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Archives for TAX

EU VAT CHANGES FOR 2015

There are two new directives, first for the fast reaction mechanism aimed towards preventing VAT fraud. Second one is for the optional and temporary application of the reverse charge mechanism in relation to supplies of certain goods and services. Quick Reaction mechanism provides the legal basis to the countries that are members of the EU to integrate an emergency measure in they are in position to serious case of sudden and massive VAT fraud.

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FUNDAMENTAL ACCOUNTING

Financial statements are prepared according to agreed upon guidelines. In order to understand these guidelines, it helps to understand the objectives of financial reporting. The objectives of financial reporting, as discussed in the Financial Accounting standards Board (FASB) Statement of Financial Accounting Concepts No. 1, are to provide information that

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SAVE ON TAXES

Value Added Tax (VAT) is a tax on consumption levied in the United Kingdom by the National Government. It was introduced in 1973 and is the third largest source of government revenue after Income Tax and National Insurance. It is administered and collected by HM revenue and customs, primarily through the Value Added Tax Act 1994. VAT is levied on most goods and services provided by registered businesses in the UK and some goods and services imported from outside the European Union.

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PROPER INVOICE INFO

Financial statements are prepared according to agreed upon guidelines. In order to understand these guidelines, it helps to understand the objectives of financial reporting. The objectives of financial reporting, as discussed in the Financial Accounting standards Board (FASB) Statement of Financial Accounting Concepts No. 1, are to provide information that

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Tax authorities warn of bank account changes

HM Revenue and Customs (HMRC) has reminded taxpayers of changes to its bank account.

As from 9 August 2011, businesses and individuals will no longer be able to use the old Bank of England account.

Any payments directed to the Bank of England accounts after this date will be rejected automatically by the banking system, HMRC said.

To ensure that that payments are made on time, it is essential that the correct bank account information is used.

Details can be found at: http://www.hmrc.gov.uk/payinghmrc/index.htm

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Regulation date nearing

Each year, the government introduces regulatory changes affecting businesses on two common commencement dates. These dates are 6 April and 1 October.

There are a number of changes due to come into force in April 2011. What follows is a summary, but not an exhaustive list, of the more important new rules with which businesses will need to comply.

Some changes have a bearing on the financial year and, as a consequence, may be effective from 1 April.

Corporation Tax

The main rate of corporation tax drops from 28 per cent to 26 per cent, while the small profits rate drops from 21 per cent to 20 per cent, both for the financial year that begins on 1 April.

Electronic filing for corporation tax

As from 1 April 2011, all companies and organisations must file their company tax returns online in the iXBRL format. This covers any accounting period ending after 31 March 2010. What’s more, they must make their payments electronically too.

The rules on how to calculate corporation tax have not altered, nor has the return itself.

Any company or group that is required to put together accounts under the terms of the 2006 Companies Act must now do so using the Inline eXtensible Business Reporting Language or iXBRL. The format is designed specially for business reporting. Information that relates to the period of the company tax return must be tagged accordingly. Unincorporated organisations such as charities, clubs or societies, or a charity that is incorporated under the Charities Act, must file their computations using iXBRL.

In the case of groups of companies, the individual companies must submit their returns in the iXBRL format. Should a parent company be required to put together group accounts in addition to separate accounts, these must also be filed in iXBRL. However, the consolidated accounts need to include the same details about the parent company as the individual accounts would have done.

The new rules apply to the filing of year-end P35 and P14 forms and in-year P45 and P46 forms.

All corporation tax payments, and related payments such as the interest charged on overdue payments and late filing penalties, must be made electronically. Online that means direct debit, using debit or credit cards on the BillPay service, or using a bank’s or building society’s internet service. Offline electronic methods include BACS, CHAPS or a telephone banking service.

There are only two exemptions from the new rules. These are companies whose directors and company secretary are members of a religious faith whose beliefs run contrary to using electronic communications, and companies that are subject to a winding up order or is in administrative receivership.

Industry taxes

As from 1 April, the rates that apply to Landfill Tax, the Aggregate Levy and the Climate Change Levy increase as appropriate.

Stamp Duty Land Tax

A new rate of SDLT of 5 per cent applies to the sale of residential properties of a value of £1 million or higher. However, this does not cover non-residential or mixed-use properties. Where contracts were embarked upon before 25 March 2010 but were not completed by 6 April 2011, it is likely that the new charge will not apply.

Employment regulations

Extra paternity leave

As from 3 April, there are important changes to paternity leave and pay.

New fathers gain the right to additional paternity leave and pay (APL&P) if their partner gives birth on or after 3 April 2011.

Additional paternity leave (APL) means a father can take up to 26 weeks’ leave to care for the child.

Under the new regulations, parents have the option of dividing maternity leave between them. Fathers have the legal right to take up the final three months of paid maternity leave due the mother provided she returns to work. They will be paid the statutory maternity pay per week for the three-month period.

They will also have the chance to take a further three months of unpaid leave, bringing the total amount of parental time-off for couples of newborn children to 12 months.

Fathers can only start their APL 20 or more weeks after the child’s birth, and once their partner has returned to work from statutory maternity leave or ended their entitlement to statutory maternity pay, or maternity allowance.

The employee’s APL will have to have ended by the end of the 52nd week after the child’s birth. The father only receives additional statutory paternity pay (ASPP) during the time their partner would have been receiving statutory maternity or maternity allowance.

Flexible working requests

As from 6 April, the rules allowing working parents to request flexible working arrangements were to have been extended to those with a child aged 17. The current rules limit the right to make a request to those with a child aged 16 and those with a disabled child aged below the age of 18.

However, the Government has recently announced that it will be postponing the extension of the entitlement.

The Government said it is committed to extending the right to request flexible working to all employees in due course, as set out in the Coalition Agreement. But the purpose for delaying the extension of flexible working is to allow businesses breathing space in the current economic climate.

Right to request time off for training

The Government has also reversed moves to extend to workers in firms with fewer than 250 employees rules entitling staff to the right to request time off for training.

Positive action on recruitment and promotion

As from 6 April, employers can recruit or promote employees with a protected characteristic if they are of equal merit to another candidate and if the employer believes that employees with that characteristic are underrepresented in the workforce or are disadvantaged by it.

But employees will only be able to conduct positive action in those cases it is a balanced way of tackling under-representation or disadvantage.

They cannot choose a candidate who is less well qualified or suited simply on the grounds of that characteristic.

Those characteristics include, among others, race, age, disability, religious belief, sexuality and pregnancy.

Scrapping of default retirement age

The default retirement age of 65 is dropped as from April 2011.

Under the new rules, employers will no longer be able to terminate the employment of staff members simply because they have reached 65.

The default retirement age of 65 is to be phased out between 6 April and 1 October 2011.

The change means that, from 6 April 2011, employers cannot issue any notifications for compulsory retirement using the DRA procedure.

Between 6 April and 1 October, only people who were notified before 6 April, and whose retirement date is before 1 October, can be compulsorily retired using the DRA.

While after 1 October, employers will not be able to use the DRA to compulsorily retire employees.

The decision to scrap the default retirement age was made in response to a combination of a shortfall in pension savings and the increasing longevity of the UK population.

Employers will continue to be allowed to run with a compulsory retirement age for employees provided there is an objective business justification for doing so.

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Firms get reminder on corporation tax changes

HM Revenue and Customs (HMRC) has issued a reminder about important changes that will be affecting corporation tax this April.

Under the changes, all company tax returns sent in from April 2011 must be filed online for accounting periods ending after 31 March 2010.

What’s more, returns will need to be submitted in a data format known as Inline XBRL or iXBRL.

Corporation tax payments must likewise be made electronically from April 2011.

The changes are not confined to limited companies. The new rules will apply to other organisations that pay corporation tax, including clubs, societies, associations, co-operatives, charities and other unincorporated bodies.

Companies can file online using either commercial software or HMRC’s own filing software. The latter is specifically aimed at companies with less complex tax affairs.

There is already a wide range of commercial software available, with more coming onto the market in the near future.

More information on the commercial software options can be found atwww.hmrc.gov.uk/efiling/ctsoft_dev.htm.

Firms that still need to sign up for electronic corporation tax filing can visitwww.hmrc.gov.uk/ct and then click ‘register for corporation tax online’.

Alternatively, HMRC and Companies House have launched a new joint filing service for company accounts.

The service allows companies with relatively straightforward financial affairs to send their accounts in iXBRL format to HMRC and Companies House as part of their company tax return.

To use the service, firms must register with HMRC online services and enrol for corporation tax online. A template can then be used to submit accounts to both HMRC and Companies House.

More information can be found at www.hmrc.gov.uk/ct/ct-online/file-return/joint-filing.htm.

If you have any concerns over the new filing system, we will be more than pleased to offer expert advice.

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Paper self-assessment tax date imminent

Taxpayers are being reminded that the date for submitting a paper self-assessment tax return is looming.

The cut-off point for paper returns is 31 October.

Last year, some 2,467,000 people submitted self-assessment tax returns in paper format.

Of those, 2,143,000 (87 per cent) managed to meet the deadline. Late returns could mean a £100 penalty.

However, HM Revenue and Customs (HMRC) is encouraging taxpayers to consider online filing.

Stephen Banyard, director of HMRC’s business customer unit, said: “The other option would be to file online – three quarters of self assessment filers already do so – where you get three months longer to file.

“Online filing has other advantages too: your tax is calculated automatically; you get an immediate online acknowledgement once you’ve filed; and it’s processed faster, so any money you’re owed is repaid more quickly. So, it is really worth considering.”

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Government embarks on tax consultation

The Treasury has issued nine consultation papers on various aspects of the personal and business tax system in what amounts to a far-reaching overhaul of the entire regime.

The papers are asking for views on, among other topics, a reform of the PAYE system, pensions tax relief and inheritance tax.

Announcing the consultations, David Gauke, the Treasury Secretary, said: “We want to make the tax system simpler and work better for the taxpayer. By reducing burdens, making the right choices and involving taxpayers, we are sending a very clear signal that Britain is open for business.

“We are committed to a more considered and open approach to tax policymaking. That is why consultation and scrutiny of our tax policies will be the cornerstone of our tax policymaking process. I want to encourage relevant parties to provide their feedback on the tax consultations we have published.”

The papers follow on from a series of tax changes introduced in the emergency Budget and from the government’s commitment to simplify the overall tax system.

Other tax issues that will be assessed include furnished holiday lettings, associated company rules, foreign branch taxation, the controlled foreign company regime and the modernisation of investment trust company rules.

On PAYE, the government is looking to update the system.

Mr Gauke said: “The PAYE system needs to respond better to the circumstances of the individual taxpayer because only in this way will we be able to reduce errors and provide taxpayers with the clearest picture possible of their tax and allowances.

“We also need a PAYE system that reduces the burden on employers.”

At the moment, responsibility for administering the system lies with employers, who deduct employees’ income tax and NICs at source.

A real time system could see tax and NICs automatically taken from employees’ gross pay as it enters their bank accounts.

There are plans, too, to change the way that pension contributions are treated for tax purposes.

The Treasury is proposing that each taxpayer’s annual pension allowance, the amount by which pension funds can grow tax free, should be reduced from the current £255,000 a year to between £30,000 and £45,000.

The new measures would replace the previous administration’s intention to taper pension tax relief for higher earners.

The consultations will also investigate inheritance tax avoidance schemes. Transfers of property into trusts, as a way of sidestepping inheritance tax, will be subject to a much closer level of scrutiny.

The government has already consulted on the use of travel and subsistence schemes for temporary workers under the national minimum wage, and has concluded that some action needs to be taken to prevent any abuses on expenses.

Commenting on the consultations, Vincent Oratore, President of the Chartered Institute of Taxation (CIOT), said: “The government’s objective of simplifying the system and reducing burdens on business and individual taxpayers is one that the CIOT shares. The more comprehensible the tax system the more likely it is to command public and business confidence and the more likely taxpayers are to get their tax right.

“The review of the proposed changes to pensions tax relief is especially welcome. We all understand that pensions tax relief is going to be curtailed, but that there has to be a simpler way than the complex and costly system previously legislated for. A cut in the annual contribution limit would be a simpler and more pragmatic way forward.”

Mr Oratore added: “We also welcome the discussion document on improving the operation of the PAYE system. It seems to acknowledge many of the problems with the PAYE system and offers the opportunity of real change to a system that, for all its merits, is creaking badly and imposing too many burdens on employers.

“The prospect of changes that, for example, largely eliminate P45/46 problems, mean tax codes are far more up-to-date and offer the possibility of streamlining tax credits and benefits, is very appealing.”

But Richard Baron, head of taxation at the Institute of Directors, warned: “We now need to see the full cycle through to Budget 2011. If proposals get the thumbs-down from business, it will be important for Ministers to accept that fact and drop them.”

More details on the various consultations can be found at http://www.hm-treasury.gov.uk/consult_liveindex.htm

 

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Employers reminded of possible tax errors in April payslips

Employers and employees are being reminded that there could be some errors with the new PAYE tax codes that have been issued by HM Revenue and Customs (HMRC).

As a result, employees should check their April and May payslips to see if they are paying the correct amount of tax.

This may be reflected in any unexpected change to the amount of money they receive in wages.

Worries emerged earlier in the year that a proportion of the 25 million tax coding notices that have been sent out may have been wrong.

The codes dictate how much employers and pension firms deduct in income tax for the coming 2010/11 financial year.

A number of people with one job have received two (or more) tax coding notices with different codes. This is because HMRC’s new system, which combines information on NICs and PAYE details for the first time, has been failing to distinguish between current and previous jobs in all cases.

Without complete information on those taxpayers who have moved from one job to another recently, the new database has been treating them as if they are in more than one job.

HMRC has said that it is in the process of reviewing individual cases to correct as many discrepancies as quickly as possible.

This means that in a number of cases where P2 forms have been issued to employees, HMRC won’t be sending P9 forms to their employers until the reviews have been completed. So some employees’ tax codes won’t have reached their employers in time for the new tax year.

If an employer does not receive a P9 in time, HMRC has said that they should continue to operate the existing 2009/10 code for the employee concerned even though the employee may already have been issued with a revised coding for 2010/11.

HMRC went on to add that, if an employee contacts an employer because they think their tax code may be wrong, then the employer should get them to call HMRC on the number printed on the coding notice or on 0845 3000 627.

In most cases a correct new tax code will be sent to both employers and employees in due course.

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