VAT reminder

The registration and deregistration thresholds have increased from 1st April 2016

Registration

The taxable turnover threshold that determines whether a person or business must register for VAT increases from £81,000 to £83,000

Deregistration

The taxable turnover threshold that determines whether a person or business may apply for deregistration increases from £77,000 to £79,000

Flat Rate Scheme (FRS) limits

The taxable turnover thresholds have not changed here. Provided your taxable turnover is less than £150,000 you may apply to join the scheme. Once in FRS, you can stay in the scheme until your turnover reaches £230,000 for the year.

Why would you choose to account for VAT using FRS? It is because preparing your VAT figures is easy and quick and sometimes there is actually a financial benefit to you in accounting for VAT in this way compared to using other methods available. I can advise you if this is suitable for your business and so please call me if you would like to know more. I have many clients accounting for VAT in this way - if it is of benefit to them. 

Mark

RTI Important tax deadlines

RTI - End of tax year important deadlines In previous years HMRC required that you file a P35 Employer Annual Return together with associated P60s for each employee. An 'end of year' process still exists as a final EPS )Employer Payment Summary) submission for 2015/2016 marked as being the 'Final Return'. 19th April 2016 deadline You must have sent all RTI submissions for the tax year 2015/2016 by this date. This includes any FPS re-submissions/amendments as well as the your final EPS submission for the year. HMRC will not accept FPS submissions for 2015/2016 after 19th April 2016. If you attempt to file an FPS after this date your return will be rejected by HMRC and you will receive a late filing penalty of £100 as well. If you miss this deadline and need to submit pay information for HMRC for 2015/2016 then you will need to do so via an 'Earlier Year Update' (EYU) using HMRC Basic PAYE Tools software (Personal note to everyone - I would prefer to avoid doing this as it involves extra work and cost to you!) CIS Suffered If you normally have CIS tax deducted from your work, you must let us have this information quickly because in order to claim the tax suffered this must be shown on the RTI Employer Payment Summary (EPS) by 19th April. Monthly CIS Returns Whilst you do not have to give any 'payment statements' to subcontractors immediately, the details must still be reported on a monthly CIS Return by the 19th April with any deductions shown on the RTI Employer Payment Summary (EPS) by this date. What does this mean, we now only have two weeks after 5th April 2016 to file everything! Lets work together to get this done. With kind regards Mark

Auto enrolment

Pensions - Auto Enrolment Auto Enrolment is a set of duties to make sure all employees who are eligible, automatically become members of a qualifying pension scheme with a high enough level of contributions. This means the employer has several new responsibilities such as: • Workforce assessment • Provision and Auto Enrolment into a qualifying scheme • Facilitating opting out and refunds • Record keeping Time Frames You will have to understand your obligations as an employer over the next few years. For most small employers the following dates are relevant, however larger employers will have to register much sooner. In any event, now is the time to start reviewing what is involved. • Any employer with a PAYE scheme registered before 1st April 2012 must have enrolled their staff by April 2017 • Any employer with a PAYE scheme registered from 1st April 2012 must have enrolled their staff by February 2018 For more information on this subject, click on the following link here

IR35 - Update 2015

IR35 - Where are we now?

IR35 remains a very hot topic.  Following the OTS (Office of Tax Simplification) review of IR35 and the Government’s commitment to keep IR35 and improve the way it is administered by HMRC we have seen lots of changes including:

• Creation of the IR35 Forum
• Complete review and rewrite of HMRC’s IR35 guidance
• New IR35 HMRC compliance approach with 5 specialist HMRC IR35 teams
• Lots more IR35 investigations
• Trial of the Business Entity Tests
• Improved promotion and communication of IR35
• Launch of HMRC’s IR35 contract review service and helpline
• New Assurance processes for IR35 for those in the Public Sector
• Office Holder tax rules changed

We have also seen the review of the use of Personal Service Companies by the House of Lords Select Committee earlier this year.

Pilot and the report
 
All these new IR35 processes have recently been subject to review and the IR35 Forum has now published their report on the new processes.  This report also aims to address many issues raised by the House of Lords Select Committee.

Key findings in a nutshell
 
Much has already been done to improve the administration of IR35 and there is more to do on many of the areas identified for improvement.

The Business Entity Tests will be abolished with effect from April 2015.  The tests were designed to indicate the level of risk of an IR35 investigation, rather than being any sort of status test.  However, it became clear that the tests were of little use to the typical contractor or Personal Service Company user with most of them falling into the “high risk” band.  Worse still it was found that the tests were being manipulated and various web sites sprung up offering to rent virtual offices to contractors and all sorts of additions (at a fee) to gain a “low risk” score.  Because the tests are all about the risk of IR35 HMRC investigation, achieving a low risk score does NOT mean that IR35 does not apply.  So it’s goodbye to the BETS and not before time.

IR35 Investigations.

• If you receive a Business Records Check letter from HMRC that asks whether IR35 has been considered please note that you have on your hands a full blown IR35 investigation.
• If you ask HMRC for an extension of time to gather all the information they will grant this and confirm the extension within a formal “Notice to Produce”. 
• These enquiries are not being confined to IR35 and you will likely have an expenses and benefits enquiry at the same time.
• Without exception HMRC are interviewing the end client for their views on the day-to-day working practices.
• If you contract to the end client via an agency, you cannot rely at all on the clauses in the agency contract in isolation to support an outside IR35 decision.
• You must always take an in-depth look at what you are actually doing.  Any sort of IR35 opinion based on the terms and conditions set out in the written contract alone is meaningless.  This applies even where you have a direct contract i.e. no agency.
• Consider getting some sort of confirmation of the true terms and conditions from the end client, as part of your normal review process and certainly ahead of any technical submission to HMRC.
• 50% of all IR35 current enquiries are into those providing services to the Public Sector. . We have seen numerous investigations in the traditional government departments e.g. DWP, MOD etc but it is clear that this is now being extended into the NHS, BBC and local authorities.
• Finally don’t panic and seek specialist help.

IR35 Contract Review Tips for you

• Always look in detail at the actual working practices.
• Make sure you are certain who the end client is – this is often unclear when multiple agencies are involved in the contractual chain.
• Make sure the working practices match the written contract.
• In agency cases try to seek sight of the “upper” contract between the agency and the end client.
• Consider a confirmation of arrangements in the event of a future IR35 investigation.
• IR35 is not a once made in or out decision.  It has to be considered for every single contract or extension entered into.

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Tax relief at Christmas

Tax Relief at Christmas

As thoughts turn to all things Christmassy, I thought I would write a few words on tax issues relevant to the forth coming festive season. I hope this will give you some ideas while planning treats for your customers and staff!


 Christmas Parties

• The cost of a staff party or other annual function for employees is an allowable tax deduction for businesses. This does not apply to sole traders and business partners of unincorporated organisations.
  
  As long as the function meets the following criteria, there will be no chargeable taxable benefit for the employee:

• It must be open to all employees, or to all at a particular location.
• The cost per head must not exceed £150. If more than one annual function is provided the aggregate cost per head must not exceed £150. Partners and spouses of employees are included in headcount when calculating the cost per head of attendees.
• If the £150 limit is exceeded staff will be taxable in full on total cost per head for them and their partner/spouse also attending.
• Cost is calculated as the total cost of the party or function including any transport or accommodation provided and VAT.
  
  
  

VAT is recoverable on staff entertaining expenditure but this does not extend to staff partners/spouses so input VAT will need to be apportioned.

Client Entertaining

Client entertaining (i.e. hospitality of any kind) is never an allowable deduction for business tax purposes and input VAT cannot be recovered on it.

Business Gifts

Gifts to customers are only allowable as a tax deduction if:

• The total cost of gifts to any one individual per annum does not exceed £50 and
• The gift bears a conspicuous advert for the business and
• The gift is not food, drink, tobacco or exchangeable vouchers.
  
  

However samples of a trader’s product are allowable even if they are food, drink or tobacco. 

Gifts to Staff

In some cases HMRC will consider a benefit exempt on the grounds that the cash equivalent of the benefit taxable on the employee is so trivial as to be not worth pursuing. HMRC have conceded that an employer may provide an employee with a seasonal gift such as a turkey, an ordinary bottle of wine or a box of chocolates and this will be considered an exempt benefit. However, a case of ordinary wine or bottle of fine wine or a hamper is unlikely to be considered trivial.

This concession also applies to seasonal flu jabs which are also considered trivial but your employees may not be quite so appreciative of the “gift”!

Some employers give staff vouchers at Christmas; these are subject to tax and NI on the individual.

Christmas Bonus for staff

This will count as ordinary earnings and be subject to PAYE and NI as if it were additional salary.

 I hope this has given you some ideas and information on festive tax matters.

Mark

Tax on classic company cars

As mentioned in our mileage versus company car blog, if you purchase a car through your Limited Company and it is available for private use, (for example you park it at your home) then you have a taxable benefit. As a recap this is calculated from taking the price of the car if it was brand new, known as the list price, and multiplying it by a percentage based on the CO2 emissions of the car.

However, if you have car that was registered before the 1^st January 1998, then there would be no CO2 data, making it impossible to calculate the taxable benefit. Cars that fall into this category are known as “Classic Cars”. HM Revenue & Customs have an alternative way of calculating the percentage based on the engine size -15% for engines up to 1400cc, 25% for 1401cc to 2000cc and 35% for any engine larger or if it has a rotary engine. Just like with the CO2 percentages, you add 3% if the car is a diesel.

But that’s not all, if the current market value, i.e. how much the car is currently worth, is at least £15,000 and also higher than the list price of the car (which is possible depending on how old the car is) then you would use the cars current value instead of the list price.

Fuel benefit is the same as regular cars, with the figure for 2013/14 being £21,100 which is multiplied by the above percentage.

If you have a company car that falls into the requirements to be a classic car, and you would like help calculating any benefit that may be due, please get in touch.

Mark

Zero-hours contracts

Research from The Chartered Instistute of Personnel and Development (CIPD) suggests that the use of zero-hours contracts is becoming widespread throughout the UK. The research, widely reported in today’s press, states that the CIPD estimates around 1 million workers to be on zero-hours contracts. But what are zero-hours contracts and what are the implications of using them for your business? When is it appropriate to use them and what rights do employees on zero-hours contracts have? Below we tackle these questions and assess the advantages and disadvantages for you and your staff.

Q. There has been a lot of talk on the news about zero-hours contracts. What is a zero-hours contract?

A. A zero hours contract is a contract of employment where the employee is not guaranteed a minimum or maximum number of hours of work. However, there is an expectation that when the employee is offered work by the employer they will accept the work offered.

Q. When can I use a zero-hours contract?

A. Zero-hours contracts are often used where there are peaks and troughs in a business which makes it difficult to provide employees with weekly contracted hours, for example, in the hospitality and leisure industry or the healthcare sector.

Q. What happens if someone I originally employed on a zero-hours contract starts working a certain number of hours each week in the business?

A. If an employee works regular hours each week over a period of time, then there is an argument to say that these hours could become their contracted hours and that they would no longer be a zero hours employee.

Q. What rights does someone employed under a zero-hours contract have?

A. Someone employed on a zero-hours contract is an employee. This means that after two years’ continuous service (if they were employed on or after 6th April 2012) they would have the right to claim ordinary unfair dismissal at an Employment Tribunal. They are also entitled to the National Minimum Wage, paid holidays and, if they qualify, Statutory Sick Pay.

Q. If an employee on a zero-hours contract isn’t working out, can I just stop offering them work?

A. No. As mentioned above, they are employees and as such, depending on their length of service, they may have employment rights.

Q. How do I calculate holiday pay for an employee engaged on a zero- hours contract?

A. Where an employee doesn’t have any regular hours then their holiday pay is calculated based on their average pay over the previous 12 weeks. If they did not earn anything during one week, then you should add in the pay from the week before the 12th week to bring the total up to 12.

Q. Is a zero-hours contract the same as a casual worker agreement?

A. No, a casual worker is engaged to work for an employer either on a one-off basis for a short period of time, or on an ad-hoc, as required, basis. They usually have no regular pattern of days or hours of work. The employer does not guarantee the casual worker any minimum amount of work within any given period of time.

The casual worker is free to accept or decline the offer of work, which means that no mutuality of obligation exists in the working relationship.

Q. What are the advantages and disadvantages of a zero hours contract for you and your employees?

A. For the employer

Advantages:

This type of contract can allow you to manage your business needs more efficiently and with greater flexibility.

These types of contracts can be appropriate when you have unpredictable levels of work, the work is irregular or the need for work is very short term. When you know that you have work to offer it would be good if you could provide the employee with as much notice as possible.

There is a mutuality of obligation in that the employee is obliged to work upon the demand (subject to certain exception like holidays) and the employee is obliged to come to work subject to a minimum notice requirement.

Disadvantages:

The downsides for using this type of contract are that the contract will be a contract of employment as opposed to a contract of services and that the employee will accrue continuity of service (whether or not they are actually working) and thus gain over time.

For the employee

Advantages:

The main benefits for the employee of a zero hours contract is that it may suit their personal circumstances and suit individuals who want occasional work.

It also gives the employee continuity of service and allows them to accrue statutory unfair dismissal and redundancy rights as well as accrue annual leave under the Working Time Regulations.

Disadvantages:

The main disadvantage of this type of contract is that it appears to be very one sided for the employer, as the employee can often be sitting around waiting to be offered work whilst being unpaid and the employee only gets paid for when they work- no regular pay or consistency for them.

If the above affects you and you would like to know more, then please give me a call.

Mark.