Q: What payroll procedures apply to student employees?
A: There are special rules for ‘student employees’. A student employee is in full-time education and only works during the holidays. This means they do not work in the evening or weekends during term time either. Provided they meet this condition and earn less than the personal allowance (£8,105 2012/13), you do not need to deduct tax from them. Ask the student employee to complete form P38(S) Student Employees
However, if they earn more than the lower earnings limit (£107 per week 2012/13) their wages should be recorded on a P11 Deductions Working Sheet or your equivalent payroll systems and you should complete form P14 End of Year Summary for them at the tax year end.
Student employees are treated like normal employees for National Insurance purposes. So if they earn more than the employees’ earnings threshold (£144 per week 2012/13), then you will have to pay employers’ NI as normal. Furthermore, you will have to start deducting employees’ NI from the student if they earn above the upper accrual point (£146 per week 2012/13).
Please note, under current plans, form P38(S) will; be withdrawn from 6 April 2013 which will mean students will be treated in the same way as all other employees for PAYE and NI purposes.
Category: PAYE, NIC & Benefits In Kind
HMRC registration
Q: I moved in with my girlfriend this year so we started renting out my house. When do I need to register with HMRC?
A: You have not stated exactly when you starting receiving rental income, but the normal rule is that you must inform HM Revenue & Customs (HMRC) by 5th October following the end of the tax year in which you started letting the property. The tax year starts on 6th April and ends on the following 5th April.
This rule would also apply if you started to receive any other untaxed income- such as you started your own business or you received untaxed income from investments. The same date also applies if you made a Capital Gain.
So if you started receiving the rental income before 5th April 2012, then you will need to register soon- by 5th October 2012. But if you started receiving the rental income after 6th April 2012, then you have until 5th October 2013 to register with HMRC.
Penalties can apply for late registration, so you should always register with HMRC as soon as possible.
Category: Income Tax
Flat Rate Scheme: Reclaiming VAT
Q: I am on the Flat Rate Scheme for VAT and I was told that there are some instances when I might be able to recover VAT on my expenses. Is this true and if so, what are the requirements to meet in order to recover it?
A: Essentially, VAT can only be recovered on capital assets with a VAT-inclusive price of £2,000 or more.
However, you do not need to spend that on one single capital asset. If for example, you purchased a number of pieces of equipment at the same time from the same supplier, and the total price was over £2,000 including VAT, then you could require the VAT charged to you.
But there are other restrictions as follows:
- It must be a purchase of goods; and not services
- Leased/ hired assets are deemed to be a supply of services; therefore, if you hired a van, you could not recover the VAT on the rental payments
- In contrast, if you say purchased a van under a Hire Purchase agreement, then this is deemed to be a supply of capital goods and any VAT could then be recovered
- You cannot recover the VAT on capital goods that you intend to resell- whether you are selling them on their own or incorporated into other goods to supply to someone else
- You cannot recover the VAT on capital goods that you intend to let, lease or hire out- for example, a bouncy castle
- Buildings materials and building work are not capital goods- even if you buy them for someone else to actually undertake the work with
Category: Value Added Tax (VAT)
National Minimum Wage: increase?
Q: I believe in the past, the National Minimum Wage normally changes about this time this year. Is there an increase soon?
A: You’re absolutely right; there is typically a change to the National Minimum Wages (NMW) annually on 1st October.
The rates are due to on 1st October 2012 to:
- £6.19 – the main rate for workers aged 21 and over
- £4.98 – 18-20 year old rate
- £3.68 – the 16-17 year old rate for workers above school leaving age but under 18
- £2.65 – the apprentice rate, for apprentices under 19 or 19 or over and in the first year of their apprenticeship
Category: PAYE, NIC & Benefits In Kind
Private mileage in company cars
Q: My employee has a company car, and historically, he has always had a benefit for the car itself and the fuel- because he doesn’t reimburse me for any fuel he uses for private journeys. Is there any way we can reduce his benefits in kind, because they’re costing him a lot on tax now.
A: This may sound a bit extreme, but you could discuss the company no longer paying for his fuel. Whilst this may sound expensive for him, if you sit down and do the calculations, you may actually find he is better off this way- particularly if you intend to increase his salary as a result of him losing his fuel benefit.
He could then charge the company for any business mileage he does, using the advisory fuel rates.
The other alternative is that the company continues to pay for all of his fuel, but the company charges the employee for all of his private mileage- again using the advisory fuel rates.
In either case, the fuel benefit could be reduced down to nil if you can meet all of the requirements.
Please not that due to the frequently changing fuel prices, HM Revenue & Customs regularly updates the advisory fuel rates, so always check their website for the latest figures here:
http://www.hmrc.gov.uk/cars/advisory_fuel_current.htm
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Category: PAYE, NIC & Benefits In Kind
Disclaimer – advice shared in this column is intended to inform rather than advise and is based on legislation and practice at the time. Taxpayer’s circumstances do vary and if you feel that the information provided is beneficial it is important that you contact us before implementation. If you take, or do not take action as a result of reading this column, before receiving our written endorsement, we will accept no responsibility for any financial loss incurred.
