Edwin Smith - Chartered Accountants
  • Home
  • About Edwin Smith
  • Accounting Services
  • Contact Edwin Smith

Employer email alerts service

Posted by: edwinsmith on July 28th, 2010

HMRC is aiming to reduce the amount of information it posts to employers by replacing it with online guidance and downloads. HMRC has already withdrawn the paper version of the Employer Bulletin, which instead can be read online. Signing up for the employer email alerts will notify you when there is new guidance and downloads available, such as Employer CD-ROM updates and other important information.

HMRC strongly recommend that all employers subscribe to the email alerts to stay up to date and to help run your payroll.

To register for the employer mailings email alert you will need your:

- Employer PAYE reference number

- Employer name

- Email address

- Telephone number and contact name.

Each registration will last for up to one year after which HMRC will send you an email asking you to re-register. This is simply to ensure that the contact details held for this purpose are kept up to date.

You won’t be able to sign up for email alerts if your company is in liquidation or receivership, or if you operate any of the following:

- the Simplified Deductions Scheme

- a scheme deducting National Insurance only

- a scheme with no employees - for example a contractor only, fees only or sick pay scheme

- a scheme designed for the taxation of electoral roll payments

- a profit sharing scheme

- a contractor only scheme

- a Taxed Award scheme

- a foreign employer who operates a special UK system

If you fall in to one of these groups, you will continue to receive paper products as usual.

Please not that only one email address can be used for each Employer PAYE reference.

Please contact us if you have any questions or refer to the HMRC employer email alert service information.

Filed under: PAYE

Furnished Holiday Lettings to continue – but for how long

Posted by: edwinsmith on July 27th, 2010

In the 2010 post election budget it was confirmed that the previously agreed abolition of Furnished Holiday Lettings (FHL) would not take place and the FHL rules will continue for 2010/11.

What is FHL

Holiday lettings are generally taxed under the property income rules however, the Furnished Holiday Lettings (FHL) rules allow holiday lettings of UK properties, and properties situated in the European Economic Area (EEA), that meet certain conditions to be treated as a trade for some specific tax purposes.

What’s the difference

Different tax rules apply to income from letting property and income from trading. Income from letting property, including holiday lettings, is normally taxed under the property income rules. However, the FHL rules allow holiday lettings that meet certain conditions to be treated as a trade for the following tax purposes:

  • loss relief;
  • capital allowances;
  • Landlords Energy Saving Allowance (LESA);
  • certain capital gains reliefs (including business asset roll-over relief, entrepreneurs’ relief, relief for gifts of business assets, relief for loans to traders and exemptions for disposals of shares by companies with a substantial shareholding); and
  • relevant UK earnings when calculating the maximum relief due for an individual’s pension contributions.

Conditions of the FHL rules

Certain conditions must be met in order to qualify for the tax treatment provided under the current FHL rules:

1. the property must be situated in the UK or EEA;

2. the business must be carried on commercially, and with a view to a profit;

3. Pattern of occupation: Total periods of longer term occupation must not exceed 155 days during the relevant period. A period of longer term occupation is a letting to the same person for longer than 31 continuous days;

4. Availability: the property must be available for commercial letting as holiday accommodation to the public for at least 140 days during the relevant period; and

5. Letting: the property must be commercially let as holiday accommodation to members of the public for at least 70 days during the relevant period. A letting for a period of longer term occupation is not a letting as holiday accommodation for the purposes of this condition.

If you let a property that is situated outside the UK but within the EEA, which otherwise satisfies the FHL qualifying conditions above, you can choose whether to be taxed under the FHL rules or under the normal rules for property businesses. However, you cannot pick and choose which of the FHL rules apply.

Likely changes

The Government is looking to introduce changes to the FHL rules from 6 April 2011 (1 April 2011 for companies). The proposed changes would:

  • Ensure the FHL rules apply equally to properties in the EEA;
  • Increase the number of days that qualifying properties have to be available for, and actually let as, commercial holiday letting; and
  • Change the way in which FHL loss relief is given.

Full details about the proposed changes will be published over the summer, for consultation.

Please contact us for more information or if you have any questions.

Filed under: Tax

Reimbursing business mileage

Posted by: edwinsmith on July 16th, 2010

Employers

Employers can reimburse employees using their own car, van, motorcycle or cycle for business travel by using tax free Approved Mileage Allowance Payments or AMAPs for short. The current rates are:

Kind of vehicle Rate
Car or van 40p for the first 10,000 miles

25p after that
Motorcycle 25p
Cycle 20p

Employees can also receive a tax free payment for carrying passengers on business journeys in their own car or van at the rate of 5p per mile.

If the employer pays more than the approved amount, the excess should be returned on form P11D or P9D. If you pay the exact amount, you do not need to notify HMRC. If you pay less (or nothing at all), the employee is entitled to a deduction for the shortfall as Mileage Allowance Relief. This can be done by completing a P87 form - Tax relief for expenses of employment, and submitting this to HMRC without the need for completing a self assessment tax return. However, the passenger rate cannot be claimed if your employer doesn't pay it.

If your business is registered for VAT you can claim input VAT on the fuel element only of the mileage allowance providing there is documentation in support of the claim. Unless the employee purchases the road fuel using fuel card, credit card or debit card provided by the employer, the employer must retain invoices issued to employees when the fuel is delivered to them. This can be a full VAT invoice or a less detailed VAT invoice. Input tax may only be claimed on the cost of fuel for business use in making taxable supplies. As such, the invoices only need to cover this amount.

HMRC accept that the amount of the invoice in many cases will not match the input tax claim in respect of business fuel in any one claim period and invoices may cover more than one period, particularly where fuel is purchased towards the end of a period. Clearly, a claim cannot be supported by a VAT invoice which is dated after the dates covered by the claim. This means, in practice, that it may be advisable for employers to arrange for their employees who use, or may use, their cars for business purposes to retain all fuel invoices. This will ensure that, at the end of the claim period, the value of business fuel is covered by an invoice.

HMRC publish their own advisory fuel rates per mile rates every 6 months but also accept rates set by recognised motoring agencies, eg RAC, AA etc. The input claim is calculated by multiplying the fuel element of the mileage allowance by the VAT fraction, currently 7/47, and then 1/6 from 1 January 2011 when the rate of VAT increases to 20%.

Records to keep of employees’ mileage

If employees are paid a mileage allowance the employer must have records for each employee showing:

  • the mileage travelled
  • whether the journey is both business and private
  • the cylinder capacity of the vehicle
  • the rate of mileage allowance and
  • the amount of input tax claimed (and VAT receipts if input is claimed)

Self-employed taxpayers

Self-employed taxpayers can compute their expenses using the above fixed rate mileage allowance per business mile if the annual turnover of their business is less than the VAT registration threshold when they first use the vehicle. This method is intended to make things simpler for small businesses. No one has to use it. Taxpayers who do not use it should deduct the actual amount they spend. In either case the journey must be made wholly and exclusively for business purposes.

Taxpayers can only use the mileage rate basis if they apply it consistently from year to year. They can only change to or from an 'actual' basis when a vehicle is replaced.

If the turnover of the business increases and exceeds the VAT registration threshold, then the taxpayer should continue to use the mileage rate basis until the vehicle is replaced.

If there is a change in the VAT threshold, then the taxpayer should continue to use the same basis until the vehicle is replaced.

Filed under: PAYE, Tax, VAT

Late PAYE payment penalty warning letters

Posted by: edwinsmith on July 9th, 2010

With the introduction of penalties for late PAYE payments, HMRC will be sending warning letters if you do not pay on time. This may be done the first time in the tax year if HMRC think the payment is late (see our previous article Penalties for late PAYE payment to be issued from 2010/2011).

The letter is not a penalty notice and is only to let you know that HMRC think a payment has been made late and that a penalty could be charged. You may not always get a warning letter and importantly you would still get charged a penalty if you have made a late payment (normally more than once in tax year).

Obviously if a payment has been made late then you need to ensure you pay on time to avoid becoming liable to a penalty in future – see below for ways to remind you of tax deadlines.

If you believe that you have been sent a letter in error then you do not need to contact HMRC. You need to make a note of why you don’t think a penalty would be chargeable in case HMRC contact you in future concerning penalty action.

HMRC will contact you before a penalty is charged and will send you a penalty notice.

Avoiding warning letters where no PAYE/NIC due 

If no PAYE/NIC payments are due then you can avoid an unnecessary warning letter or payment reminder by informing HMRC on or before your normal payment that no payment is due. You can do this using the HMRC online notification service for no PAYE/NICs payments due.

Reminders for tax deadlines

If would like email alerts to remind you of various tax deadlines there is a useful link tax deadline email alerts on the Business Link website  that will enable you to setup a tax deadline calendar personal to your business. You will need to register with Business Link and then following instructions shown in the above link and provide some basic information on your business.

Filed under: PAYE