HMRC – Making Tax Digital
Below is a brief summary about the ‘Making Tax Digital’ consultations and proposals from HMRC. HMRC’s vision is for businesses to be able to easier understand and manage their tax affairs. It wants to make greater use of the information that it already holds such as bank and building society interest to make things easier on the tax payer without them having to compile this information again. Digital record-keeping will be required from 2018 for most businesses, sole traders and landlords in order to report quarterly to HMRC. HMRC aren’t looking to become software providers, they will expect the tax payer to use third party software although they are trying to ensure free options are available. Those with income below £10,000 will not be required to use the new ‘making tax digital’ system. Further thresholds haven’t been decided yet. This is being looked at while HMRC are reviewing how they can simplify the tax system. Other areas they are looking at are the thresholds for cash vs revenue accounting and similar areas. One thing we can say for certain is that tax administration in the UK will look very different in 5 years time. At Courtley West we keep up to date on all the current developments at HMRC and we proactively engage with many of our clients using the cloud based book-keeping systems which ultimately will be very instrumental in the delivery of the quarterly reports. As always, if you have any queries about how this may affect you or you’d just like to know how we may help your business, please get in...
read morePersonal Expenses and Tax
This crops up time and time again and so we thought we’d write up a little article to let you know where you stand with the taxman and how it works. The basic rule for work-related expenses is that they are tax deductible where they are incurred wholly and exclusively for the purpose of your job. This means that if you personally pay for something that is related to (for example) business travel and then the company reimburses you, the company can claim a tax deduction and there is no income tax charge on you. However if the company pays you for a something of personal benefit to you, then you will be taxed on it. (Unless you have an exemption.) Overnight accommodation Let’s take overnight accommodation and related expenses as an example. The bill for stopping in a hotel and the meals when you stay away on business won’t result in a tax bill (the wholly and exclusively rule). However if the company pays for extras deemed for your personal benefit, for example use of the hotel gym or a pay-per-view movie then these are taxable. If the extras are included in the room bill and not itemised separately then you won’t be taxed. But what if they are shown separately? Your company can take advantage of a little tax break where these personal expenses are exempt where on average they don’t exceed £5 per night (or £10 if you’re travelling outside the UK). It’s based on an average, so if you spend £10 on the first night, then you’re still okay provided you don’t spend anything on the second night etc. A word of warning to employers though. If they opt to pay more than the exempt amount i.e. £7 per night, the whole lot becomes taxable and not just the excess over the £5. Making best use of the rules 1. You don’t actually need to incur the expenses in order to be paid by the company, therefore the company could make the payments and you get an extra £5 tax free in your pocket. 2. Make it a company policy that where any personal expenses exceed the limit, then the excess is reimbursed to the company. If you find the above interesting and would like some further assistance, please get in touch. Courtley West...
read morePAYE: Real Time Information
There is something big happening in the world of payroll and it’s going to affect all employers. HMRC are introducing “Real Time Information”. Currently, HMRC don’t really know how much is owed on your company payroll until the P35 is submitted at the end of the year. This makes it hard to chase for outstanding amounts owed without guessing. Basically, what this means for an employer is that for every pay date a submission needs to be made to HMRC detailing the amount due. When will this happen? The pilot is being rolled out in April 2012 and this will affect all employers from October 2013. How will it work? Originally, HMRC wanted this bolted onto a BACS transmission, but the majority of small firms pay their staff by normal bank transfer and not through the BACS system, in fact there might even be one or two employers out there who still pay their employees by cheque or cash! Instead, this will be an additional part of the payroll software used by employers or their payroll agents. What problems might you encounter with this new system? Please make sure your payroll figures are correct and complete before preparing your payroll, because once it’s been submitted to HMRC it will be very difficult to correct. Please make sure your payroll records i.e. names, addresses, dates of birth, national insurance numbers etc. are also correct as one incorrect piece of data in the submission will prevent the whole submission from being accepted. Regardless of which data is correct, yours or HMRC’s, if they don’t agree, it won’t be accepted. It remains to be seen how this one will be resolved – painfully, if the PAYE coding notices are anything to go by. HMRC have identified 110 pieces of information they want for each employee, the list includes, passport number and “current gender”. Hopefully they’ll narrow this list down but clearly this will create more work for HR departments. What else? Well P45’s are to be scrapped and instead we will have a “leavers statement”. We don’t know what the difference is yet. Hopefully the system will be refined before implementation though! The tip of the iceberg? HMRC have also expressed a desire to have “Centralised Deductions”. What does this mean? Employers tell HMRC what each employees gross pay is to be, the employers then give the gross payment to HMRC who then pass the net pay onto the employees. No, we don’t think they understand what they’d be letting themselves in for either. If “Real Time Information” is a success then they might consider developing this idea, but it is just an idea at the moment. Ben Storey FCCA Courtley West Chartered Certified Accountants....
read moreTax Exemption on Smart Phones
Employees who are given smart phones by their employers will no longer have to pay tax or national insurance contributions (NICs) for them, HM Revenue and Customs have said in new guidance. Previously, smart phones were only exempt from tax if they were provided by the employer solely for business purposes. This tax exemption was, therefore, unlikely to apply to everyone. Employees who have in the past paid tax and NIC’s can make a claim for a refund of any tax and NIC paid to date. The change is good news for employees as it means there’s no tax or NIC to pay on their first work mobile phone, regardless of how much the employee uses it privately. However, HMRC has said the tax exemption applies only to devices primarily designed for voice communication and specifically says mobile devices that only provide Voice over Internet protocol (VOIP) – a technology for making free or cheap calls over the Internet – will not qualify. This means that tablets and other similar devices will remain subject to the old tax rules. If you any queries regarding this news please don’t hesitate to contact us. We’re here to help. Ben Storey Courtley...
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