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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.

October Key Tax Dates

Mar4

1 – Due date for payment of Corporation Tax for the year ended 31 December 2011

5 – If a Tax Return has not been received, individuals and trustees must notify HMRC of new sources of income and chargeability in 2011/12

14 – Return and payment of CT61 tax due for quarter to 30 September 2012

19 – Tax and Class 1B NI due on PAYE settlements for 2011/12

19/22 – PAYE/NIC and CIS deductions due for month to 5/10/2012 or quarter 2 of 2012/13 for small employers

31 – Deadline for 2011/12 self assessment paper returns to be filed for HMRC to do the tax calculation. If a paper return is being filed also the deadline for tax underpaid to be collected by adjustment to your 2013/14 PAYE code (for underpayments of up to £3000 only)

 

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

RTI Gathers Pace

Jan21

We warned you previously about the new real time information (RTI) process. Now the Taxman is writing to all employers who are not already part of an RTI pilot, to tell them how to prepare for RTI.

To recap: RTI is a new way of submitting payroll data to the Tax Office. Instead of sending PAYE information to HMRC once after the end of the tax year, employers must submit their payroll data online on every occasion their employees are paid.

If you run a computerised payroll, your payroll software should be updated to cope with RTI. However, do check with your software provider, as some payroll packages are not going to be revised for RTI. In which case you need to find new payroll software, or use the free software provided by HMRC (for up to 9 employees), or ask us help you process your payroll each month.

All small and medium sized employers will be expected to start using RTI to submit payroll data from April 2013, unless they have agreed a different start date with the Tax Office. Once you receive an ‘invitation’ from the Taxman to use RTI, you must join the RTI system from the date directed.

You will need to collect some new data items under RTI which are not currently required for PAYE, such as:

– Hours worked per week for each employee based on one of four bands;
– Details of those earning less than the lower earnings limit (£107 per week);
– Which employees are paid irregularly, perhaps only once per year; and
– Passport numbers for employees who do not have NI numbers.

In addition you will need to have the correct NI number (where this exists), date of birth, gender, full name and address for each employee.

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

A guide to The New Penalties Regime

Nov7

A SIMPLE GUIDE TO THE NEW PENALTIES REGIME

 

This is a basic guide prepared by the Technical Advisory service for members and their clients. It is an introduction only and should not be used as a definitive guide, since individual circumstances may vary. Specific advice should be obtained, where necessary.

 

The New Penalties Regime

 

The aim of the new penalties regime is to provide a simpler and more consistent approach by HM Revenue & Customs (HMRC).

 

UNDERSTANDING THE NEW PENALTIES REGIME

 

HMRC is introducing a new penalties regime applying to documents due to be filed on or after 1 April 2009.

The new regime covers the following the taxes:

  • VAT
  • PAYE
  • National Insurance contributions
  • Capital Gains Tax
  • Income Tax
  • Corporation Tax
  • Construction Industry Scheme

 

The proposal is to extend it to other taxes, levies and duties though it has been stated that it will not apply to any benefits or credits like tax credits, nor will it apply to the national minimum wage.

 

The general approach of the new regime is designed to be fairer, helping those that are compliant and punishing those who are not. The reason underlying an error will now be looked into and they have coined the term ‘reasonable care’ as key to determining the amount of penalty charged.

 

Reasonable care

 

The definition of ‘reasonable care’ varies from person to person and their unique circumstances and abilities. It is a behavioural change and tax payers and their advisors must demonstrate in their everyday work reasonable care can be demonstrated. HMRC has provided the following examples of reasonable care:

  • keeping accurate records to make sure your tax returns are correct
  • saving your records in case you need them later
  • checking what the correct position is when you don’t understand something
  • telling HMRC promptly about any error you discover in a tax return or document after you’ve sent it.

 

It stands to reason that a person with simple tax affairs will have a simple system of records and that a person with complicated tax affairs may have a complicated system of records.

 

For example, reasonable care is where a person who enters a transaction not encountered in their usual activity, takes steps to make sure the correct treatment is realised. That could be by seeking advice or checking the treatment is correct and would be similar to the reasonable steps taken once an error is discovered.

 

HMRC states that if reasonable care is taken to get things right and still an error occurs then there will be no penalty. In addition, once an error is discovered reasonable steps must be taken to promptly disclose it. Reasonable steps include:

 

  • consulting with an accountant or agent to discuss the position so they can inform HMRC
  • ringing HMRC to discuss it
  • discussing it with one of HMRC’s officers if there is an ongoing compliance check
  • e-mailing, faxing or writing to an HMRC office with details.

 

 

Penalty suspension

 

There is also a new system of penalty suspension under this new regime. A penalty can be suspended for up to two years provided certain conditions are met and you do not become liable to any other penalties during the suspension period. If at the end of two years the conditions are met the penalty will be cancelled. The suspension cannot be applied where the error was deliberate. Further details can be found on the HMRC website.

 

Calculating the penalty

 

The penalties under the new regime are based on the extra tax due and the rates depend upon the reason underlying the error. In addition to the penalty, interest will also be charged on the extra tax due.

 

The four stage sliding scale of penalties apply to: a mistake despite reasonable care, a careless mistake, a deliberate mistake and a deliberate and concealed mistake. This is best demonstrated by graph 1, that clearly demonstrates the difference between prompted and unprompted disclosure.

 

 

It is clear that there is an option of reducing the potential penalty in all circumstances, what therefore can mitigate your penalty? There are three categories for mitigating your penalty, described as:

  • Unprompted and prompted disclosures
  • Behavioural
  • Quality of disclosure

The first is clearly displayed in the diagram above, the second and third can be grouped together and are best demonstrated by looking at the definition of three terms.

  • telling HMRC about any errors (can mitigate your penalty by 30%)
  • helping HMRC work out the extra tax that is due (can mitigate your penalty by 40%)
  • giving access to HMRC to check the figures (can mitigate your penalty by 30%)

 

 

FURTHER CONSIDERATION

HMRC has produced a number of useful guides about the new penalty regime:

 

The first is a simple guide to the new penalties regime. The second is a questions and answers document containing common questions on the new penalties regime.

 

Finally, as with most penalties, there is always a system in place to appeal against any penalty levied. Further details can be found on the HMRC website.

http://www.hmrc.gov.uk/manuals/chmanual/CH84000.htm

 

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.

RTI and PAYE

Aug27

Q. What’s all this about RTI? Do I have to do something by October? Is it going to cost me more?

A. Real Time Information (RTI) is a new way of submitting PAYE information to the tax office. All employers will have to use RTI by October 2013 (not this year), but some employers are starting to use RTI early in a test phase from April 2012. The aim is to add more employers to the RTI project at intervals, depending on how the first tests go. The tax office says your payroll software should cope with RTI when the time comes. We suggest you ask your software provider when their RTI update will be ready, and how much it will cost. We can help you prepare your payroll for RTI. This involves checking you have the full name, gender, date of birth and accurate NI number for every employee, including those who earn less than the NI threshold.

 

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

PAYE Reconciliations Starting

Aug6

Between now and October 2012 around 5.1 million taxpayers will receive notice of a tax under or over-payment, arising from the PAYE reconciliation exercise for 2011/12. These PAYE adjustments are the natural result of calculating whether each taxpayer has paid the right amount of tax through PAYE or not.

The PAYE system does not cope well when a person has several employments or pensions running concurrently, or changes the benefits in kind (such as a car or medical payments) part way through the tax year. As a result the amount of tax deducted from salary or pension is not perfect, although more problems are being overcome every year.

When the HMRC computer calculates that you have under or over-paid tax for the year it will send you a tax calculation on form P800. We will not get a copy of the P800 as your tax agent, so if you want us to check the figures for you please send us a copy.

If you are going to check the tax calculation yourself, start with the forms P60 or P45 you have received from your pension provider or employer for the tax year. First ensure you are comparing documents for the same tax year, the latest P800 form should be for 2011/12, but you may be sent calculations for earlier tax years. Is all the tax deducted as reported on the forms P60 also shown on the P800? There have been cases of HMRC mixing up the PAYE records of two taxpayers, so watch for any discrepancies in your taxed income figures.

You also need to check that your full personal allowance has been included, and the amounts for benefits or other income are accurate. These figures are often estimated at the beginning of the tax year, and may not have been amended to reflect the true amounts.

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