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Additional self assessment deadline to consider

Posted by: edwinsmith on October 7th, 2010

In addition to the self assessment tax return filing and payment deadline of 31 January 2011 for the year to 5 April 2010, there is a further deadline to consider.

If the tax due to HMRC for the year to 5 April 2010 is less than £2,000 then the amount can be collected through your PAYE code number for 2011/12, providing that you have active employment or pension income. This will spread the tax over the year to 5 April 2012 by increasing your monthly PAYE deductions, effectively paying the 2009/10 tax monthly from April 2011.

If you would prefer the option to pay this way then your tax return must be submitted electronically to HMRC by 30 December 2010 (or manually by 31 October 2010).

Please contact us if you have any questions or to discuss this further.

Filed under: Tax

Please tell us, because the taxman won’t be

Posted by: edwinsmith on September 30th, 2010

As part of a cost cutting measure, HM Revenue & Customs (HMRC) have reviewed the forms it sends to tax agents (accountants) and advisers and decided that some forms will no longer be issued to agents and the issue of some other forms will be suspended in the meantime and reviewed further.

The most important form changes are listed below.

Being withdrawn September 2010

  • P800 - Tax Calculation form

 

Being withdrawn October 2010

  • SA 250 - Letter telling the customer about their Unique Taxpayer Reference (UTR) and detailing the requirement to complete an annual Self Assessment tax return

 

  • SA 251 - Letter to advise a client that HMRC will no longer require future Self Assessment tax

 

Being withdrawn December 2010

  • P2 - PAYE Coding Notice - before the 2011/12 annual coding run

 

We recommend that if you receive any of the above forms to forward a copy to us as soon as you receive it so that we can review the form, making any corrections and have the records on file.

Please see the HMRC’s website for a full list of agent form changes and please contact us if you would like to discuss these changes further.

Filed under: Tax

Employers CD-ROM update September 2010

Posted by: edwinsmith on September 23rd, 2010

If you are using the 2010 CD-ROM, HMRC have issued an important update.

You should download and install the Employer CD-ROM September update by clicking the link. This should be completed even if you have previously updated the Employer CD-ROM.

You will know that your CD-ROM has successfully updated if the Home Page shows in the top right hand corner 'September Updated Edition'.

Installing the update now will make sure your 2010 CD-ROM is compatible with the new PAYE tools when they become available next year. HMRC will not send you a paper Employer Annual Pack and Employer CD-ROM to finalise 2010-11 and start 2011-12. Instead of a CD-ROM a set of PAYE tools will be available to download straight to your computer. They will be compatible with your 2010 CD-ROM as long as you have downloaded the September update. The tools will include:

  • the Employer Database
  • all the calculators
  • forms to fill in from the database
  • learning modules

We will alert our clients nearer the time, but if you would like to receive an email alert from HMRC when the new downloads are available please review our previous article Employer email alerts service to register.

Filed under: PAYE

NIC holiday for Employers

Posted by: edwinsmith on September 16th, 2010

The government scheme to allow certain employers a 12 month holiday from paying class 1 employers National Insurance contributions (subject to certain conditions) began on 6 September 2010.

The scheme has the potential to save the employer up to £5,000 per employee for the first 10 employees hired, subject to the following conditions:

  • The business must be based in a qualifying location (explained below)
  • The business must be considered as new according to the guidance issued and have started trading during the qualifying period
  • The employees included must be hired within the first 12 months of business 

If you believe your business satisfies the qualifying conditions, you should contact HM Revenue and Customs to confirm your entitlement to join the scheme (you must not take advantage of the scheme before obtaining HMRC’s approval).

Locations covered

In order to qualify for the holiday, the business must be able to demonstrate that the principal place of business is in one of the following locations:

  • Northern Ireland
  • Scotland
  • Wales
  • East Midlands
  • North East
  • North West
  • South West
  • West Midlands
  • Yorkshire and Humber

The principal place of business is where the majority of business activities are carried out.  If there is no one obvious place of business because it is internet based or the activities are carried out equally in numerous locations, the principal place of business will be deemed as the administrative base  i.e. where your paperwork is stored or meetings are held. 

If you are unsure which region your business falls into, there is a region finder on the Government office network website.  If your principal place of business is in another European Union country you should contact the HMRC New Employer helpline.

If you believe that your business meets the location criteria and would like further information on the new business and qualifying employee guidelines, please contact us.

Filed under: PAYE

Revised tax calculations issued by HMRC

Posted by: edwinsmith on September 8th, 2010

HM Revenue and Customs (HMRC) are currently issuing letters to tax payers who they believe have under or over paid tax during the tax years 2008/09 and 2009/10. 

The revised calculations are based on information provided by employers and pension providers who have paid income to the individual after deducting PAYE and National insurance at source.

Most individuals will have paid the correct tax and therefore should not expect to receive a letter, but those who do should check the tax calculation carefully to ensure the details are correct.

In order to check that a revised tax calculation is correct, you should

  • Agree the amounts shown on the calculation to your forms P60, P11d or annual certificates for each source of income. 
  • Ensure that the correct allowances have been applied to your calculation based on your age, marital status and any other circumstance affecting personal allowance.

If you agree that your calculation is correct then you do not need to take any action as any repayment will be made to you within seven days and any payment due under £2,000 will be collected from your future income using your PAYE coding notice which will be applied to your future salary or pension. Payments due over £2,000 will be collected separately and HMRC will tell you how to make this payment.

If you believe that your calculation is incorrect then you should contact HMRC as soon as possible to inform them of the error.

In some cases, where the underpayment should have already been collected by HMRC based on information already provided, it may be possible to be granted an extra statutory concession so that you do not have to pay back the amount.  This is a rare situation and is at the discretion of HMRC, so any individual who believes this is the case should contact HMRC as soon as possible.

If you would like assistance with checking your revised tax calculation or understanding future PAYE coding notices, please contact us to arrange a consultation.

Filed under: PAYE, Tax

Send records in early to avoid 20% VAT rate on accountancy fees

Posted by: edwinsmith on August 31st, 2010

VAT will be increasing from 17.5% to 20% with effect from 4 January 2011. Therefore, it will be beneficial for non VAT registered clients to bring in their records earlier this year so that the required work, such as preparation of tax returns and/or accounts, can be carried out before Christmas in order to save 2.5 % on the VAT included on the cost of accountancy fees.

It is important to note that the accounting and tax work must be carried out before the VAT rate rise on 4 January, so the records must be received in good time to allow this to happen.  However, the deadline is more likely to be before Christmas as most offices close over this period.  A good amount of time can be viewed as approximately 4 weeks.

Alternatively, if you make a payment in advance before 4 January 2011, the VAT tax point becomes the payment date and will incur VAT at 17.5%.

With the 2009-2010 self assessment tax returns deadline being 31 January 2011, the VAT rate change provides a good financial incentive to send records in early to meet the deadline and to avoid the 2.5% increase in VAT.

Please contact us if you have any questions.

Filed under: VAT

Change to National Minimum Wage

Posted by: edwinsmith on August 25th, 2010

From 1 October 2010, the National Minimum Wage rates will increase, as per the table below.

This year is the first year that includes a minimum wage for apprentices and the new adult minimum wage rate will be extended to 21 year olds.

Old rate(per hour) Employee New rate(per hour)
£5.80 Workers aged 21 and over(previously 22 and over)   £5.93
£4.83 Workers aged 18 to 20    £4.92
£3.57 Workers aged 16 to 17    £3.64
- Apprentice under 19    £2.50
- Apprentice 19 and over but only in the first year   £2.50

 

Please contact us if you have any questions.

Filed under: PAYE

When was the last time you checked your PAYE tax code?

Posted by: edwinsmith on August 17th, 2010

Receiving a bonus, a pay rise or increasing your income in any way, could increase your tax bill by much more than you think.

Most people in the UK are entitled to a personal allowance, the amount of which depends upon your age. The personal allowance allows you to earn a specific amount of income without having to pay tax. Income in excess of your personal allowance is taxed at a variety of rates depending upon your level of income and the type of income received. From 6 April 2010, the personal allowance is reduced as your earnings increase over the current threshold of £100,000. For every £2 of adjusted net income above £100,000 you will lose £1 of your personal allowance. This means that once your net income reaches £112,950, you will not be entitled to receive a personal allowance for the current tax year.

Your adjusted net income is generally found to be your gross income from all sources less pension contributions and gift aid donations but specific advice should be taken to assess this figure.

If you are employed then your tax liability is generally deducted each month by your employer under pay as you earn (PAYE) and so most people would expect the correct tax to be paid. However, to calculate the tax, the employer uses your tax code which could be incorrect for a variety of reasons resulting in you under or overpaying tax.

If your tax code is incorrect due to an excessive personal allowance being given, a 40% taxpayer with one employment and no other income could easily have an underpayment of up to nearly £2,600 despite their salary being taxed at source.

Tax codes are generally issued by HMRC around the start of the tax year. To calculate how much personal allowance to give you in the code, HMRC base their calculations on the level of income which you received in the previous tax year. If you earned over £100,000 in the previous year, then it is likely that your personal allowance has already been reduced to an appropriate level. If you earned less than £100,000 last year and expect to earn in excess of that amount this year, then you should check your PAYE tax code. If you have a personal allowance of £6,475, then you should contact your tax office to provide them with an updated income estimate. They should then provide an updated tax code if appropriate. You may then pay more tax for the rest of the tax year.

If you complete a self assessment tax return, then any underpayment will be collected through self assessment. If you do not do so, then any underpayment will be assessed by HMRC and you may receive an unexpected tax bill.

It is in your interest to keep an eye on your level of income and the personal allowance that HMRC may have allocated you for this year and future years.

If you are worried that your tax code may be incorrect or have any more questions, then please contact us.

This article is for general information only and is not intended to be advice to any specific person. You are recommended to seek competent professional advice before taking or refraining from taking any action on the basis of the contents of this article.

Filed under: PAYE, Tax

Budget Payment Plans

Posted by: edwinsmith on August 10th, 2010

HMRC now offer a payment method which allows you to make voluntary contributions towards your future personal tax bills.

If you are registered for self assessment online and are up to date with your tax payments, you can set up a regular amount to be collected by HMRC either weekly or monthly via a Direct Debit.

The budget payment plan is a flexible method of payment and allows you to:

-    change your regular payment amounts if you wish,

-    suspend your payments for up to 6 months, and

-    cancel the payment plan at any time.

Your personal tax payments must be up to date before you can set up a budget payment plan. HMRC helpline staff can assist with bringing your affairs up to date if you require.

There are many benefits to setting up a budget payment plan including:

-    Safe and secure payments, protected by the Direct Debit Guarantee

-    Greater control over your finances

-    Spreading the cost of your future tax bills

-    Reducing the risk that you will be late in paying your tax

Those who use this scheme are effectively lending their money to HMRC without any return on your investment and so this is perhaps not a ‘good investment’. However, it may have its uses if you struggle to have the discipline to save for your personal tax or would just feel happier if you were able spread your tax payments over a number of months, regardless of the fact that some of it will be in advance of the actual due dates.

Other uses of the direct debit facility

The direct debit facility can also be used to set up single payments of personal tax such as those due in January and July each year, where applicable, which reduces the need for you to remember to pay your personal tax, only requiring you to ensure that the money is there to pay it.

When setting up a direct debit, you must allow 5 working days before you wish to make the payment.

More information regarding budget payment plans is available on the HMRC website.

For assistance with your tax calculations or to discuss how budget payment plans may help you, please contact us.

Filed under: Tax

VAT Errors and How To Correct Them

Posted by: edwinsmith on August 2nd, 2010

VAT errors can prove costly to you as failure to correct errors can result in a penalty and interest.

If you discover that you have made an error in your vat records and/or returns, then you need to correct them. How you do this will depend upon whether you have submitted the return for the vat period in which you have made the error.

If you have NOT yet completed your vat account or return for the period in which you made the error then : You can correct the error by amending your records. You should make a clear note to show the reason for the error and you should make sure that the correct VAT figure is declared on the return.

 
If you have already submitted your return then : You will need to correct the error as detailed below.

 

There are two methods for correcting any errors made as follows:

Method 1 – correction on a vat return

You can use this method to adjust your VAT account and include the value of that adjustment on your current VAT return providing:

  • the net value of errors found on previous returns does not exceed £10,000, or
  • the net value of errors found on previous returns is between £10,000 and £50,000 but does not exceed 1% of the box 6 (net outputs) VAT return declaration due for the return period in which the errors are discovered

To work out the net value of VAT errors on previous returns, you should work out:

  • the total amount due to us, if any, and
  • the total amount due to you, if any.

If the difference between the two figures is greater than £10,000 and exceeds 1% of the box 6 (net outputs) VAT return declaration due for the current return period during which the error is discovered, you must use Method 2. You must always use Method 2 if the net errors exceed £50,000 or if the errors made on previous returns were made deliberately.

Method 2 – VAT Form 652

You must use this method if:

  • the net value of errors found on previous returns is between £10,000 and £50,000 and exceeds 1% of the box 6 (net outputs) VAT return declaration due for the current return period during which the error was discovered, or
  • the net value of errors found on previous returns is greater than £50,000, or
  • the errors on previous returns were made deliberately.

You may, if you wish, use this method for errors of any size instead of a method 1 error correction. If you use this method you must not make adjustment for the same errors on a later VAT return.

You should use form VAT 652 when notifying HMRC of an error correction under this method or you can write to the appropriate office for error corrections and provide full details of the errors in a letter including:

  • how each error arose
  • the VAT accounting period in which it occurred
  • if it was an input tax or output error
  • the VAT underdeclared or overdeclared in each VAT period
  • how you calculated the VAT underdeclared or overdeclared
  • whether any of the errors resulted in you paying HMRC an amount that wasn’t due
  • the total amount to be adjusted, and
  • Sufficient detail about the error to enable HMRC to decide if interest is due

To avoid penalties or in some cases reduce them, it is important that errors are corrected immediately and that your declaration or correction is not prompted by a HMRC visit.

If we find errors in your records when we review them, we will advise you how to make the necessary corrections. If you discover that you have made an error and would like to discuss what to do next, then please contact us.

Filed under: VAT
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