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Make the Losses Work

May20

The value of shares quoted on the stock market has risen recently. This may encourage you to sell some investments before the end of this tax year (5 April 2013) in order to use your annual capital gains exemption and to soak up any capital losses. Any gains covered by the exemption (currently £10,600 per person) or capital losses are free of capital gains tax.

We can’t advise you on what to sell, but we can help you calculate the level of your capital losses and potential gains. It is essential that you tell your financial adviser or stockbroker how much capital losses you have already realised, so future disposals can be made to meet the level of those capital losses.

If you have forgotten to declare a disposal which made a capital loss on your tax return form, there may be no harm done, but you need to submit a claim for the loss before it can be set against a later gain. The deadline for claiming capital losses is now four years from the end of the tax year in which the loss arose, so you can still claim for losses made in 2008/09 and later tax years. We can help you with these claims.

Don’t forget you can crystallise a capital loss on shares which you still hold, but are now worth nothing or almost nothing. This is called a negligible value claim.

If you would like any further information, please do not hesitate to contact Southside Accountants Wimbledon & London.

Annual Payroll and RTI

May13

Under real time information (RTI) PAYE reporting, a Full Payment Submission (FPS) report is required to be made to HMRC every time an employee is paid, not just once after the end of the tax year as is currently the case. RTI will be compulsory for most employers from the first pay date following 6 April 2013.

Many one-person companies may wish to pay the director just once a year and avoid monthly RTI reporting. If you want to do this, you must first check that your payroll software will cope with an annual payroll, as many main-stream payroll software packages do not.

The second stage is to understand what reports HMRC will require under RTI. An annual payroll must be registered with HMRC. The current advice on the HMRC website says: “If all payments on which tax and NICs are due are paid to your employees annually in a single tax month, you can ask HMRC to be treated as an ‘annual payer’. You must use the same month every year, so if this changes or you start paying your employees more frequently, you will need to tell HMRC.”

There should be more guidance on the HMRC website about annual payrolls soon. If you do not register the payroll as being annual you will need to submit an Employer Payment Summary (EPS) to HMRC every month, which shows nil payments made to the employee.

If you would like any further information, please do not hesitate to contact Southside Accountants Wimbledon & London.

May Key Tax Dates

May8

19/22 – PAYE/NIC and CIS deductions due for month to 5/12/2012

30 – Deadline for 2011/12 self assessment online returns to be filed if you are an employee and want tax underpaid to be collected by adjustment to your 2013/14 PAYE code (for underpayments of up to £3,000 only)

If you would like any further information, please do not hesitate to contact Southside Accountants Wimbledon & London.

May Question and Answer Section

May6

Q. I registered as self-employed in 2005, but as I didn’t have any income I ignored the tax returns the tax office sent me. When they demanded £1,000 tax for each year I got my act together and sent in the completed tax returns which showed no tax due. Now the Taxman won’t cancel the tax demands issued for the years before 2008/09. What can I do?

A. You have been caught by the tax law here. The years before 2008/09 are ‘out of time’ and the Taxman doesn’t have to cancel the tax demands for those years. Although you may be able to appeal for the tax demands to be cancelled under ‘special relief’, but you need to show it would be unconscionable for the Taxman to collect the excessive tax. This is a very high hurdle to clear.

Q. From 1 January 2013 Independent Financial Advisers (IFAs) are not permitted to charge commission, and should instead charge fees for the advice and services they provide. Do firms of IFAs have to charge VAT on all the advice they give or is some advice exempt from VAT?

A. The VATman’s guidance says the IFA’s advice-only services will be subject to VAT, but if the fee is for an introduction to an exempt financial service, that introduction fee will be exempt from VAT. As an IFA you need to sort out exactly what you are charging for:

  • general advice
  • introductions to exempt services (such as to authorised dealers in securities) or
  • introductions to services which are subject to VAT such as discretionary investment manager services.

We need to discuss your particular circumstances in detail to sort out the VAT position.

Q. I got divorced in 2007, but I still jointly own my former family home with my ex-wife. We agreed she would live there with my daughter until she finished her school exams. The house is now about to be sold. Will I have to pay capital gains tax on my share of the profit made?

A. You can escape tax on the gain made on your former home if all these conditions are met:

  1. Since you left the property your former spouse has occupied it as her main residence.
  2. The agreement for your ex-spouse to stay in the home was made either under a court order, or as part of your divorce.
  3. You haven’t elected for another property to be your main residence for any part of the period since you ceased living in your former home. If you have acquired another property in the meantime, you need to think carefully about which property you claim capital gains tax relief on, as this relief can’t be applied to two properties for the same period.

If you would like any further information, please do not hesitate to contact Southside Accountants Wimbledon & London.

VAT Registration Advice

May1

It’s one number (£77,000 from 1 April 2012), so why is so easy to get it wrong? We are talking about the compulsory VAT registration threshold in the UK. If your VAT taxable turnover (sales) total for the previous 12 calendar months exceeds this compulsory registration threshold, or the sales you expect to make in next 30 days will exceed that threshold, you MUST register for VAT within the next 30 days.

You can now register for VAT online on the HMRC website, but we recommend that you talk to us first, as so many things can go wrong. If you make a mistake with the form, the Taxman may not let you correct it. For example:

  • If you exceed the VAT registration threshold due to a ‘blip’ in sales, you can ask the VATman for permission not to register for VAT, but you must ask first and permission may not be granted.
  • You can reclaim VAT on services you purchased for your business in the six months before the day your VAT registration is effective from, so it is essential to time your VAT registration date with an eye on the invoice dates for those expensive services. If the service relates to an asset which was no longer held at registration, the VAT can’t be recovered as pre-registration VAT.
  • If you receive a large order which will push your sales over the VAT registration threshold for the next 30 days alone, pay attention to the delivery dates for that order. A staggered delivery for the order may mean you do not exceed the VAT threshold in the next 30 days, and you may register for VAT too early.

If you would like any further information, please do not hesitate to contact Southside Accountants Wimbledon & London.

Taskforce Targets Private Landlords

Apr29

The Taxman has announced a taskforce to investigate tax avoidance by landlords in South East England.

Private residential landlords have now been the subject of a taskforce in: Scotland, North Wales, London, East Anglia, North East, North West, and now South East England. That covers pretty much the whole of the UK. The message is clear; individuals who own rental properties must correctly declare all of the income and gains generated by those properties.

It is relatively easy for the Taxman to trace the owners of let properties through the Land Registry and compare the registered owner’s name to those recorded on the electoral roll for the property. If the names aren’t the same, the Taxman will assume the property has been let. He can also ask letting agents to provide lists of the landlords and properties they serve.

If you would like any further information, please do not hesitate to contact Southside Accountants Wimbledon & London.

Business Record Checks

Apr24

The Taxman apparently believes that anyone who does business in cash must be a potential ‘tax cheat’. This is ridiculous of course, but his latest business record checks campaign is based on this fallacy.

If you receive a call from the Taxman asking questions about your business records, please refer the caller to us before agreeing to answer his questions. You should not be penalised for doing this. The Taxman is required to deal with the taxpayer’s agent if asked to do so.

The telephone questionnaire is a computer generated script, which only accepts a limited range of answers. For example: How many purchases are in cash? Answers accepted: none, a third, half or more.

The answers given determine whether the Taxman sends you guidance on how to keep better business records, or an Inspector to check what you may be doing wrong. Where the Taxman wants to inspect your business records, please ask us to be present when they come. The potential penalties for flying solo are not worth it.

If you would like any further information, please do not hesitate to contact Southside Accountants Wimbledon & London.

Planning for RTI

Apr22

If you are an employer you should have received information from the Taxman about operating PAYE under Real Time Information (RTI).

Employers with fewer than 5001 employees will have to operate RTI from 6 April 2013, and that includes one-man companies. Some employers have already started to use RTI under the pilot program. Individuals who employ carers in their own home may be able to defer migrating to RTI until April 2014.

You need to check whether your payroll software will be RTI-ready from April 2013. Don’t assume it will be. Some software providers have decided to discontinue legacy packages and force you to move to more expensive offerings. Even HMRC is cutting back on the free payroll software it provides. The HMRC PAYE Basic Tools will work under RTI, but only for up to nine employees, and it does not handle net pay arrangements for employer pension contributions.

If you use an external provider to run your payroll, you should talk to them about how much it will cost to run your payroll from April 2013. RTI requires more data to be submitted to the Tax Office than currently required (see below). Also the RTI reports must be sent on or before the day on which employees are paid, which could be daily or weekly. Currently the Taxman requires an annual report of what has been paid and deducted under PAYE.

The ‘on or before’ requirement has been relaxed in limited circumstances where employees are paid in cash on the day they work, and the amount of payment cannot be known in advance. This may apply to bar staff and crop-pickers. However, the RTI report must still be made within seven days of the day of payment, or when the next payroll is run, whichever comes next.

As the purpose of RTI is to provide accurate information to the DWP on claimants’ earnings, employers are also required to report the weekly hours worked by each employee, as they fall into the following bands:

A. Up to 15.99 hours
B. 16 to 29.99 hours
C. 30 hours or more
D. Other

You don’t have to record the exact hours worked, only the normal hours the employee is expected to work.

RTI penalties will commence from April 2013. However, these are only penalties for inaccurate returns, not for late returns.

Penalties for inaccurate returns are not issued automatically and generally are only applied after a PAYE inspection (employer compliance check). However, as under RTI the employer will be making as least 12 reports a year (full payment submissions: FPS), the risk of inaccuracies creeping in must be greater than under the current once a year reporting system.

Penalties for late FPSs submitted within the tax year will be issued automatically, but not until after April 2014. However, the final FPS for the tax years 2012/13 and 2013/14 will be subject to a late return penalty if it is not received by 19 May following the tax year end.

If you would like any further information, please do not hesitate to contact Southside Accountants Wimbledon & London.

 

HMRC forms – PAYE

Apr17

Agent copies of forms

HMRC will no longer send a number of PAYE forms to Agents as part of its efficiency saving measures.

 

The following forms issued between now and December 2010 will now only be sent to the taxpayer and if appropriate the employer organisation. These forms include:

  • P800 – Tax calculation
  • P800 – Tax calculation
  • SA 250 – Letter advising the customer of their unique Taxpayer Reference and detailing the requirement to Complete an annual Self Assessment tax return
  • SA251 – Letter advising the customer that HMRC will not require future self assessment tax returns to be completed

 

The professional bodies will be making representations regarding the withdrawal of the agent’s copies of these forms but, in the meantime, it is important that clients keep their agents informed of all forms and correspondence with HMRC.

 

Tax calculations – end of year PAYE reconciliations

You have probably realised from the recent media coverage, that HMRC started sending out Forms P800 tax calculations for 2008/9 and 2009/10 to taxpayers from 6 September 2010. The purpose of the forms is to reconcile an individual’s total PAYE income and tax liabilities, rather than looking at the separate sources in isolation.

 

The types of taxpayer that will be most affected by this would typically include:

  • Employees in receipt of new benefits in kind
  • People with more than one job
  • Pensioners with multiple pensions

 

 

The forms will only be sent to taxpayers who have paid too much or too little tax. Agents will not be sent a copy of these forms so, if you receive one, it is important to send it to your agent.

 

 

P2 Notices of coding

Notice of coding explains to the taxpayer what the tax code is and how it is worked out. If the amounts are incorrect the taxpayer could end up paying too much or too little tax.

Taxpayers and Agents will need to quickly check any notices they receive and ensure that they are revised by HMRC before the new tax year starts.

 

As mentioned above, agents will no longer receive copies of P2 Notices of Coding and, therefore, they should be sent to your agent as soon as they are received.

 

Forms SA250 and SA251

These forms are important as they notify taxpayers of whether or not they are required to complete a self-assessment tax return.

 

These are important forms and, once again, agent copies of these forms are to be withdrawn so, if you receive one, it is important to send it to your agent as soon as possible.

 

 

 

This is a guide for ACCA members to provide assistance when dealing with clients or informing colleagues. This document has no regulatory status and provides an overview of the changes.

If you would like any further information, please do not hesitate to contact Southside Accountants Wimbledon & London.

 

 

Penalties for late payment of employer and contractor PAYE

Apr10

Penalties for late payment of PAYE from tax year 2011-12

 

This guide tells you about the late payments penalties which apply for all employers and contractors from May 2010. This includes:

  • tax
  • National Insurance contributions (NICs)
  • Construction Industry Scheme deductions
  • Student Loan deductions.

 

 

Who will the penalties apply to?

The new late payment penalties will apply to all employers and contractors that do not pay on time. Large employers and contractors will still have to pay electronically, but the new penalties will replace the mandatory electronic payment surcharge.

 

How much will the penalties be and when will they be issued?

The amount of penalty depends on whether payment is due on a monthly or quarterly basis, or annually.

 

Monthly and quarterly payments

For late monthly and quarterly payments the penalty will start at 1% of the late amount and will increase to 4% depending on how many times you pay late. You will not have to pay a penalty if only one payment is late in any tax year, unless the payment is more than six months late.

 

Monthly and quarterly amounts more than six months late

HMRC may charge penalties of 5% of the amount that is late on any monthly or quarterly payments more than six months late. HMRC may also charge further penalties of 5% if you have still not paid after 12 months.

 

 

Annual payments (for example Class 1A NICs and PAYE Settlement Agreements)

HMRC may charge up to three penalties of 5% of the amount that is late, depending on the length of time that the amount is not paid in full.

 

What if I can’t pay?

Please ring the Business Payment Support Service on 0845 302 1435 as soon as possible.

 

In certain circumstances, HMRC may allow extra time to pay. If HMRC agree extra time to pay, HMRC will not charge further penalties on amounts included within the agreement from the date you approach them – provided you stick to the agreement. You may still have to pay penalties for earlier late payments. Any penalties you do have to pay may be included within the agreement.

 

What if I disagree?

You will be able to appeal against the liability to the penalty, for example because:

  • the payment was not late, or
  • there is a ‘reasonable excuse’ for being late.

 

You will also be able to appeal against the amount of the penalty.

 

Further information

Further information is on the HMRC website. Go to http://www.hmrc.gov.uk/paye/problems-inspections/late-payments.htm or from the home page use the quick link Paying HMRC and see the update in the PAYE/Class 1 National Insurance area.

 

 

These notes are for guidance only and reflect the position at the time of writing. They do not affect any right of appeal.

 

If you would like any further information, please do not hesitate to contact Southside Accountants Wimbledon & London.