L in this table |
| E | Married women and widows entitled to pay reduced National Insurance |
| C | Employees over the State Pension age |
| L | Employees who can defer National Insurance because they’re already paying it in another job |
Employees not in contracted-out pension schemes
| Category letter | Employee group |
|---|---|
| A | All employees apart from those in groups B, C and J in this table |
| B | Married women and widows entitled to pay reduced National Insurance |
| C | Employees over the State Pension age |
| J | Employees who can defer National Insurance because they’re already paying it in another job |
Employees in a money-purchase contracted-out scheme
This kind of scheme ended in April 2012 but some employees might still be part of one.
| Category letter | Employee group |
|---|---|
| F | Tax years before 2012 to 2013 only: all employees apart from the ones in groups G, C and S in this table |
| G | Tax years before 2012 to 2013 only: married women and widows entitled to pay reduced National Insurance |
| C | Employees over the State Pension age |
| S | Tax years before 2012 to 2013 only: employees who can defer National Insurance because they’re already paying it in another job |
How to claim zero rate of employer contributions
You should already have proof of age for all your employees. A copy of a passport, driving licence or birth certificate will be required to show that your employee qualifies for the new zero rate of employer’s contribution. The seven new categories are valid from 6th April and must be applied from the first salary payment after 5th April 2015 to benefit from the new zero contribution rate for employers.
What does this have to do with Auto Enrolment?
You need to have proof of age for all your employees aged under 21 to claim the zero contribution rate for employer’s National Insurance. By the time of your staging date you must assess all your workers, based on their earnings and age. To help you prepare for Pension Auto Enrolment you can make sure that all your employee records are up to date and that your payroll software has the full details for all workers including their date of birth. This is a good opportunity to clean up all your employee data.
Alterledger can help
For more information on saving employer’s national insurance and preparing for Pension Auto Enrolment, contact Alterledger or visit the website alterledger.com.
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The VAT advantages of a development company
Property Development is a trade, where as Property Investment isn’t – renting out a residential property is a VAT exempt supply.
If you are planning significant building work, setting up a Development Company or using a building contractor might save VAT.
Assuming you employ a builder…
The VAT Rules are in VAT Notice 708 Buildings & Construction
Your builder may be able to charge you VAT at the reduced rate of 5 per cent if you are converting premises into:
- a ‘single household dwelling’
- a different number of ‘single household dwellings’
- a ‘multiple occupancy dwelling’, such as bed-sits, or
- premises intended for use solely for a ‘relevant residential purpose’
As your builder will be VAT registered, they reclaim the VAT they are charged and then charge you VAT at 5%.
If your business is property rental and you do the work yourself, you can’t take advantage of the 5% rate.
If your Development Company is VAT registered you can reclaim all the VAT.
Get your existing business or your property development company to convert the property and then sell it to another company that you own (may be an SPV) will be a VAT Zero Rated transaction. The other company then carries on the rental business.
steve@bicknells.net
Say goodbye to small earnings
Say hello to small profits
HMRC has changed the name of the threshold for paying Class 2 National Insurance from the Small Earnings Limit to the Small Profits Threshold. If you earn less than £5,965 in 2015-16 you won’t need to pay Class 2 NI, but if you do, it will be calculated as part of your 2015-16 tax return and due with the rest of your tax by 31st January 2017.
English: British National Insurance stamp. (Photo credit: Wikipedia)
Alterledger can help
For more information on filling in your tax return, contact Alterledger or visit the website alterledger.com to see if you can organise yourself better and cut your tax bill.
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What a difference a day makes
How about three extra days?
HMRC has relaxed the rules on “Real Time Information” for payroll reporting. UK employers are required to send electronic reports to HMRC with each payment of wages to employees. HMRC are now saying that you can submit your RTI report up to three days after the payment date without incurring a penalty.
Any employer who has received an in-year late filing penalty for the period 6 October 2014 to 5 January 2015 and filed within three days, should appeal online by completing the “Other” box and add “Return filed within 3 days”.
Outsource your payroll
Despite the relaxation provided by three extra days, the burden on employers is only likely to increase over the coming months. Auto enrolment is being rolled out to all UK employers over the next couple of years. With the new payroll year about to start on 6th April, now is a good time to consider using a payroll bureau – or at least checking that your current systems will deal effectively with auto enrolment pensions. For more information please and see how Alterledger can help please click here.
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How do you account for Construction Retentions?
It’s a very common question, the client pays you and keeps a retention of 5% reducing to 2.5% on completion to be released after the end of the defects period.
You do the same with your sub-contractors.
The retentions need to be held in balance sheet accounts as they can’t be invoiced to client and aren’t due to the sub-contractors. But they should be included within sales and sub-contract costs.
HMRC’s guidance is in BIM51520
In the construction industry it is a common feature of construction contracts for the customer to retain part of the contract fee over a maintenance period pending the satisfactory completion of any remedial work required by the contractor. Typically this may be for a 12-month period between a Certificate of Completion being given and the issue of a Maintenance Certificate.
In their accounts, builders will generally deal with retentions in one of the following ways:
- include retentions within turnover, provide for the estimated cost of remedial work, and make provision for any debt impairment (see BIM42700 onwards), or
- defer recognition of retentions until their receipt becomes virtually certain.
Each of the above accords with generally accepted accounting practice and should be followed for tax purposes unless an unrealistically conservative view has been taken.
In recent years, construction industry customers have become increasingly reluctant to pay retention monies, irrespective of whether there are defects to be made good. It is now common for such monies never to get paid. Consequently, it will often be the case that, whichever of the above approaches is adopted, there will be little or no difference in the figure of net profit.
A challenge will only be appropriate in worthwhile cases. For example, where retentions are only recognised on receipt but, in practice, a large proportion is in fact consistently paid over to the builder and there is a significant tax effect (compared with the alternative provisions method).
There is guidance on VAT in VATTOS5170
……the tax point for retentions is delayed until either a VAT invoice is issued or payment of the retention is received, whichever is the earlier. It must be stressed that this only applies to the retained element of the contract price. The rest of the supply is subject to the normal tax point rules.
steve@bicknells.net
Sole Traders lose Goodwill Tax Relief
Since 6th April 2008 and until 3rd December 2014 Sole Traders and Parternships were able to claim Entrepreneurs Tax Relief on Goodwill when becoming a Limited Company.
Until the 3rd December 2014 they would claim there Capital Gains Allowance
| Period | Tax-free allowance |
|---|---|
| 5 April 2013 to 6 April 2014 | £10,900 |
| 5 April 2014 to 6 April 2015 | £11,000 |
Then claim ER which reduced the rate of tax to 10% on the gain.
But from the 3rd December they will now pay Capital Gains at the normal rates of CGT which are 18% or 28% (for Higher Rate Income Tax Payers).
This doesn’t change the potential ability of the company to offset goodwill against their Corporation Tax Return.
There are still other benefits related to goodwill as explained in this blog
The tax benefits of goodwill on incorporation?
steve@bicknells.net
The Yacht that wasn’t a benefit in kind
This is the case of Gillian Rockall v HMRC (2014) HKFTT 643.
Mr Michael & Mrs Gillian Rockall were involved in running a hotel and conference centre and providing high-end residential courses, amongst the companies assets was a 140 foot ocean-going yacht costing $11.9 million called Masquerade of Sole.
HMRC issued assessments on Mr & Mrs Rockall for the tax years 2000-2001 to 2008-2009 on the basis of personal use (benefit is normally assessed as 20% of the market value).
The Yacht was used for:
- Business Networking
- Customer Training
- Exploring Business Opportunities in the Caribbean and Mediterranean
- Friends and Acquaintances were taken on occassional trips to provide a opinion on opportunities
The Yacht was also placed with an agent for charter when not required for the purposes above.
The First-Tier Tribunal took the view that the use of the Yacht was only for Business and not for private purposes.
However under S203 ITEPA 2003 a benefit in kind would arise because the asset was at the disposal of the employees.
The Rockalls appealed to the First-Tier Tax Tribunal, on the grounds that the use of the yacht was tax-deductible under s365 of the Income Tax (Earnings and Pensions) Act 2003 (ITEPA). This requires that the item comprising the benefit in kind was used ‘wholly, exclusively and necessarily in the performance of the duties of the employment’.
The tribunal has now ruled that the yacht was bought and operated purely for business purposes and thus was fully tax-deductible for both the Rockalls.
– See more at: http://www.step.org/yacht-used-impress-customers-were-legitimate-expense#sthash.dNRhVYmG.dpuf
How do you create a Tronc?
Typically, an employee is appointed to administer the tronc and is usually referred to as the troncmaster. HMRC does not prescribe who the troncmaster should be.
Frank owns a pub and restaurant. Tips paid by cheque, debit and credit card are all passed to Sharon, the troncmaster, who has been appointed by Frank. Sharon operates PAYE on the tips that she distributes. A staff committee decides on the allocation and Frank has nothing to do with this.
Even though Frank has appointed Sharon as troncmaster he has played no part, directly or indirectly, in the allocation of the tips because he is not involved in determining who should receive tips and how much each employee should receive. In these circumstances, no NICs will be due on the tips received by the tronc members. Example from NIM02942
Y0u may also find my blog helpful
How Troncmasters can keep your tips NI and VAT Free
The Income Tax (Pay As You Earn) Regulations 2003 require an employer to
- Notify HMRC of the existence of a tronc created on or after 6 April 2004
And
- Give the troncmaster’s name (if known)
When you are notified of a tronc you should
- Confirm that there is an organised arrangement for sharing tips and determine
- How the tronc receives monies (for example employees paying in cash tips or an employer paying in credit card tips)
- Who holds the tronc monies and how (for example, is there a tronc bank account and if so who operates it?)
- On what basis are distributions made from the tronc and who decides that basis
- Which employees are tronc members
- Whether the person said to be the troncmaster accepts and understands the role (including the obligation to operate PAYE)
If you are satisfied that there is a tronc for PAYE purposes (bear in mind that a business could have more than one tronc, for example a hotel could have separate troncs for restaurant staff and housekeeping staff and each should be dealt with separately)
- Arrange for a PAYE scheme to be set up in the name of the troncmaster. Further information can be found in PAYE20160
steve@bicknells.net
HMRC Solicitors Campaign – do you have anything to declare?
You can tell HM Revenue and Customs (HMRC) about any income you haven’t declared (this is known as ‘voluntary disclosure’).
The Solicitors Tax Campaign gives you the chance to do this if you work within the legal profession as a solicitor in a partnership or company, or as an individual.
How to tell HMRC about undeclared income
- Fill in a notification form by 9 March 2015.
- Fill in a disclosure form and pay what you owe by 9 June 2015.
Use the calculator to help work out what you owe. Only use the calculator if both of the following apply:
- your tax affairs are straightforward
- you’re entitled to only basic personal allowances
There’s a different calculator if you need to tell HMRC about more than 5 years of unpaid tax.
Call the helpline before 9 June 2015 if you need more time to pay.
Help and advice
You can read more about how to make your voluntary disclosure.
Call the Solicitors Tax Campaign helpline if you need more help.
Solicitors Tax Campaign helpline
Telephone: 0300 013 4749
From outside the UK: +44 300 013 4749
Monday to Friday, 8am to 8pm
https://www.gov.uk/solicitors-tax-campaign
steve@bicknells.net
Business Accountant 