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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 HMRC has already withdrawn the paper version of the Employer Bulletin, which instead can be read online.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

Post Election Budget Report 2010

Posted by: edwinsmith on June 22nd, 2010

The post election budget 2010 main changes are as follows:

Income Tax

There is no change to the 2010/11 rates and allowances.

For 2011/12 legislation will be introduced to increase the personal allowance for those under 65 by £1,000 to £7,475 for basic rate payers only. The basic rate limit will not be determined until the September 2010 retail price index (RPI) figure is known.

National Insurance Contributions (NIC)

For 2011/12 the secondary threshold, which is the point at which employers start to pay Class 1 NIC, is to be increased by an extra £21 per week above indexation.

The secondary threshold for 2011/12 will not be known until publication of the RPI for September.

This change is in addition to the increase in the primary (employee) threshold already planned for 2011/12, and the 1 per cent rise in rates.

Regional Employers National Insurance Holiday

Subject to meeting the necessary legal requirements, the government will shortly announce a scheme where for the next three years new businesses set up outside of London, the South East and the Eastern regions will be exempt from up to £5,000 of Class 1 employers’ national insurance payments, for each of their first 10 employees hired in their first year of business.

The government hopes to launch this scheme by September, but any qualifying new business set up from today will qualify.

VAT Increase

The Standard rate of VAT will increase from 17.5% to 20% for any supply made on or after 4 January 2011 and any acquisition or importation taking place on or after that date.

Anti-forestalling legislation and changes to the VAT flat rate scheme percentages will also be introduced as a result of this measure.

Changes to the Payment on Account regime thresholds will be made at a later date to maintain the status quo of the scheme.

Corporation tax

The corporation tax rates for the financial year commencing 1 April 2011 will be reduced to the following rates:

  Profits Rate
Main rate In excess of  £1,500,000 27%
Small Profits rate Below £300,000 20%

 

A marginal rate will be effective between these limits.

The main rate will be further reduced by 1% each year until 2014/15, when it will be 24%.

Capital allowances on plant and machinery

The capital allowance rates will be reduced with effect from 1 April 2012 (for Corporation Tax) or 6 April 2012 (for Income Tax) to the following rates:

Writing down allowances: Rate per annum
Main Rate Pool 18%
Special Rate Pool 8%
Annual Investment allowance £25,000

 

Expenditure on long life assets, thermal insulation, integral features and cars with emissions of 160g/km or more (in the case of cars purchased on or after April 2009) is allocated to the special rate pool.

A 100% first year allowance will be introduced for the purchase of new / unused zero emission goods vehicles for 5 years commencing on 1 April 2010 (for Corporation Tax) and 6 April 2010 (for Income Tax).  This rate is subject to certain conditions.

Furnished holiday lettings

The furnished holiday lettings rules (FHL) will not be withdrawn from 6 April 2010 (1 April 2010 for companies) although the government will publish a public consultation over the summer about plans to change the tax treatment of furnished holiday lettings from April 2011.

Capital gains tax (CGT)

From 23 June 2010, the rate of CGT for individuals where their total taxable gains and income is below the higher rate threshold will remain at 18%. However, for gains above that amount, the tax rate increases to 28%. For trustees and personal representatives, all taxable capital gains will be taxed at 28%.

The rate of CGT for gains qualifying for entrepreneurs’ relief remains 10 per cent. The lifetime limit on gains qualifying for entrepreneurs’ relief is increased from £2 million to £5 million. This applies for gains made on or after 23 June 2010.

The annual exempt amount remains at £10,100 for 2010/11.

Gains arising in 2010/11, but before 23 June 2010, will continue to be liable to CGT at 18% and will not be taken into account in determining the rate (or rates) at which gains of individuals arising on or after 23 June 2010 should be charged.

Child and Working Tax Credit rates

The budget announced several changes to the child and working tax credits. Summarised below are the main changes coming into effect in April 2011.

The child element of the Child Tax Credit will increase by £150 above the Consumer Prices Index (CPI) in April 2011. The baby element of the Child Tax Credit will be removed from April 2011. There will also be changes to the thresholds and withdrawal rates as set out below:

  2010/11 2011/12
First withdrawal rate 39% 41%
Second income threshold £50,000 £40,000
Second withdrawal rate 6.67% 41%
Income disregard £25,000 £10,000

 

From April 2012, the period for which a tax credit claim and certain changes of circumstances can be backdated will be reduced from three months to one month.

Child benefit

From 2011/12, both rates of Child Benefit will be frozen for three years.

Pensions – annual allowance

The government announced that it is considering restricting pensions tax relief from 6 April 2011, by reforming the existing pension savings allowances, principally by significantly reducing the annual allowance. It has been suggested that the level of a reformed annual allowance may be in the region of £30,000 to £45,000.

The reformed allowances would replace the high income excess relief charge, which currently is due to come into force on 6 April 2011.

Individual Savings Accounts (ISA)

From 6 April 2011 the annual ISA subscription limits will be linked to the RPI on an annual basis. The new limits will be calculated by reference to the RPI for the September before the start of the following tax year, and HMRC will announce the new limits each year in advance of the start of the new tax year in which they will apply. They will be rounded to a convenient multiple of £120. In the event that the RPI is negative, the ISA limits would remain unchanged.

Please contact us at Edwin Smith if you would like to discuss the Post Election Budget Report 2010 in more detail or apply any changes to your specific circumstances.

This blog news page 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 web page.

Filed under: Budget Report, Tax, VAT

Form 42 Employment-related securities

Posted by: edwinsmith on June 21st, 2010

The 2009/10 form must be completed and returned to the Employee Shares & Securities Unit by 6 July 2010. If the form was issued on or after 8 June 2010, it must be returned within 30 days from the date of issue shown on the form.

Penalties may be chargeable where the form is received late or is incomplete or inaccurate.

The form requires details of security options granted to or exercised by employees, securities acquired by employees and events occurring after the acquisition of the securities. Where a limited company is incorporated in the UK in the year ended 5 April 2010 a report of the acquisition of the initial subscriber shares (also called founder shares) by the directors or prospective directors is not required if certain conditions are fulfilled. Details of the conditions to be met are in form 42 guidance.

The majority of newly UK incorporated companies should meet the conditions and will be relieved of the requirement to complete this form.

The facility to file these returns online has been suspended from 1 April 2010, as part of an overhaul of HM Revenue & Customs IT infrastructure so you will need to file a paper return. Since 6 April 2010 the Employee Shares & Securities Unit is being transferred from London to Nottingham and forms should be returned to the Nottingham address regardless of the address on the form.

For assistance with completing your year end forms or for further information on the above topic please contact us.

Filed under: PAYE

Tax credit renewal packs and notifying changes

Posted by: edwinsmith on June 18th, 2010

Anyone claiming working or child tax credits will shortly (or you may have already) receive a renewal pack. The forms are to help HMRC check that you were paid the right amount of money in the year ended 5 April 2010 and that you are on track to receive the right amount in the current year.

Your renewal pack may be made up of just an Annual Review notice or both and Annual Review notice and an Annual Declaration.

The Annual Review notice

The Annual Review notice gives details of the tax credits you received during the year and your personal circumstances. It also tells you how to renew your tax credits. You get an Annual Review notice only if either you just get the family element of Child Tax Credit or you claimed tax credits but didn't get them because your income is too high (a ‘nil award’). You should check that the personal circumstances you gave to the Tax Credit Office at the start of your award period are correct and that any changes that you have since reported are shown.

The Annual Declaration

The Annual Declaration asks you to provide details of your income for the tax year that started on 6 April 2009 and ended on 5 April 2010. You will need to work out your total income so that you can check if the income shown on the Annual Review notice is correct, and then correctly complete your Annual Declaration (if you were sent one).

There should be a working sheet in the notes sent with your renewal pack which you can use. Your adviser is also available to provide assistance if required. Guidance on working out your total income is also available on the HMRC website.

When to renew

If you received both an Annual Declaration form and an Annual Review notice then you should deal with the renewal as soon as possible but by 31 July deadline at the latest (unless your renewal pack states otherwise).

If you are unable to provide details of your actual income for the last tax year prior to the deadline you should renew using an estimate of your income which is as accurate as possible and make it clear that the income is based on an estimate. If you’ve given details of estimated income then you are usually required to provide actual amounts by 31 January but check your Annual Review notice to see if you’ve been given a different date.

If the Tax Credit Office doesn’t hear from you by 31 July - or the deadline on your renewal pack - they will stop your tax credits payments and send you a statement showing you whether you’ve been paid too much, or not enough, tax credits. You then have a further 30 days to provide the information asked for. If you don’t provide the information within 30 days, you will usually have to make a new tax credits claim. You will also be asked to pay back any overpayments from the last tax year - and any payments made to you since 6 April.

If you just received an Annual Review notice, then you will only need to renew if the information in the notice has changed, or if anything is wrong, missing or incomplete, the deadline remaining as above.

Keeping your details up to date

Not doing so is the main reason that overpayments of tax credits arise. It is important that you notify HMRC of any changes to your personal circumstances as soon as they arise to avoid under or overpayments of your tax credits. A penalty could also be imposed.

Please see the HMRC website for a full list of the changes which should be reported. These can be reported by contacting the tax credit helpline.

I don’t claim tax credits

If you don’t currently claim tax credits because your income is too high, you may wish to consider making a protective claim in case your circumstances change, particularly if you are self employed and your profits fluctuate. Claims can only be backdated for three months and you could miss out. If you think this could apply to you, then please contact your adviser to discuss this further.

Filed under: Tax

P9D, P11D and P11D(b) filing deadline

Posted by: edwinsmith on June 16th, 2010

The annual expenses and benefits forms are due for filing with HMRC by 6 July 2010.

If you are an employer providing benefits to employees or reimbursing expenses then you must complete one of the following forms for each employee detailing the expenses/benefits paid during the year ended 5 April 2010:

  • P9D - for employees earning less than £8,500
  • P11D - for employees earning more than £8,500

A P11D(b) form summarising the total taxable benefits and calculation of the Class 1A National Insurance due should also be completed.

To avoid a penalty all forms must be submitted to HMRC by 6 July 2010.  A copy of the P9D or P11D form should also be provided to the employee by 6 July 2010.

Methods of submission/payment to HMRC

The following methods are all acceptable ways of submitting the P9D, P11D and P11D(b) forms to HMRC:

  • Complete a paper version and send by post
  • Use the interactive version contained on the employers CD-ROM and send by post
  • File the forms electronically using the HMRC website.

Any Class 1A National Insurance must be paid to HMRC by 19 July (22 July if you pay electronically).  The HMRC website has details of how to make Class 1A National Insurance payments.

Dispensations

If you have obtained a dispensation from HMRC regarding the expenses/benefits paid to your employees then there is no requirement to report the dispensed items on the P9D/P11D form.  Our previous post details how dispensations can now be applied for online as well as by post.

For assistance with completing your payroll year end forms or for further information on the above topic please contact us.

Filed under: PAYE
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