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Welcome...
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| RTI - More Information |
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The rules for reporting wages, hours worked and payroll deductions under real time information (RTI) are still being written.
What to report
RTI reports will need to be made where at least one employee is paid above the lower earnings limit (LEL), (£109 per week for 2013/14). For wages between the LEL and the Primary threshold (£149 per week for 2013/14) the worker is given NI credits although they don't actually pay any NI, so the level of their wages needs to be reported.
A major difference between RTI and the current system, is that once the employer is reporting under RTI, reports must be made for each employee even if no tax or NI are deducted for a particular period. This because RTI has two functions; - to report deductions to HMRC and to report net pay for each worker to the Department of Work and Pensions (DWP) to allow the DWP to calculate top-up benefits such as Tax Credits and the new Universal Credit.
The wages for employees aged under 16 are not required to be included in the RTI report, unless those wages are so high that the worker will be subject to income tax. Workers aged under 16 do not pay NICs, and are not eligible to claim Tax Credits.
Penalties for errors
The draft legislation released on 11 December 2012 indicates that penalties for errors in RTI reports will apply from 6 April 2013, when most employers will be required to start using RTI. Those employers who are already in the RTI pilot programme may be subject to penalties if their last RTI report for the 2012/13 tax year is incorrect.
In either case the penalties for errors in RTI reports will not be collected until the 2013 Finance Act has been passed, probably in late July 2013. This application of penalties from the start of RTI has come as an unpleasant surprise, because tax and accountancy bodies have been pushing for a 'soft-landing' for the RTI penalty rules for all employers.
Penalties for late reports
Penalties for RTI reports which are submitted late will generally apply from 6 April 2014 onwards. Remember an RTI report will have to be filed every time employees are paid. Under the current system a report of PAYE deductions is only required to be submitted to HMRC once per tax year, by 19 May after the end of the tax year.
Where the last RTI report for the tax years 2012/13 (for employers in the RTI pilot) or 2013/14 is submitted by 19 May after the end of the tax year, there will be no late-filing penalty. However, from 6 April 2014, where the employer fails to submit RTI reports on time within the tax year, the employer could be fined for each month for which RTI reports are late. Only one penalty per month will apply even if the employer makes more than one RTI report during the month.
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| New Tax Free Allowance |
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The standard personal allowance (amount of tax-free income) for 2013/14 will be £9,440. We had been expecting a smaller increase to £9,205.
The new higher allowance allows an individual to earn £181.54 per week (about £787 per month) tax free. But the NIC thresholds will not increase by as much, so an employee starts to pay NICs on income way below the tax-free threshold.
In 2013/14 the class 1 primary NI earnings threshold for employees will be £149 per week (£7755 per year). Employers will pay class 1 NI on wages of £148 or more per week (£7700 per year). You need to consider the NI costs for both you and your company when deciding how much you can extract from your own company as salary.
If you pay yourself the full personal allowance of £9,440 as salary from 6 April 2013, you will have personal NIC of £202.20 (12% x (9440-7755)) for the year. Your company will also pay £240.12 (13.8% x (9440-7700)) in class 1 NICs. However, the salary and NIC cost is fully tax allowable for the company.
A salary of £7,695 per year (about £147.98 per week) will avoid both employees and employers NICs. But you will get an NI credit for state retirement pension purposes if your salary lies in the range £109 to £149 per week. Unfortunately under RTI (see above), payments of salary in that range will have to be reported to HMRC, so there is no admin saving on paying a low salary.
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| Polytunnels and Glasshouses |
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Does your business use a polytunnel or glasshouse?
In the past the Taxman has refused to allow a tax deduction for the cost of such structures, on the basis that greenhouses are buildings. A greenhouse is generally expected to last several years, so the cost of the structure should be treated in the business accounts as 'capital' rather than as a 'revenue' expense. The cost of capital items cannot be deducted from annual profits, as the total expenditure must be spread over the life of the asset, using capital allowances. However, no capital allowances are given for the cost of buildings and similar structures (as opposed to the equipment they contain).
Now the Taxman has changed his mind. Polytunnels can qualify for capital allowances in certain circumstances, such as where the tunnel is moved around to aid the growth of particular crops in different areas at different times. If the primary function of the polytunnel is to provide shelter for livestock or stores, it will be regarded as 'premises' and not qualify for capital allowances.
A glasshouse may qualify for capital allowances if it contains, as part of the structure, permanently installed computer controlled equipment that automatically adjusts the heat and humidity inside the glasshouse. Unheated glasshouses will not qualify for capital allowances, as the Taxman views these as fixed buildings which happen to be made of glass.
The good news is that this change of approach comes into effect immediately, so all open claims for capital allowances on polytunnels or glasshouses can be settled in line with the Taxman's new guidance. If you have had a claim for capital allowances refused based on the old guidance, you can ask the Taxman to reconsider your claim.
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| January Question and Answer Section |
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Q. If I purchase a Land Rover Defender for use in my partnership business can I reclaim the VAT paid on the purchase? I will use the Land Rover 75% for business and 25% for private journeys.
A. You first need to check that the specific model of Land Rover Defender is regarded as a commercial vehicle for VAT purposes by HMRC. We can make this check for you.
If HMRC agrees the Defender is a commercial vehicle, you can reclaim 75% of the VAT paid on the purchase, on the basis that it will be used for business purposes for 75% of its useful life. You should keep accurate mileage records of all your business journeys so you have evidence of the business use of the vehicle, in case HMRC ask you to prove the business use percentage. If the percentage of business use of the vehicle changes you may have to make an adjustment to your VAT return.
Q. The Christmas feasting has taken its toll on the waistlines of everyone in our company. Can I give the workforce a boost by having the company pay for gym membership for me and all my staff?
A. A company may provide sports or recreational facilities for its workforce, but unless those facilities are used mainly by current and former employees with exclusion of the general public, there will be a benefit in kind tax charge for the employees and the company. A membership for a gym open to any paying member from the general public would be taxed as a benefit for employees, the taxable value being the cost to the company of providing that membership.
Q. My business has started exporting goods. I've heard I need an EORI number. What is it, and how do I get one?
A. The Economic Operator Registration and Identification (EORI) scheme started on 1 July 2009 and replaced the previous TURN system. The EORI provides a unique number for a business to quote to any Customs authority in the EU, for example when the business needs to make a customs declaration when goods arrive or depart from the EU.
If your business had a number under TURN, it should automatically have been issued with an EORI number. If your business is VAT registered in the UK you need to complete form C220 to obtain an EORI number, if you are not VAT registered the form to complete is C220A. We can obtain and file these forms for you.
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| January Key Tax Dates |
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1 - Due date for payment of Corporation Tax for the year ended 31 March 2012
14 - Return and payment of CT61 tax due for quarter to 31 December 2012
19/22 - PAYE/NIC and CIS deductions due for month to 5/1/2013 or quarter 3 of 2012/13 for small employers
31 - Deadline for filing 2012 Self Assessment personal, partnership and trust Tax Returns - £100 first penalty for late filing even if no tax is due or tax due is paid on time
Balancing self assessment payment due for 2011/12
Capital gains tax payment due for 2011/12
First self assessment payment on account due for 2012/13
Interest accrues on all late payments
Half yearly Class 2 NIC payment due
Further penalty of 5% of tax due or £300, whichever is greater for personal tax returns still not filed for 2010/11
5% penalty for late payment of tax unpaid for 2010/11 self assessment
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Please contact us if we can help you with these or any other tax or accounts matters.
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All new client consultations are provided free of charge and without obligation.
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TWR Accountants are based in Brandon near Thetford, offering local business owners and individuals a wide range of services to small and medium sized businesses.
All clients receive fixed fees, work delivered on time and free unlimited phone support. Visit our website http://www.twraccounts.co.uk for more information.
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