New PAYE Late Payment Penalties

Employers and contractors may be liable to penalties if they do not pay PAYE, National Insurance contibutions, Construction Industry Scheme deductions and student loan deductions on time and in full for periods starting on or after yesterday, 6 April 2010.

HMRC have produced a guide to these new penalties, Which apply to all employers and contractors, from May 2010.

These penalties are in addition to any interest charged. Full details can be found on the HMRC website:

http://www.hmrc.gov.uk/paye/problems-inspections/late-payments.htm

New Online Tax Help For Small Businesses

For those of you just starting out in business, or thinking of doing so, there's a new online resource, set up by HMRC, via Business Link, to help you through a few of the basics, such as starting out in business, National Insurance, record keeping and employing other people.

This help takes two main forms. There are 10 brief, bite sized videos, providing an overview of each topic, as well as a downloadable guide, entitled; "Giving your business the best start with tax".

It's not going to answer every question, and as usual, I would always suggest seeking specific business advice from an expert, however, it's a useful start for those wishing to answer a few of the more common questions.

This information can be found at http://www.businesslink.gov.uk/bdotg/action/detail?itemId=1081677261&type=CAMPAIGN&site=1000&furlname=taxhelp&furlparam=taxhelp&ref=&domain=www.businesslink.gov.uk

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Definately worth a quick look.

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**Update** These videos have now been updated to our own web site. You can also check them out there. http://www.1stadditions.biz/30920/info.php?p=9&pno=0

HMRC To Change The Way It Carries Out Compliance Checks

The way HM Revenue & Customs (HMRC) carries out compliance checks (also known as enquiries, visits and inspections) will change from 1 April 2009. These changes will affect how we manage compliance checks for:

• Income Tax
• Capital Gains Tax
• VAT
• PAYE
• The Construction Industry Scheme
• Corporation Tax

The new compliance checks legislation is designed to make the tax system simpler and more consistent.

From 1 April 2009, HMRC will have one set of powers covering PAYE, VAT, Income Tax, Capital Gains Tax, Corporation Tax and Construction Industry Scheme to:

• visit businesses to inspect premises, assets and records
• ask taxpayers and third parties for more Information and documents

These powers are provided by Schedule 36 of the Finance Act 2008.

The new legislation will also provide:

• greater flexibility in setting record-keeping requirements after 1 April 2009
• new time limits for assessment and claims which will not be fully in force until April 2010 - but there will be some transitional arrangements from 1 April 2009
• important safeguards for customers
  These measures are provided by Schedule 37 and Schedule 39 of the Finance Act 2008.

Legislative changes at a glance:

The new legislation provides HMRC with:

• one set of powers to inspect business records, assets and premises
• the ability to see statutory business records without a right of appeal
• the ability to look at records for PAYE, Income Tax, the Construction Industry Scheme,
• Capital Gains Tax and Corporation Tax during the tax year before a return has been submitted
• a new power to correct obvious errors in a tax return based on information held by HMRC
• a single approach across all taxes to asking taxpayers and third parties for supplementary information, based on formal information notices with a right of appeal

The legislation also makes some changes to the way HMRC must carry out compliance checks, including:

• a new four-year time limit for assessments and claims - a reduction from six years for Income Tax, Capital Gains Tax and Corporation Tax and an increase from three years for VAT
• reductions in extended assessment time limits
• a streamlined process for closing Corporation Tax assessments
• a new statutory ban on inspecting purely private dwellings without consent
• a statutory requirement for HMRC to give at least seven days prior notice of a visit, unless either an unannounced visit is necessary, or a shorter period is agreed
• a new requirement that unannounced visits must be approved beforehand by a specially trained HMRC officer
• a statutory requirement on HMRC to act reasonably.

Soooo. That's the official line out of the way, but how will affect the average Tax Payer?

Well, for once, HMRC appear to be genuinely trying to streamline the system, and, not only that, there is a wealth of information around to help us understand the new regime, including the HMRC web site, a podcast and online learning tool (see the links below).

There has been much concern amongst smaller, home based, businesses that these new powers will, effectively, give HMRC carte blanche to visit their home premises whenever they wish. The reality is, this would only happen in instances of suspected fraud, or if there were a strong reason to do so (such as significant levels of equipment and / or stock being stored there or employees working from a home office). HMRC have also confirmed that they would be happy to conduct any such visits with the client's accountant in attendance, to minimise the 'fear factor' involved.

In conclusion then, although the penalties can be severe for non compliance, if we stay within the legislation, we have nothing to fear. This is being made easier to achieve, by standardising the procedures and penalties across all key areas of tax.

As usual, only time will tell.

The HMRC web site, http://www.hmrc.gov.uk/about/new-compliance-checks.htm, outlines the basics.

It also has a link to the online e learning module, http://www.hmrc.gov.uk/e-learning/compliance-checks/Externalmodule/HTML/Externalmodule_menu.html.

There's even a podcast available, at: http://podcasts.hmrc.gov.uk/audio/18_HMRC_Compliance_Checks.MP3. It's only 8 minutes long, so why not check it out?

Recession Hits Government Coffers Too!

We're all feeling the effects of the recession, but many might be surprised to hear jst how much it is now taking its toll on public finances, addording to recently released official figures.

The UK's public sector finances recorded a surplus of £8.4bn in January, well down on the £15.3bn surplus in the same month last year.

Government borrowing for the first 10 months of the financial year now stands at £67.2bn. The chancellor has forecast borrowing for the full year of £77bn.

The year-on-year drop in January's surplus was largely due a slump in tax receipts, which fell by £7bn.

Government borrowing now stands at 47.8% of the UK's economic output. Last January, it stood at 42.2%.

"It's clear that public sector finances are deteriorating quite rapidly," said Amit Kara at UBS.

"The tax take is being hammered by the recession," commented Howard Archer, economist, Global Insight

January is traditionally a good month for the public finances as they are boosted by annual tax receipts, however, these have been hit by falls in income tax caused by rising unemployment and the curbing of bankers' bonuses in the City, and by falls in corporation tax as businesses' profits suffer during the recession.

The temporary cut in VAT from 17.5% to 15% has also affected tax revenues.

The Office of National Statistics, which releases the public finance figures, also said that it plans to incorporate the finances of the Royal Bank of Scotland (RBS) and Lloyds Banking Group into the public finance balance sheet. It said this could add between £1 trillion and £1.5tn to public sector.

HMRC Introduces Streamlined Tax Returns And Extended Penalties

The self-assessment tax return for self employed people who do not use an accountant has been simplified, with fewer questions and easier language.

Questions about less common types of income and reliefs have been moved to the Additional Information pages, whilst there is a new two-page form for more straightforward, smaller businesses, with turnover below £64,000.

Although online SA Tax Returns still need to be filed by 31 January, the deadline for paper returns has been shortened to 31 October.

What the Tax Man giveth, he also taketh away!

The 2008 Finance Bill has also extended penalties for the period from 1 April 2008 (due to be filed by 1 April 2009)

HMRC will charge penalties for documents containing careless or deliberate inaccuracies that lead to understatement of tax liabilities, a false or inflated statement of loss, or inflated claim for the repayment of tax. Their aim is to crack down on those who do not comply, whilst helping those who do.

They suggest that reasonable care should be taken when completing forms because errors will be penalised, and recommend that early disclosure of errors will reduce those penalties.

New Personal Allowances From September

Next month, new changes will be implemented to personal tax allowances and bandings, as part of the Chancellor’s measures to offset the effects of the removal of the 10p in the pound tax band.

Personal Allowances for the 2008-09 tax year will be increased, by £600, to £6,035 (from the current £5,435). This will coincide with a reduction of the basic rate tax band limit from £36,000 to £34,800. (This is the income level, over which, we will pay higher rate tax).

If you are an employee, the changes will take effect on the first day on or after 7 September 2008, and will be back dated to the beginning of the tax year (April 2008). As self employed, these changes will be reflected in our 2008-09 Self Assessment Tax Return.

The changes will equate to an annual tax saving of around £120 per year (or £2.30 per week). Due to the backdating of the changes, depending on the date and amount they are paid, most employees will see a £60 or £70 reduction in their tax bill in the month of September or October respectively.

These changes are designed to benefit basic rate tax payers only. Higher rate tax payers will see no benefit at all, as the higher rate tax threshold has been reduced proportionately to counteract the increased personal allowances.