Category: Accounting

Will you have a week 53 payroll year end in 2015?

Close up of payslip

Monthly payrolls never have a week 53 but weekly, fortnightly and for-weekly paid employees will have a week 53 if the process date is Sunday 5th April 2015. If it falls on any other day you don’t have a week 53 this year.

In the ‘Tax week number’ field of your FPS, put:

  • ‘53’ if you pay your employees weekly
  • ‘54’ if you pay them fortnightly
  • ‘56’ if you pay them every 4 weeks

If you make a mistake

If you find a mistake in your final FPS of the year, what you need to do depends on the type of mistake and when you find it.

Mistake When What to do
Wrong payments or deductions By 19 April Send an additional FPS with corrected year-to-date figures, and enter ‘0’ in ‘Pay in this period’
Wrong payments or deductions After 19 April Send an EYU showing the difference between the amounts on the wrong FPS and the correct year-to-date amounts – don’t give the year-to-date amounts
Wrong payment date By 5 April Send an additional FPS with the correct payment date – put ‘0’ in ‘Pay in this period’ and give the year-to-date figures

How will FRS102 affect your tax position?

junge frau lernt für eine prüfung

FRS102 will affect us all, even small companies will be subject to a version of FRS102.

Its not just a reporting standard it will affect your tax position too, for example

Intangible Assets and Goodwill

Under FRS102 these assets will have a maximum life of 5 years where as UK GAAP allowed them to have an infinite useful life.

Distributable Reserves

There are various FRS102 changes that can effect these but one specific one is deferred tax which will be calculated on investment properties.

Operating Leases

Leases incentives will be spread over the entire life of the lease rather than to first break clause.

Asset Reclassification

Some assets such as Websites and software development could be reclassified as Intangible

Have you assessed the changes for your business?

FRS 102 is effective for periods beginning on or after 1 January 2015.

steve@bicknells.net

A new type of employment status

The Office of Tax Simplification – Employment Status Report – March 2015 suggests we could see a new type of worker being created, part way between Employed and Self Employed. We could also see the term office holder removed from legislation.

Contractor Weekly reported – This involves the introduction of a new category of worker, a ‘third way’ between the employed and self-employed, acknowledging that some workers do not fit easily into either of the two traditional positions and that they should be subject to a modified set of tax rules. Freelancers might fall into this ‘third way’ and who might be seen as people who have chosen this route of working and want certainty over their status.

Click on this link to read the Employment Status Report

Will this solve the IR35 problem? who will it defined? what should the rules be?

Workers

 

steve@bicknells.net

What if you change a dividend to salary

Stress business woman

Let’s look at the case of Richard and Julie Jones v HMRC [2014] UKFTT 1082 (5 December 2014).

They took a small salary and regular dividends from their recruitment company which was absolutely fine until the company got into financial trouble!

Their accountant (unethically but in an attempt to help their client) suggested they should re-write history and change the dividends to salary so that the liquidator couldn’t recall the dividends.

HMRC then decided to demand PAYE and NI and pursued Richard and Julie personally.

HMRC was refused the right to collect PAYE tax and NI due on the salary, not because the law didn’t allow it, but because it wasn’t possible for Richard & Julie to reclassify the dividends. They had been properly paid and the correct procedure followed. History couldn’t be rewritten and the dividends should have been changed to loans if the dividends were illegal.

steve@bicknells.net

Is my website a fixed asset?

WWW Website

HMRC use the Analogy of a shop window….

The cost of a web site is analogous to that of a shop window. The cost of constructing the window is capital; the cost of changing the display from time to time is revenue. (BIM35870)

UITF Abstract 29

Set out 4 key areas of cost:

  1. Planning – P&L
  2. Application and infrastructure development – Tangible Fixed Asset
  3. Design costs – P&L
  4. Content costs – P&L

HMRC also have some useful information on software in CA23410

CAA01/S71

Computer software qualifies for PMAs if it is not already plant.

Computer software is not defined in the capital allowance legislation. You should treat computer programs of any type and data of any kind as computer software. Computer programs range from operating systems like Windows to games like Solitaire. There may be no physical asset because software is sometimes transferred by electronic means, for example it may be downloaded over the Internet. Software acquired that way is also plant.

A person may acquire a right to use or otherwise deal with computer software. If so, the right and the software to which it relates are plant. Treat the person as owning the plant while the person is entitled to the right.

 

Capital Allowances and the Annual Investment Allowance can be claimed against Plant including software.

steve@bicknells.net

New reporting requirements for intermediaries

with computer

An intermediary is any person who makes arrangements for an individual to work for a third party or be paid for work done for a third party. An employment intermediary is also commonly referred to as an agency.

From 6 April 2015, intermediaries must return details of all workers they place with clients where they don’t operate Pay As You Earn (PAYE) on the workers’ payments. The return will be a report (or reports) that must be sent to HM Revenue and Customs (HMRC) once every 3 months.

Agencies will be required to let HMRC know the following details:

  • Contractor’s name, address, date of birth, etc.
  • PAYE reference.
  • National Insurance number.
  • How the contractor was engaged during the period (i.e. was he working via a limited company).
  • The duration of each assignment.
  • Details of the contractor’s limited company (e.g. company registered number).
  • How much was paid to the contractor.

The regulations will give HMRC information that will enable it to decrease false self-employment and abuse of offshore working. This will help HMRC to:

  • support intermediaries that comply
  • penalise intermediaries that don’t comply
  • make sure the right tax and National Insurance is paid by people working through intermediaries
  • reduce unfair commercial advantage

Here is link to the full reporting requirements – Legislation Link

This is the link to consultation – Consultation

steve@bicknells.net

Improvements to the Construction Industry Scheme (CIS)

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CIS covers most construction work to buildings, including site preparation, decorating and refurbishment.

Exceptions

You don’t have to register if you only do certain jobs, including:

  • architecture and surveying
  • scaffolding hire (with no labour)
  • carpet fitting
  • delivering materials
  • work on construction sites that is clearly not construction, eg running a canteen or site facilities

 

So what is being changed?

The changes are outlined in this document – CIS Link

Key Changes

  • Reducing the Gross Status minimum turnover threshold to £100,000 a year for businesses with multiple directors (from April 2016)
  • Initial and annual compliance tests will focus on fewer obligations
  • Penalties triggered by failure to file a nil CIS return can be set aside on appeal from April 2015
  • It will be easier for Joint Ventures to obtain Gross Status if one party already holds Gross Status
  • Online verification will be mandatory from April 2017
  • Earlier repayments can be made to liquidators in insolvency proceedings. Currently where a subcontractor is a company, no repayment of any amount deducted and paid over to HMRC by a contractor can be made to the subcontractor until after the end of the tax year in which the deduction was made. These rules will be amended so that in certain cases where the amount deducted by the contractor is excessive, a repayment can be made during the tax year.
  • Mandatory online filing of CIS returns will be introduced with the offer of alternative filing arrangements for those unable to access an online channel by reason of age, disability, remote location or religious objection.
  • The directors’ self assessment filing requirements will be removed from the initial and annual compliance tests.

steve@bicknells.net

What tax allowances can childminders claim?

Nurture

Childminders work in their own homes and are paid by parents for looking after their children, often while the parents are at work. Profits from childminding are usually chargeable to Income Tax as trade profits, although some occasional childminders’ profits may be chargeable as miscellaneous income.

Many childminders are members of the Professional Association for Childcare and Early Years (PACEY), formerly known as the National Childminding Association (NCMA). HMRC entered into an agreement with the NCMA on the expenses that will be allowed as deductions from childminding income.

Household expenditure

The agreement is based on the hours that childminders work and not on the number of children they care for. A childminder looking after a child on a full time basis for 40 or more hours each week is entitled to claim the full time proportion of expenses.

How this works is illustrated in the following table:

 

Hours worked % of Heating and lighting costs % of Water rates, Council Tax and Rent
10 8% 2%
15 12% 4%
20 17% 5%
25 21% 6%
30 25% 7%
35 29% 9%
40 (full time) 33% 10%

The full time figures shown in the table should be scaled down from depending on hours worked.

Wear and tear of household furnishings

A deduction of 10% of total childminding income may be made to cover the wear and tear of furniture and household items. This is intended to include household items which are not used wholly and exclusively in childminding. A childminder claiming this deduction may not, however, claim relief for the cost of replacing such household items. Reasonable costs of cleaning household items where the need for cleaning is as a result of childminding activities may be allowed as a separate item.

The agreement also covers the following expenditure:

Food and drink

Reasonable estimates for the costs of food and drink provided for the children being cared for are acceptable and receipts are not required.

Car expenses

Where appropriate, childminders can use the simplified expenses mileage rates. However, if the childminder wishes, the actual cost of car expenses for childminding purposes can be claimed instead.

Other costs

Also allowable – the cost of toys, outings, books, safety equipment, stationary, travel fares, membership fees or subscriptions to your childminding organisation, public liability insurance premiums and the actual cost of telephone use for childminding purposes.

You can find further details in BIM52751

steve@bicknells.net

 

HMRC – More sanctions against tax avoidance schemes

UK tax return form

Since 2010 there have been 42 changes to tax law to close loop holes and deter tax avoidance.

Key changes were Accelerated Payments and High Risk Promoter Rules.

There is new consultation document out now ‘Strengthening sanctions for tax avoidance’ which runs till 12th March 2015.

A serial avoider may:

  • Use a number of tax avoidance schemes each year that were intended to offset their tax liability several times over in the hope that at least one will work.
  • Repeatedly use tax avoidance schemes to shelter the same type of income year after year.
  • Repeatedly use avoidance schemes to cover the majority of income or gains as they arise.
  • Often use tax avoidance schemes to cover major life or commercial events.

The new sanctions are expected to include:

  • Surcharges on repeated or concurrent use of tax avoidance schemes
  • Being compelled to provide more documents and records
  • Stop notices
  • Name and shame

Will this end the use of tax avoidance schemes?

steve@bicknells.net