Accountants Reading News

Christmas gifts and parties

Posted by: edwinsmith on November 16th, 2012

Just a reminder of the tax implications of Christmas parties and gifts - the implications for employees and employers can be found on our earlier news article tax on Christmas gifts and parties.

Expenditure on business entertaining and gifts is not generally an allowable expense against profits for tax relief in a business. However, an employer can obtain tax relief on a staff entertainment event such as a Christmas party or sporting event so long as the entertaining is wholly and exclusively for the purposes of the trade and is not merely incidental to entertainment which is provided for customers or others who are not employees. ‘Employees’ is extended to include retired members of staff and the partners of existing and past employees.

Whether or not the entertaining is incidental will depend on the nature of the occasion. If the employer would not have paid for the entertaining had the guest not been present, then the event is business entertainment and the entertainment of the employee is incidental to this. The total cost of the guest and the employee would not be allowed as a deduction against profits.

Gifts tend to follow the same rules as business entertaining and are not allowable as a deduction against profits. One exception to this is small gifts carrying a conspicuous advertisement and which fulfil the following conditions:

The gift is not food, drink or tobacco, nor is it a token or voucher exchangeable for goods.
The cost of the gift (together with the cost of any other such gifts to the same recipient in the relevant tax period) does not exceed £50.

Examples of allowable gifts are diaries, pens and mouse mats with the advertisement on the gift itself, and not just on the wrapping.

The above is a summary of some of the rules on gifts and business entertainment. If you would like more information then please contact us.

Filed under: Employers, PAYE, Tax

Child Benefit changes

Posted by: edwinsmith on November 8th, 2012

From 7 January 2013, the High Income Child Benefit charge will be introduced. This will affect you if the following apply:

Either you or your partner have income over £50,000 (in a tax year), and
Either you or your partner is entitled to receive child benefit.

You will also be affected if during a tax year you have an individual income of more than £50,000 and someone else is entitled to receive Child Benefit for a child who lives with you because they contribute at least an equivalent amount of Child Benefit towards the child's upkeep, for example pocket money or clothes. NB: it doesn't matter if the child that is living with you is not your own child.

If your household is affected, the person with the higher income may have to pay a tax charge based on the actual income and the child benefit received. Therefore you may wish to either stop receiving the Child Benefit, or continue to receive Child Benefit and use the self assessment system to calculate the tax charge each year.

If you choose to stop receiving your payments, this will not affect your entitlement to Child Benefit, and you should still complete a claim form if you have not already done so. This is because Child Benefit:

can help you qualify for National Insurance credits that can protect your entitlement to State Pension
can help protect your entitlement to other benefits such as Guardian's Allowance
ensures your child is automatically issued with a National Insurance number before their 16th birthday

If you choose to continue receiving Child Benefit, the higher earner in the household will be subject to a tax charge each year equivalent to 1% of the Child Benefit received for every £100 of income over £50,000 in a tax year. As such, households where the higher earner has income of £60,000 or more will receive a tax charge equal to 100% of the Child Benefit received.

Example

Your individual adjusted net income is £54,000. You are entitled to Child Benefit for two children of £438 for the period from 7 January 2013 to 5 April 2013.

Your tax charge will be worked out as follows:

Step one: income over £50,000 = £4,000

Step two: determine the percentage rate to be applied to the result from step one, so £4,000 ÷ 100 = 40 (%)

Step three: £438 x 40% = £175

'Your tax charge will be = £175

To estimate the High Income Child Benefit charge applicable for your household click here

A full guide on the changes introduced by the High Income Child Benefit charge can be found on the HMRC website.

If you are unsure whether these changes will affect your household, or to speak to one of our qualified accountants contact us

Filed under: Benefits, Self Assessment, Tax

VAT flat rate scheme – be aware of the pitfalls

Posted by: edwinsmith on November 2nd, 2012

Although there are benefits to the VAT flat rate scheme which is available to small businesses there are some pitfalls that can easily be overlooked. For further details on scheme HMRC - VAT Flat rate scheme for small businesses.

The main principle of the Flat Rate Scheme (FRS) is that the VAT paid to HMRC is based on a flat rate percentage (determined by type of business) being applied to the gross income of the VAT registered trader.

Gross income includes all business income (zero rated and exempt) unless it falls outside the scope of VAT. As land income is considered as business related under the VAT regulations then VAT could become payable on property rental income.

Therefore under the FRS it would be quite easy to overlook paying VAT on zero rated and exempt income related to the business such as property rental income and sale of business cars.

As an example a sole trader who has rental income (even if income separate to business such as income from a residential letting) then VAT would be payable on the rental income at the flat rate applicable. This would not apply to jointly owned properties in this scenario.

When assessing the advantages of using the FRS the effect of any zero rated/exempt exempt income should be considered.

Please contact us for further advice or assistance concerning the VAT Flat Rate Scheme.

Filed under: VAT

Dates and deadlines: November 2012

Posted by: edwinsmith on November 1st, 2012

1 November: Corporation tax payment for company not within the instalment regulations: year ending 31 January 2012

2 November: Submission of form P46 (car) for changes in quarter to 5 October 2012

5 November: End of month 7 for PAYE

7 November: Online VAT return due to be filed and electronic payment of VAT due to be cleared into HMRC bank: quarter ended 30 September 2012

12 November: Direct debit VAT payment will be taken: quarter ended 30 September 2012

19 November: CIS monthly return deadline: month ended 5 November 2012

19 November: Cheque payments due for PAYE/NI, student loan and CIS: month ended 5 November 2012

22 November: Electronic PAYE/NI etc payments to be cleared into HMRC bank: month ended 5 November 2012

30 November: Company tax return CT600 due to HMRC: years ending 30 November 2011

30 November: Company accounts (Private Limited Co) due to be filed: years ending 29 February 2012

30 November: Company accounts (Public Companies) due to be filed: years ending 31 May 2012

1 December: Corporation tax payment for company not within the instalment regulations: years ending 29 February 2012

Filed under: Company Secretarial, Dates and deadlines, Employers, PAYE, Tax

Forthcoming pension changes for employers – Work Place Pensions

Posted by: edwinsmith on October 26th, 2012

If you are an employer with staff:

aged between 16 and 74
working in the UK
from whom you deduct income tax and National Insurance contributions

your duties regarding pension provision will change over the next few years.

The new system is known as ‘auto enrolment’. The specific duties you will face will depend on the ages and earnings of your staff, and will commence on your staging date.

To understand when these changes will affect your business, our publications page includes a table of the various staging dates announced by The Pensions Regulator. To access this document please click here.

Over the coming weeks we will publish a useful guide summarising the key duties employers will face and which employees must be ‘auto-enrolled’ into a pension scheme.

For more information on pensions and employment, please contact us.

Filed under: Employers

Using form P50 to claim tax back

Posted by: edwinsmith on October 19th, 2012

Form P50 is used when you have stopped working and you wish to claim back overpaid tax prior to the end of the tax year. It can only be used in certain circumstances where you have stopped working and either;

You have been unemployed for four weeks or more, or
You are not claiming one of the taxable benefits listed below, or
You do not expect to go back to work in the next four weeks, or
You have retired permanently and are not receiving a pension from your old employer, or
You have returned to full-time study

The taxable benefits which exclude you from a tax claim using form P50 are:

Jobseeker’s Allowance (JSA)
Taxable Incapacity Benefit (IB), Note IB is usually taxable if paid for more than 28 weeks.
Employment and Support Allowance (ESA)
Carer’s Allowance.
Contribution-based Employment and Support Allowance (ESA).

In completing the form you will need to tick one of the options in the declaration as follows to confirm that either:

You have been unemployed for four weeks or more and have not claimed any of the taxable benefits listed on page one;
You have retired from work and do not get a pension from an old employer;
You have returned to full-time study; or
You do not expect to go back to work (including part-time or casual employment) before the start of the new tax year on 6 April.

You will need to send parts 2 and 3 of your P45, details of employee leaving work form, given to you by your previous employer, to HMRC with your P50 claim form. HMRC will calculate any refund due based upon your declaration and send it to you together with a replacement P45 reflecting the revised tax paid for the year.

Should you make a declaration that you do not expect to go back to work but then do, you may then pay tax on the whole of your income as your personal allowances may have already been fully used.

The P50 claim can be downloaded from HMRC website but please contact us for further help and advice if it is needed.

Filed under: PAYE, Tax

Real Time Information – changes to PAYE reporting

Posted by: edwinsmith on October 11th, 2012

Changes to the current system

Currently employers in the UK are required to report to HMRC at the end of each payroll year, summarising the payments to their employees and the deductions made for Income Tax and National Insurance Contributions (NICs) using a P35 employers year end return and a P14 for each employee.

From April 2013, almost all employers will be required to make regular reports to HMRC showing the employee payments, deductions (E.g. Income Tax, NICs and Student loans), and details of any starters or leavers in each payroll period. The reports, known as a full payment submission (FPS), will need to be submitted every time a payment is made under PAYE and should include details of all employees, including those earning below the NIC lower earnings limit (£107 per week for 2012/13).

A summary of the key RTI facts is available in the publications section of our website. Please contact us if you are unsure about how the changes will affect your business.

Filed under: PAYE

Audit threshold changes

Posted by: edwinsmith on October 5th, 2012

A new Statutory Instrument has been issued that amends the Companies Act 2006 in respect of accounts and audit exemptions for accounting periods ending on or after 1 October 2012. The new rules apply to companies and limited liability partnerships.

Audit thresholds for small companies have been aligned with accounting thresholds for small companies. Small companies will therefore be entitled to an exemption from mandatory audit if they meet two out of the three mandatory criteria:

No more than 50 employees;
No more than gross assets of £3.26 million;
Less than £6.5 million in turnover.

There are also new exemptions from mandatory audit for certain subsidiary companies and dormant subsidiaries from preparing and filing accounts.

Changes also make it easier for companies who currently use IFRS(International Financial Reporting Standards) voluntarily to switch from IFRS to UK GAAP when preparing their accounts.

Is your year end 30 September 2012? Are you required to have an audit under the old rules but not the new rules? If so and you would be interested in not having an audit for the year to 30 September 2012, contact us.

For further details please contact us.

Filed under: Audit

Dates and deadlines: October 2012

Posted by: edwinsmith on October 1st, 2012

1 October: Corporation tax payment for company not within the instalment regulations: year ending 31 December 2011

1 October: National Minimum Wage increase comes into effect

2 October: HMRC Tax return initiative deadline

5 October: Notify HMRC of chargeability to Income Tax / Capital Gains Tax from this date if not within Self Assessment for 2011/12

5 October: End of month 6 for PAYE

7 October: Online VAT return due to be filed and electronic payment of VAT due to be cleared into HMRC bank: quarter ended 31 August 2012

12 October: Direct debit VAT payment will be taken: quarter ended 31 August 2012

14 October: CT61 quarterly return and payment deadline: quarter to 30 September 2012

19 October: CIS monthly return deadline: month ended 5 October 2012

19 October: Quarterly nil payment notification: quarter to 5 October 2012

19 October: Cheque payments due for PAYE/NI, student loan, CIS and PAYE Settlement Agreements: month ended 5 October 2012

22 October: Electronic PAYE/NI etc payments (inc PAYE Settlement Agreements) to be cleared into HMRC bank: month ended 5 October 2012

31 October: Deadline for submission of paper self assessment returns for 2011/12

31 October: Company tax return CT600 due to HMRC: years ending 31 October 2011

31 October: Company accounts (Private Limited Co) due to be filed: years ending 31 January 2012

31 October: Company accounts (Public Companies) due to be filed: years ending 30 April 2012

1 November: Corporation tax payment for company not within the instalment regulations: years ending 31 January 2012

2 November: Submission of form P46 (car) for changes in quarter to 5 October 2012

Filed under: Company Secretarial, Dates and deadlines, National insurance, PAYE, Self Assessment, Tax, VAT

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