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Maximising tax relief on pension contributions – Special Annual Allowance

Posted by: edwinsmith on March 8th, 2010

From 6 April 2011, higher rate tax relief on pension contributions will be restricted. In advance of this the government introduced anti forestalling rules to prevent individuals from making significant contributions now in order to take advantage of the higher rate tax relief prior to this date.

These measures apply to tax payers whose relevant income is in excess of £130,000 in any of the three tax years 2007/2008, 2008/2009 and 2009/2010. 

For these tax payers, higher rate tax relief on pension premiums in the current and following tax year will be limited to the special annual allowance which is set at £20,000 for most tax payers (up to £30,000 for some) unless those contributions were considered to be ‘regular’ contributions in place prior to 22 April 2009.

If your total pension contributions exceed £20,000 (or up to £30,000 if you are eligible for the increased limit), a tax charge will be levied on those contributions which are not classed as regular and will effectively reduce the rate of tax relief given on the excessive pension contributions to the basic rate of tax.

If you do fall within the measures to reduce the tax relief available, are considering increasing your pension contributions in the future, and do not currently utilise the maximum special annual allowance available to you, then you may wish to ensure that you maximise your relief prior to 5 April 2010 by making additional pension contributions up to the special annual allowance.

If your employer makes contributions into your pension, then you should contact us for additional advice.

There are too many rules to consider fully in this article but if you believe that your personal circumstances may fall within the above measures, then please contact us at Edwin Smith as we can assist with applying the rules to your individual circumstances.

Filed under: Tax

The Business Inspector sponsored by HMRC

Posted by: edwinsmith on March 5th, 2010

A new TV series called ‘The Business Inspector’ is sponsored by HM Revenue & Customs (HMRC). The programme will raise awareness among small businesses that they need to keep good records, maintain cashflow and market their business effectively.

The Business Inspector is a four part series that will be broadcast weekly on Five at 8pm from 17 March 2010 and is presented by Hilary Devey, an award winning entrepreneur and multimillionaire.

Hilary Devey visits eight small firms that are struggling to survive or grow and advises them on how to improve their businesses.

HMRC are hoping that the programme will help small businesses realise the benefits of taking better care of their records and paperwork such as improved cashflow.

In addition, HMRC have also launched a new fact sheets series called ‘Tax help’ that provide straightforward advice and information.  The first fact sheet deals with record keeping requirements.

Filed under: Tax

HMRC Phishing emails

Posted by: edwinsmith on March 1st, 2010

Following the deadline for submission of the self assessment tax returns, there is a new wave of HM Revenue & Customs (HMRC) phishing emails circulating.  These emails have the subject of ‘tax refund notification’ and are sent from ‘autorefund@hmrc.gov.uk’.

To the unsuspecting recipient, this email may appear genuine as it contains the HMRC logo and the Business Link and Directgov logos in the footer.  The email contains a link which asks you to click to submit your refund request which will take you to a fake website where you will be asked to complete further personal details which will then be captured and used by the fraudster.

There are plenty of other HMRC phishing emails which have been reported to HMRC and a full list can be viewed by clicking the link provided.  We have reported this current version to HMRC and so the list may be updated shortly.

For the avoidance of doubt, HMRC do not send tax refund notifications by email. If you do receive such an email and are concerned, or if you have already acted on such an email, please contact your normal adviser at Edwin Smith.

Filed under: Tax

P35 Employer Annual Return To File Online

Posted by: edwinsmith on February 22nd, 2010

HM Revenue & Customs (HMRC) are currently reminding employers that their Employer Annual Return (P35 form) for the tax year 2009/10 must be filed online by 19 May 2010. Previously small employers - those with 50 employees or below - were given an incentive to encourage online filing but this has now ceased and paper filing of the P35 form is no long available. So, if you file your P35 form on paper, even if it’s before 19 May, you could receive a penalty.

To file online, employers must register with HMRC’s PAYE Online service if this has not already been done. Smaller employers can then use HMRC’s own free software to file their employee data securely online. However, it is recommended to register early as activation is required before the HMRC filing software can be used. Larger employers can purchase a range of commercial software to file online.

Please contact us if you require further information or assistance with filing online as we can file online on your behalf.  Alternatively visit the HMRC website or review the HMRC’s Employer CD-ROM, which is being sent to all employers.

Filed under: PAYE

Incorrect Tax Coding Notices

Posted by: edwinsmith on February 17th, 2010

A transfer to a new system at HM Revenue & Customs (HMRC) has caused some errors to be made in the issue of some PAYE code notices issued to taxpayers.

The three main errors which have been identified are as follows:

  • a previous employment stopped some time ago but the system has not picked this up and a Coding Notice has been sent for that employment

 

  • two notices have been sent for the same employment

 

  • the code BR (basic tax) or DO (higher rate tax) has been given for an employment or pension for the first time.

 

It is also possible that your tax code could be wrong for other reasons.

Many of these codes will be applied to pensions and employment income from April 2010 and so it is important that the errors are identified and corrected.

Where we receive a copy of a coding notice directly from HMRC, we will be checking this for you and will advise you if an error has been made, however, if you believe that your code is incorrect, then you should contact us.

If you would like to learn more regarding your tax code then more information can be found on the HMRC website.

Filed under: PAYE

Penalties for late PAYE payment to be issued from 2010/2011

Posted by: edwinsmith on February 12th, 2010

From 5 May 2010, the end of the first month in the 2010/2011 tax year, all employers and contractors will be subject to a penalty regime for late payments. Penalties will be charged for late monthly, quarterly or annual payments of:

  • tax
  • National Insurance Contributions
  • Construction Industry Scheme deductions
  • Student Loan deductions.

In year payments and the Class 1A National Insurance payment relating to P11D benefits will need to be made on time and in full. HM Revenue & Customs (HMRC) have confirmed though that one late payment in the tax year will not result in a penalty as long as it is not more than six months late.

Penalties will be worked out on a proportion basis of the amount that is late.  The later the payment the bigger the percentage will be. Please click here for information on the penalties.

Payments can be made in various ways and more information can be found on the HMRC website.

HMRC are issuing PAYE/CIS ‘Paying electronically’ letters in lieu of the yellow Employer Payslip Booklet, for 2010/2011, to encourage more electronic payments. The letter provides the necessary details to pay electronically instead of paying by post with a payslip. However, HMRC have confirmed that you or your accountant can write to the relevant tax office to receive the yellow Employer Payslip Booklet if electronic payments cannot be made. Only large employers, employing over 250 employees, must pay electronically so it is more of a convenience for smaller employers.

Paying electronically provides additional time to make payment. Due dates for payments can be found on the HMRC website.

If no amounts are due for a particular month or quarter a nil payslip should be sent on time, either by post or by using HMRC’s website, to avoid any unnecessary penalties. To do this online you will need your accounts office reference number. To send by post you will need the yellow Employers Payslip Booklet.

If you have any questions or would like to find out more please either contact us or review the penalties information on the HMRC website.

Filed under: PAYE

Tax Amnesty for Doctors and Dentists

Posted by: edwinsmith on February 4th, 2010

HM Revenue & Customs (HMRC) has launched a Tax Health Plan (THP) to offer medical professionals the opportunity to disclose understated income. Since the initial release of the THP, further guidance has been provided by HMRC to state that dentists as well as GMC members are included within the THP.

Intention to notify must be made by 31 March 2010 and then, once registered, disclosure along with payment of tax, interest and penalties must be made by 30 June 2010.

Accountants are able to notify and disclose on behalf of their clients. To notify you will need your GMC registration number and National Insurance number.

HMRC will not calculate your tax, interest or penalties so you or your accountant will need to calculate this. The penalty, to include with your disclosure, is 10% of the underpaid taxes/duties and Class 4 National Insurance unless the unpaid liability is less than £1,000 where there will be no penalty. Interest will be calculated from the date the tax was due to the date of payment. Details of interest rates can be found on the HMRC website by clicking here.

HMRC has stated that they will “pursue those with undeclared tax liabilities who decide not to make a disclosure. In these cases the penalties could be up to 100% of the tax due and in exceptional circumstances criminal investigation may be considered”.

Click here to find out more information on the HMRC website. Alternatively, please contact us and we can assist you.

Filed under: HMRC campaigns, Tax

VAT Returns Online and Electronic Payment

Posted by: edwinsmith on February 1st, 2010

From 1 April 2010, all VAT registered businesses with a turnover of £100,000 or more and all businesses that are newly registered for VAT, whatever their turnover, will have to file their VAT returns online. These affected businesses will also have to pay any VAT due electronically. These changes apply to quarters commencing on or after 1 April 2010.

If you do not have a HM Revenue and Customs (HMRC) online account already for VAT or any other service, you can register on the HMRC website. Please note that you can have one HMRC account to deal with all matters of your business relating to HMRC.

You will be able to file your VAT returns using your HMRC online account or by using your accounting software. A list of the accounting software available for online VAT filing can be found here and select 'XML VAT Return'. Alternatively, we can file your VAT returns on your behalf and inform you of any VAT due. Please contact us if this is would be helpful.

HMRC have confirmed that paper VAT returns will not be sent for those businesses that fall into the above categories. Instead, an email reminder will be sent to you providing that you have registered and confirmed your email address on your HMRC online account for VAT purposes.

The benefit of filing VAT online and paying electronically is that you get additional time to submit your VAT return and pay any VAT due. Please click here to find out more about the additional time to file VAT returns and pay VAT electronically. It is worth noting however, that you will not get any additional time to submit your VAT return if a repayment of VAT is due.

Please contact us if you would like to discuss these changes or if you would like any advice.

Filed under: VAT

Guide to VAT rate change to 17.5% on 1 January 2010

Posted by: admin on November 3rd, 2009

All standard rated goods or services sold from 1 January 2010 onwards will need to be charged with the VAT rate of 17.5%. 

However, using the change of rate rules, the 15% VAT standard rate can be used if you sold goods or services before 1 January 2010 but did not raise the sales invoice until after this date.  HM Revenue & Customs (HMRC) do not need to be notified if you do this. 

The same principle works for purchase invoices.  So if you receive a purchase invoice after 1 January 2010 for goods or services received before 1 January 2010 you should expect an invoice with 15% VAT.  If you receive purchase invoices after 1 January 2010 that you believe to be incorrect you should contact the supplier to arrange a credit note and a new purchase invoice with the correct VAT rate included.  Please note that you can only claim VAT at the amount shown on the invoice.

 Accounting software will need to be updated to deal with the VAT rate change.  Each software company should issue some guidance on how to make the necessary changes.

 The VAT on fuel scale charges will need to be adjusted to take account of the 17.5% rate from 1 January 2010.  The VAT payable on the scale charges will need to apportioned accordingly if your VAT return period spans 1 January 2010.

 Flat rate percentages will change from 1 January 2010. HMRC state that further details will be available towards the end of 2009.

 Anti avoidance legislation is in place to stop arrangements being made to account for the 15% VAT rate in advance of 1 January 2010 relating to goods or services to be provided afterwards.

 Please contact us if you have any questions regarding the standard VAT rate change to 17.5% on 1 January 2010.

Filed under: VAT

New Disclosure Opportunity (NDO) – tell the Revenue now

Posted by: admin on October 27th, 2009

HM Revenue & Customs (HMRC) is using its legal powers to obtain information about holders of offshore accounts from all UK banks and financial institutions.

There is, of course, nothing wrong with holding an offshore account or owning an offshore asset as long as you have paid any tax due on the capital invested and on any interest arising on the account or on any income received relating to the asset.

In 2007 HMRC operated the Offshore Disclosure Facility to give the offshore account holders with five major UK banks the opportunity to put their tax affairs in order. HMRC now want to encourage the customers of other financial institutions with unpaid tax and/or duties connected in any way to offshore accounts or assets to pay what they owe. HMRC are therefore introducing the New Disclosure Opportunity (NDO) to help them get their tax affairs up to date.

This is the final opportunity for customers with offshore accounts or assets. HMRC will not offer preferential terms to offshore account and asset holders in the future.

You must have notified before the 30 November 2009 to be able to go on and disclose.

At the end of the notification period, HMRC will target those with offshore bank accounts and undeclared tax liabilities who have chosen not to come forward to make a disclosure.

Filed under: HMRC campaigns, Tax
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