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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Fraudulent E-mail Regarding HMRC Tax Refund

It has come to our attention that an email is in circulation advising that you have received a tax refund from HMRC, the email then requires you to click on a link to go through the government gateway. HMRC will NEVER email you advising of a refund. See the attached report on HMRC’s website: http://www.hmrc.gov.uk/security/examples.htm Please do not click on the link in the email. The best course of action is to delete it.

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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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Key Points from the Autumn Statement 2012

George Osbourne has delivered his 2012 Autumn Statement we’ve summarised the key points covering business, individuals & pensions. BUSINESS The small companies rate of tax is to be left at 20% but the main corporation tax rate will be cut by a further 1% to 21% by 2014. Small business rate relief is to be extended by another year to 2014. INDIVIDUALS The personal allowance to go up to £9,440 next year. The 40% tax threshold is to rise by 1% in 2014 and 2015 from £41,450 to £41,865 and then £42,285. The capital gains tax annual exemption amount is to increase by 1% to £11,000 in 2014/2015. Inheritance tax limits, which currently stand at £325,000, will increase by 1% in £329,000 in 2015/16. The overall ISA savings limit will increase from £11,280 in 2012/13 to £11,520 in 2013/14. PENSIONS The annual savings limit will reduce from £50,000 to £40,000 in April 2014. From 2014/15 there will be a further reduction in the lifetime pension relief allowance from £1.5 to £1.25m. If you have any queries on the above please don’t hesitate to get in...

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Taxman Deploys more Task Forces

As part of a £900m investment, HM Revenue and Customs are deploying extra task forces to curb the activities of tax dodgers.  These teams are expected to recover more than £30m for the public purse.  HMRC have several operations set up to target restaurants, hair and beauty businesses, pubs and nightclubs as well as motor trade companies in the South West, Yorkshire, the North East, and South Wales.  Their remit is to examine the records of business and individuals and carry out other necessary investigations to catch and deal with tax avoiders and evaders. The project follows similar successful operations last year targeting market stall holders, taxi firms, restaurants and property rental businesses.  Those task forces managed to collect more than £50m from tax dodgers, and the operations are now being rolled out more...

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Tax 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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