Archive for the ‘PAYE’ Category

PAYE 3 days grace and risk based penalties to continue

Wednesday, June 8th, 2016

HMRC have confirmed, in their updated guidance, that the three day easement and risk assessed approach to issuing penalties will continue to apply for 2016/17. As a result employers will not incur penalties for delays of up to three days in filing PAYE information during the 2016/17 tax year.

Late filing penalties will continue to be reviewed on a risk-assessed basis rather than be issued automatically.

Employers are required to file a Full Payment Submission (FPS) on or before each payment of wages is made to employees. Limited exceptions apply to this deadline which are set out at https://www.gov.uk/running-payroll/fps-after-payday’.

HMRC will not charge a late filing penalty for delays of up to three days after the statutory filing date, however employers who persistently file late, will be monitored and may be contacted or considered for a penalty.

Get in touch

If you would like help with payroll matters please do get in touch by calling us on 01782 566101 or Contact@Slatersca.co.uk.

Internet link: GOV.UK Penalties

National Minimum Wage rates and National Living Wage

Wednesday, September 9th, 2015

The National Minimum Wage (NMW) is a minimum amount per hour that most workers in the UK are entitled to be paid. NMW rates increases come into effect on 1 October 2015.

From 1 October 2015:

  • the adult rate will increase by 20 pence to £6.70 per hour
  • the rate for 18 to 20 year olds will increase by 17 pence to £5.30 per hour
  • the rate for 16 to 17 year olds will increase by 8 pence to £3.87 per hour
  • the apprentice rate will increase by 57 pence to £3.30 per hour.

Employers also need to be aware that from April 2016, the government will introduce a new mandatory National Living Wage (NLW) for workers aged 25 and above. This will initially be set at £7.20 which is a 50p increase in the adult rate of NMW coming into force in October 2015. This represents an increase of in excess of £1,200 per annum in earnings for a full-time worker on the current NMW.

The NMW will continue to apply for those aged under 25. The government has issued further details of the new NLW policy.

Penalties

Penalties may be levied on employers where HMRC believe underpayments have occurred and HMRC may ‘name and shame’ non-compliant employers.

Please contact us if you would like help with payroll issues.

Budget Statement 18 March 2015

Thursday, March 19th, 2015

 Personal Tax and miscellaneous matters

 Personal Tax allowance

The personal allowance for those born after 5 April 1948 will be increased to:

  • For 2015-16 – £10,600
  • For 2016-17 – £10,800
  • For 2017-18 – £11,000

From 2016-17, there will be one Income Tax personal allowance regardless of an individual’s date of birth.

 Income Tax rate bands

There was significant press commentary prior to the Budget predicting an increase in the threshold at which tax payers are liable to the 40% Income Tax rate. The declared higher rate thresholds are:

  • For 2015-16 – £42,285
  • For 2016-17 – £42,700
  • For 2017-18 – £43,300

If your income before allowances exceeds these amounts you will be paying 40% Income Tax on the excess (this assumes that you are only entitled to the basic personal allowance).

The threshold at which the 45% rate starts is unchanged at £150,000.

There were no changes to the basic Income Tax rate (20%), the higher rate (40%) and the additional rate (45%).

 Personal savings allowance (PSA)

From 6 April 2016, a PSA will apply to provide exemption of up to £1,000 of a basic rate taxpayer’s savings income, and up to £500 of a higher rate taxpayer’s savings income. The PSA will not be available to additional rate (45%) Income Tax payers.

These benefits will be in addition to the tax advantages offered from ISAs.

 Annuity flexibility

From April 2016 people who are drawing an annuity will be able to sell that income to a third party for a capital sum. The change will allow annuity holders to sell their annuities without punitive tax penalties of up to 70%.

To prepare for this flexibility the Government has published a consultation to develop a secondary market in annuities.

 Pension’s lifetime allowance

From 6 April 2016 the pension’s lifetime allowance will be reduced to £1m (currently £1.25m).

 Trivial benefits in kind

From 6 April 2015 employee benefits costing £50 or less will be exempt for tax purposes.  An annual cap of £300 (of combined trivial benefits) will apply to office holders of close (smaller) companies and family members of those office holders.

From the same date the £8,500 threshold for benefits in kind is abolished.

 Working tax credits (WTCs)

In order to tighten the eligibility conditions for those claiming WTCs based on their status as a self-employed person, it will be necessary for claimants to demonstrate that their business is viable, or is working towards viability. The test will mirror the principles already set out in tax case law.

 Excise duties

Alcohol duty is being reduced from 23 March 2015. This reduction will amount to:

  • 1p off a typical pint of beer
  • 18p off a typical bottle of spirits
  • 1p off a typical litre of cider

The duty rates on wine not exceeding 22% abv, and sparkling cider of a strength not exceeding 5.5% abv, have been frozen.

 Tobacco duty rates

Duties are increased by 2% above the rate of inflation. The price of a pack of 20 cigarettes will increase by 16p.

 Vehicle excise duty 2015-16

Rates for cars, vans and motorcycles will increase in line with the Retail Prices Index.

Rates for heavy goods vehicles will be frozen.

 Transferrable allowances

From April 2015 a spouse or civil partner, who is not a taxpayer, or who does not pay tax above the basic rate, will be entitled to transfer up to £1,060 of their personal allowance to their spouse or civil partner. This will not advantage higher rate tax payers as the recipient of the transfer cannot be subject to tax at higher than the basic rate. This could result in a saving of up to £212 for the recipient (20% of £1,060 in 2015-16). The limit will increase to £1,080 in 2016-17 and £1,100 in 2017-18.

Business Tax

 Corporation Tax rate

The main rate of Corporation Tax from 1 April 2015 is 20%. The main rate and small company rate will be the same from this date dispensing with the need for marginal rate calculations.

 National Insurance for under 21s partially abolished

From 6 April 2015 employers with employees under 21 years old will no longer have to pay Class 1 Secondary National Insurance Contributions (NICs) on earnings up to the Upper Secondary Threshold (UST) for those employees.

The zero rate won’t apply to Class 1A or Class 1B NICs. Class 1 Secondary NICs will apply if the employee is earning above the UST.

 Capital Gains Tax – Entrepreneurs’ Relief (ER)

Where this relief is linked to the disposal of privately held assets used in a business, to qualify for ER the disposal of these assets must be linked to a significant material disposal of the business. This is defined as at least a 5% shareholding in a company or of a 5% share in the assets of the partnership carrying on the business.

Legislation is also being introduced to prevent claims for ER in respect of gains on shares in certain companies that invest in joint venture companies, or which are members of partnerships. This new provision will deny relief where the investing company has no trade of its own.

Both these changes apply from 18 March 2015.

 Entrepreneurs’ Relief on disposal of goodwill

ER is denied in respect of gains on business goodwill where the goodwill has been disposed of to a limited company which is related to the claimant. This change was introduced 3 December 2014 following the Autumn Statement.

Following consultation, the legislation has been amended to allow ER to be claimed if the partners in a firm do not hold or acquire any stake in the successor company.

 Capital Gains Tax – wasting assets exemption

From April 2015, the exemption for wasting assets will only be available where the qualifying assets have been used in the seller’s own business.

 Van benefits for zero emission vans

From 2020-21 there will be a single benefit charge applying to all vans. This compares with the current £nil rate. The transitional steps will be:

  • 2015-16 – 20%
  • 2016-17 – 40%
  • 2017-18 – 60%
  • 2018-19 – 80%
  • 2019-20 – 90%
  • 2020-21 a single rate will apply with no reduction for zero emission vans.

 Farmer’s averaging of profits

It is proposed that farmers will be able to average results for Income Tax purposes for up to 5 years, presently only 2 years, from April 2016.

  Flood defence relief

Contributions made by companies and unincorporated businesses after 1 January 2015, to flood relief partnership funding schemes, will be deductible for both Corporation Tax and Income Tax purposes. The relief will apply to monetary contributions and for the cost of contributed services.

 Landlord’s energy saving allowance (LESA)

LESA will not be extended beyond 31 March 2015, for corporate landlords, and 5 April 2015 for unincorporated landlords of let residential property.

 Bank loss relief restriction

The proportion of a bank’s annual profits that can be offset by carried forward losses is to be restricted to 50%. Following consultations an allowance of £25m will be included for groups headed by a Building Society.

 Banks’ compensation payments

Although no date was set for its implementation, the Government will consult on making customer compensation payments non-deductible for Corporation Tax purposes.

 Bank levy rate increase

The bank levy is to be increased to 0.21% from 1 April 2015.

 Film, orchestra and television tax relief changes

 

  1. High-end television tax relief: the minimum UK spend requirement reduced from 25% to 10%. Changes to the cultural test will also be made to bring them into line with similar changes to the film cultural test.
  2. Children’s television tax relief: from 1 April 2015 producers of children’s television programmes, including game shows and competitions, will be able to benefit from tax relief.
  3. Film tax relief: payable tax credits to increase to 25% for all films from 1 April 2015.
  4. A new tax relief will be introduced for orchestras from 1 April 2016.

 

VAT registration and deregistration limits

From 1 April 2015:

  • Registration threshold increased from £81,000 to £82,000
  • Deregistration threshold increased from £79,000 to £80,000

 VAT refunds for charities

From 1 April 2015 charities that provide palliative care will be able to obtain a refund of the VAT they incur in providing these services and also in relation to their non-business activities.

A similar scheme will be introduced for “blood-bike” charities to enable them to recover the VAT incurred on the purchase of goods and services.

 Gift Aid Small Donations Scheme

From 6 April 2016 the maximum amount that can be claimed through the scheme will be increased to £8,000. This will allow Charities and Community Amateur Sports Clubs to claim a Gift Aid top up payment of up to £2,000 a year.

Savers and investors

 

ISAs – increased flexibility

Regulations will be introduced in autumn 2015 to enable savers to withdraw and replace money in their cash ISA accounts without it counting towards their annual ISA subscription limit for that year.

 Help to Buy ISA

In order to encourage and support first time house buyers to raise a deposit, the Government is to introduce a Help to Buy ISA from autumn 2015. The essential elements of the scheme are:

  • Maximum monthly savings to an account will be set at £200.
  • Maximum initial deposit will be £1,000.
  • A Government bonus amounting to 25% of the amount saved will be added to the account when saver buys their first home. The maximum bonus will be £3,000 based on achieved savings of £12,000.
  • The bonus is only available for the purchase of homes in the UK by first time buyers.
  • Accounts can be opened for 4 years, but once opened you can save for as long as you like.
  • The bonus is available on homes up to £450,000 in London or £250,000 elsewhere.
  • Only available to persons who are 16 years or over.
  • The accounts are open to individuals so a couple could have two accounts.

Our summary of the latest tax updates

Tuesday, March 10th, 2015

As there are so many small things to update you on in March, we’ve pulled them all together into one post:

Avoid losing your personal allowance

For every £2 that your adjusted net income exceeds £100,000, the £10,000 personal allowance is reduced by £1. Pension contributions and Gift Aid can help to reduce adjusted net income and save tax at an effective rate of 60%.

Get ready for the new flexible pension rules

For those aged 55 and over and with a SIPP or other money purchase schemes, the new flexible pension rules commence on 6 April 2015. The new rules allow such pensioners to withdraw as much or as little income as they like from their fund but the income drawn will be taxed at their marginal tax rate.

Those affected should discuss the options with an Independent Financial Adviser who will need to work closely with us as the tax payable on the pension will depend upon their level of other income.

Make charitable payments under gift aid to save more tax

Higher rate taxpayers should make any charitable payments under Gift Aid so that you obtain additional tax relief. The charity will also be able to reclaim the basic rate tax from HMRC.

 

Year end capital gains tax planning

Have you used your 2014/15 annual exemption of £11,000? Consider selling shares where the gain is less than £11,000 before 6 April 2015. Also, if you have any worthless shares consider a negligible value claim to establish a capital loss. You may even be able to set off the capital loss against your income under certain circumstances.

Take advantage of your 2014/2015 ISA allowances

Your maximum annual investment in ISAs for 2013/14 is £15,000. Your investment needs to be made before 6 April 2015. In addition, have you thought about investing for your children or grandchildren by setting up junior ISAs or pensions? In the 2014/15 tax year, you can invest £4,000 into a Junior ISA for any child under 18 who does not have a Child Trust Fund.

 

Other tax efficient investments

If you are looking for investment opportunities, have you considered the Enterprise Investment Scheme (EIS), which offers income tax relief of 30 per cent as well as capital gains tax relief when you buy shares in certain qualifying companies? An even more generous tax break is available for investment in a qualifying Seed EIS company where income tax relief at 50 per cent is available. It is possible to shelter 50% of your capital gains in 2014/15 and there is a capital gains tax exemption when the shares are sold. Note however that qualifying Seed EIS companies tend to be risky investments so professional advice should be taken.
A 30% income tax break is also available by investing in a Venture Capital Trust.

Inheritance tax planning before 6 April 2015

Have you made use of your annual inheritance tax exemptions? The general annual exemption is £3,000 per donor (plus last year’s £3,000 exemption if you did not use it). Also consider making regular gifts out of your income to minimise the growth of your estate that will be liable to IHT.

The £2,000 employment allowance continues for 2015/16

The £2,000 “employment allowance” introduced in 2014/15 continues to be available for 2015/16.

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Maximise tax relief for capital expenditure

Those running a business should take advantage of the temporary increase in the Annual Investment Allowance (AIA) to £500,000. 5th April 2015 is not relevant for this tax break as the limit continues until 31 December 2015 when it is scheduled to reduce to just £25,000. AIA provides a 100% tax write off for plant and equipment used in your business. This tax relief extends to fixtures and fittings within business premises such as electrical, water and heating systems.

The £2000 employment allowance continues for 2015/16

Tuesday, March 10th, 2015

The £2,000 “employment allowance” introduced in 2014/15 continues to be available for 2015/16. Note that this allowance provides relief from paying employers NIC on the first £2,000 of contributions. The £2,000 allowance is set against employers NIC on a cumulative basis during the tax year.
The allowance is available to most employers, although those under common control are restricted to just the one £2,000 allowance.  Husband and wife companies with no other employees charged to national insurance may find it tax efficient to change the mix of salaries and dividends to take advantage of the £2,000 allowance. From 6 April 2015 it may be advantageous to increase directors’ salaries to the new £10,600 personal allowance instead of the NIC threshold of £8,060 (£155 a week).

 

The extra £2,540 will save £508 (20%) corporation tax (£1,016 for two directors) whereas the additional employees NIC would be just £305 each.

 

Husband and wife company – from 2015/16:

 

Salary                               £10,295 net = gross £10,600

Dividend up to BR band  £28,606 net = gross £31,785

Top of BR band                    £42,385

Net cash extracted (each) £38,901

Total extracted                £77,802 for couple

 

There would however be 20% corporation tax payable.

Profits before tax £71,515 @ 20% = £14,303 corporation tax, thus profits before salaries and tax would be £92,715.

 

This results in an overall tax and NIC rate of just 16.1%.

A salary in excess of £10,600 would attract income tax (at 20%) and employee’s NIC at 12%.

PAYE and RTI Penalties

Tuesday, March 10th, 2015

PAYE end of year – pay on time reminder

HMRC are reminding employers that with the end of the 2014/15 tax year approaching they will soon need to make their final 2014/15 PAYE (RTI) submission.

For most employers, the final submission will be their final Full Payment Submission (FPS) which advises HMRC about the very last employee payments for 2014/15 and this needs to be made on or before 5 April 2015. Details of how to make the final submission can be found on the GOV.UK website using the link below. Alternatively if you would like help with your payroll please do get in touch.

HMRC are also advising employers to take extra care as the deadline for electronic payment of 22nd March falls on a Sunday.

HMRC are advising that employers should ensure their payment reaches HMRC on time, which means that cleared funds should be in HMRC’s account by the 20th unless employers are able to arrange a Faster Payment. For more details about paying HMRC electronically visit Pay PAYE tax.

 

HMRC concession for late RTI returns and payments

HMRC have announced that employers will not incur penalties for delays of up to three days in filing RTI returns. There is no change to the filing deadlines and employers should generally file their full payment submissions (FPS) ‘on or before’ each payment date unless a concession applies.

HMRC are also advising any employer that has received an in-year late filing penalty for the period 6 October 2014 to 5 January 2015 and was 3 days late or less, to appeal online by completing the ‘Other’ box and add ‘Return filed within 3 days’.

In addition, to prevent unnecessary penalties being issued, HMRC will be closing around 15,000 PAYE schemes next month that have not made a PAYE report since April 2013 and which appear to have ceased.

HMRC will write to the affected schemes to tell them about the planned closure and what to do if they are, or should be, operating PAYE.

Employers with fewer than 50 employees are reminded that PAYE late filing penalties will apply to them from 6 March.

Advisory fuel rates for company cars

Tuesday, March 10th, 2015

New company car advisory fuel rates have been published which took effect from 1 March 2015. Due to the reduction in fuel prices many rates have reduced this quarter between two and three pence so please take care to update your expenses payments. However, the guidance states: ‘You can use the previous rates for up to one month from the date the new rates apply’. The rates only apply to employees using a company car.

The advisory fuel rates for journeys undertaken on or after 1 March 2015 are:

Engine sizePetrol
1400cc or less11p
1401 cc – 2000cc13p
Over 2000cc20p

 

Engine sizeLPG
1400cc or less8p
1401 cc – 2000cc10p
Over 2000cc14p

 

Engine sizeDiesel
1600cc or less9p
1601cc – 2000cc11p
Over 2000cc14p

Other points to be aware of about the advisory fuel rates:

  • Employers do not need a dispensation to use these rates. Employees driving employer provided cars are not entitled to use these rates to claim tax relief if employers reimburse them at lower rates. Such claims should be based on the actual costs incurred.
  • The advisory rates are not binding where an employer can demonstrate that the cost of business travel in employer provided cars is higher than the guideline mileage rates. The higher cost would need to be agreed with HMRC under a dispensation.

If you would like to discuss your car policy, please contact us.

PAYE end of year – pay on time reminder

Tuesday, March 10th, 2015

HMRC are reminding employers that with the end of the 2014/15 tax year approaching they will soon need to make their final 2014/15 PAYE (RTI) submission.

For most employers, the final submission will be their final Full Payment Submission (FPS) which advises HMRC about the very last employee payments for 2014/15 and this needs to be made on or before 5 April 2015. Details of how to make the final submission can be found on the GOV.UK website using the link below. Alternatively if you would like help with your payroll please do get in touch.

HMRC are also advising employers to take extra care as the deadline for electronic payment of 22nd March falls on a Sunday.

HMRC are advising that employers should ensure their payment reaches HMRC on time, which means that cleared funds should be in HMRC’s account by the 20th unless employers are able to arrange a Faster Payment. For more details about paying HMRC electronically visit Pay PAYE tax.