Paying HMRC, VAT invoices, NICs for young people

It's the eleventh hour and the SA tax returns are almost done, but have your clients' managed to pay their tax on time? This year HMRC has thrown hurdles in their way as we explain below. We also have news of changes coming into effect from April 2015 for VAT invoices and NICs. In both cases clients need to be warned in advance to budget for different payments and receipts.

Paying HMRC

In a break from previous practice, this year HMRC has not sent out SA reminder letters to individuals that include a paying-in slip. This has left many clients waiting for the payslip as a prompt to pay their tax and to complete their tax returns.    

The pixies behind the GOV.UK website think that everyone has internet access and uses online or telephone banking, so those factors are prerequisites for almost all the methods of payment suggested on the ìhow to pay your self-assessment tax billî page.  But there are a large number of people who donít bank online either because they donít have a computer or they simply donít trust online banking.  

For those off-line taxpayers paying a tax bill generally means writing a cheque and sending it through the post with a payment slip, or taking the cheque to a bank, building society or post office with a payment slip. Note the taxpayer needs the payment slip as printed by HMRC and attached to a SA statement -which many people have not received this year.  

You can help your clients by printing a personalised payslip from the GOV.UKwebsite, but that payslip can only be used to accompany a cheques sent through the post to HMRC collector of taxes in Bradford. It is now technically too late for a cheque to arrive by 31 January, as HMRC says it takes three working days for a cheque to reach them and be processed. 

Where the taxpayer has a debit card, they can use that card at a Post Office to pay the tax due, but a payment slip is still needed. However, the payment must be made by close of business on Friday 30 January 2015 to count as being received by HMRC by 31 January 2015. Also the maximum payment that can be made through the Post Office in one transaction is £10,000. 

A debit or credit card can be used to pay HMRC directly, though the internet or by telephone, but there is a 1.4% charge for using a credit card. To pay by debit card the taxpayer needs to have the funds required in the bank account attached to that card. The bank may also set a daily limit on the amount that can be paid using a debit card, on via online or telephone banking. 

Taxpayers can pay HMRC over the phone by calling 0300 200 3402. This number is not advertised anywhere on the GOV.UK website. 

This is an extract from our tax tips newsletter dated 29 January 2015. The newsletter itself contained links to related source material for this story and the other two topical, timely and commercial tax tips. It's clearly written and extremely good value for accountants in general practice. Try it for free by registering here>>>

RTI spaghetti, Holiday pay, Auto-enrolment

The frantic personal tax season is almost over so this week we are looking at issues relating to payroll and pensions. RTI late filing penalties are starting to arrive with large employers for the quarter beginning 6 October 2014. Claims for unpaid holiday pay are also a worry for some employers. Auto-enrolment a nightmare you have tried not to think about, but those staging dates are just around the corner, so action is needed now.

RTI spaghetti

The good

RTI was supposed to make the PAYE reporting ìinstantî i.e. in ìreal timeî. So why do we still have to answer those end-of-year questions on the final FPS or EPS submitted for the year? Surely HMRC have all the information they need as it has been reported during the tax year.

Thatís true and HMRC have admitted they donít use the data provided by the end-of-year questions for compliance purposes, so those questions have been scrapped (by SI 2015/02). Thus when you submit a final FPS or EPS after 6 March 2015 in theory you shouldnít have to answer those annoying questions.

However, this change was announced too late to be included in most payroll software for 2014/15. Even HMRCís free Basic PAYE Tools software will not be updated for this change to the end of year procedures until July 2015. So it looks like you will have to answer those pointless questions for 2014/15 although HMRC will do nothing with the information.

The bad 

RTI requires every employer to report to HMRC at least once per tax month by the ìpayment dateî for the employeesí salary, unless the PAYE scheme has been registered as ìannualî. This creates 12 filing deadlines for the tax year instead of one end-of-year deadline.

If a filing deadline is missed there is a potential late filing penalty. From 6 October 2014, large employers (50 or more employees) have been charged penalties for late filed RTI reporting deadline, although those employers are permitted one late filing per tax year. The penalty notices for October to January will start to arrive with employers this month. But HMRC are not sending copies tax agents, so you should remind your clients to tell you if they receive a penalty notice.

Smaller employers (up to 50 employees) will be charged penalties for missing RTI filing deadlines from 6 March 2015. Those smaller employers are not granted one late filing in 2014/15, so if the RTI report due in the period 6 March 205 to 5 April 2015 is late, it will generate a late filing penalty. 

The ugly 

There is a new online system to appeal against RTI penalties. The penalty notice includes an ID number to use to log the appeal. You should be able to do this for your clients using PAYE online. However, remember to take a screen print of the information you have keyed-in with the appeal ñ ie the reasons for appeal, as there is no prompt to print a copy for your records.

This is an extract from our tax tips newsletter dated 22 January 2015. The newsletter itself contained links to related source material for this story and the other two topical, timely and commercial tax tips. It's clearly written and extremely good value for accountants in general practice. Try it for free by registering here>>>

Benchmarking of profits, Clients' expense records, Directors' loans

Back in the day the Inland Revenue trained their officers to understand that different taxpayers required different approaches, and to use their discretion to smooth out the difficulties which real life throws up. Nowadays their approach is: one penalty fits all, and business profits are compared to standard benchmarks as we explain below. We also question how deeply you should delve into a client’s expenses, and have news on how to reclaim s 455 tax paid on directors’ loans. 

 

Benchmarking of profits

In our newsletter on 17 April 2014 we explained how the HMRC “transparent benchmarking team” was writing to sole-trader businesses in selected trade sectors to nudge them into reviewing their reported net profit ratios. The trades targeted were: painters and decorators, driving instructors, taxi drivers and pharmacists.

The HMRC benchmarking team has now turned its attention to car mechanics and furniture shops. However, this time it is looking at the VAT returns of up to 7500 businesses, rather than the gross profit figures reported on the SA tax returns. 

The HMRC letter asks the trader to work out its VAT mark-up ratio by comparing the difference between sales and purchases (ie gross profit), as a percentage of all purchases as reported on the VAT return. It provides a range of mark-up ratios which HMRC say are standard for the trade.

HMRC ask the business to compare its VAT mark-up ratio for the last 12 months of VAT returns to the standard mark-up ratios. If it’s mark-up ratio falls outside the standard range, it should review the figures to be included in boxes 6 and 7 on its next VAT return.  

This is where you come in. In spite of asking some fairly complicated questions about profits and mark-up, HMRC has decided not to copy the letter to the tax agents of the businesses they have selected for this experiment. Fortunately the HMRC letter does not require a reply, so it can be safely ignored if you are confident that your client’s VAT returns are correct. 

However, the HMRC letter will certainly generate some alarm the business owners who receive it, so be prepared for some panicky phone calls - just what you need at this busy time of year.

 

This is an extract from our tax tips newsletter dated 15 January 2015. The newsletter itself contained links to related source material for this story and the other two topical, timely and commercial tax tips. It's clearly written and extremely good value for accountants in general practice. Try it for free by registering here>>>

Fit for work, More MOSS guidance, SA twitter, chat and bugs

Judging from the pressure on hospital A&E departments many people are not “fit for work” this month. At least employers can now use the Government funded fit for work service to help their employees get back to work, as we explain below. We also have news of further changes to the VAT-MOSS guidance including a new concession. Finally HMRC have turned to social media to answer taxpayers’ SA questions – is this a help or hindrance? 

Fit for work

From 6 April 2014 employers have been unable to reclaim statutory sick pay (SSP) paid to their employees. The Government promised to reinvest the money saved by withdrawing this refund scheme (mostly used by smaller employers) into a new health and work service to support employees to return to work. This was promised to be available from April 2014, then Autumn 2014...

Finally on 15 December 2014 the new health and work service was launched as a website called “Fit for Work”. There is a different website for workers in Scotland, but it is accessed from the same place. In fact the key part of the Fit for Work service – referral of the worker to an occupational health professional - is not operating yet.

When the referral service is working employees will be offered an occupational health assessment when they have been, or expect to be, absent from work due to sickness for four weeks or more. Employers can pay for medical treatments for their employees as recommended by such an assessment provided through Fit for Work, or by any other occupational health professional.  

From 1 January 2015 the first £500 of such medical costs paid for by the employer, is a tax and NI-free benefit for the employee (ITEPA 2003, s 320C). The medical treatment must meet a number of requirements to qualify for this tax exemption as set out in regulations (SI 2014/3228). There is some useful guidance in the consultation document for those regulations on the circumstances in which treatments will qualify for the tax exemption or not.

This is an extract from our tax tips newsletter dated 8 January 2015. The newsletter itself contained links to related source material for this story and the other two topical, timely and commercial tax tips. It's clearly written and extremely good value for accountants in general practice. Try it for free by registering here>>>