The government via HMRC are tightening the screws and are being less lenient in agreeing to defer demands for payment of tax. In particular they will not agree to defer tax that is late, so get in before the 31 July if you want to delay paying the Self Assessment payments on account for 2009/10 that are due this week.

You will have to show that you have exhausted all avenues in raising the cash and have tried the bank, family, friends, kids piggy banks etc before throwing yourself prostrate at their feet.

Further information: HMRC Time to Pay details

Posted By Haydn Pyatt - Tuesday July 27, 2010.
Tags: Debt Collection , Tax

Emergency Budget June 2010

First Impressions of the Tax Changes as the Chancellor sits down

As expected George Osborne’s first budget was wide ranging but surprisingly concise in the detail. The machine-gun delivery of areas of spending savings, such as the abolition of the Committee for Conversion to the Euro probably gave that effect.

His application of Pareto’s 80:20 rule will appeal to the number crunchers amongst us, the deficit will be reduced by an 80% reduction in government expenditure and a 20% increase in taxation.

The main increase is the 14% rise in the rate of VAT from 17.5% to 20% with effect from 4 January 2011. This will provide a frenzied consumer boom in the autumn especially in big ticket items such as cars and home improvements.

Corporation Tax for companies with profits over £300,000 will be reduced from 28% down to 24% in annual 1% rate decreases. For companies with lower profits the rate will be reduced from 21 to 20% from April 2011. To help pay for this, the depreciation rate for Capital Allowances will be reduced from 20% to 18% and the annual investment allowance will be reduced from £100,000 to £25,000 with effect from 2012/13.

The threshold at which National insurance will start will rise from £110 to £131 per week from April 2011. Income Tax thresholds will also increase by £1,000 to £7,475 from April 2011, but the 40% band will remain frozen at £37,400. National Insurance holidays worth up to £5,000 will be given to new businesses setting up outside the south east and employing up to 10 staff.

No increase in tobacco, fuel or alcohol duties and if you are a cider drinker the 10% planned rise in duty is abolished. Council tax will be frozen in areas that have low spending councils.

Capital Gains Tax will be based on your marginal tax rate in future. From midnight on 22 June 2010 gains will remain taxed at 18% for basic rate tax payers but will rise to 28% for higher rate taxpayers. The £10,100 exemption will remain. Sellers of businesses will be able to claim Entrepreneurs Relief on the first £5m of gains and pay an effective rate of 10%

Overall it will require close scrutiny over the coming weeks but for those who are not in the public sector or in receipt of benefits and allowances it does seems a fair and economically viable Budget.

Posted By Haydn Pyatt - Tuesday June 22, 2010.
Tags: Economy , Tax

Latest Fuel Rates from HMRC

HMRC reviews the published advisory fuel rates every six months and the new rates are effective from 1 June 2010

Employers may choose to: implement the new rates immediately or use the old rate for up to one further month, and require employees to make supplementary payments if the new rates cannot be applied immediately, although there is no obligation to do so.

HMRC explains the way in which the rates are calculated. They are based on average fuel consumption for the different engine sizes, reduced by 10% to make the figures more realistic. The fuel prices used are petrol – 119.9p per litre ; diesel – 121.9p per litre ; LPG – 65.4 p per litre

The advisory fuel rates are provided by HMRC for employers to apply where they reimburse employees for business travel in their company cars, or require employees to repay the cost of fuel used for private travel in company cars.

Further information: HMRC Fuel Rates

Posted By Haydn Pyatt - Friday June 4, 2010.
Tags: Tax , Small Business

VAT on Motoring

Introduction

The basic options for recovering VAT on motoring expenses are:

a) claim all the VAT back on road fuel and pay the Motoring Scale Charge b) keep a detailed mileage record and calculate the proportion of VAT relating to business mileage c) pay a mileage allowance and keep the petrol receipts

or d) don’t claim back the VAT on road fuel.

If you reclaim VAT on road fuel for private motoring, HMRC will insist that you pay the Motoring Scale Charge. This charge is based on the CO2 emissions of the car and not the actual amount of private usage.

The scale charge must be added to the output tax (box 1), on the VAT return. If the business has a second or more cars and private fuel is provided, even with low mileage, there is a second or subsequent, scale charge. The only way around this is to have no fuel provided for private motoring for the second car.

If a company car driver repays the business, in full, for the fuel that they use for private motoring, then no scale charges are due, but VAT will be due on the payments received.

On the plus side the VAT on all road fuel, both business and private can be reclaimed, and the system is simple to use. On the down side you have to have quite high mileages for it to be financially worthwhile.

Keep Mileage Records

If you do not want to use the Motoring Scale Charge because the Scale Charge is more than the VAT on the road fuel, you can record all of your mileage in a mileage log showing the business mileage and the total mileage.

So if you have done 5,000 miles in the quarter and 1,000 are business miles, then you can recover 20% of the VAT. The system is accurate but complicated.

Pay a Mileage Allowance

If you do not want to pay the Scale Charge and the mileage log is too much of an administrative burden, then you can pay a mileage allowance and claim back the VAT on the element relating to road fuel.
The AA and RAC publish mileage rates that give the fuel costs per mile for the different engine sizes; these can also be obtained from the HMRC website. It normally works out at between 10 to 15 pence per mile depending on the engine size.
You then apply the VAT fraction to that figure and claim it back as input tax. You do need to have expenses forms to back up the claims and you will need to obtain petrol receipts to support the claim. Any purchases of less than £250, including VAT only, require a less detailed tax invoice.

The only other alternative is not to claim back the VAT on any road fuel at all !

Posted By Haydn Pyatt - Tuesday June 1, 2010.
Tags: Tax , Management

Interest on Late PAYE

With effect from 19th May HMRC will be charging interest penalties on any late payment of PAYE.

The late payment penalties apply to all employers and contractors – whether you employ one or several hundred employees or subcontractors. They apply to monthly, quarterly and annual periods of PAYE starting on or after 6 April 2010.

Late payment penalties could be charged on any PAYE amount due if it isn’t paid in full on time, including

* monthly or quarterly PAYE (Pay As You Earn) * student loan deductions * Construction Industry Scheme (CIS) payments * Class 1 National Insurance contributions (NICs) * annual payments of employers’ Class 1A NICs * annual PAYE Settlement Agreements (PSA) payments * PAYE determinations or charges raised

Notification of a late payment penalty

If a penalty is due, HMRC will send you a late payment penalty letter telling you how much you owe and when you have to pay it by. It will also tell you what to do if you think the penalty is wrong, including how to appeal.

For penalties relating to late payments that occurred in the 2010-11 tax year, HMRC will send notifications of late payment penalty charges after the end of the year. HMRC has up to two years after the late payment occurred to issue a penalty letter.

It is your responsibility to make sure that you pay on time. HMRC does not issue reminder letters.

PAYE/National Insurance payments and deadlines

Penalty rates and how they will apply

Penalties will be charged on each PAYE scheme independently. Therefore, if you operate more than one PAYE scheme you need to make sure that amounts due for each individual PAYE scheme reference is paid in full on time.

Monthly or quarterly PAYE payments

You will not be charged a penalty if only one PAYE amount is late in a tax year – unless that payment is over 6 months late.

The amount of the penalty will depend on how much is late and how many times your payments are late in a tax year. So if you pay part of what is due on time then any penalty will only be charged on the part that is late. The penalties range from 1% to 5% depending on hoew many times you have been late in making your payments.

Visit the HMRC WebSite for the current rates at http://www.hmrc.gov.uk/paye/problems-inspections/late-payments.htm

If you have still not paid a monthly or quarterly amount in full, after six months you may have to pay a penalty of 5%. A further penalty of 5% may be charged if you have not paid after 12 months. These penalties apply even where only one payment in the tax year is late.

*****

Posted By Haydn Pyatt - Thursday April 22, 2010.
Tags: Tax , Small Business