December Planning for RTI. Business Record Checks

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1 Welcome... To December's Tax Tips & News, our newsletter designed to bring you tax tips and news to keep you abreast of the latest developments in taxation. This month s Newsletter gives another update on operating PAYE under the Real Time Information (RTI) regime, which comes into effect in April next year at the start of the new tax year. I have already written to clients for whom we run payroll about this and asked them to supply their company bank details. The reason for this was I had hoped to automate the payment of PAYE each month with the payroll run, thereby ensuring that PAYE is paid accurately and on time by clients. After discussions with Sage, our software provider, and with HMRC I now learn that this is not practical for the time being. Thanks to all of you who have sent us or will send us your company bank details, as requested. We shall hold these on file pending the introduction of automated PAYE payments. (Something similar operates for VAT payments, so I don t see why it should not become possible and practical for PAYE.) December 2012 Planning for RTI Business Record Checks Taskforce Targets Private Landlords VAT Registration Advice December Question and Answer Section December Key Tax Dates In the meantime we shall continue to request clients to make their payments of PAYE in the usual way. It becomes more important next April to pay the right amount of PAYE on time, as, under RTI, HMRC will know the exact amount that should be paid for each month and so will feel more confident than ever before about issuing penalties for late payment of PAYE within the tax year. We shall, of course, remind clients about this again before the start of the next tax year. If you have any comments questions about this or any other topic covered by the Newsletter, please get in touch. If you need further assistance just let us know or you can send us a question for our Question and Answer Section. We are committed to ensuring all our clients don't pay a penny more in tax than is necessary.

2 Please contact us for advice in your own specific circumstances. We're here to help! Planning for RTI If you are an employer you should have received information from the Taxman about operating PAYE under Real Time Information (RTI). Employers with fewer than 5001 employees will have to operate RTI from 6 April 2013, and that includes one-man companies. Some employers have already started to use RTI under the pilot program. Individuals who employ carers in their own home may be able to defer migrating to RTI until April You need to check whether your payroll software will be RTI-ready from April Don't assume it will be. Some software providers have taken this time to discontinue legacy packages and force you to move to more expensive offerings. Even HMRC is cutting back on the free payroll software it provides. The HMRC PAYE Basic tools will work under RTI, but only for up to nine employees, and it does not handle net pay arrangements for employer pension contributions. If you use an external provider to run your payroll, you must talk to them about how much it will cost to run your payroll from April RTI requires more data to be submitted to the Tax Office than currently required (see below). Also the RTI reports must be sent on or before the day on which employees are paid, which could be daily or weekly. Currently the Taxman requires an annual report of what has been paid and deducted under PAYE. The 'on or before' requirement has been relaxed in limited circumstances where employees are paid in cash on the day they work, and the amount of payment cannot be known in advance. This may apply to bar staff and crop-pickers. However, the RTI report must still be made within seven days of the day of payment, or when the next payroll is run, whichever comes next. As the purpose of RTI is to provide accurate information to the DWP on claimants' earnings, employers are required to provide the weekly hours worked by each employee, as they fall into the following bands: A. Up to hours B. 16 to hours C. 30 hours or more D. Other You don't have to record the exact hours worked, only the normal hours the employee is expected to work. From April 2014 the Taxman will charge penalties where RTI reports are submitted late, or containing inaccurate information. Please talk to us about how your business can meet the RTI challenge and how we can help. You have just four months to get ready. Business Record Checks The Taxman apparently believes that anyone who does business in cash must be a potential 'tax cheat'. This is ridiculous of-course, but his latest business record checks campaign is based on this fallacy. If you receive a call from the Taxman asking questions about your business records, please refer the caller to us before agreeing to answer his questions. You should not be penalised for doing this. The Taxman is required to deal with the taxpayer's agent if asked to do so. The telephone questionnaire is a computer-generated script, which only accepts a limited range of answers. For example: How many purchases are in cash? Answers accepted: none, a third, half or

3 more. The answers given determine whether the Taxman sends you guidance on how to keep better business records, or an Inspector to check what you may be doing wrong. Where the Taxman wants to inspect your business records, please ask us to be present when they come. The potential penalties for flying solo are not worth it. Taskforce Targets Private Landlords The Taxman has announced a taskforce to investigate tax avoidance in landlords in South East England. Private residential landlords have now been the subject of a taskforce in: Scotland, North Wales, London, East Anglia, North East, North West, and now South East England. That covers pretty much the whole of the UK. The message is clear; individuals who own rental properties must correctly declare all of the income and gains generated by those properties. It is relatively easy for the Taxman to trace the owners of let properties through the Land Registry and compare the registered owner's name to those recorded on the electoral roll for the property. If the names aren't the same, the Taxman will assume the property has been let. He can also ask letting agents to provide lists of the landlords and properties they serve. Please talk to us if you are uncertain about what reliefs and expenses you can claim for your let property. VAT Registration Advice It's one number ( 77,000 from 1 April 2012), so why is so easy to get it wrong? We are talking about the compulsory VAT registration threshold in the UK. If your VAT taxable turnover (sales) total for the previous 12 calendar months exceeds this compulsory registration threshold, or the sales your expect to make in next 30 days will exceed that threshold, you MUST register for VAT within the next 30 days. You can now register for VAT online on the HMRC website, but we recommend that you talk to us first, as so many things can go wrong. If you make a mistake with the form, the Taxman may not let you correct it. For example: - If you exceed the VAT registration threshold due to a 'blip' in sales, you can ask the VATman for permission not to register for VAT, but you must ask first, permission may not be granted. - You can reclaim VAT on services you purchased for your business in the six months before the day your VAT registration is effective from, so it is essential to time your VAT registration date with an eye on the invoice dates for those expensive services. If the service relates to an asset which was no longer held at registration, the VAT can't be recovered as pre-registration VAT. - If you receive a large order which will push your sales over the VAT registration threshold for the next 30 days alone, pay attention to the delivery dates for that order. A staggered delivery for the order may mean you do not exceed the VAT threshold in the next 30 days, and you may register for VAT too early. December Question and Answer Section Q. I registered as self-employed in 2005, but as I didn't have any income I ignored the tax returns the tax office sent me. When they demanded 1000 tax for each year I got my act together and sent in the completed tax returns which showed no tax due. Now the Taxman won't cancel the tax demands issued for the years before 2008/09. What can I do? A. You have been caught by the tax law here. The years before 2008/09 are 'out of time' and the

4 Taxman doesn't have to cancel the tax demands for those years. Although you may be able to appeal for the tax demands to be cancelled under 'special relief', but you need to show it would be unconscionable for the Taxman to collect the excessive tax. This is a very high hurdle to clear. Q. From 1 January 2013 Independent Financial Advisers (IFAs) are not permitted to charge commission, and should instead charge fees for the advice and services they provide. Do firms of IFAs have to charge VAT on all the advice they give or is some advice exempt from VAT? A. The VATman's guidance says the IFA's advice-only services will be subject to VAT, but if the fee is for an introduction to an exempt financial service, that introduction fee will be exempt from VAT. As an IFA you need to sort out exactly what you are charging for: - general advice - introductions to exempt services (such as to authorised dealers in securities) or - introductions to services which are subject to VAT such as discretionary investment manager services. We need to discuss your particular circumstances in detail to sort out the VAT position. Q. I got divorced in 2007, but I still jointly-own my former family home with my ex-wife. We agreed she would live there with my daughter until she finished her school exams. The house is now about to be sold. Will I have to pay capital gains tax on my share of the profit made? A. You can escape tax on the gain made on your former home if all these conditions are met: - Since you left the property your former spouse has occupied it as her main residence. - The agreement for your ex-spouse to stay in the home was made either under a court order, or as part of your divorce. - You haven't elected for another property to be your main residence for any part of the period since you ceased living in your former home. If you have acquired another property in the meantime, you need to think carefully about which property you claim capital gains tax relief on, as this relief can't be applied to two properties for the same period. December Key Tax Dates 19/22 - PAYE/NIC and CIS deductions due for month to 5/12/ Deadline for 2011/12 self assessment online returns to be filed if you are an employee and want tax underpaid to be collected by adjustment to your 2013/14 PAYE code (for underpayments of up to 3000 only) Need Help? Please contact us if we can help you with these or any other tax or accounts matters. In addition, if there's anyone else who you think would benefit from the newsletter, please forward the to them or ask them to contact us to be added to the newsletter list. New Clients Welcome If you are not already a client and are interested in becoming one, we would love to come to meet with you to discuss how we can help and provide you with a competitive quote for our services. All new client consultations are provided free of charge and without obligation. About Us top John Turner FCA provides a personal, friendly and comprehensive service to tax payers and small

5 businesses in Reading and Berkshire at affordable prices. Visit our website for more information. Disclaimer The information contained in this newsletter is of a general nature and no assurance of accuracy can be given. It is not a substitute for specific professional advice in your own circumstances. No action should be taken without consulting the detailed legislation or seeking professional advice. Therefore no responsibility for loss occasioned by any person acting or refraining from action as a consequence of the material can be accepted by the authors or the firm. Copyright John Turner FCA. All rights reserved. Berkshire House, 252 Kings Road, Reading, RG1 4HP