Archive for February, 2014

National Minimum Wage (NMW) penalties to increase

Wednesday, February 26th, 2014

Employers have been warned recently that schemes setting out to avoid payment of wages to employees at the minimum rates set by the National Minimum Wage regulations will be penalised. Currently, employers found lacking in this area will be required to make up the unpaid wages and pay fines which can be up to 50% of the total arrears, capped at £5,000 for each notice of underpayment issued by HMRC.

These penalties are due to be increased. If new regulations being debated in Parliament are approved the penalties payable for non-observance of the NMW rules will be:

  • Fines amounting to 100% of the unpaid wages.
  • The maximum penalty for each notice of underpayment increased to £20,000

 Further legislation is proposed to ensure that the £20,000 fine is applied to each underpaid worker.

 As of October 2013, the current NMW rates are:

  • Apprentices under age 19 or those in the first year of their apprenticeship: £2.68 per hour.
  • Under 18: £3.72 per hour.
  • Between 18 and 20 years: £5.03 per hour.
  • Age 21 and over: £6.31 per hour.

Employers should also keep an eye on the rulings of Employment Tribunals. A recent case, for instance, has determined that certain classes of employees should be paid for travelling time.

With the proposed increases in the penalty regime it is now imperative that employers review their pay rate structures to ensure that they are compliant with NMW requirements. Take professional advice now if you are at all unsure of your obligations. Don’t wait for the grey suits to turn up on your doorstep requesting to audit your pay records.

Possible VAT bonanza for golf clubs

Monday, February 24th, 2014

Since the 1990s fees for playing at not-for-profit sports clubs has been exempt for VAT purposes. However, HMRC has asserted that only club members’ playing fees are exempt for VAT purposes. Any visiting players have paid VAT included in their green fees. Clubs who have charged the same amount to members and visitors have therefore suffered a loss of revenue (the amount of VAT included in visitors’ fees that has been paid to HMRC).

The EU court has now ruled that the VAT exemption should also apply to visiting players.

This opens up the possibility that clubs can recover the VAT they have paid over to HMRC that was included in their charges to visiting players.

No doubt it will be necessary to demonstrate that clubs have borne the cost of the VAT themselves – that their charges were inclusive of VAT for visiting players. For clubs that do qualify refunds can be claimed back to 31 March 2009. This will be a welcome cash flow injection for many clubs who have suffered during the recent recession.

Clubs should act immediately, take professional advice, and lodge an appropriate claim.

Certain PPI victims should declare interest received on compensation payments

Thursday, February 13th, 2014

Many victims of miss-sold Payment Protection Insurance are unaware that they need to declare any interest they received as part of their settlement on their tax return. HMRC have commented:

"The interest may or may not have had tax already deducted depending on the type of company making the payment of the interest.

"If banks and building societies are paying the interest then there is no obligation on them to deduct tax because the interest is not interest on a deposit and there are specific exemptions for banks and building societies from the need to deduct tax from yearly interest.

"All other companies have an obligation to deduct tax from yearly interest when it is paid. If a company does deduct tax then there is a statutory requirement that it advises the customer when making the payment that tax has been deducted and the gross and net amounts of interest."

So if you have received compensation, particularly during the tax year to 5 April 2013, make sure you advise HMRC asap – the deadline for notification was 31 January 2014.

Cash rich company shareholders may lose out on IHT and CGT relief

Tuesday, February 11th, 2014

There has been significant press coverage recently suggesting that companies are hoarding cash. It would seem that this is one of the contributory factors affecting low levels of business investment. Directors are loath to part with their hard won cash reserves.

For private company shareholders and shareholders with a significant stake in Plcs this may have a detrimental effect on their ability to claim inheritance tax Business Property Relief (BP), or capital gains tax Entrepreneurs’ Relief (ER); if they gift (BP) or otherwise dispose of their shareholding (ER).

The problem arises as cash rich companies may disqualify their shareholders from claiming these reliefs as they are considered to be investment rather that trading companies. The Institute of Chartered Accountants recently sought clarification on this point from HMRC. Here’s a record of their exchanges:

The Institute’s representations were:

‘Where a company holds an amount of cash which is in excess of the amount which it “normally holds” and there is no evidence of any given project upon which the funds will be expended, then BP relief will be denied as the excess will be treated as an excepted asset.

Members are aware of the HMRC guidance… and this has proved sufficient in demonstrating the position of HMRC.  It clarifies that cash balances should be viewed in light of the business’s trading cycle and that businesses should keep evidence of discussions surrounding the intended use of cash balances.

However, in the light of the current economic climate and in order to weather the financial adversity faced by many businesses within the UK, it is widely recognised that businesses are retaining increased cash buffers in case of any further downturn in their trade.  This is a widely accepted tactic in surviving a recession to ensure that businesses succeed and reverts to the cliché that “cash is king”.

In this regard, confirmation from HMRC that they are aware of this change in mind-set of business owners and company directors, and look favourably on surplus cash held in this regard, would be extremely useful to our members.’

 And HMRC’s response:

‘We understand that due to the financial circumstances in which businesses find themselves, they may choose to hold more cash in case of a potential downturn in trade.  We can also confirm that in recent times we have seen this on a more frequent basis where businesses hold cash in excess of what they would traditionally require.

However, our guidance remains the same, and unless there is evidence which directs us to the fact that the cash is held for an identifiable future purpose, then it is likely it will be treated as an excepted asset.  Therefore the holding of funds as an “excess buffer” to weather the economic climate is not a sufficient reason for it not to be classed as an excepted asset.’

Record self-assessment returns as HMRC unmoved on deadline

Thursday, February 6th, 2014

Record numbers of self-assessment filings were received by HM Revenue & Customs as it stood firm on its 31 January deadline day, despite calls to push it back.

ACCA had led the drive from the deadline to be moved to today (Monday 3 February) in order to give thousands of first-time self-assessment filers extra time to submit.

Changes to child benefits and a rise in the last year of self-employed meant there was a high number of first-time self-assessors struggling to meet the deadline in 2014, ACCA claimed.

As it happened, a new high of 10.03 million filed on time. With around 10.74 million expected, some 710,000 face late-filing penalties of £100. There are further penalties after three, six and nine months.

The busiest day for online returns was 31 January, when HMRC received 569,847. The busiest hour occurred between 4pm and 5pm on the same day, when 45,706 returns – more than 12 per second – were received. And 21,027 people left it until the eleventh hour, filing their online return between 11pm and midnight on deadline day.

By way of comparison, there were 10.34 million people in self-assessment in 2011/12, 92.9% paid their dues on time in 2013, leaving around 730,000 people facing the consequences of late payment.

A record 1,566 online returns on Christmas Day in the run-up to 2014’s deadline, up from 1,548 the year before.

The busiest day over the festive period, however, was Christmas Eve, when 17,000 individuals booted up their computers, got their financial information together and sent an online tax return; a 19% leap on the 14,330 in 2012.

Boxing Day saw a further 4,493 people send their returns – a 4% fall from the 4,685 received last year.

In total, 23,059 online returns were received over the three-day period, a 12% increase on the 2012 total of 20,563.

As far as submissions over New Year are concerned, 26,905 returns filed New Year’s eve and 12,938 filed New Year’s Day.

With reference to the calls to push back the deadline, HMRC said: “Individuals receive their notice to file in April/ May, if they decide to file by paper the deadline is the 31 October for paper and for online filing the deadline is 31 January – these are statutory deadlines.

“If someone has registered for our online service, or existing customers have lost their user ID or password and realise they have left it too late, we will allow a bit of extra time for this information to be received [this year until 15 February]. This only applies to taxpayers who did the following between midnight on 21 January and midnight on 31 January 2014; enrolled for the self-assessment online service, or; requested a replacement user ID or password.”


Original story posted from Accountancy Age –

Law Society warning on LLP tax reform

Thursday, February 6th, 2014

The Law Society is concerned that if the present changes to LLP taxation are enshrined in the forthcoming Finance Act 2014, decisions will have to be made for tax, rather than commercial reasons.

For example members may be required to introduce capital purely to comply with changes in tax law. There are also fears that the tax changes will make UK based LLPs less competitive than overseas LLP partnership structures.

There is an argument that HMRC are demonising the loss of National Insurance revenues that result from the reclassification of salaried employees as LLP members, and ignoring the real benefits that LLP structures offer the development and prosperity of our financial services and legal sectors. After all it is this sector that is presently “buoying up” our economic growth.

It will be interesting to see if the representations made by the Law Society and other affected groups will impact HMRC’s guidance on LLP tax changes that are due to be published on 17 February 2014.

CBI champions use of equity finance

Wednesday, February 5th, 2014

According to a recent CBI report UK companies rely too heavily on debt finance. It said that 50% of small and medium sized businesses used bank loans and more than one-third used overdrafts. Of the remainder only 3% use equity finance: the European average is 7%.

 Smaller UK businesses seem to associate equity funding with loss of control. Kaja Hall, CBI chief policy director is quoted as saying:

 “We need to shatter the equity finance glass ceiling and encourage growing firms across the UK to use this largely untapped resource. It’s a myth that using it results in loss of control and decision-making. Equity finance is one of the most effective ways for small and medium-sized firms to access investment capital and there are plenty of investors who take a minority stake.”

 It does appear that UK business owners are drawn to shorter term solutions offered by their banks: overdrafts and loans. The main problem with this sort of short-term approach to investment funding is that in today’s slow moving economic conditions businesses may need to borrow for longer periods in order to achieve their investment and growth goals.

 There is talk that building societies should be given rights to lend to the business community. Perhaps Government could step in to make the present, temporary, Seed Enterprise Investment Scheme a permanent feature of the UK tax system? Time for a rethink. UK businesses need to be able to invest for long term development and the present trend towards short term fixes does not really hit the spot.


Monday, February 3rd, 2014

As we move into 2014, many businesses and their management teams are taking a step back, looking at the business, considering how the market will develop over the next 12 months and creating plans to grow the firm and take advantage of changes in the business environment.

A typical approach to planning suggests multiplying last year’s financial results by an acceptable growth factor. Industry standards vary, often from 5% to 25%. Add to that number any enhancements to your product or service lines plus solutions to key problems you’ve been meaning to address, and that will essentially give you an outline of a business plan.

What can you learn from last year’s performance
What did you do right – what worked – what should you do more of? What did you do wrong – what didn’t work – what should be stopped immediately? Business owners and managers should also ask themselves what is missing from the business. What could be added which will make a big difference in the overall business. For example, does the firm need to review pricing, do some market research or develop a new training plan for staff.

Focus on objectives and set targets
Targets for sales, financials, etc should be aspirational and dynamic. They should inspire everyone responsible for making them happen to do whatever it takes to get the job done. The objectives should be SMART – specific, measurable, achievable, realistic and timely. E.g. a true objective is not simply “increase sales”. Instead it would be “increase sales by winning 3 new contracts in the banking sector by August 2014 by leveraging our existing contacts at Bank AB and Accounting Firm CD”.

Map out your plan for achieving these goals
Your implementation plan should consider who is responsible for what. You should map out specific milestones and assign a manager or accountable person to each. They should then be fully briefed and it should be made clear that they are expected to deliver their specific part of the overall plan. These key people can now work with the management team to develop the strategies necessary to deliver the objectives. They can estimate costs too so that finance can assign a relevant budget.

Make an effort to improve a few things to achieve steady growth. You are trying to build a sustainable business model, not something that grows too quickly and falls over in 18 months time.


Monday, February 3rd, 2014

Real Time Information or RTI was introduced from 6 April 2013 which requires employers to submit payroll data to HMRC on or before wages and salaries are paid to employees.


However during the 2013/14 tax year this general rule is relaxed for employers with fewer than 50 employees who may submit their payroll data by 5th of the following month. It has recently been announced that this concession will be extended to 5 April 2016.


This relaxation is very useful as it should be remembered that penalties will start being imposed for late submissions from 6 April 2014. Please contact us if you need advice on operating RTI or would like us to deal with the administration of payroll on behalf of your business.


You can also read more about this on the HMRC website:

Tax Diary February/March 2014

Monday, February 3rd, 2014

 1 February 2014 – Due date for Corporation Tax payable for the year ended 30 April 2013.

 19 February 2014 – PAYE and NIC deductions due for month ended 5 February 2014. (If you pay your tax electronically the due date is 22 February 2014.)

 19 February 2014 – Filing deadline for the CIS300 monthly return for the month ended 5 February 2014.

 19 February 2014 – CIS tax deducted for the month ended 5 February 2014 is payable by today.

 1 March 2014 – Self Assessment tax for 2012/13 paid after this date will incur a 5% surcharge.

 1 March 2014 – Due date for Corporation Tax due for the year ended 31 May 2013.

 19 March 2014 – PAYE and NIC deductions due for month ended 5 March 2014. (If you pay your tax electronically the due date is 22 March 2014.)

 19 March 2014 – Filing deadline for the CIS300 monthly return for the month ended 5 March 2014.

 19 March 2014 – CIS tax deducted for the month ended 5 March 2014 is payable by today.