FAQS for November 2013

November 2013

Staff travel expenses
Q: My business is growing and as a result, my staff have started incurring travel expenses. Is there anything I should be aware of?
A: Normally where an employee incurs business-related expenses, the reimbursement of them should be rported on a P11D but the employee can claim a deduction for them. Therefore, there is no impact on the employee’s tax liability but there is some paperwork to be completed.
As an alternative, you could pay the HMRC benchmark travel and subsistence payments, which are:

• 45p per mile for the first 10,000 miles; 25p per mile thereafter
• £5 for breakfast if the business journey starts before 6am
• £5 if the employee spends more than five hours away and buys one meal
• £10 if they’re out for more than ten hours and they buy two meals
• £15 if they are out beyond 8pm, and buy an evening meal

Your staff must purchase some food and with the benchmark subsistence payments, but it could be just a sandwich and anything they don’t spend is theirs to keep tax and NI-free.

Category: PAYE, NIC & Benefits In Kind

VAT on staff Christmas presents
Q: I’ve just purchased a bulk load of chocolates and bottles of wine for staff Christmas presents. Can I reclaim the VAT on them?
A: If you give away goods and are entitled to recover VAT on them, you must account for VAT on their cost value. So I’m afraid this means the VAT position is neutral.
However, you do not have to account for VAT on ‘business gifts’ made to the same person so long as the total cost of all the gifts does not exceed £50 (excluding VAT) in any 12-month period. A ‘business gift’ is simply a gift of goods that is made in the course of your business.
Gifts and entertaining is a complex area, as it can have a multitude of tax, National Insurance and VAT implications.
Category: Value Added Tax (VAT)

Received a P800
Q: I have received a P800 from HMRC saying I have underpaid tax for 2012/13. What should I do?
A: Most people should have paid the right amount of tax through the Pay As You Earn (PAYE) system and there is nothing more for employers, employees or HMRC to do - so you do not need to be concerned if you do not get a P800 Tax Calculation. However, if you have been sent a P800 tax calculation by HMRC, it either means you’re getting a tax refund or you need to pay more tax.
If you receive a P800 Tax Calculation, it's important you check it to make sure you agree with the information included as HMRC have been known to make errors. The calculation will show your total taxable income, the allowances that are due to you and the amount of tax paid for each of the relevant tax years. It will also show the amount of over or underpaid tax.
Where your P800 shows non-PAYE income such as bank interest or other investment income, the figures will be estimated as HMRC doesn’t have direct access to these details and relies on you to provide them. So make sure you compare these figures in particular to your own records.
If you agree with the tax calculation you do not need to do anything but keep it safe. If you don't agree with the P800 Tax Calculation, you should call HMRC as soon as possible.
If the P800 shows you owe tax of £3,000 or less, where possible will HMRC aim to collect it by adjusting your code for 2014/15 so you’ll pay the extra tax through your earnings for that year.
Where the P800 shows you’ve overpaid tax, you’ll receive a cheque, usually within 14 days.

Category: Income Tax

Tax on Staff Christmas Gifts
Q: I’m looking at what to order for my employees for their Christmas presents. Is there any advice you have for me? I don’t want my employees to pay tax or National Insurance on their gifts- or the hassle of any extra admin!
A: If you buy your employees a seasonal gift such as a joint of meat or a box of chocolates, then this would be deemed ‘trivial’ and therefore, there are no reporting requirements and nor would any tax or National Insurance be triggered.
However, if your gifts are more lavish than the examples above- say a hamper, case of wine or vouchers - then the cash equivalent must be taxed via the payroll, form P11D or a Pay As You Earn Settlement Agreement (PSA). With the first two options, tax and National Insurance will be triggered and will be deducted from the employee. However, with a PSA the employer agrees to settle their liability.
Gifts and entertaining is a complex area, as it can have multitude of tax, National Insurance and VAT implications.
Category: PAYE, NIC & Benefits In Kind

Missed the tax return deadline
Q: I received my paper tax return earlier this year and totally forgot to complete and send it to HMRC. Will I now get fined £100?
A: No, because you still have the option to file your return online with HM Revenue & Customs (HMRC) and as an incentive to go paperless, HMRC allow until 31st January 2014 for submission. Provided you successfully file your return online with HMRC by this date, you will not be charged the £100 penalty.
However, if HMRC receive a paper 2012/13 tax return from you now the 31st October deadline has elapsed, you will be charged the £100 penalty automatically.
And remember, a late return will cost you a £100 penalty; even if there is no tax to pay or you pay the tax due on time. Furthermore, the penalties will increase the longer the delay in filing.

Category: Tax Returns

Lost receipts
Q: I have lost some of the receipts for my business. Where do I stand on recovering the VAT on them?
A: In order to exercise your basic right to recover the VAT on them, you must hold a valid VAT invoice.
However, in the absence of such an invoice, you may still be able to make a claim for the VAT, but these claims are at HMRC’s discretion. According to a HMRC Statement of Practice, they will look for alternative evidence where there is no valid VAT invoice, such as:

• Alternative documents, such as a supplier’s statement, purchase orders, etc
• Evidence of the receipt of the goods/ services, such as delivery notes
• Payment records
• Records of onward sales or consumption of the goods/ services

You should also be able to prove the existence of the supplier, by say having their VAT number.
The above list is not exhaustive and just to reiterate, accepting a claim for VAT where there is no valid VAT invoice is at HMRC’s discretion.

Category: Value Added Tax (VAT)

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.

Q&As Accounts & Tax October 2013

New business registration with HMRC
Q: I have just started my own business. When do I need to register with HM Revenue & Customs?
A: Firstly, you need to work out which tax year your start date falls into. The tax year runs from 6th April to 5th April, so your start date falls into the tax year ended 5th April 2014. You must therefore register by the following 5th October, i.e. 5th October 2014. As you are registering as self employed, the form you need to complete is HM Revenue & Customs (HMRC) form CWF1 or you can register with HMRC online at www.hmrc.gov.uk.
You will also need to pay Class 2 National Insurance which is only £2.70 per week for 2013/14 so most people choose to pay for these contributions via Direct Debit. You will need to complete HM Revenue & Customs form CA5601 if you would like to pay via this method.
Although you have some time before you need to register, avoid leaving it too long as you may face penalties for late registration. 
Please note, this is merely with regards to self assessment, and does not include VAT or employer matters for example.

Category: Starting a Business

October Tax Return Filing Deadline
Q: I have received a letter from HM Revenue & Customs reminding me that I need to file my tax return by 31st October 2013.  I do not have all of the information together yet so I cannot complete it. Is there a way I can avoid a late filing penalty?
A: The filing deadline of 31st October 2013 only applies to those taxpayers wishing to complete and submit a paper 2013 tax return. But taxpayers also have the alternative to file the tax returns online. The online filing procedure allows taxpayers to submit 2013 returns up until 31st January 2014.
But it is a good practice to complete your tax return well ahead of the deadline. Doing it early should avoid mistakes being made and allow you time to consider any tax planning opportunities available. Furthermore, you will know what your tax liability is ahead of the due date of 31st January 2014 and therefore, have more time to put some money aside and manage your cashflow better.
Filing your tax return ahead of 31st January 2014, whether you file it electronically or in hardcopy, does not accelerate the due date for the tax either.

Category: Tax Returns

Use of home - repairs
Q: I am self employed but I operate from home at the moment. I’ve just had to make some repairs to the roof. Am I able to claim any of this as a business expense?
A: For the self-employed, their home has a dual purpose- you live there and you carry on some or all of your trade from there. As a result, many of the household expenses cover both business and private use.
The element attributable to the business will depend on the facts; including the extent and nature of the work undertaken from home. The part attributable to the business use should be allowable.
A proportion of the cost of general household repairs and maintenance is allowable in line with the proportion that the house is used solely for the business. For example, redecorating the exterior or repairing the roof.
Repairs that relate solely to part of the house that is not used for the business, such as decorating a room not used for the business, are not allowable. Equally if a room is used solely for business purposes then the cost of redecorating that room is wholly allowable.
Capital expenditure (for example on “improvements” to the property) is not allowable expenditure; though plant and machinery allowances may be appropriate for certain qualifying expenditure.

Category: Sole Traders

Separation and the High Income Child Benefit Charge
Q: My partner and I are separated and don’t live together anymore. I earn £60k a year and my wife has been receiving Child Benefit for our two daughters- who live with her. Will I still be subject to the High Income Child Benefit Charge?
A: Essentially, you may be liable to the High Income Child Benefit Charge (HICBC) if you, or your partner, have an individual income of more than £50,000 and one of you gets Child Benefit or contributions towards the upkeep of a child.
If you are liable and have received a Child Benefit payment since 7^th January then you must register for Self Assessment by 5^th October 2013 to pay the charge.
For the purpose of the HICBC, your “partner” is your husband or wife or civil partner, unless you are permanently separated from them, or the person you are living with as if they were your husband, wife or civil partner. The partner you are living with does not have to be the mother or father of the child.
If the separation occurred during the tax year, you may have to pay the charge for the period that you were living together, but your income for the whole year is taken into account and not just for the period you were living together.

Category: Income Tax

Can I reduce my NI?
Q: I am employed and earning £60,000 plus I have self employment income of £50,000. I am aware that I am now paying rather a large amount of National Insurance. Is there anything I can do about this?
A: The general principle of tax is the more you earn; the more tax you pay. However, there is an annual maximum amount of National Insurance contributions that are payable.
If you only had employment income, your employer would ensure that no more than the maximum annual amount was paid via the PAYE system.
However, where there is more than one employment or where there is a mixture of employment and self employment, there could be Class 1 contributions or Class 1, 2 and 4 Contributions respectively that exceed this maximum annual amount.
Excess payments can be repaid after the actual position has been calculated after the tax year end (5^th April). Alternatively, you may make a claim that National Insurance contributions are deferred; any shortfall being paid once the correct position has been calculated after the tax year end.

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.

Review Of Networking Groups

Networking Groups:
This is not a definitive list, but they are groups that I have personal experience of. They are low cost or FREE!
Other networking groups are available!!

1.    Meet & Mingle
Venue: LCB Depot, 31 Rutland Street, LE1 1RE
Frequency: Monthly 6-8pm
Website: http://www.eventbrite.co.uk/event/7428036457/eorg
Cost: N/A
Good: FREE – free refreshments, so a big turnout 40+ people especially start-ups, and speed networking.
Bad: Maybe to many people, speed networking can be a bit chaotic and noisy. Not everyones cup of tea.


2.    Pickle & Paratha Breakfast Networking
Venue: Observatory Meridian
Frequency: Thursday every 2 weeks, 7.30-9.00am
Website:  www.pickleandparatha.co.uk
Cost: £50 one off joining fee, then £10 for full breakfast/ £6 for continental for each meet. Introduce 3 members and you get a FREE i-pad mini.
Good: Parathas!!! Low cost and i-pad incentive. One business from each trade.
Bad: Needs more members and a bit more structure in meetings.


3.    Enterprise Club/Friendly Friday
Venue: Coffee Rupublic, Granby Street
Frequency: 2nd Friday of every month: 10.00-12.30pm
Cost: FREE
Good: FREE!, Friendly and informal, good speakers, good mix of start-ups, established businesses , and pre-start-ups.
Bad: A lot of micro businesses, or those just thinking of starting, so may not be attractive to certain businesses.
Website:  http://engage-multimedia.co.uk/events/friendly-fridays/


4.    Business Biscotti
Venue: Observatory Meridian
Frequency: Every 2 Weeks 10.00am-12pm
Cost: FREE
Good: Very informal, come and go when you like.
Bad: Pot luck –you never know whos going to turn up, no commitment required so lots of one off attendees.
Website:  http://www.businessbiscotti.co.uk



 
5.    BOB- Business Over Beer
Venue: Various
Frequency: Monthly in city pubs
Cost: FREE
Good: Beer!!! Very informal, come and go when you like.
Bad: Pot luck –you never know who’s going to turn up, no commitment required so lots of one off attendees. Better organisation at event to identify whos there for the meeting, and who’s a pub customer!
Website: http://www.creativedirection.info/blog/
STOP PRESS: Have recently launched Business Over Biriyani, so we’ll see how this develops.

September 2013 - FAQS Accounts & Tax

Q: I am a high earner and my wife is in receipt of the Child Benefit for our children. We intend to keep receiving Child Benefit in spite of the High Income Child Benefit Charge. How do I go about getting a tax return and when do I need to file it by?
A: From 7^th January 2013, you may be liable to a new tax charge if you, or your partner, have an individual income of more than £50,000 and one of you is receiving Child Benefit. It may also apply if someone else receives Child Benefit for a child that lives with you.
If you intend to keep receiving the Child Benefit, you need to register with HM Revenue & Customs (HMRC) for Self Assessment by 5^th October 2013. The easiest way to do this is online at HMRC’s website www.hmrc.gov.uk but there is still a paper form to use if you’d prefer.
Your tax return will cover the year ended 5^th April 2013 but you only need to declare the amount of Child Benefit you, or your partner, are entitled to receive for the period 7^th January 2013 to 5^th April 2013.
This tax return needs to be submitted to HMRC by 31^st October 2013 if you file it on paper; or 31^st January 2014 if you file it online. Any tax arising must be settled by 31^st January 2014.
If you would like any assistance in dealing with your tax affairs, please do not hesitate to contact us.
Category: Tax credits

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 2013 to:

• £6.31 – the main rate for workers aged 21 and over
• £5.03 – 18-20 year old rate
• £3.72 – the 16-17 year old rate for workers above school leaving age but under 18
• £2.68 – the apprentice rate, for apprentices under 19 or 19 or over and in the first year of their apprenticeship

Last year, only the over 21s and Apprentices saw an increase in the NMW. But this year, all of the rates have increased.
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 note 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
Your local TaxAssist Accountant would be happy to discuss this in more detail and calculate the differences between each option for you.
Category: PAYE, NIC & Benefits In Kind

Invoices and late VAT registration
Q: I registered for VAT a bit late and must now go back and invoice my customers for VAT. Do I have to charge VAT on top of the invoices I originally issued; or is it already included?
A: Assuming you have already received your VAT registration details from HMRC, you may now begin to issue your customers with proper VAT invoices.
But it is actually up to you whether you charge the VAT on top of the original invoice you’ve already issued; or choose to suffer the VAT yourselves by deeming it to have been included in the original invoice.
However, there is something you should bear in mind. If you are dealing with other VAT-registered businesses, they won’t mind you charging them for the additional VAT because they’ll be able to get it back from HMRC on their next VAT return. But if your customers are members of the public or someone else that can’t recover the VAT, they won’t be too happy to receive this unforeseen bill.
Your local TaxAssist Accountant would be happy to manage your VAT affairs and returns for you. Contact us for more information and to be put in touch with your local office.
Category: Value Added Tax (VAT)

Offsetting trading losses
Q: If, whilst employed and paying tax, I set up as a sole trader as well, can I offset any trading losses against the PAYE I pay?
A: As long as you are genuinely in business to earn a profit then yes, you can offset your losses against current year income or against past or future profits of the trade itself.
You should only claim relief for your loss if you ran your trade commercially for profit. If it was more of a hobby, you should only use the losses against future profits from your self-employment; HMRC will not like you to use to loss against your employment income.
Assuming your business was run on a commercial basis, you can offset your losses in several ways:

• other income for the same year or the previous year
• gains for the same year or the previous year - if your other income is used up
• other income in the previous three years if your business started within the past four years
• profits from the business in later years
• profits for the business in the previous three years if your business has ceased

In order to declare the loss and subsequently make use of it, you will need to register for Self Assessment with HMRC and complete a tax return.
Utilising losses is a complex area. I would encourage you to approach a professional for advice, such as your local TaxAssist Accountant. Please contact us if you would be like to put in touch with your local office to discuss this further.
Category: Starting a Business

Ceased employment and student loans
Q: I recently received a letter from the Student Loans Company querying my employment status. But my circumstances have not changes- I am still employed. What should I do?
A: This sounds like a known issue with HMRC’s systems; a very small number of students' employments have been incorrectly ceased.
This has prompted HMRC's systems to automatically inform the Student Loans Company (SLC) that those individuals had left their employment. As a result, SLC have issued letters to these borrowers, querying their employment status.
HMRC’s advice is to respond to the SLC saying you have not ceased employment or changed employer.
HMRC are now in the process of correcting their systems and are due to complete this within the next few weeks.
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.

Aug 2013- FAQS - Accounts & Tax

Rental income – husband and wife
Q: My wife and I have some properties in joint names but I stumped-up most of the cash for the purchase of the properties so it seems only fair that I get the lion’s share of the income from them too. But I have been told the income HAS to be split 50:50- is this correct?
A: I’m afraid to say it is the position by default.  If you live with your spouse or civil partner, the income from property held in joint names will be split in equal shares; regardless of any other circumstances.
However, clearly this puts married couples at a disadvantage to unmarried couples and therefore, there is now a way that married couples can apply to have the income allocated in an unequal way.
It does involve an application process though and you’re unlikely to be successful if for instance, your motives are only to shift more income to an individual paying tax at a lower rate.
Category: Income Tax

P11Ds not due anymore
Q: I had originally advised HMRC that P11Ds would be due for my employees, but I made a mistake and actually there are no expenses payments or benefits to return. Can I just ignore the P11D(b) I have been sent to complete?
A: Absolutely not! HMRC will be expect P11Ds and a P11D(b) from you and therefore, if the P11D(b) does not arrive, you will automatically receive a late filing penalty.
You should complete the P11D(b) accordingly- with nil entries and ticking the appropriate box stating ‘No expenses payments or benefits of the type to be returned on forms P11D have been or will be provide’ etc. Then sign and date it and send it to HMRC as you would normally.
Alternatively, you may inform HMRC online that no P11Ds are due- which might be preferable given the proximity of the deadline.

Category: PAYE, NIC & Benefits In Kind

July tax bill
Q: I have just received my income tax bill for my payment due by the end of July. It seems really high- is there anything I can do to reduce it?
A: The payment due in July is like an “instalment” for next year’s tax. HMRC will use your circumstances last year as a basis for setting these.
However, if you have good reason to believe that this year’s income will be lower than last year’s, you may apply to reduce your July payment. This must be done by 31^st January.
Be aware that if you reduce your payments too low, HMRC will levy interest- but you can amend your application if you discover this in time.
Alternatively, you could just prepare and submit your tax return. This will then trigger the comparison of these estimated payments (called Payments on Account), with your actual tax liability. So any over or underpayment will be calculated.

Category: Income Tax

To furnish or not to furnish?
Q: I have just purchased a couple of properties that I intend to let out. Can you tell me whether I am better to furnish them or not?
A: Furnishing has always been an important distinction, as only furnished lettings entitle you to the valuable Wear and Tear Allowance of 10% of the rents.
Now it is definitely worth reviewing whether you could show the property is furnished given that the renewals basis for replacing items in commercial or residential properties let unfurnished ceased from 6^th April 2013.
Loosely-speaking, HMRC guidance is that a property is furnished if it includes some (but not necessarily all) items that a tenant or owner-occupier would normally provide in unfurnished accommodation.

Category: Income Tax

Tax Credits renewal
Q: I have just received my first tax credit renewal pack since becoming self-employed. Do I need to complete my tax return before I fill in the renewal form?
A: Ideally, you should complete your renewal form with the figures entered from your tax return for the last tax year, i.e. year ended 5^th April 2013. This will ensure your tax credits award is as accurate as possible.
However, if you have not yet completed your accounts and tax return for the most recent tax year, you may submit estimated figures to the Tax Credit Office. This must still be done on the renewal forms and by 31^st July 2013 as normal.
You must supply the Tax Credit Office with the actual figures as soon as possible though- and no later than the 31^st January 2014.

Category: Tax credits

Bookkeeping software
Q: I am just starting out and I’m looking to buy some bookkeeping software. Can you list some of the keys differences between desktop software or subscribing to some online software?
A: Desktop bookkeeping software

• Speed- Can be quicker as you’re not working online and therefore reliant on internet speed
• Price- Can be cheaper as may only be a one-off payment; unlike Cloud-based software which may be infinite, monthly subscription payments

Online bookkeeping software

• Mobility- you can work anywhere; anytime provided you have an internet connection
• Communication- you may be able to email your customers through the software; therefore allowing you to attach documents to the emails such as outstanding invoices. Some may even facilitate you takings payments from your customers and others have Apps to download to your smart phone for use when you’re out-and-about
• Integration- Due to the evolutionary nature of Cloud-based software, it tends to be compatible with more software than traditional desktop products
• Security- Check with your supplier, but generally, the data in Cloud-based software is much more secure than in desktop software- which could disappear during a thunder storm!

The generic features of bookkeeping software should be prevalent whichever route you go for though- such as reporting, invoicing, customer/ supplier management, VAT returns, bank reconciliations etc.

Category: General Business

Prince George and The Paupers- An Argument For Inheritance Tax

So another prince has come into the world. He's been born into a world of immense privilage and wealth. Many other babies were born on the same day in different circumstances and financial situations. This is the great lottery of life, by complete accident and luck you can be born a prince or a pauper.
In the words of every child "Its not fair". No it isnt.
Governments attempt to "level the playing field" and reduce the gap between rich and poor, so the rich dont keep getting richer and the poor getting poorer. One of these attempts is Inheritance Tax.
I tend to hear alot of people complaining about inheritance tax, about how you pay tax all your life and even when you die you still have to pay and how "its not fair!", obviously nobody likes to pay tax-including me-but is'nt it only right to attempt to bridge this gap from a societies point of view?, to redistribute wealth for a more equitable society?
Taxpayers will of course try to minimise their tax liabilities, as they are entitled to, but its important that inheritance tax exists and its intentions are understood from a bigger picture view rather than purely self interest.

"Are you serious about business? - then ditch the crap business cards."

I have had a new 6 page leaflet designed and it will be going to print soon. It got me thinking about the many business cards I see. I go to many networking events and see many types of business card. Amongst the most common are the cheap, generic ones you can get on the net. There are a number of suppliers but the best known one rhymes with Blistermint! They tend to be on flimsy paper, with a generic image. Do you know what this tells me about you?
It says I'm not serious about my business, that "you'll see how it goes"- that you have no long term plan-and you won't be here in a years time.
These days quality well designed business cards don't cost much, and are worth the investment. Thats right I said "investment" - not a cost. They represent you and leave a lasting impression of you and your business.
Get your logo designed, something that is unique to you. One of the reasons customers deal with small businesses is because of the unique and personal service they receive-this should be reflected in your marketing material.
Ask yourself if you were presented with a unique well designed quality business card or a cheap poor quality generic card- which are likely to keep and deal with?
Spend a few quid, its worth it, and show me you are SERIOUS!!

June 2013- FAQS - Accounts & Tax

VAT on cars
Q: I am a VAT registered business and we are about to update our fleet of cars. Do I have to charge VAT on the sale of the old cars?
A: The general rule of thumb is you charge VAT on the sale where you suffered VAT on the original purchase of the car and were able to recover it.
However, most businesses are not able to recover the VAT on purchases of cars, unless the cars are:

• Stock for a motor manufacturer or dealer
• Going to be used as taxis, driving instruction vehicles or self-drive hire cars
• Will be used exclusively for business purposes (such as pool cars under certain conditions)

You may have purchased the vehicle from a private individual or non-VAT registered business, in which case you won’t have been charged any VAT on the purchase. In this scenario, you probably only need to charge VAT on any profit you make on the sale (i.e. the difference between the sales price and the original purchase price) but there are some criteria to adhere to in order to apply this. In reality, most cars are sold at a loss and if this was the case, no VAT would arise in this scenario- again, subject to certain criteria being met.
VAT and motor-related transactions are a complex area as there are specific rules that do not apply to any other instances.
Category: Value Added Tax (VAT)

Late P35
Q: I know it should have been filed by 19^th May, but I have only just filed my P35 online. What penalties can I now expect?
A: Where a P35 remains outstanding after 19^th May, HMRC will write to you advising that a penalty may already have been incurred and that the return must be with HMRC by 19th June in order to avoid further penalties.
Penalties for late P35s are calculated at £100 per 50 employees for each month or part month you delay filing your return.
If your return remains outstanding for more than four months, you'll receive a penalty notice shortly after 19^th September and again the following January and May, if necessary. These penalty notices will show the amount of penalty that's building up because you haven't filed your return on time and should tell you how you can pay it.
Please also note that there is a separate penalty regime for the late submission of P11D(b)s, which must be filed by 6^th July.
The filing requirements for this year and moving forward look very different since the introduction of Real Time Information.
Category: Payroll

Wrong tax code
Q: I noticed that the tax code my employer is using has changed and it doesn’t look right to me. I told my employer’s payroll department, but they said they were simply using the code HMRC had told them to. What should I do?
A: HMRC issues your tax code based on information they have about you and it tells your employer or pension provider how much Income Tax to deduct from your wages or pension.
If your tax code is incorrect, I’m afraid your employer cannot simply change your tax code at your request. You will need to contact HMRC on their Taxes Helpline to tell them your tax code is wrong and you will need your National Insurance number and tax reference to hand, which can be found on tax papers such as your payslip or P60.
Assuming they agree, HMRC should subsequently issue a new tax code which your employer will then use.

Category: PAYE, NIC & Benefits In Kind

Correcting a wages error under RTI
Q: I made an error on my last payroll run, which was submitted to HMRC online under their new RTI system. How should I go about correcting it?
A: Under Real Time Information (RTI), employers must submit a Full Payment Submission (FPS) when  a payroll is run and payments are made to employees. If you discovered the error before filing your next FPS you can either:

1. correct the error by using revised year to date figures on your next regular FPS - this is often the easiest way to handle the correction
2. show the adjustment by submitting an additional FPS for the pay period for the employee(s) the error relates to

Whichever option you go for, care must be taken as for instance, you may have to consider the impact on employees' record for National Insurance purposes and you may have to correct year to date information accordingly.
The changes under RTI can be daunting.
Category: Payroll

Losses and Class 2 National Insurance
Q: I have just started my own business and my business plan is projecting losses for the first year. Should I pay Class 2 National Insurance?
A: Class 2 National Insurance (NI) is payable by the self-employed at a flat-rate; regardless of profit levels. Class 2 NI counts towards your entitlement to certain benefits, like the basic State Pension, Maternity Allowance and Bereavement Benefit.
If you earn less than a certain limit (currently £5,725 for 2013/14) you can apply for a Certificate of Small Earnings Exception and not pay Class 2 NI.
However, unless you pay NI on other income such as employment income, you might decide to carry on paying them voluntarily to maintain your entitlement to the State Pension and other benefits.

Category: General Business

Private medical insurance
Q: My company now pays for private medical insurance for senior members of staff. Are there any consequences of this I need to be aware of?
A: For employees (who are not directors) earning less than a rate of £8,500 per year (including their share of the value of the policy), you have:

• no reporting requirements; and
• no tax or NICs to pay

For all company directors or employees earning at a rate of £8,500 or more per year:

• their share of the cost of the policy must be reported on form P11D
• the employer pays Class 1A NICs on the values reported
• the directors and/ or employees under the policy are subject to a tax charge on the value reported on form P11D

The total value of all employee benefits must be reported annually on form P11D(b) which must be filed (on paper or online) with HMRC by 6^th July and any Class 1A National Insurance is payable by 19^th July. Late P11D(b)s will be subject to penalties.
The good news is that the expenditure should be tax-deductible for the company though.

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.

Common Q&A concerning tax and accounts - May 2013

May 2013

Late tax return
Q: I still haven’t filed my tax return for the 2011/12 tax year. What penalties could I face when I file it?

A: You should have already received an automatic £100 initial filing penalty. This is payable; regardless of whether you had no tax outstanding or you were due a refund.
However, from the 1^st May 2013, the daily penalties of £10 per day will begin, but these will be capped at £900.
I would encourage you to file your return as soon as possible and ideally, no later than the 1^st August 2013- when a further penalty of £300 or 5% of the tax due (whichever is higher) will be added to your existing penalties. Further penalties will be triggered if the return is over 12 months late.
Please note, the dates referred to are based on the online filing of the return. If, when you file the return, you use a paper version you will face more significant penalties as paper tax returns should have been filed by 31^st October 2012.

Category: Tax Returns

RTI- Annual PAYE Schemes
Q: I am the director-shareholder of my own small company and I don’t have any employees. As a result, I want to register my PAYE scheme as an annual scheme with HMRC for RTI purposes but I can’t get through to anyone. Am I doing something wrong?

A: Annual schemes can be a useful option for many- but particularly one-man limited companies like yours. An annual scheme must meet all of the following requirements:

• all the employees are paid annually
• all the employees are paid at the same time/same date
• the employer is only required to pay HMRC annually

Unfortunately, HM Revenue & Customs (HMRC) have been overwhelmed by requests for annual schemes and changes to payment frequencies. As a result, they are currently unable to process such requests. So it is unlikely you are doing anything wrong.
It states on HMRC’s website that they are working to rectify this position and will publish a further message to announce when the matter is resolved.

Category: Payroll

Closing a business
Q: I have just stopped trading as self-employed as I have been offered a really good job. What do I need to do and do I need to tell HMRC?

A: You should tell HMRC that your trade has finished as soon as possible, so that HM Revenue & Customs (HMRC) can get your tax affairs in order. This should also bring your Class 2 National Insurance bills/ Direct Debits to an end as well. The easiest way to do this is to use HMRC’s online form called ‘Stopping self-employment’. You'll need to provide your contact details, date of birth and  (depending on your circumstances) you'll also need your Ten-digit Unique Taxpayer Reference number or National Insurance number.
Please note, the online form only covers self assessment and National Insurance, so if your business was say, VAT-registered, you will need to separately notify HMRC of the cessation of the VAT registration.
You will also need to complete a tax return for the tax year in which the trade stopped. Once HMRC have processed this, they may send you a letter stating that they no longer require a return from you if your only source of income is from employment.
Computing the profits or losses from a trade in its final year can be tricky, particularly with regards to Capital Allowances and the use of losses. But your local TaxAssist Accountant would be happy to complete your final return for you and deal with notifying HMRC of the cessation of the trade.
Category: General Business

Tax relief on buildings
Q: I have just had a storage unit built for my business. Can I offset the cost of the building against my profits?

A: In short and as a general rule, the answer is no. Tax relief on assets, usually comes in the form of Capital Allowances. However, Capital Allowances are generally not available for expenditure on land or buildings. Tax relief on the cost of land and buildings is instead obtained via the Capital Gains Tax regime when the asset is sold.
However, you may be able to claim some Capital Allowances on certain expenditure on certain buildings, such as:

• Fixtures and equipment in the building such as some kitchen equipment,
• Features “integral” to the building such as lighting systems; and
• Thermal insulation

But there are some very complex rules and conditions attached to qualifying for such Capital Allowances, so I would strongly advise you to seek professional advice to ensure you do not under or over claim. Your local TaxAssist Accountant can advise you on Capital Allowances and prepare your claim for you.
Category: General Business

What does a liquidator do?
Q: Can you give me an overview of what a liquidator does please?

A: A liquidator is an authorised licensed insolvency practitioner. Their primary function is to collect the firms’ assets, realise them and then distribute the net realisation proceeds according to a statutory priority order. The liquidator also has to investigate why the firm failed, and take the required action to bring those directors who have acted improperly to justice.
They can require the attendance of anyone who might have or is known to have, company assets in their possession, as well as those who owe the company money. In order to assist with the investigation, the liquidator can ask the court to summon anyone who might have information concerning the company’s affairs, its property and business dealings. The court can also compel the production of company records or relevant documents.
But the liquidator's role can vary slightly depending on which liquidation process they are assigned to.
There are three main types of liquidation processes which Licensed Liquidators deal with:

1. Creditors’ Voluntary Liquidation
2. Members’ Voluntary Liquidation
3. Compulsory Liquidations

This information was brought to you by F A Simms & Partners who specialise in advising and supporting on all business rescue matters. For more information regarding the content of this article please contact FA Simms & Partners today on 0845 072 2500 or email taa@fasimms.com.

Category: General Business

P11Ds- how can I reduce the burden?
Q: I’ve just submitted forms P11D and P11D(b). My P11Ds mostly cover reimbursed expenses, so as you can imagine, they’re very fiddly and time-consuming. Is there any way I can reduce the paperwork and preparation time?

A: You could apply for a dispensation (or form P11DX) from HMRC. If you are successful, this form completely removed the requirement to report reimbursed expenses on form P9D or P11D.
There is a list of expenses that can be covered by dispensations, but examples of expenses typically covered are:

• Travel, including subsistence costs associated with business travel
• Fuel for company cars
• Hire car costs
• Telephones
• Business entertainment expenses
• Credit cards used for business
• Fees and subscription

Put simply, to stand a chance at obtaining a dispensation, you must have an independent system in place for checking and authorising expense claims so as a minimum, someone other than the employee must check their claim. If you are a sole director, you may still be successful, provided that you obtain receipts for all expenditure and the expenses are within the list referred to above.
A dispensation covers these items indefinitely, however, HMRC reviews them regularly (usually at intervals of five years or less) to make sure the conditions under which it was granted still apply. Please note, a dispensation may not completely negate the requirement for P11Ds though. So if benefits in kind are provided, such as a company car, you will still need to complete forms P11D and P11D(b).


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.

Tax & Accountancy Q&As - April 2013

Car benefit changes 2013/14
Q: Can you summarise what the changes to company car and van benefits are from 6 April 2013 please?

A: From the 6th April 2013:
Company cars

• The car fuel benefit charge multiplier will increase from £20,200 to £21,100
• The lower threshold will be reduced from 120g/km to 115g/km
• The lowest appropriate percentages are still 0 per cent and 5 per cent
• The 10 per cent charge will now apply to cars with CO2 emissions of 76g/km to 94g/km
• The appropriate percentage will increase by 1 per cent for all vehicles with CO2 emissions between 95g/km and 215g/km, to a maximum of 35 per cent

Vans

• The van fuel benefit charge multiplier will increase from £550 to £564
• The van benefit is frozen at £3,000

Category: PAYE, NIC & Benefits In Kind

Leasing a car
Q: I’m thinking of leasing a car in the name of my personal company. Do you have any recommendations to keep the tax burden down?

A: Firstly, if the car triggers a benefit in kind, then you will always be better off looking for a vehicle with low CO2 emissions, as this will result in a lower car benefit percentage and therefore a lower personal tax liability for you.
Furthermore, you should also be aware that if the car has emissions over 130g/km, it is likely that 15% of the lease payments will be disallowed for corporation tax purposes. If the emissions are below this level, the entire lease payments should be tax deductible.


Category: General Business

Do I have to give a P60?
Q: I have some part-time staff and one of them has asked me for a P60. I don’t manage a payroll because I don’t pay any of them enough. Do I have to supply my employee with a P60? I’ve never done one before.

A: You are only obliged to provide your employee with a P60 if you were obliged to operate a P11 and register as an employer. Based on what you have said, it sounds as if this does not apply to you and therefore, you are not obliged to supply them with a P60.
However, they have obviously asked you for the form for a reason (perhaps they are completing their Tax Credits forms), so out of goodwill, you could complete one for them voluntarily from your records. But needless to say, a corresponding P14 does not need to be sent to HMRC.


Category: Payroll

VAT return due date
Q: I have a VAT return to submit for the period ended 28^th February 2013. When do I need to submit it to HMRC?

A: Normally, you have one month and seven days to submit your VAT return if you file it electronically. As your VAT return is dated 28^th February 2013, you have until 7^th April 2013 to file it with HMRC.
However, HMRC's VAT online service will be unavailable between 6.00am 4^th April and 6.00am 6^th April 2013. So I would encourage you to submit your VAT return early by 4^th April 2013.
Remember, late VAT returns may be subject to surcharges.

Category: Value Added Tax (VAT)

RTI and small employers
Q: I have two staff that I pay weekly, but I only run my payroll at the month end. I am aware that of the changes under RTI, but will I really be expected to operate my payroll every week from now on?

A: HMRC have announced that until 5^th October 2013, employers with fewer than 50 employees may send information to HMRC by the date of their regular payroll run but no later than the end of the tax month (5^th).
Little detail has been released surrounding this announcement, but it sounds as if adoption of the concession is optional; not the default.
But this should be of great benefit to employers such as you that pay their staff weekly but only run the payroll once a month. It should mean that you payroll process will be fairly unchanged under RTI until 5^th October 2013.


Category: Payroll

Emailing P60s
Q: I try to keep my office paperless and I was wondering if I can email my employees their P60; rather than printing them all off.

A: Since 2010/11, form P60 can be provided on paper or electronically.
But you should confirm with all of your employees that they are happy to receive their P60 electronically before proceeding to email them. Your staff will need to ensure that they have access to secure facilities to view and print a copy.
If your employees prefer not to receive their P60 electronically, then you will have to provide them with a hard copy as normal.


Category: Payroll

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.