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PAYE Tools to Replace Employer CD-Rom

Posted by: edwinsmith on March 2nd, 2011

The new online PAYE tools replace HMRC’s Employer CD-ROM. It includes all the CD-ROM’s interactive features plus an automatic update facility, to ensure the tools are up-to-date with the latest information and figures.

Employers who have used the Employer CD-ROM will need to use the new PAYE tools for the remainder of the 2010-11 tax year and for future tax years.  However, the Employer CD-ROM will first need to be updated, be downloading and installing the November Employer CD-ROM update. Please see our previous blog article on the November Employer CD-ROM update for more information. You will need to open Employer CD-ROM 2010 to ensure that the November update has been correctly installed.  Once confirmed, the online PAYE tools procedures can be completed. 

Any employer can use these tools, but they are most useful for employers with up to and including nine employees.

HMRC strongly recommends that employers keep up to speed with other important PAYE developments by signing-up to their free Employer email alerts.  Please see our previous blog article on the employers email alert service for more information.

HMRC will no longer be mailing hard copies of guidance to employers, so these alerts are now the best way to ensure employers are up to date with PAYE issues.

Please contact us if you have any questions.

Filed under: PAYE

Revised Advisory Fuel Rates – 1 March 2011

Posted by: edwinsmith on February 28th, 2011

H.M. Revenue and Customs (HMRC) have published the latest advisory fuel rates relating to mileage payments for business travel in company cars. These are as follows: 

Engine size Petrol Diesel LPG
1400cc or less 14p 13p 10p
1401cc to 2000cc 16p 13p 12p
Over 2000cc 23p 16p 17p

The new rates will be effective from 1 March 2011, however for the first month employers may continue to use the previously published rates if they choose to.

These rates will be reviewed again shortly and any changes made will be effective from 1 June 2011.  The revised fuel rates will be published on the fuel rates page on the HMRC website when they are released.

Advisory fuel rates can be used to calculate the following:

  • Reimbursement to employees of fuel used for business travel in a company car
  • Repayment by employees of fuel used for personal travel in a company car
  • Allowable input VAT on business mileage claims

A more detailed explanation of the use of these rates is on the HMRC website.

The rates applying for earlier periods are also on the HMRC website.

If you have any questions regarding the use of advisory fuel rates or mileage payments please contact us.

Filed under: PAYE, Tax, VAT

Any ideas for the Budget?

Posted by: edwinsmith on February 25th, 2011

Chancellor George Osborne is calling on the British public for ideas on how to kick-start economic growth with the launch of an online Budget idea portal.

The portal will allow members of the public, interest groups and representative bodies to send their suggestions of what they would like to see in next month's Budget.

The Budget takes place on 23 March.

Filed under: PAYE, Tax, VAT

Changes to tax relief on pension savings from 6 April 2011

Posted by: edwinsmith on February 22nd, 2011

From 6 April 2011 the rules have changed on tax relief on pension savings. The annual allowance, which is the maximum amount of pension saving that benefits from tax relief each year, becomes £50,000 (£40,000 net of basic rate tax). Pension savings in excess of this amount will be subject to a tax charge (the annual allowance charge) which will be collected via self assessment and in effect removes tax relief on this excess.

Even though pension savings may be more than £50,000 for a tax year, the charge may be reduced or not apply at all if your pension savings were less than that for earlier years. You can carry forward unused allowances from the three previous tax years to reduce the amount of tax due for a year. There is a strict order in which you use up your annual allowance. You use the current tax year annual allowance first, then use your unused annual allowance from earlier years, using the earliest tax year first. You must have been a member of a registered pension scheme to have an unused annual allowance to carry forward from an earlier year. If you have been a member of a registered pension scheme but, in one particular year, have not made pension savings for that year then you can carry forward an annual allowance of £50,000 from that year. If however, you have not been saving in a registered pension scheme then you will not have unused annual allowance to carry forward from that year.

Your pension savings in a tax year is the total of the increase in value for each scheme of which you are a member.

For personal pensions, the increase in value is the amount you have contributed in the period, grossed up to cover the basic rate tax added by HM Revenue & Customs (HMRC), for example if you pay £500 a month into a personal pension, this is grossed up to £625 a month and your pension savings for that scheme will be £7,500.

For workplace pension schemes, the value of contributions made by your employer is also included in your pension savings. Where the scheme is a money purchase/defined contribution scheme, the increase in value for the period is the gross amount you have contributed out of your pay together with amounts contributed by your employer. For defined benefits schemes, the amount of your pension savings is the increase in the value of your promised benefits over the pension input period ending in the tax year. The valuation is based on a notional ‘capital ‘ value broadly based on 16 times the amount of annual pension achieved to date and any additional separate lump sum . Your pension scheme administrator will be able to provide you with a pension savings statement if you think your savings will be over the £50,000 allowance.

For further advice, please contact us.

Filed under: Tax

Tax Treatment on Cars in Business

Posted by: edwinsmith on February 17th, 2011

Capital Allowances on Cars Acquired by the Business*

*this includes cars acquired on hire purchase

Capital allowances are available on cars purchased by the business on or after 1 April 2009 for Corporation Tax and on or after 6 April 2009 for Income Tax at the following rates which are dependent on the cars CO2 emissions. 

  • 110g/km or less – 100% first year allowance

 

  • 111g/km – 160 g/km -20% writing down allowance per annum on expenditure incurred which is allocated to the main pool

 

  • 161g/km or more – 10% writing down allowance per annum on expenditure incurred which is allocated to a special rate pool

Where expenditure on a car is allocated to either the main pool or special rate pool (where there is no non-business use of the car), there will be no balancing adjustment when the car is sold, or otherwise disposed of, unless the business is ceasing e.g. any allowances still available after deducting the disposal proceeds will continue to be written down each year at the applicable rate. There will only be a balancing adjustment on the disposal of a car when the car is in a single asset pool.

Cars purchased before 1/6 April 2009 continue to be treated under the old rule for a transitional period of 5 Years. This means that cars costing: 

  • less than £12,000 continue to be handled on the main rate pool (20% capital allowance) regardless of their emission

 

  • £12,000 or more continue to be pooled in a single asset pool with a 20% capital allowance capped at £3,000 per annum.

 

The transitional period will end on the last day of the business first chargeable period to end on or after 31 March 2014 for corporation tax and after 5 April 2014 for income tax.

Car Leasing Disallowance

For contract leased (contract hire) cars there is no restriction on the tax deductibility of the car leasing costs if CO2 emissions are 160g/km or less.

For cars with CO2 emissions over 160g/km there is a flat rate disallowance of 15% of the car leasing costs for tax purposes.

Cars Acquired by Finance Lease

The difference between hire purchase and finance lease is determined by certain tests that include whether the lessee or lessor has control of the risks and rewards of the car, how the payments are structured and by the amount of the lease payments compared to the value of the car.

We can provide advice if you should require any help to determine what type agreement you have.

Finance lease cars are depreciated over the term of the lease. Then the finance lease interest element of the payments and the depreciation are treated as allowable for tax purposes.

Please contact us if you require any assistance.

Filed under: Tax

Mobile phones and PDAs – When are they tax free?

Posted by: edwinsmith on February 7th, 2011

Mobile phones and PDAs* provided to Employees (including Directors) - When are they tax free? 

*A PDA is a Personal Digital Assistant such as a Blackberry or device with similar functionality e.g. combines functions of a mobile phone with many of the functions associated with a computer.

 Mobile Phones

There is no charge to tax on one mobile phone provided to an employee. This includes any line rental or the cost of any private calls made for that phone paid for by the employer. The phone contract must be between the employer and phone company.

(This exemption is under s319 ITEPA)

A mobile phone provided to a member of an employee’s family or household is taxable in all circumstances unless the family or household member is provided with the phone as an employee in their own right. Money an employer pays to an employee to use their own phone is taxable.

If an employer provides a mobile phone to an employee solely for business use, and private use is not significant, there is no charge to tax.

(This exemption is under s 316 ITEPA)

Therefore it is possible for an employee to be provided with two mobile phones by an employer without creating a tax charge. One phone can be provided for private use (tax exemption under s319 ITEPA) and the other phone provided solely for business use (tax exemption under s316 ITEPA).

If the employer provides two phones for private or both have mixed private and business use then only one phone is exempt. The employee and employer decide which phone is exempt and the other phones costs are chargeable as a benefit in kind.

If the phone is in the name of the employee and the employer pays the phone provider direct then the exemption for a single mobile phone will not apply. The amounts paid must be apportioned between business use and private. The basic monthly airtime tariff will always be personal if the phone is in the name of employee. Therefore only business call charges not covered by the monthly tariff can be claimed as business expenses. The private element should be treated as salary subject to PAYE/NIC.

PDA (Personal digital assistant)

A PDA such as a Blackberry is not a mobile phone and if provided to an employee must be used solely for business use (and private use is insignificant) to be exempt from tax. PDA contract must be between employer and provider of PDA.

If a mobile phone is provided for personal use and a PDA is provided to an employee and used solely for business then both will be exempt from tax.

If two PDAs are provided to an employee then only the PDA used solely for business will be tax free. The cost of the other PDA which has private use will be taxable and should be included on the P11d.

Please contact us at Edwin Smith if you require further advice.

Filed under: PAYE

Construction Industry Scheme (CIS) new penalty regime

Posted by: edwinsmith on January 31st, 2011

From October 2011, the penalties for late or non-filing of a contractor's monthly return within the Construction Industry Scheme are changing.

The first return falling within the new penalty regime will be the return for the month ending 5 November 2011.

The following penalties will apply to that return and all subsequent months' returns that are not filed or filed late:

  • A fixed penalty of £100 immediately a return is late.
  • A second, fixed penalty of £200, two months after the filing date if the return is still outstanding.
  • If the return is still outstanding six months after the issue of the first penalty, a tax-geared penalty is charged which is the greater of £300 or 5% of the amount of deductions shown on the return.
  • If the return is still outstanding twelve months after the issue of the first penalty, a further tax-geared penalty is charged which is the greater of £300 or 5% of the amount of deductions shown on the return. Higher levels of penalty apply where, as a result of the failure to file the return on time, information has been deliberately withheld.

Interest will be chargeable on any penalty paid late.

In many cases, the new penalties will be less than what would be charged now. In particular, for new CIS contractors, there will be an upper limit to some of the penalties that are charged. This upper limit will apply when new contractors first send a monthly return, if that return and any other monthly returns that are sent at the same time, are late.

Although the new penalties do not start until October 2011, any contractor who has been, or is, charged penalties for filing a monthly return late before October 2011, may ask HMRC to:

  • work out how much the penalties would be under the new rules, and, if less than the amount already charged
  • agree that their penalties should be reduced to the lesser amount.

Please contact us for help if you have recently received a penalty.

Filed under: PAYE

BillPay Website Address Changes

Posted by: edwinsmith on January 13th, 2011

The web address for paying tax to HMRC over the internet with a debit or credit card has changed from 20 December 2010 to www.santanderbillpayment.co.uk/hmrc.
This applies to the following taxes:

  • self assessment;
  • PAYE/Class 1 National Insurance;
  • VAT;
  • stamp duty land tax;
  • corporation tax; and
  • miscellaneous payments.
Filed under: PAYE, Tax, VAT

Self Employed Class 2 National Insurance Contributions – Changes To Payment Dates

Posted by: edwinsmith on December 21st, 2010

From April 2011 the payment dates for Class 2 NIC will change.

These contributions for the self employed will be paid at the same time as the self assessment tax payments are made, being 31 January and 31 July. Those paying by a monthly Direct Debit can still continue on this basis (see below for transitional changes in first year).

Payments by Direct Debit

Those currently making payments by monthly Direct Debit will have collection delayed to meet the new due dates and to bring the payment dates into line. This will mean the following.

  • for the first year only, monthly Direct Debits will stop for a short period and then start again
  • Class 2 contributions due for April 2011 will be requested from your bank in August 2011
  • payments thereafter will be monthly unless you choose to pay 6 monthly from April 2011 (see below)

A new option to pay by 6 monthly Direct Debit, collected in January and July each year, will be available from April 2011 for those who do not wish to spread their payments

Payments made by internet/telephone banking, CHAPS, Bank Giro, Post Office or post

You will receive just two payment requests from HM Revenue & Customs (HMRC) in the year, in October and April (instead of four bills), showing payments due by 31 January and 31 July respectively. You do not need to wait until the due date to make payment.

HMRC will be issuing detailed information to those affected by the changes via a series of special mail shots in the coming weeks.

Please contact us for further information.

Filed under: Tax

December Online Tax Return Registration

Posted by: edwinsmith on December 17th, 2010

Self Assessment taxpayers are being advised by HMRC to register now to be able to send their 2009/10 tax return online before the 31 January 2011 deadline.

Any outstanding 2009/10 Self Assessment returns must now be completed online as the 31 October paper-filing deadline has passed.

If you’re completing your return online for the first time, you’ll first need to register for online filing. You’ll immediately get a User ID, and an Activation Code will be posted to you. Once you’ve activated your account, you can complete your tax return online.

HMRC are advising that it’s important to register as early as possible as it can take up to seven working days to receive your Activation Code and January is normally very busy.

The alternative is to appoint an accountant to complete your tax return as most will have software that can file tax returns online.

Please contact us for more information.

Filed under: Tax
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