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...

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Auto Enrolment

We’re posting a series of short blogs regarding auto enrolment, if you are an employer and you have staff this WILL apply to you. Too many employers are still burying their heads in the sand, the start date for the largest employer was 2012 and the smallest employers are caught in 2017. Read on and if your affected please get in touch and we’ll help keep you on the right side of the Pensions Regulator.   What is Auto Enrolment? Automatic Enrolment is being staged in over a period of six years, which started with the largest employers in 2012. Automatic enrolment means that, rather than having to choose which pension scheme to join, members of staff are put into one by their employer as procedure. If any staff member decides not to be in the pension scheme, they must opt out. You must write to all your staff to tell them how being auto-enrolled will affect them and allow other staff to join if they request to do so. The new scheme has been introduced to promote people to stay in pension saving, this is because statistically, people are living for much longer yet too many people aren’t saving enough – if anything at all, for what is presumably going to be a long retirement. The law on workplace pensions has been made easier for millions of people to save up for their pension, particularly those on lower incomes. All UK employers have to enrol their staff automatically into a workplace pension if they meet certain criteria and make contributions. If you are an employer in the UK, you must start enrolling staff into a pension scheme from your staging date, though there is an option to postpone the enrolment for three months. Does it apply to me? Are you an employer in the UK, with staff working for you? – If so, then yes, automatic enrolment applies to you and there are things you’ll need to do. We’ll be covering these in our next...

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2014 Budget Summary

Please find below our 2014 budget summary with the most relevant changes in the budget for our customers. Individuals Personal allowances For people born after 6 April 1948, the personal tax allowance for 2014/15 is £10,000. This will increase to £10,500 from 6 April 2015. For people born on 5 April 1948 or before, the personal tax allowance for 2014/15 is £10,660. From April 2015, spouses and civil partners will be able to transfer 10% of their personal allowance to each other, which means £1,050 in 2015/16. To be eligible to make or receive the transfer, neither party must be liable to tax at the higher or additional rate. Tax rates 2014-2015 The basic rate of 20% will be charged on income up to £31,865. The higher rate of 40% will be charged on income from £31,866 to £150,000. The additional rate of 45% will be charged on income over £150,000. Companies The main rate of corporation tax will be 21% from April 2014, falling to 20% from April 2015.   VAT The VAT registration threshold with effect from 1 April 2014 will be as follows:                                                                         Registration (£)                                            Deregistration (£) UK taxable supplies                       81,000                                                                   79,000   ‘Relevant Acquisitions’ from other EC Member States              81,000                                                                   81,000   Annual Investment Allowance   To continue to support business investment, the Government is doubling the Annual Investment Allowance to £500,000 from April 2014 until the end of 2015.   Other news   From 1 July 2014, cash and shares ISAs are to be merged into a New ISA – NISA – with an annual tax-free savings limit of £15,000. Savers will now have complete flexibility over the cash and shares mix within the overall limit of £15,000.   From April 2015, the starting rate of tax for savings income will be reduced from 10% to nil. The maximum amount of taxable savings income that will be eligible will rise to £5,000 from £2,880.   From 1 June 2014, the cap on Premium Bonds will rise from £30,000 to £40,000, increasing further to £50,000 in 2015/16. From August 2014, two £1 million prizes per month will be on offer, instead of the current one.   And finally…   HMRC is going to be given debt collection powers to recover money direct from the bank and building society accounts, including ISAs, of debtors who owe over £1,000 of tax or tax credit debts. HMRC will use this route after the debtor has been contacted ‘multiple times’. A minimum of £5,000 will be left ‘across’ debtors’ accounts after the debt has been recovered. I think we’ll blog more about this later, this is a new tactic by HMRC who don’t have a reputation for getting their calculations right and so this is probably something to be concerned...

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Personal 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...

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RTI Penalties

RTI Penalties HMRC had threatened penalties for those employers that don’t comply with the new RTI rule, here’s an update to see what the latest is. What is RTI? (Real Time Information) Starting from April 2013, all employers must send details of salary, tax and national insurance to HMRC via the internet each time they make a payment to an employee. This means that the end of year returns P35 & P14 are no longer required and so there won’t be any late filing penalties for these documents. Instead penalties will be imposed for missing the RTI deadlines. Penalties HMRC have announced the late notification penalties won’t apply for the first year of RTI and instead they’re working on a fair and practical way to implement these from 2014. PAYE errors The RTI submissions (Full Payment Submissions) won’t be subject to fines for late submission in the first year however penalties will still be charged under the existing rules for employers who make PAYE errors. Late Payments Interest and penalties will continue to be charged on late payments however it is worth noting that under RTI it will be clearer to HMRC when a payment is late and to calculate the interest and penalty due. Watch this space for further information and if you have any questions please don’t hesitate to get in touch. Ben Courtley West Chartered Certified...

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PAYE: 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....

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