Tax Calendar

The following Tax Events are due on 19th July 2017:

Business Tax Events

PAYE quarterly payments are due for small employers for the pay periods 6th April 2017 to 5th July 2017.

This deadline is relevant to small employers and contractors only. As a small employer with income tax, national insurance and student loan deductions of less than £1,500 a month you are required to make payment to HMRC of the income tax, national insurance and student loan deductions on a quarterly basis.

Where the payment is made electronically the deadline for receipt of cleared payment is Friday 21st July 2017 unless you are able to arrange a ‘Faster Payment’ to clear on or by Saturday 22nd July. In year interest will be charged if payment is made late. Penalties also apply.

PAYE Student loan and CIS deductions due for the month to 5th July 2017.

This deadline is relevant to employers who have made PAYE deductions from their employees’ salaries and to contractors who have paid subcontractors under the CIS.

Employers are required to make payment to HMRC of the income tax, national insurance and student loan deductions. Contractors are required to make payment to HMRC of the tax deductions made from subcontractors under the CIS.  

Where the payment is made electronically the deadline for receipt of cleared payment is Friday 21st July 2017 unless you are able to arrange a ‘Faster Payment’ to clear on or by Saturday 22nd July. In year interest will be charged if payment is made late. Penalties also apply.

Class 1A NIC due for 2016/17.

This deadline is relevant for employers who have provided their employees with benefits for 2016/17. These benefits should have been reported by the 6th July and the amount of the Class 1A employer only NI liability due calculated on the form P11D(b).

Where the payment is made electronically the deadline for receipt of cleared payment is Friday 21st July 2017 unless you are able to arrange a ‘Faster Payment’ to clear on or by Saturday 22nd July. Interest will be charged if payment is made late. Penalties may also apply. 

We have a Tax Calendar on our website so you never miss a deadline to see future deadlines please visit our calendar  https://www.torrwaterfield.co.uk/resources/tax-calendar 

New £10 Note

New £10 Note

It has recently been revealed that the new £10 note will have the face of the famous writer Jane Austen featured on the front.

Production of the new note began last August, however it is due to be launched on the 200th anniversary of Jane Austen’s death, July 18th, and all notes are to be issued during September 2017.

The current £10 note is the oldest Bank of England bank note which is currently still in circulation and, due to developments in technology, the security features can now be updated.

New features

The new note will be made of the same polymer materials as the £5 note.

It will be slightly bigger than the polymer £5 note, however it will be smaller than the current £10 note that is still in circulation.

The polymer notes are being introduced as they are cleaner, more secure and also much more durable than the old notes.

There has been no date released for when the old £10 notes will leave circulation, however I am sure that this will be announced closer to the time.

Over 20 countries currently issue polymer banknotes which include Australia, who introduced them in 1998, New Zealand, Mexico, Singapore and Canada who introduced them in 2011.

September 2017 is nearly upon us, so just bear in mind that these new notes will be replacing the old notes shortly.

For more information please see The Bank of England website here or contact us.

Jessica Cooper, Accounts & Tax 

New Lifetime ISA

The Lifetime Individual Savings Account (ISA) is a longer term tax-free account that receives a government bonus. The accounts will be available from today (6 April 2017). HMRC have produced a helpful guide on the account. Some of which is reproduced below:

Opening a Lifetime ISA

You can open a Lifetime ISA if you’re aged 18 or over but under 40.

As with other ISAs, you won’t pay tax on any interest, income or capital gains from cash or investments held within your Lifetime ISA.

Saving in a Lifetime ISA

You can save up to £4,000 each year in a Lifetime ISA. There’s no maximum monthly savings contribution, and you can continue to save in it until you reach 50. The account can stay open after then but you can’t make any more payments into it.

The £4,000 limit, if used, will form part of your overall annual ISA limit. From the tax year 2017 to 2018, the overall annual ISA limit will be £20,000.

Example – you could save:

£11,000 in a cash ISA

£2,000 in a stocks and shares ISA

£3,000 in an innovative finance ISA

£4,000 in a Lifetime ISA in one tax year.

Your Lifetime ISA won’t close when the tax year finishes. You’ll keep your savings on a tax-free basis for as long as you keep the money in your Lifetime ISA.

Lifetime ISAs can hold cash, stocks and shares qualifying investments, or a combination of both.

Government bonus

When you save into your Lifetime ISA, you’ll receive a government bonus of 25% of the money you put in, up to a maximum of £1,000 a year.

Withdrawals

You can withdraw the funds held in your Lifetime ISA before you’re 60, but you’ll have to pay a withdrawal charge of 25% of the amount you withdraw.

A withdrawal charge will not apply if you’re:

using it towards a first home

aged 60

terminally ill with less than 12 months to live.

If you die, your Lifetime ISA will end on the date of your death and there won’t be a withdrawal charge for withdrawing funds or assets from your account.

Transferring a Lifetime ISA

You can transfer your Lifetime ISA to another Lifetime ISA with a different provider without incurring a withdrawal charge.

If you transfer it to a different type of ISA, you’ll have to pay a withdrawal charge.

Saving for your first home

Your Lifetime ISA savings and the bonus can be used towards buying your first home, worth up to £450,000, without incurring a withdrawal charge. You must be buying your home with a mortgage.

You must use a conveyancer or solicitor to act for you in the purchase, and the funds must be paid direct to them by your Lifetime ISA provider.

If you’re buying with another first time buyer, and you each have a Lifetime ISA, you can both use your government bonus. You can also buy a house with someone who isn’t a first time buyer but they will not be able to use their Lifetime ISA without incurring a withdrawal charge.

Your Lifetime ISA must have been opened for at least 12 months before you can withdraw funds from it to buy your first home.

If you have a Help to Buy ISA, you can transfer those savings into your Lifetime ISA or you can continue to save into both – but you’ll only be able to use the government bonus from one to buy your first home.

You can transfer the balance in your Help to Buy ISA into your Lifetime ISA at any time if the amount is not more than £4,000.

In 2017/18 only, you can transfer the total balance of your Help to Buy ISA, as it stands on 5 April 2017, into your Lifetime ISA without affecting the £4,000 limit.

If you would like to discuss any of this further then please get in touch.  0116 2423400 or info@torrwaterfield.co.uk

Time for new change

As you may or may not be aware The Royal Mint has revealed that a new issue of the £1 coin is to take place and is set to be released on 28th March 2017.

So why change?

Approximately 1 in 30 £1 coins are counterfeit – this in itself is a fairly high amount.

However, when you put this ratio into the estimated amount of £1 coins in circulation it is staggering.

As of March 2014, The Royal Mint estimated that there were 1,553,000,000 £1 coins in circulation of which 3.04% were counterfeit – meaning that there is around £47,211,200 of counterfeit £1 coins in circulation. The new coin should be considerably more difficult to attempt to fake due to a number of new features.

What are the features?

12-sides – New distinctive shape – making it instantly recognisable.

Bimetallic – it is made of two metals. The outer ring is gold coloured (nickel-brass) and the inner ring is silver coloured (nickel-plated alloy).

Latent image – it has an image like a hologram that changes from a ‘£’ symbol to the number ‘1’ when the coin is seen from different angles.

Micro-lettering – it has very small lettering on the lower inside rim on both sides of the coin. One pound on the obverse “heads” side and the year of production on the reverse “tails” side, for example 2016 or 2017.

Milled edges – it has grooves on alternate sides.

Hidden high security feature – a high security feature has been in built into the coin to protect it from counterfeiting in the future.

When will this happen?

The new coins will be introduced on 28th March 2017 leading to a co-circulation period where both old and new coins will be accepted. On 16th October 2017 a demonetisation period will begin where the old £1 coins are under no obligation to be accepted and should not be redistributed – they can however be deposited into most high street banks.

How can it affect my Business?

If you have a cash handling business then you need to ensure all machines that accept pound coins are compatible with the new design and if not, then your machinery supplier needs to be contacted as a matter of urgency. Once October 2017 comes around you have the right to refuse the old style one pound coins as this is the beginning of the demonetisation period. As mentioned above, once this time comes, do not worry, as the old style pound coins can be deposited into most high street banks for a significant period of time.

The pound won’t be round for much longer…

If you would like to discuss this more please contact us 0116 2423400

Brook Lucas, Accounts & Tax 

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Have you paid your self-assessment bill?

Tax Payments – How late can you be?

With the madness of the January tax return deadline, it may have slipped some of your minds to actually pay your self-assessment bill. If this is the case then you may be wondering how you will be penalised for doing so.

For those that have filed their self-assessment tax return before the deadline but have not paid the bill, there will be interest accruing at 2.75% pa for the first 30 days.

However, after 30 days from the deadline the full amount of tax due will be subject to a 5% penalty. This means that if you had a liability of £5,000 unpaid by midnight on 2 March 2017, there would be an immediate fine of £250 added to your account.

Similarly, if after 6 and 12 months from the filing deadline you have not paid the full balance, then there would be additional 5% penalties on the tax outstanding at those dates.

Furthering the example above, should there still be an outstanding debt of £5,000 on 1 August 2017 then an additional £250 penalty will be accrued and if the debt has still not been settled by 1 February 2018 then another £250 will be added. This means that within just 12 months, a £5,000 tax bill will have penalties totaling £750.

On top of this there will also still be interest accruing on both the tax and penalties. Making the estimated amount owing on 1 February 2018 £5,887.

Sam Jefferson, Accounts & Tax 

If you need further help please contact us.

ARE YOU THINKING OF SELLING YOUR BUSINESS?

Selling a business can be a lengthy and stressful process. A sale may be considered due to pending retirement, illness, a lifestyle change, or a host of other reasons. The better and more time you have to prepare for a sale, the less stressful the experience will be.

Here at Torr Waterfield, we can help you with the process, from start to finish. Here are a few pointers to help you on your way…..

  • Review the strengths and weaknesses of your business. A SWOT analysis will help you to identify and address the weaknesses and threats, and improve the strengths and opportunities before sale
  • Consider the Key Performance Indicators (KPIs) of the business, and how these can be identified and reviewed both by you and a potential buyer
  • What do you think the business is worth and what is the minimum value you would be prepared to sell it for? Just as importantly, are there likely to be potential buyers willing to pay that minimum price?
  • Consider ways to increase sales and reduce costs in the immediate period prior to sale. A business is often valued on a price to earnings ratio or earnings multiple method, so recent increased profitability can increase its value
  • Consider the infrastructure and management profile of the business, and whether the necessary skills and knowhow are sufficient in the event of your retirement/removal
  • Consider your own tax position and ensure the sale method is the most suitable to you e.g. Entrepreneur’s Relief is available for business asset and share sales fitting certain criteria. This relief allows chargeable gains on sales to be taxed at 10%, even for higher rate tax payers. Other sales methods, such as sale of assets and goodwill, may be more appropriate
  • Consider employee issues in the event of a sale; e.g. does TUPE (transfer of employment rights) apply? How will your employees react prior to and after a sale? Do you advise them of your plans and keep them up to date with progress?
  • Ensure that the position, legal or otherwise, and potential impact on a sale of any minority shareholders or partners has been taken into account
  • Consider what may happen to the business premises; will they be part of the sale? Are they owned by your Personal Pension, in which case it may be worthwhile continuing to lease the premises to the purchaser?
  • Appoint professional advisors and expert help to assist with your valuation, to help with any legal agreements that need to be drawn up and to review your tax position prior to and after the sale

You only sell your business once, so it must be done properly to ensure you get full benefit.

If you would like to find out more about selling your business, please speak to me at Torr Waterfield

Peter Morris , Director _DSC4779

 

Shared parental leave – What are you entitled to?

Shared parental leave (SPL) allows employed parents and adopters to share leave and pay with their partner to care for children from birth until their first birthday.

  • Only employees can take SPL; they must have a partner (separated partners still qualify if sharing responsibility for care of child at the time of birth)
  • SPL allows mothers (or adopters) to shorten their maternity leave (and pay) to share the leave (and pay) with their partner in order to care for children in their first year; it is the mother’s choice whether to share leave
  • The mother can only share with one person; it is her choice provided her partner satisfies the qualifying conditions
  • Even if only one parent is entitled to SPL and/or ShPP (e.g. one is self-employed or not entitled to ShPP), the other partner may still  be entitled to SPL/ShPP if both satisfy the qualifying conditions
  • The employee taking SPL must have been employed 26 weeks by the 15th week before the expected week of childbirth and remain employed in the week before the start of SPL. Their partner must also satisfy an employment and earnings test
  • At least 8 weeks’ written notice must be given to end maternity leave and start of SPL
  • SPL can only be taken a week at a time but can start mid-week. SPLIT days can be used to work part-time by agreement with employer
  • SPL can be taken by both parents at the same time or at separate times; they must decide how to take it. The mother can remain on maternity leave while the partner is on SPL
  • SPL can be taken in up to three separate blocks (unlike maternity leave) or more if the employer agrees
  • There are detailed notice provisions which must be followed
  • Employees can work for up to 20 days during SPL (SPLIT days), as well as 10 days during maternity leave (KIT days). These must be agreed with employer.

 SHARED PARENTAL PAY (ShPP) 

Can pay be transferred as well as leave?

Yes.  Statutory maternity pay (SMP) is available to female employees from the 11th week before the expected week of birth or the actual birth if earlier.  It is paid for 39 weeks (the maternity pay period – MPP) with the first 6 weeks being at 90% of pay (and then either the flat rate of £139.58 or 90 per cent if this is lower for the remaining 33 weeks.  But, only 37 weeks is available for ShPP as the mother must take the first 2 weeks after the birth. Women who do not qualify for SMP will often qualify for maternity allowance which is paid at £139.58 or 90 per cent of average earnings if this is lower.

If you wish to discuss any of this in more detail please contact us 0116 2423400 

Becky Edwards, Payroll Manager 

Autumn Statement 2016

On Wednesday 23 November 2016 our new Chancellor of the Exchequer, Philip Hammond, delivered his first (and last) Autumn Statement. 4221396001_5220447677001_5220145961001-vs

“No other major economy makes hundreds of tax changes twice a year, and neither should we” – this is perhaps the most welcome measure announced in the Autumn Statement.  In recent years the Autumn Statement has been a mini-Budget, meaning that many, sometimes significant, tax changes were being announced twice a year.  This has been problematic in terms of giving taxpayers a reduced degree of certainty regarding planning their tax affairs (plus it means I have to write an extra blog each year) so for this announcement alone, Philip Hammond gets a ‘thumbs up’ from me!

Following the spring 2017 Budget, the Budget will be delivered each autumn – spring will be reserved for a statement from the Office of Budget Responsibility to respond to their previous forecast.  The odd tweak of fiscal policy may be made each spring, if economic circumstances require it – personally I think this option has been retained so the Government are able to be more flexible in response to the future impact of Brexit (you can infer from that what you will…I’m taking it as that they have no idea what the impact will be).  I’m also hoping that an autumn Budget will give more time for us all to absorb the changes before they come into force the following April.

Our full Autumn Statement roundup can be found on our website here, but below are the main points that I think are relevant to our clients and their businesses.  A lot of the announcements aren’t new, but are instead Philip Hammond confirming that he plans to keep some of his predecessor’s policies.

Personal Tax Rates and Allowances

The personal allowance is currently £11,000 and will increase to £11,500 from April 2017.  The reduction in personal allowance for those with higher income (‘adjusted net income’ over £100,000) remains so that, from April 2017, there will be no personal allowance available where ‘adjusted net income’ is over £123,000. 

The higher rate threshold will increase from £43,000 currently to £45,000 from April 2017, for those who are entitled to the full personal allowance.

Philip Hammond confirmed his intention to keep George Osborne’s policy to increase the personal allowance to £12,500, and the higher rate threshold to £50,000, by the end of this Parliament.

Corporation Tax Rates and Allowances

The new corporation tax rates from April 2017 to March 2021 were announced at the Budget and have now been enacted – the rate will be reduced from 20% to 19% from April 2017 and a further 2% to 17% from April 2020, which will be welcomed by small and large businesses alike.

Again, this was announced in the Budget but has been kept by the new Chancellor – corporate losses (excluding capital losses) arising after 1 April 2017, when carried forward, will be able to be used against future profits from other streams.  Currently there are restrictions on how the losses can be relieved, which is restrictive for certain types of business.

National Insurance Contributions (NIC)

Previously payable by the self-employed, Class 2 NIC is being abolished from April 2018 – we knew this was coming, however what we didn’t know was how self-employed taxpayers would get entitlement to basic state pension and other contributory benefits and allowances, as payment of Class 4 NIC (also paid by the self-employed) has not in the past been ‘contributory’.  From April 2018, Class 4 NIC will become ‘contributory’ and those paying it will be entitled to state pension etc.  Those with income below the Small Profits Limit (£5,965 in 2016/17) will be able to pay Class 3 NIC, currently £14.10 per week to ‘top-up’ their entitlement.  There will no longer be the option for these individuals of voluntarily paying Class 2 NIC, for which the current rate is a mere £2.80 per week!

The Office for Tax Simplification are tasked with – you guessed it – making tax simpler.  One of their recommendations that is being implemented is the alignment of the thresholds at which employees and employers pay Class 1 NIC.

Other Payroll Matters

Having only been increased in October 2016, The National Living Wage is increasing from £7.20 to £7.50 from April 2017 and smaller increases to the National Minimum Wage are also coming in – full details on our website here

I mentioned in a blog post on 11 October 2016 that the Government have been consulting on the use of salary sacrifice schemes and on Wednesday, the Chancellor outlined the changes to be introduced from April 2017.  Salary sacrifice arrangements (other than relating to pensions, childcare, cycle to work and ultra-low emission cars) entered into after this date will no longer enjoy tax and national insurance savings – however agreements entered into before this date will remain tax and NI-free until April 2018, so subject to the administrative hurdles that have to be jumped for an effective salary sacrifice, there’s still some mileage left in them yet!

Philip Hammond continues George Osborne’s assault on company car drivers with a further 2% increase in the percentage applied to each band of company car from April 2018, and a further 3% from April 2019.  From April 2017, pure electric cars will be charged at 9%, rising to 13% in April 2018 and 16% in April 2019 – a huge increase from the 7% benefit in kind in the current year.  I can only assume this is a reaction to the amount of employers who have provided these cars to employees, and benefited from the low rate.  I do find it a little disappointing that tax incentives are introduced to encourage certain behaviours (such as the provision of electric cars) and then as soon as people actually take the Government up on their offer, it effectively gets withdrawn – this is especially harsh when it relates to company cars as many of these will be leased over a number of years and therefore the business and employees are stuck with the cars that no longer afford them the low tax charges that were in place when the vehicles were first provided.

VAT Flat Rate Scheme Anti-Avoidance

 Businesses registered for VAT under the flat rate scheme pay over VAT at a specific rate (currently between 4% and 14.5%) as determined by their type of business – it simplifies the accounting for VAT as these businesses pay VAT over to HMRC at a lower rate than the 20% they charge to customers, but do not reclaim VAT on most expenses.  For many small businesses, this can be both time-saving and money-saving.  From April 2017 a new 16.5% rate will apply to businesses with limited costs (i.e. labor-only businesses) using the flat rate scheme.  The details on which businesses will be affected by this are on our full Autumn Statement update here

Making Tax Digital

HM Revenue & Customs are consulting on various measures intended to bring the UK tax system into the digital age.  A major change is that from April 2018, most self-employed taxpayers and landlords will be required to keep their records digitally, update HMRC at least quarterly, plus submit a year end declaration.  While HMRC are keen to emphasis that this does not mean five tax returns per year, we eagerly await the details on how the proposals will work in practice when HMRC issue their response to the consultations in January 2017.

If you want to discuss any of this further then please get in touch here.

Katie Kettle, Chartered Certified Accountant

Technical Manager

 Katie Kettle Colour

Autumn Statement 2014

Yesterday, George Osborne presented what was possibly the most important Autumn Statement of his time as Chancellor.

Many of the changes outlined were, as expected, highly political and therefore may not be relevant to the majority of taxpayers. Those measures will not be explored here as we will focus on the items that are more likely to be relevant to you.  Our full round-up of the Autumn Statement can be found here.

Personal Tax

From 6 April 2015 the personal allowance (tax free amount for individuals) will increase from the £10,000 it is currently, to £10,600.  The Chancellor had previously announced in March’s budget that the allowance would be £10,500 which in real terms is worth £20 to each person.

At the same time, the income level at which higher rate tax becomes payable will increase from £41,865 to £42,385 which is worth £104 to higher rate taxpayers.

Married couples and civil partners can transfer 10% of their unused personal allowance to their spouse, if neither are a higher or additional rate taxpayer.  This means the transferrable amount will increase to £1,060 for 2015/16 – potentially a benefit of £212 to couples in those circumstances.

ISAs were repackaged into NISAs in July 2014 and from 6 April 2015 the maximum tax free investment increases £240 from £15,000.  George also announced that surviving spouses will be able to invest inherited ISA funds from their deceased partner into their own ISA and maintain the tax free status.

Peer-to-peer loans are something that is increasing in popularity, particularly due to low levels of bank lending and the economy being in a position where growth is possible.  Unfortunately, not all businesses that are lent to will prosper and could result in the loan debt “going bad” for the lender.  From 6 April 2015, individuals will be able to obtain relief for these losses against any peer-to-peer income they have.

Major changes are ahead for pensions! A lot of this was announced previously by the Chancellor and the theme is that you will have choice and flexibility over what you do with your pension.  There is no longer a requirement to purchase a lifetime annuity.  There is an option to allocate part of a pension fund into a “flexi-access drawdown account” from which any amount (which would be subject to tax) can be taken at any time, or to take a series of lump sums directly from the pension fund.  The rules relating to pensions are complex so we recommend you speak to an independent financial advisor.  If you do not have a financial advisor, please get in touch and we will introduce you to our preferred advisors.

Business Tax

In line with the plan that has been in place for a number of years now, from 1 April 2015 the main rate of corporation tax will be reduced from 21% to 20% – this means that effectively we will have a flat rate of corporation tax across all sizes of company.

Relief on research and development for companies will increase from 225% to 230%.  While this increase is fairly insignificant, it serves as a reminder that huge tax breaks are available for companies undertaking R&D activities.  This is a highly specialist area and we can help you to maximise the amount you could claim under the scheme.  R&D relief may be available to you if you work on projects that are aiming for a technological or scientific improvement on what is already out there.  If you think you may qualify for this generous relief, please get in touch.

One of the major announcements for those in the construction industry is improvements to the operation of the Construction Industry Scheme (CIS).  We welcome the proposals to simplify and improve the compliance and turnover tests that will allow more subcontractors to access and keep gross payment status (this is to receive money from their contractors without CIS deduction).  For companies, getting a refund of the CIS suffered is a lengthy process, so it will be a great thing if more subcontractors can be paid gross.

From 6 April 2015 self employed persons will pay their Class 2 National Insurance along with their income tax and Class 4 National Insurance through their tax return, based on the number of weeks of self employment.  For those that wish to spread the cost (currently Class 2 NI can be paid monthly by direct debit), HMRC will retain a facility for this.  Those with income of less than the relevant threshold will no longer have to apply for an exception, reducing the paperwork burden on self employed people with low income.

One of the announcements that could have a detrimental effect on small business is the abolition of corporation tax relief for goodwill on incorporation.  Currently, when a sole trader or partnership transfers their business to a limited company, the goodwill in the business is sold to the company.  The company then gets corporation tax relief as the goodwill is written off over the years, and the individual(s) pay capital gains tax at the Entrepreneur’s rate of 10% of the sale proceeds (after deducting the annual exemption).  Both of these preferential treatments are being taken away – companies will no longer get corporation tax relief and individuals won’t get Entrepreneur’s Relief so will pay Capital Gains Tax at 18% or 28%, depending on their level of income.  The justification for this is that the Government feel the old system was unfair to businesses that had always operated as companies.

Employment Taxes

From 6 April 2015, employers will no longer have to pay Employer NIC on employees aged under 21 on amounts paid to them under £42,385 per annum.  As most 21 year olds are paid much less than this, this is a real saving for employers that would ordinarily have to pay 13.8% on earnings over approximately £150 per week.

Another Employer NIC break was announced for apprentices up to 25 years old on earnings in the same way as above, however this will not come into force until 6 April 2016.

The Employer Allowance which can be offset against the first £2,000 of Employer NIC remains in force for next year.  If you have not yet claimed the allowance for the current tax year, please contact us, it’s not too late!

Capital Taxes

As mentioned in the Business Taxes section, a major change that affects small businesses going forward is the removal of Entrepreneur’s Relief when transferring from a sole trade or partnership to a limited company.

A positive step in this area is that gains which are eligible for Entrepreneur’s Relief but are deferred through Enterprise Investment Scheme or Social Investment Tax Relief will remain eligible for the Entrepreneur rate when the gain is realised.

Another, and probably the headline announcement of the Autumn Statement is the major reform of Stamp Duty Land Tax (SDLT).  From today (4 December 2014) each new SDLT rate will be payable only on the proportion of the property value which falls within each band.  This is a huge step in the right direction as it removes the distortion in the current system, where the amount of tax due jumps at each at the thresholds.  Where contracts have been exchanged but not completed on or before 3 December 2014, the purchaser will have the option of the old or new structure.  Anyone purchasing a property under £967,000 (which is the majority of buyers) will benefit from these changes.  For example, a purchase of £130,000 will give a saving of £500, and a purchase at £275,000 will give a saving of £4,500!  This is great for buyers and sellers alike – while the buyers benefit from the lower tax, sellers will benefit too as buyers will no longer be put off purchasing just above one of the limits, as the cliff edge approach will no longer apply.

Other Matters

A major headline that was expected was the devolution of many tax powers to Scotland.  The Chancellor went further and announced proposals for devolution to Northern Ireland and Wales also, albeit not as devolved as Scotland.

A particularly relevant announcement is the Direct Recovery of Debts (DRD) powers given to HMRC.  Under this they will be able to recover outstanding debt directly from the bank accounts of taxpayers.  As scary as that sounds, we are assured there are a number of safeguards in place to protect taxpayers including a minimum debt limit of £1,000, a guarantee that all debtors will receive a face-to-face visit from HMRC before the debt is considered for DRD, that HMRC will not take any more debt than would leave the taxpayer with less than £5,000 in the bank and thankfully, the option of appeal to County Court.  HMRC say they will use this power only in a small minority of cases (approximately 17,000 per year out of 400,000 debt cases – around 4%).  If you are struggling with tax debt, please get in contact with us – we can help you work with HMRC to come to an agreement which would hopefully avoid them resulting to these powers.

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