2013 Budget Summary

The Chancellor of the Exchequer, George Osborne, delivered his 2013 budget on 20 March.  There was lots of talk about deficit and debt, growth and GDP, but what I’m sure you want to know is…..how does it affect me?

One of the headline-grabbing announcements was the acceleration of the increase in personal allowance (tax free income allowance we all get) to £10,000 – this was originally planned to come in from April 2015 but it will now come in from April 2014 instead.  The new allowance from next month is £9,440, up from £8,105 in the current year.

April 2014 also sees an introduction of an allowance of £2,000 for all businesses to use against their Employer’s National Insurance liability, which for small business will make a real difference.

The main rate of corporation tax has been falling since 2011 at 1-2% per year and from April 2015 it will be 20% – the same rate that small companies pay.  We are hoping this means that the cumbersome “associated company” rules will therefore be scrapped as we will effectively have a flat rate of tax for companies.

Part of this year’s budget that was announced early was the increase in the Annual Investment Allowance from £25,000 to £250,000 for 2 years from January 2013 – this is the amount businesses can spend on plant & machinery (not cars) each year and get a deduction for the whole cost, in full, against their profit for the year.  BE CAREFUL though if you are planning on investing in significant plant & machinery as the transitional rules are particularly complex!  Please call us (0116 2423400) and we can advise you on the most tax efficient timing for your expenditure.

Our full overview of the budget can be found on our website click here.

Training Walk – Three Peaks Challenge

The Three Peaks 24hr hike starts 29th June and Saturday saw the first training session take place in anticipation of the challenge.  Mike Waterfield arranged a walk which he regularly takes around the Narborough/Littlethorpe area. It’s a circular walk that lasted around 2.5 hours mainly due to the muddy/wet conditions as you can see in the pictures.

Abbie Henshaw one of TorrWaterfield’s semi-senior accountants took part in the walk on Saturday. At 19 Abbie is our youngest member taking part in the challenge, here are some reasons why she decided to take on The Three Peaks.

“I decided to take part in the challenge as I have never taken part in anything like this before.  I have recently joined a gym and have really enjoyed it and when this opportunity arose I decided it was something I wanted to do. I have the least amount of experience with long distance walking but I’m really looking forward to the challenge. I plan to train a lot between now and the challenge. I have been walking with another Torrwaterfield colleague, Rebecca Edwards who is more experienced so she is putting me through my paces and I plan on attending all of the organised training walks.”

The donation page is now all up and running so why not take a look and if you’re feeling generous why not make a donation. Click here to be taken to Bamboozle’s donation page.

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Payroll – Are you RTI ready?

What is RTI?

RTI,or Real Time Information, is a new system that HMRC are introducing to improve the operation of Pay as you Earn (PAYE). This new legislation is being introduced by HMRC from 6 April 2013.

So as this new legislation is fast approaching it’s important to start preparing your business now.

 The employer will need to send details to HMRC every time they pay an employee, on or before the date of payment. When the employee’s PAYE data is submitted each payday, it will be checked against the PAYE data that HMRC holds on that employee.

 Under RTI you will still continue to deduct tax and national insurance as you do today. You will also continue to make the payment of any outstanding PAYE & NIC liability to HMRC by the 19th of the next calendar month (22nd if you pay electronically).

                               

Why are HMRC introducing RTI?

HMRC are introducing this new legislation for a number of reasons:

–       To enable HMRC to have a more efficient response to PAYE errors.

–       To support the introduction of Universal Credits, this will streamline benefits into one payment.

–       To ensure that people receive the benefits they’re entitled to, to reduce fraud.

–       To provide the Department for Work and Pensions with up-to-date information about each claimant’s employment income more efficiently.

Step by step guidance to ensure that you are ready.

Step 1

To be ready to report your payroll information each payday you must do one of the following:

  • Purchase payroll software if you don’t already have any (some packages are free)
  • Update your existing payroll software to a version with this functionality (your provider can advise on this)
  • Use your accountant to do the reporting for you

Here is a list of some of Sage’s prices.

Who for? Which software is suitable for you? Price’s from… £ per month
For businesses with up to 10 employees. Sage instant payroll

£9.17

For businesses with up to 25 employees. Sage 50 payroll

£17.50

For businesses with more than 25 employees. Sage 50 payroll & their very best support package

£50.00

Online payroll for managing up to 15 employees. Sage one payroll

£5.00                     

 

Step 2

Check that you are registered for PAYE online.

 You will most likely already be registered for PAYE online. However if you are not registered yet, and you are responsible for your own payroll reporting, then you will need to register for PAYE Online. This is vital for sending payroll reports to HMRC and being advised of employee tax code changes.

Step 3

Any inaccurate data may lead to an incorrect submission; therefore you should be checking that the following information you hold for your employees is up to date:

–       Name

–       Address

–       Date of birth

–       National Insurance Number

–       Gender.

Please note that every employee will need to go on your payroll including students and casual workers.

 

Penalties for incorrect & late submission for 2013-14

Penalties for late returns

–       There will be no change to the penalties for late filing of returns for the tax year 2013-14. The current penalty regime will continue to apply at the tax year end. There will be no penalties if in-year Full Payment Submissions are submitted late.

Penalties for inaccurate returns

–       Penalties for inaccuracies may apply to in-year returns from the 2013-14 tax year.

Late payment penalties 2013-14

–       For the tax year 2013-14, HMRC will continue to use a risk-based approach to identify employers who are not complying with their payment obligations and who therefore might be liable to late payment penalties. Where employers who are not complying with their obligations are identified, late payment penalties may be charged.

–       HMRC will notify employers who may have defaulted on either a filing or payment obligation as soon as possible to enable them to get back to compliance quickly and avoid any further penalties for future failures.

 

How to deal with corrections?

If you were to make an error on your payroll there is no need to make another submission as HMRC will be made aware of this when you make your next submission. This is done by reviewing the “year to date” figures. However you will need to ensure that any errors are rectified under your own payroll system. 

Thank You,

Lucy Durham 

Lucy Durham April 2012

torrwaterfield are taking on The Three Peaks

Back in 2009 Torr Waterfield completed the Yorkshire three peaks challenge. Well that was just the warm up…..now it’s time for the real thing. The Torr Waterfield team are taking on all three peaks Ben Nevis, Scafell Pike and Snowden.

The aim is to complete the three peaks in 24 hours and raise as much money as possible for Bamboozle Theatre Charity. Please click here to take a look at the wonderful work they do. 

The Basic Outline of the challenge:

Friday 28th June – Travel to Fort William (420 miles – 8 hours) & stay overnight

Saturday 29th June – 5pm start climbing Ben Nevis (1344 meters – 10.5 miles up and down)

10pm – Finish Ben Nevis and start drive to Scafell Pike (245 miles – 6 hours)

Sunday 30th June – 4am Arrive and start climbing Scafell Pike (978 meters – 6 miles up and down)

8am Finish Scafell Pike and start drive to Snowdon (213 miles – 5 Hours)

1pm Arrive and start climbing Snowdon (Miners track) (1058 meters – 8 miles up and down)

5pm FINISH Snowdon

Over the next few months leading up to the challenge there will be lots of training (and no doubt lots of blisters). We will keep you posted each week with how the training is going, the donations being raised and why members of the team chose to take on the demanding challenge. 

Are you trading fully protected?

 

Are you worried about customers paying ?

Suppliers chasing you for overdue invoices ?

If you have answered YES to both of these questions then you should consider trading through a limited company. 

If things go wrong (sometimes even with the best planning they do) if you trade through a limited company you could walk away with no personal liabilities therefore protecting you & your family.

Please contact us to find out more.  We can even incorporate the limited company in 24 hours.

Business Records Checks by HMRC

On 1 November 2012, HMRC started a ‘new approach to Business Records Checks’ (BRCs). The target audience of these checks are small and medium sized businesses.

What are Business Records Checks?

In the context of income tax, a BRC is a check by HMRC that the records of a business are adequate to allow a taxpayer to submit an accurate income tax return.

HMRC consider that a large number of small and medium sized businesses are making errors which are not individually significant but the cumulative effect for the total tax collected from such businesses is very high. HMRC therefore see BRCs as a cost effective way of checking the adequacy of business records.

What are adequate records?

This is one of the difficulties. Unfortunately there is no precise answer to this question.  For a trading business, the following would be regarded as adequate records:

  • a record of all sales and takings, including cash receipts. For example till rolls, sales invoices, bank statements, and paying-in slips;
  • a record of all purchases and expenses, including cash purchases. For example purchase invoices, receipts, bank and credit card statements, and cheque book stubs.

Why might a business be selected?

HMRC select a number of businesses based on their view of businesses which are more likely to be at risk of having inadequate records. The criteria for HMRC’s computer driven risk analysis is not known but, for example, a business with a lot of cash transactions is likely to be seen as higher risk.

What is involved in a BRC? 

After the selection process the following may happen.

  • HMRC will contact the business, initially by letter, advising that the business has been selected for a BRC and HMRC will get in touch, normally by phone, within a few days.
  • In the phone call, HMRC will ask approximately 15 questions about the business records to help them determine the adequacy of the records.
  • From the replies given the HMRC officer:
  • will assess whether you are likely to be able to submit an accurate tax return from your records. No further action will be taken at this stage;
  • may feel you could do with some additional help and support to put your records in order. The HMRC’s Business Education and Support Team will subsequently contact you;
  • may decide you are at risk of keeping inadequate records in which case they will state that you need a face to face visit.
  • In each case, HMRC will tell you during the call.

What should you do if you receive the letter about BRC?

If you do receive a letter, we would recommend that you contact us as soon as possible. We can then advise you as to whether it is better if we contact HMRC on your behalf. We may be able to answer the questions without you having the stress of answering them.

If you would prefer to deal with the phone call yourself, then do so but if as a result of the call, HMRC state that you need a face to face visit, please contact us before the visit. We will be able to attend the meeting to ensure that the HMRC officer comes to a reasonable conclusion as to the state of the records and what action may be necessary to remedy any deficiencies.

Please do not take the prospect of these visits lightly. If HMRC consider that the records are inadequate and no changes are made, HMRC may apply a record keeping penalty (usually £500).  That won’t necessarily be the end of the problem as when your tax return is submitted, HMRC are more likely to open an enquiry into the reported profits.

If you would like any more information please contact us.

Payroll – In Real Time

From 6th April 2013 there will be significant changes in the way that payroll information is submitted to HMRC under Real Time Information (RTI).

Please click here to read our briefing which provides an overview of these changes.

The new procedures will not only impact on how the information has to be submitted but also the timing and this will result in employers needing to change their payroll procedures.  Whether you operate your own payroll or your accountant deals with the payroll for you it is important to be aware of the imminent changes.

If you calculate your own payroll, you need to ensure that your software is RTI compatible and that you are aware of your obligations as from 6 April 2013. If you operate sage payroll, then V16 onwards is RTI compatible and we can provide training in February & March 2013 if required.

Please contact us if you wish to discuss this with a member of our team.

P.S. Since our briefing was compiled, HMRC have changed the Payment Submission deadlines for casual workers etc paid in cash on the day.  The up to date legislation can be found at  http://www.hmrc.gov.uk/news/rti-paye-returns.htm 

2012 Autumn Statement

On Wednesday 5 December the Office for Budget Responsibility (OBR) published its updated forecast for the UK economy. Chancellor George Osborne responded to that forecast in a statement to the House of Commons later on that day.

In the period since the Budget in March a number of consultation papers and discussion documents have been published by HMRC and some of these proposals are summarised here. Draft legislation relating to many of these areas will be published on 11 December. We will provide an update for you on 12 December if significant changes are announced.

Our summary also provides a reminder of other key developments which are to take place from April 2013.

The Chancellor’s statement

His speech and the subsequent documentation was a ‘mini-Budget’ announcing tax measures in addition to the normal economic measures.

Our summary concentrates on the tax measures which include:

  • Changes to personal allowances and tax bands
  • Changes to pensions reliefs
  • A tenfold increase in the Annual Investment Allowance to £250,000
  • A further reduction in the main rate of corporation tax
  • Announcements regarding the General Anti Abuse Rule and other ‘abusive arrangements’.

To read our summary click here 

This is no fairy tale – A Guide to the Child Benefit Change

The ‘high income’ Child Benefit charge is set to come into effect from 7th January 2013 and the Government estimate that it will impact on 1.2 million families. You may have received a letter from HMRC regarding this.

To help you to decide if this affects you, please http://www.torrwaterfield.co.uk/briefings/briefing-child-benefit to read our briefing which provides a clear and concise summary of what you need to know about the impending Child Benefit charge. It highlights some of the practical problems to be considered in deciding whether the charge applies, and on whom it falls, as well as identifying what action could or needs to be taken.

Please note that this does not affect your 2012 self assessment tax return, but when your 2013 tax return is completed (next year) your accountant will be asking about details of the Child Benefit that you have received during the period from 7 January 2013 to 5 April 2013, as you may be required to pay this back unless you have elected not to receive it.

Please be aware that the Child Benefit charge is completely separate to the Child Tax Credit which is administered by a separate HMRC system and is not reportable on your self assessment tax return.

Should you be VAT registered ?

If your sales in the last twelve months have been over £77,000, then you will almost certainly need to be VAT registered.

Once registered then VAT must be considered every time that you make a sale.

The standard rate of 20% will apply to most sales and the default position is that you will be required to complete a VAT return every 3 months.  There are alternative ways to complete your VAT Return such as Cash Accounting where you only pay the VAT over to HMRC when you have been paid !, Annual Accounting – where you pay a fixed monthly standing order and only complete one VAT return per year, Flat Rate Scheme – where you pay a fixed % of your gross sales but do not claim any VAT back on your purchases.

As you can see there are many different options and professional advice is required to see which is best for your business and it is very important that your bookkeeping reflects the scheme that you are on.

It is important to check the details which are available at hmrc.gov.uk or contact us to talk through the different options.