Accountants Reading News

PAYE form P35 end of year returns question 6

Posted by: edwinsmith on April 19th, 2010

The first part of question 6 on the Employer Annual Return P35 form asks ‘Are you a Service Company?’ Please note that HMRC’s definition of a ‘Service Company’ for the purposes of question 6 includes a limited company, a limited liability partnership or a partnership (but not a sole trader) which provides personal services to third parties.

This question should be answered ‘yes’ if:

- An individual performed services (intellectual, manual or a mixture of the two) for a client or clients, and

- The services were provided under contract between the client and the service company of which at any time during the tax year, the individual performing the services was a shareholder or partner, and

- The service company’s income was, at any time during the tax year, derived wholly or mainly (that is, more than half of it) from the services performed by the shareholders or partners personally.

The second part of this question, ‘if ‘yes’, have you operated the Intermediaries legislation (sometimes know as IR35) or the Managed Service Companies legislation?’, should only be answered ‘yes’ if:

- income has been treated as deemed employment income and PAYE/NICs deducted in accordance with the Managed Service Company or Intermediaries legislation (IR35), or

- an engagement is within the IR35 rules but the deemed payment is nil because sufficient amounts of employment income has been paid.

Further help can be obtained from a HMRC helpsheet and employer guidance on page 77. Alternatively please contact us at Edwin Smith.

Filed under: PAYE

Payroll software updates

Posted by: edwinsmith on April 16th, 2010

If you run your payroll using a software package you should ensure that you have installed the latest update. If your software has an automatic update facility, then it may have been updated already. Other software providers make the update available as a download on their website or a CD Rom sent to you automatically or by request.

Although many of the personal allowances and rates have remained the same, the new 50% tax band is introduced from 6 April 2010 and the statutory maternity pay rates have also been updated. Installing the updates will not only change these items but will also ensure that you are able to run the 2009/2010 year end procedures.

If you use the HMRC Employers CD Rom to process your payroll, you should ensure that you are using the most up to date version and have installed the latest update issued in March 2010 as reported in our previous article.

Filed under: PAYE

Employers Who Don’t Need To Make Year-end Returns (form P35)

Posted by: edwinsmith on April 8th, 2010

For 2009/10, employers may not need to complete an employer year-end return but HMRC must be informed.

An Employer Annual Return form P35 is not required only if you have not had to maintain any P11 deductions working sheets during the tax year, therefore a nil P35 form. One reason for this is if no earnings have been paid in the year through that particular payroll.

You may receive unnecessary reminders or penalty notices if you do not tell HMRC that you will not be completing a 2009/10 P35. HMRC strongly recommends that you make the notification online, as it is quicker, cheaper and easier than writing or calling.

Within the online notification you will need to confirm either that you will be submitting form P11D(b) by 6 July 2010 or that no form P11D(b) is due.

We can notify HMRC online on behalf of clients if required so please contact us if this will be of use or if you have any questions.

Filed under: PAYE

Employers CD Rom Update March 2010

Posted by: edwinsmith on April 7th, 2010

Some users have experienced problems with the 2010 Employer CD-ROM. HMRC have produced a March 2010 CD-ROM update (V2.0.2) that you can download or order and it is recommended that you do this whether or not you have experienced any problems or if the problems you've experienced differ from those below. The March update will provide better error reporting which will make it easier for the helpdesk to help you should the need arise.

Known issues which the March 2010 update will fix

Once you've installed the March update the following known issues should be resolved:

- the total amount of tax and National Insurance contributions due sometimes being carried forward incorrectly to the 2009-10 end-of-year summary (P35)

- problems transferring data from the 2009 CD-ROM

- problems opening PDF forms (Windows users only)

However, as previously mentioned, please still install the update even if you haven't encountered these problems.

How to get the update

The update can be downloaded from the HMRC website.

You will need to exit or close your current CD-ROM before installing the update. And once you've installed it, you can continue using the CD-ROM with any 2009-10 data already entered – the update should fix all of the problems mentioned above.

If you've entered any data for the start of the new tax year, 2010-11, this will be deleted. You will need to re-enter it after applying the March update so this update should be installed as soon as possible.

Getting an update if you don't have internet access

If the computer on which with your CD-ROM is installed doesn't have internet access then you can do either of the following:

- download the March update on a different machine and copy it to the relevant computer (fastest solution)

- call the Employer Orderline who will post you the update on disc.

If you've already sent in your 2009-10 Employer Annual Return

You should still download and install the March 2010 update. What you do next will depend on whether your Employer Annual Return was accepted or rejected.

If your return was originally rejected then you can use the CD-ROM again to file your return. You need to do this before 19 May 2010.

If your return was accepted please contact the Online Services Helpdesk on 0845 60 55 999 who can then tell you the action you may need to take.

Further help and guidance is provided on the HMRC website or alternatively please contact us.

Filed under: PAYE

Edwin Smith client feedback questionnaire

Posted by: edwinsmith on March 31st, 2010

We are always looking at ways to improve the service we provide to you and we appreciate your comments that would help us to meet your needs. Our website includes a questionnaire for you to offer any comments you may have on our services which will help us gain a better understanding of you and your requirements. We would be grateful if you would take a few minutes to complete the client feedback questionnaire. Thank you.

Filed under: Client questionnaire

Old Bank Accounts of HMRC Are Closing

Posted by: edwinsmith on March 30th, 2010

All HM Revenue & Customs (HMRC) bank sort codes and account numbers changed during 2009 as HMRC moved its banking services to Citi and Royal Bank of Scotland Group from the Bank of England.

HMRC temporarily continued to accept payments made using the old Bank of England account details, however this will change during 2010 when the old accounts will be closed. If you’ve not yet set up your payments to go to the new accounts please do so now by reviewing the HMRC payment information.

If you pay by Bank Giro, please make sure you use one of the newly issued payslips including the new NatWest account details. If you only have payslips that contain HMRC's old Bank of England account details please contact the tax office that issued them to you and ask for replacements.

If you are paying HMRC by Direct Debit you don’t need to do anything. Your Direct Debit instruction remains active.

From 2010, if you make a payment using the old bank account numbers it may be returned. This could result in your payment reaching HMRC late, which in turn could lead to your being charged a late payment penalty, interest or surcharges.

Filed under: PAYE, Tax, VAT

Budget 2010

Posted by: edwinsmith on March 24th, 2010

Budget Report 2010 main points in summary:

Income Tax

basic rate will remain at 20%
higher rate will remain at 40%
additional rate will be set at 50%

The basic rate limit will remain at £37,400 and the starting rate limit for savings will remain at £2,440. The personal allowances will remain at their 2009-10 amounts.

From 2010/11 the amount of the personal allowance will be gradually withdrawn for all individuals (regardless of age) with "adjusted net incomes" above £100,000. The rate of reduction is £1 for every £2 above the income limit.

National Insurance

All NICs rates and thresholds are unchanged, except for two areas which are:

the Lower Earnings Limit (LEL) which is linked to the basic State Pension will increase by £2 from £95 per week to £97 per week; and
the special Class 2 rate for Volunteer Development Workers will increase by 10p from £4.75 per week to £4.85 per week, because this is linked to the LEL.

For 2011/12, in addition to the 0.5% increases already announced at PBR 2008:

the main rates of Class 1 and Class 4 NICs will be increased by a further 0.5 per cent to 12 per cent and 9 per cent respectively;
the employer rate for both Class 1A and 1B contributions will be increased by a further 0.5 per cent to 13.8 per cent;
the additional rate of Class 1 and 4 NICs will be increased by a further 0.5 per cent to 2 per cent; and
the primary threshold and lower profits limit will be increased by £570 to compensate the lowest earners.

Inheritance Tax

The Inheritance Tax (IHT) nil rate band will be frozen at its current level of £325,000 up to and including tax year 2014/15.

Capital Gains Tax

No change in the Capital Gains Tax rate of 18%.

Entrepreneurs relief increasing to £2 million from 6 April 2010.

Annual exemption of £10,100 remains the same.

Pensions

The 2010/11 Lifetime Allowance of £1.8 million and Annual Allowance of £255,000 will continue to apply at these levels for a further five tax years.

As announced at Budget 2009 there will be restricted tax relief on pensions savings with effect from 6 April 2011 for people with income of £150,000 or over but below £180,000 (although individuals with pre-tax income of between £130,000 to £150,000 may be caught by the legislation). The tax relief on pension contributions (including the value of employer contributions for those in employment) will reduce gradually from marginal rate to basic rate as income increases. Where income is £180,000 or over, tax relief on pension contributions will be restricted to basic rate. For the anti forestalling rules please refer to our previous news article 'Maximising tax relief on pension contributions – Special Annual Allowance'.

Stamp Duty Land Tax (SDLT)

On or after 25 March 2010 and before 25 March 2012 first time buyers will not pay any Stamp Duty Land Tax (SDLT) for property purchased up to £250,000.

A new SDLT rate of 5% will apply to residential property purchases for over £1 million on or after 6 April 2011.

Savers

As announced at Budget 2009, from 6 April 2010 the annual ISA investment limit for every adult is £10,200, up to £5,100 of which can be saved in cash.

VAT

The taxable turnover threshold, which determines whether a person must be registered for VAT, will increase from £68,000 to £70,000, from 1 April 2010.

The taxable turnover threshold which determines whether a person may apply for deregistration will be increased from £66,000 to £68,000.

Corporation Tax

For the Financial Year commencing 1 April 2010 the small profits rate of Corporation Tax remains at 21%.

The marginal relief fraction remains at 7/400ths for all profits.

For the Financial Year commencing 1 April 2010 the main rate of Corporation Tax remains at 28%.

Annual Investment Allowance (AIA)

The AIA from 1 April 2010 (for Corporation Tax) or 6 April 2010 (for Income Tax) will double to £100,000.

Please contact us at Edwin Smith if you would like to discuss the Budget Report 2010 in more detail.

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

End of Year Tax Planning

Posted by: edwinsmith on March 23rd, 2010

INCOME TAX

Whilst personal allowances, the basic rate of 20% and higher rate of 40% are not changing in 2010/11 there are changes for individuals with income over £100,000. If your income is over £112,950 your personal allowance will be reduced to nil. If your income is between £100,000 and £112,950 then your personal allowance will be restricted at the rate of £1 for every £2 of income above £100,000.

For individuals with income over £150,000 there is a new additional rate of tax of 50% for income other than dividend income and a new dividend additional rate of 42.5% (as opposed to 32.5%).

Any owner managed company whose shareholders may be facing the 50% rate of tax or a reduction in their personal allowance, may like to consider paying dividends prior to 6 April 2010 to take advantage of the current lower tax rates. Similarly any business with employees earning similar levels of income may wish to consider bringing forward any bonus payments to the current tax year.

Married couples and civil partners should review their positions as an income balancing exercise may produce tax savings.

Owner managed businesses should consider their cash flow requirements as withdrawing capital and reinvesting it as a loan to give tax relief could be beneficial. Careful structuring is required so please contact us if you wish to discuss this.

CAPITAL GAINS TAX

The annual exempt amount for individuals for the current year is £10,100 and gains above this amount are taxed at 18% in the current year. Have you used your annual exemption? The exempt limit and rates for 2010/11 have not yet been set.

INHERITANCE TAX

The Inheritance Tax annual exemption still stands at £3,000 per individual and can be carried forward for one year only. If an individual has not made any gifts since 5 April 2008 then they have an allowance of £6,000 to use before 6 April 2010. For a married couple or civil partners who have made no gifts they have an exempt amount of £12,000 between them.

INDIVIDUAL SAVINGS ACCOUNTS (ISAs)

The amount savers aged 50 or over in the current tax year was increased to £10,200 this year. Any saver born on or before 5 April 1960 can invest the full £10,200 in a stocks and shares ISA with one provider or up £5,100 can be saved in a cash ISA with one provider with the remainder being saved in a stocks and shares ISA with either the same or another provider. For savers who were born after 5 April 1960 the limit is £7,200 in a stocks and shares ISA with up to £3,600 being saved in a cash ISA.

From 6 April 2010 the higher limit of £10,200 applies to all savers with £5,100 maximum into a cash ISA.

Please contact us for your end of tax year planning advice to discuss your individual circumstances.

Filed under: Tax

VAT Cheque Payments By Post

Posted by: edwinsmith on March 16th, 2010

HM Revenue and Customs (HMRC) has announced that from 1 April 2010 all cheque payments by post for VAT will be treated as being received by them on the date upon which the cleared funds reach HMRC’s bank account.

In practice, this means that you must allow enough time for the payment to reach HMRC and to clear into HMRC’s bank account no later than the due date shown on your VAT return. If your cheque payment does not clear by the due date shown on your VAT return you may be liable to a surcharge for late payment.

A cheque takes three bank working days to clear and so excludes Saturdays, Sundays and bank holidays. Cheque payments made by bank giro are not affected by this change.

Electronic payment methods are recommended by HMRC as this is safe and secure and, in most cases, gives you up to seven extra calendar days to pay or, if you pay by Direct Debit, at least ten extra calendar days.

Those who must file their VAT returns online are required to pay electronically and so will not be affected by this change.

The VAT payment methods available are listed on the HMRC website.

Filed under: VAT

Accountants Reading

PAYE form P35 end of year returns question 6

Payroll software updates

Employers Who Don’t Need To Make Year-end Returns (form P35)

Employers CD Rom Update March 2010

Edwin Smith client feedback questionnaire

Old Bank Accounts of HMRC Are Closing

Budget 2010

End of Year Tax Planning

VAT Cheque Payments By Post

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