Welcome to August's Tax Tips & News, our newsletter designed to bring you tax tips and news to keep you abreast of the latest developments in taxation. If you need further assistance just let us know or you can send us a question for our Question and Answer Section. We are committed to ensuring all our clients don't pay a penny more in tax than is necessary. Please contact us for advice in your own specific circumstances. We're here to help!
My Tax Return Catch-up
The Taxman has launched a campaign to persuade tardy taxpayers to submit their over-due tax returns for 2011/12 or earlier years. If you have a personal tax return form (or notice to complete a tax return) sitting in a drawer, and have been putting off the tedious task of completing it, now is the time to act.
The Taxman's campaign is called: My tax return catch-up. It was launched in July and will run to 15 October 2013. It is not open to those who operate outside the tax system in the so-called 'black economy', and have never received a tax return form or notice to submit a tax return.
All the outstanding tax returns must be submitted by 15 October 2013, which is also the due date for paying any tax due. If you can't pay all your outstanding tax by that date, you can ask for a time to pay agreement to spread the tax payment over several months.
The incentives for joining the tax return catch-up campaign include lower penalties for late submission of returns and late payment of tax. Just how much lower those penalties will be is not specified, the actual discount will depend on your circumstances.
If you, or a friend or relative, want to take part in the tax return campaign, that taxpayer first has to tell HMRC they want to join. This can be done online, by phone or post and we can do this on your behalf. We can also help with completing the outstanding tax returns, calculating the tax due, and negotiating for time to pay outstanding tax with the tax office. Remember submitting an overdue tax return can sometimes result in a tax repayment!
The procedure of 'self-billing' is frequently used in the publishing and construction sectors, where a large business customer engages lots of smaller businesses as suppliers (eg authors or subcontractors). The customer issues self-billed invoices on behalf of the small suppliers, usually with the payment to each supplier.
If you are operating self-billing you must comply with the conditions set out in the VAT Notice 700/62: Self Billing. These conditions have recently changed, so make sure you download the latest version of the VAT notice from the HMRC website. In particular there is a new legal requirement to mark all self-billed invoices as 'SELF BILLING'.
The key requirement of self-billing is that the suppliers must actively agree to self-billing, and provide the customer with their VAT details (registration number and address). Those that do not sign a self-billing agreement must issue their own invoices to the customer.
When you operate self-billing you should review your self-billing agreements at least once a year. This involves checking with the supplier that their billing details are still correct, and whether their business is VAT registered or not. In the recent recession many businesses have deregistered for VAT but have carried on trading.
It is important to get the supplier's VAT details right, If you issue a self-billing invoice on behalf of a supplier, that includes VAT, when the supplier is not VAT registered, your business will over-claim VAT. This will result in penalties and interest for your business.
Your annual review of self-billing agreements does not have to be conducted all at the same time; the agreements can be reviewed on a rolling basis.
RTI for Seasonal Workers
Have you taken on casual workers this summer? Perhaps you are paying piece-rates for the amount of produce picked or packed by each person. Reporting such small and variable payments under the new RTI system is a significant hassle.
The RTI rules require you to report each payment to workers on or before the date of the payment. Fortunately you may be able to use one of these two concessions to ease your RTI reporting burden:
a) Where you pay your causal workers daily or more than once a week, but the amounts paid are less than £109 per person per week, you can send RTI reports to HMRC weekly; or
b) Where the total number of your employees, including casual workers, is less than 50, you can send your RTI reports to HMRC on a monthly basis.
Concession b) will only apply for payments made before 6 April 2014.
Your casual workers are likely to have no set working hours for each week. In effect they will be on a zero-hours contract; paid for the hours they work, but otherwise not at all. In such cases you should choose option D of hours worked on the FPS report under RTI.
The Government wants employers to report data on the hours worked by employees in order to prevent fraud in the Tax Credits system. Under Universal Credit the hours worked will not be relevant to the employee's claim, so in time when all claimants are moved from Tax Credits to Universal Credit, the requirement to report hours worked should be dropped.
If your company makes a deliberate VAT mistake, which results in less VAT being paid over to HMRC than is correctly due, you as the director of that company can be issued personally with a penalty. This very rarely happens, but the VATman does have the power to impose such penalties where he can show the underpaid VAT was due to the dishonest conduct of one or more of the directors.
Two recent cases illustrate the types of situations where a personal penalty can be imposed:
Mr Brookes is the sole director of a building company. A VAT inspection found suppliers' invoices to support VAT inputs were missing. Brookes obtained 'copy' invoices from the main suppliers, but those 'copies' were found to be very poor forgeries. Brookes was served with a personal penalty of £43,753 which was 60% of the over claimed VAT.
Mr & Mrs Walker failed to submit eight successive VAT returns for their company. The VAT office issued estimated VAT assessments to the company which were less than the VAT eventually found to be due, and the Walkers did not challenge those estimated assessments. The Walkers were served with personal penalties totalling £194,214.
If you are getting in a VAT mess, ask us to help you out before things get really serious!
August Question and Answer Section
Q. I am thinking of investing some money in premium bonds. Are there any tax advantages or disadvantages?
A. You won't receive interest on the money held in premium bonds but any prizes you receive from those bonds are tax free. The prize fund is calculated on the basis of a nominal interest rate of 1.3%. Thus if you hold £10,000 in premium bonds for one year, on average you should expect to win £130 as bond prizes over the year. However, that return is not guaranteed and you may win more or less. You could also win the big prize of £1million!
The premium bonds will form part of your estate for inheritance tax purposes, so will be subject to inheritance tax on your death if the value of your total estate exceeds the exempt limit of £325,000 (fixed to 2018).
Q. I am a non-executive director of a number of companies. Can I offer consultancy services to those companies on a self-employed basis?
A. You can offer your services to those companies on a self-employed basis, but you need to have a clear contract which distinguishes your work as a consultant from work you do as a director. The self-employed tasks need to be invoiced separately and declared to HMRC as a separate business from your fees as a director.
Generally the fees for work you perform as a director should be taxed under PAYE. Legislation introduced in the Finance Act 2013 requires the IR35 provisions to apply to work done as officers where that work is charged through a third party, such as a personal service company.
Q. I formed my new company in November 2012 and my wife (Liz) became a director and employee of that company at that time. Liz is now expecting our first child in August 2013. Can our company pay Liz statutory maternity pay?
A. Unfortunately Liz has not worked for 26 weeks for her employer before the 15 weeks prior to birth, so statutory maternity pay is not due. There is nothing to stop your company from paying Liz her normal wages while she is on maternity leave, but as those wages do not amount to statutory maternity pay the company can't reclaim that pay from the tax office.
August Key Tax Dates
2 - Last day for car change notifications in the quarter to 5 July - Use P46 Car
19/22 - PAYE/NIC and CIS deductions due for month to 5/8/2013