HMRC aren’t easy to speak to and unless you know the tax rules its easy to make mistakes, that’s why HMRC allow you to appoint agents to help you with your tax affairs.
To appoint an agent you use form 64-8
Form 64-8 covers authorisation for individual tax affairs (partnerships, trusts, tax credits and individuals under PAYE) and business taxes (VAT, PAYE for employers and Corporation Tax). If you’re a personal representative you can use form 64-8 in certain circumstances to ask HMRC to deal directly with an agent.
There are times when you might want extra help for example with an HMRC Compliance Visit and you can appoint a temporary agent using form COMP1.
The Comp1 relates only to the appointment of an adviser to deal with a compliance check. It does not authorise us to deal with that adviser for anything outside that check. Form Comp1 does not replace or amend any existing authorisation made using form 64-8 or the online authorisation facility, or in CITEX cases a letter giving authority for the agent to act.
The temporary authorisation can be used to:
- extend an existing authorisation, for example where there is an adviser acting for one tax under a form 64-8, and the customer wants that adviser to act for more taxes just for the purpose of the compliance check
- appoint an adviser to deal solely with the compliance check where there is no existing adviser authorisation
- appoint a ‘specialist’ tax adviser, for example in Specialist Investigation cases, just to deal with a compliance check. In such cases this will allow the existing adviser to continue to act for the customer in their day to day tax matters.
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You pay National Insurance contributions to qualify for certain benefits including the State Pension.
You pay National Insurance if you’re:
- 16 or over
- an employee earning above £155 a week
- self-employed and making a profit of £5,965 or more a year
The Office of Tax Simplification is currently beginning a process of looking at merging National Insurance with Income Tax.
ACCA’s head of tax Chas Roy-Chowdhury warned that an alignment of NI and income tax rates would be crucial prior to a merger taking place.
Whilst This is Money reported…
Middle and high earners could see their tax bills jump under radical plans to merge income tax and National Insurance, a tax expert has warned.
People taking home £50,000 a year could be £230 worse off, but low earners on £20,000 would save more than £530, and those on £30,000 would come out around £380 ahead, according to snap research by Tilney Bestinvest on the potential tax shake-up.
Chancellor George Osborne wants to reduce ‘complexity’ in the tax system to make it clearer exactly how much people have to cough up, and has ordered the Office of Tax Simplification to see if there is a case for change.
This change is also likely to lead to changes to Pension tax relief reform, Your Money
The government has already announced a consultation on the pension tax relief system, and I believe that a merger of income tax and NI would likely result in the floated idea of a pension with ISA-like tax treatment. This is because at present, a basic rate taxpayer gets 20% tax relief on pension payments but surely this would increase to 32% under a combined system. It seems illogical to increase tax relief at a time when they are actually trying to reduce the cost to the Exchequer. An equal tax treatment of ISAs and pensions could be a prelude to merging the two, potentially drawing ISAs into some form of limetime allowance.
Its nearly time to prepare your P11D’s, here is a link to the 2014-15 P11D
You’ll need to submit an end-of-year form to HM Revenue and Customs (HMRC) for each employee you’ve provided with expenses or benefits.
The form will either be a P9D or a P11D, depending on the expense or benefit.
You may need to submit form P11D(b) to report the amount of Class 1A National Insurance due on all the expenses and benefits you’ve provided. You should do this if:
- you’ve submitted any P11D forms
- you’ve been sent a P11D(b) form by HMRC
If you don’t submit any P11D forms, you can tell HMRC that you don’t owe Class 1A National Insurance by completing a declaration.
Due by 6th July 2015.
As an employer, you can apply for a dispensation on some expenses and benefits you provide for your employees. This means you won’t need to report them to HM Revenue and Customs or pay tax or National Insurance on them. Here is a link to apply for Dispensations.
There are also Benchmark Scale Rates which can be paid tax free, alternative you can claim the actual costs
||Amount (up to)
|One meal (5 hour) rate
|Two meal (10 hour) rate
|Late evening meal rate
Let’s look at the case of Richard and Julie Jones v HMRC  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.
Typically, an employee is appointed to administer the tronc and is usually referred to as the troncmaster. HMRC does not prescribe who the troncmaster should be.
Frank owns a pub and restaurant. Tips paid by cheque, debit and credit card are all passed to Sharon, the troncmaster, who has been appointed by Frank. Sharon operates PAYE on the tips that she distributes. A staff committee decides on the allocation and Frank has nothing to do with this.
Even though Frank has appointed Sharon as troncmaster he has played no part, directly or indirectly, in the allocation of the tips because he is not involved in determining who should receive tips and how much each employee should receive. In these circumstances, no NICs will be due on the tips received by the tronc members. Example from NIM02942
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The Income Tax (Pay As You Earn) Regulations 2003 require an employer to
- Notify HMRC of the existence of a tronc created on or after 6 April 2004
- Give the troncmaster’s name (if known)
When you are notified of a tronc you should
- Confirm that there is an organised arrangement for sharing tips and determine
- How the tronc receives monies (for example employees paying in cash tips or an employer paying in credit card tips)
- Who holds the tronc monies and how (for example, is there a tronc bank account and if so who operates it?)
- On what basis are distributions made from the tronc and who decides that basis
- Which employees are tronc members
- Whether the person said to be the troncmaster accepts and understands the role (including the obligation to operate PAYE)
If you are satisfied that there is a tronc for PAYE purposes (bear in mind that a business could have more than one tronc, for example a hotel could have separate troncs for restaurant staff and housekeeping staff and each should be dealt with separately)
- Arrange for a PAYE scheme to be set up in the name of the troncmaster. Further information can be found in PAYE20160
Apple and Facebook are now offering to pay for female employees to freeze their eggs!
The initiative is part of the so-called “perks arms race” as Silicon Valley firms battle to recruit top talent and it is hoped the perk will attract more women into a traditionally male-dominated sector. (Sky News)
Fertility specialist Philip Chenette is quoted as saying “providing egg-freezing coverage for employees can be viewed as a type of payback for women’s commitment in a mael-dominated industry where technology firms are often competing to attract female talent” (NBC News)
The cost for egg freezing in the US is about $10,000 (£6,200) for every round, as well as $500 or more for storage each year.
Apple also offer assistance with adoption.
Will UK companies soon be offering this perk?
Many employers who submit mainly nil returns (ie small owner managed businesses) for RTI are likely to get a letter from HMRC with Specified Charges on them, this is because under RTI if you don’t pay any employees in a pay period you need to submit a return to HMRC, if you forget or mis a period, which with HMRC RTI Basic PAYE Tools is easily done, HMRC will create a charge.
HMRC define a Specified Charge as
These are amounts we have estimated to be due when we have not received the necessary RTI PAYE submissions. We base these on you previous filing and payment history. We do this under Regulation 75A Income Tax (Pay As You Earn) Regulations 2003.
But as its an estimate is unlikely to be correct and on top of that HMRC will probably charge interest based on their Specified Charge.
If you get a Specified Charge check your RTI Submissions to makesure that you haven’t missed any, if you have missed one, post it now
HM Revenue & Customs (HMRC) has started the annual automated End of Year Reconciliation process to check whether customers in PAYE (Pay As You Earn) have paid the right amount of tax in 2012-13.
Most people – around 85 per cent of those in PAYE – will have paid the right amount of tax for the year so won’t receive any contact from HMRC. If you have paid too little or too much tax under PAYE for 2012-13, HMRC will automatically send a tax calculation (on form P800) to you showing the details along with notes explaining what it means. It’s expected that this automated process will be completed by October 2013, and there is no need to contact HMRC.
If you have:
- Paid too much tax, you will be sent a cheque, in most cases, within 14 working days from the receipt of a P800 Tax Calculation.
- Paid too little tax, the underpayment will in most cases be automatically collected through your 2014-15 annual tax code over 12 months. Where this is not possible, HMRC will write to you and let you know what options are available to pay the tax outstanding.
Millions of P800 calculations will be sent out!
The P800’s are likely to contain errors because:
- Large amounts of data are manually input
- Estimates especially for Bank Interest and Investment Income
So check the following carefully:
- P60 – you get this at the end of each tax year
- P45 – you get this when you leave a job
- PAYE Coding Notice
- P11D Expenses and benefits
- P9D Expenses payments and income from which tax cannot be deducted
- Bank and Building society statements
- Pension Tax Deductions
Its expected that around 3 million people will be asked to pay more tax and around 2 million people will have overpaid.
Here is a link to the HMRC Helpsheet on understanding your P800
Asda employ 170,000 UK staff and they have received final demands from HMRC for outstanding tax bills ranging from £72 to £160 because they all potentially underpaid income tax last year (according to the Courier and Payroll World).
Assuming each employee only has to pay back the minimum amount, then Asda employees across the UK will have to give more than £12 million back to the taxman.
May be Winston Harrigan could help them this weekend, he loves surprises…..
Employees receive their pay every four weeks. This means that once every 20 years they are paid 14 times a year rather than 13.
PAYE (Pay as You Earn) tax contributions were not collected in the extra pay, meaning employees had, through no fault of their own, paid less tax for the year than they should have.
Employees began receiving letters from HMRC demanding they settle their tax bills last week.
You can read Asda’s advice at http://greenroom.asda.com/news-and-info/colleagues-affected-by-underpayment-of-tax-for-year-ending-5th-april-2013
HMRC have published guidance ‘Dealing with Week 53 payments’
PAYE (Pay As You Earn) tax is deducted differently from ‘week 53’ payments. HM Revenue & Customs (HMRC) treats it as a non-cumulative payment (also known as ‘Week 1’), meaning that it is treated in isolation and tax is deducted without taking into account previous pay and tax details. So the tax code you use should be non-cumulative in all cases.
This advice has only been given since the tax year end.
PAYE Settlement Agreements (PSA’s) are requested by Employers and subject to agreement with HMRC. Under this agreement the employer will be responsible for accounting for any tax and national insurance liabilities arising. Any items covered by a PSA will not need to be shown on forms P35 and P11D at the end of the tax year.
Applications for PSA’s should be made before 6th July 2013 if you want to use them for the tax year ended 5th April 2013, once approved by HMRC payment of the Tax and NI is due by the 19th October (payments by cheque) or 22nd October (payments online).
The tax due is grossed-up at the employee’s marginal rate. For example, £5,000 of benefits provided to higher rate taxpayers (40 per cent) would be grossed-up as follows:
Benefits of £5,000 x 40 per cent = £2,000 tax
Grossed-up tax = £2,000 x 100/100-40 = £3,333.33
Benefits plus grossed-up tax = £8,333.33 x 13.8 per cent Class 1B = £1,149.99
Total due to be paid £3,333.33 tax plus £1,149.99 Class 1B = £4,483.32
PAYE Settlement Agreements can only be created for:
) examples (not exhaustive) of what may constitute a minor item.
- incentive awards
- reimbursement of late night taxi fares outside s248 ITEPA 2003
- personal incidental expenses in excess of the statutory daily limit
- present for an employee in hospital
- staff entertainment, for example a ticket for Wimbledon
- use of a pool car where the conditions for tax exemption are not satisfied
- subscriptions to gyms, sports clubs etc
- telephone bills
- gift vouchers and small gifts
HMRC (PSA 1070) examples (not exhaustive) of what may constitute an irregular item.
- relocation expenses where the amounts concerned exceed the £8000 tax exempt threshold (Section 287 ITEPA 2003)
- occasional attendance at an overseas conference where not all the expenses qualify for relief
- expenses of a spouse occasionally accompanying an employee abroad
- occasional use of a company holiday flat
- one off gifts which are not minor.
HMRC (PSA 1080) examples (not exhaustive) of what may constitute an impracticable item
- free chiropody care
- hairdressing services
- Christmas parties and similar entertainment provided by the employer which do not already qualify for relief
- cost of shared taxis home which do not satisfy s248 ITEPA 2003
- shared cars.
Gov.uk has guidance on How to get a PSA