HMRC launch the Tax Catch Up Plan

HMRC have launched a campaign to target private tutors and coaches who have undeclared tax liabilities.

The Tax Catch Up Plan (TCUP) is aimed at individuals who provide private lessons, or who profit from tuition and coaching, as a main or secondary income where the correct tax has not been paid. The types of tuition, instruction or coaching covered by the TCUP include tuition of traditional academic subjects, fitness and dance instruction, musical instrument tuition, art, services provided by life coaches and others.

Under the TCUP, tutors and coaches have until 31 March 2012 to advise HMRC about their outstanding tax for the years up to 5 April 2010, and pay what they owe. HMRC have confirmed that those who come forward by the deadline are likely to receive the best possible terms for paying the tax owed. If they have to pay a penalty, it is unlikely to be more than 20%.

Those who wait for HMRC to come to them will find that they have to pay much higher penalties (as much as 100% and may even face criminal prosecution). After 31 March 2012, using information pulled together from different sources, HMRC will investigate those who have chosen not to come forward.

Marian Wilson, Head of HMRC Campaigns, said:

‘Our campaigns are designed to ensure tax is paid so that the money is available to spend on public services used by everyone. We are making it as easy as possible for people offering tuition and coaching to use this unique opportunity to put their tax affairs in order by making a full disclosure, and benefit from the best possible terms.

We are using various intelligence sources to identify and then target those who do not take advantage of this opportunity to declare their full income. The message is clear: contact us before we contact you.’

The Tax Catch Up Plan has two stages:

• From 10 October 2011 to 6 January 2012, tutors/coaches/instructors must register with HMRC to ‘notify’ that they plan to make a voluntary tax disclosure.

• By 31 March 2012 those who have registered to notify must tell HMRC what they owe and pay the tax, interest and penalties due.

People can register online by completing a notification form which can be accessed using the link below or by calling HMRC on 0845 601 8817.

Please do get in touch if you have any concerns in this area.

Agreement with Switzerland to secure billions in unpaid tax

The government has agreed measures with Switzerland to tackle offshore tax evasion. Under the terms of an agreement, existing funds held by UK taxpayers in Switzerland will be subject to a significant one-off deduction of between 19% and 34% to settle past tax liabilities.

From 2013, a new withholding tax of 48% on investment income and 27% on gains will ensure the effective future taxation of UK residents with funds in Swiss bank accounts. This will be accompanied by new information-sharing rules which will make it easier for HMRC to find out about Swiss accounts held by UK taxpayers. The new charges will not apply if the taxpayer authorises a full disclosure of their affairs to HMRC.

Internet link: Press release

Advisory Fuel rates for Company Cars

New company car advisory fuel rates have been published to take effect from 1 September 2011. HMRC’s website states:

‘These rates apply to all journeys on or after 1 September 2011 until further notice. For one month from the date of change, employers may use either the previous or new current rates, as they choose. Employers may therefore make or require supplementary payments if they so wish, but are under no obligation to do either.’

The advisory fuel rates for journeys undertaken on or after 1 September 2011 are:

Engine size	Petrol	LPG
1400cc or less	15p (15p)	11p (11p)
1401cc – 2000cc	18p (18p)	12p (13p)
Over 2000cc	26p (26p)	18p (18p)

Engine size	Diesel
1600 cc or less	12p (12p)
1601cc – 2000cc	15p (15p)
Over 2000cc	18p (18p)

Please note that only one rate has changed and that has been reduced and care must be taken to apply the correct rate after the one month period of grace.   

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.

Internet link: HMRC advisory fuel rates

New National Minimum Wage

The adult rate of the National Minimum Wage (NMW) increases to £6.08 (£5.93) an hour from 1 October 2011. This is payable to those age 21 and over.

The rate for those aged 18 to 20 increases to £4.98 (£4.92) and for 16 and 17 year olds to £3.68 (£3.64) an hour.

The apprentice rate, for apprentices under 19 or 19 or over and in the first year of their apprenticeship, increases to £2.60 (£2.50) and hour.

Updated guidance available on the Business Link website includes specific situations such as those engaged on work experience or internships and their entitlement to the NMW. The guidance also includes a new worker checklist for employers and case study examples.

The press release confirms:

‘Entitlement to the NMW does not depend on a job title but on whether the arrangement they have with an organisation makes them a worker for NMW purposes. Where an individual is a worker - and no exemption applies – then they must be paid at least the NMW.’

Employment Relations Minister Edward Davey said:

‘Internships and work experience of all forms offer an excellent opportunity in helping to bridge the gap between education and the workplace. And for businesses it allows them access to a wide talent pool of some of our best and brightest who didn’t take the traditional route into a job.

Fairness though is absolutely paramount with all placements. When a worker is entitled to the minimum wage, they should be paid it and we will continue to enforce the law. Today’s publication will help clarify this for employers and will also make sure that all interns and those on work experience placements have a better understanding of their entitlement to the minimum wage.’

HMRC are able to charge penalties to those employers found to be in breach of the NMW rules.

If you have any queries on the NMW please do get in touch.

Internet links: NMW rates Business link guidance Press release NMW Penalties

15% of self assessment tax returns are late

http://www.accountingweb.co.uk/article/sa-penalties-hit-15m-more-come/519767

Changes to audit exemption thresholds

This is a message on the proposed changes from the President of the ICAEW (at http://www.icaew.com/)

Today the Department for Business, Innovation and Skills has announced a formal consultation on increasing audit exemptions, removing some of the gold plating that previous governments have applied to EU directives in this area. In a nutshell, the proposals are:-

• To extend audit exemptions for SMEs by aligning the mandatory audit thresholds with EU small company thresholds. Currently in the UK, SMEs have to meet both turnover and balance sheet thresholds to be exempt from audit. In future, to be classified as small for accounting purposes, businesses will have to meet two out of three criteria (turnover, balance sheet and headcount).
• To exempt subsidiary companies from the statutory audit where they fulfil a rigorous set of conditions including a commitment from the parent company to guarantee its debts.

In considering these proposals, what is important to me is that we continue to reinforce the message that effective financial management is crucial for any business. Strong financial controls and appropriate management oversight are important components for any company seeking to grow and build their business, no matter what their size. That’s what chartered accountants tell their clients and that’s the message I continue to press home to ministers.

Audit is critical in this. It plays a vital role in the oversight and governance of companies. This is as true for many smaller businesses as it is for larger multi-nationals. It provides investors, shareholders and management with trusted independent verification of an organisation’s financial statements and gives some insight into how well it is being run.

In my view, many SMEs and subsidiaries will continue to choose to have an audit, even though they may qualify for exemption, because it provides confidence and peace of mind. It can be important to have audited accounts when pitching for contracts or seeking finance.  For those who choose not to have an audit, we should absolutely continue to encourage them to seek third party assurance on their financial statements. This is a service an ICAEW Chartered Accountant can provide.

We need to look carefully at the detail of the proposals and ICAEW’s Audit and Assurance Faculty will be responding to the consultation in due course. To help us shape our response, we will be consulting members and would like to know what you think. If you’re in business and as a result of these proposals are now eligible for audit exemption, will you take it? If you’re in practice and have clients who may now be exempt from audit, how do you think this will impact on you and your business?

I look forward to hearing your thoughts.

Mandatory new pension scheme rules for employees

Great guidance from Peninsula

Auto enrolment 12 month reminder

As part of the government’s plans for pension reform, employers must automatically enrol their workers into a pension scheme. The largest employers, in terms of the number of workers they have, and in some cases, by PAYE reference, will have to comply first, with a ‘staging date’ of 1st October 2012. The ‘staging date’ is the date from which an employer must start to auto enrol their workers into a scheme. To find out when your staging date is, click  here.

From the relevant staging date, all workers must be auto enrolled into a qualifying pension scheme by their employer. Employers can choose which scheme they use but it must meet minimum standards in respect of the benefits it provides or the amount of contributions paid to it.

Employers must therefore:

• make a minimum 3% contribution is made towards a defined contribution scheme (based on qualifying pensionable earnings) such as NEST (see below); or
• offer membership of a defined benefit scheme or certain hybrid scheme which either has a contracting out statement or meets the test scheme standard

One qualifying scheme that has been set up specifically for an employer to use so that he meets his new obligations is called NEST (National Employment Savings Trust) and is available to any employer who wants to use it. However, use of this is not compulsory, as long as the pension scheme used counts as a ‘qualifying’ one.

Employers who currently use a pension scheme should therefore check that it counts as a qualifying scheme. If it does, then they can continue to use it under the pension reform. If it isn’t, then they should check how the existing scheme can be amended, or set up a new scheme.

Not all workers must be auto enrolled – only ‘eligible’ workers must be. ‘Eligible’ workers are those who:

• are 22 years old and over
• are under state pension age
• earn more than the minimum earnings threshold (likely to be £7475 per year); and
• work or ordinarily work in the UK

However, other individuals will have the right to be enrolled into their employer’s pension scheme if they ask to be. These are:

• jobholders aged between 16 and 22, or between State Pension Age and 75 with earnings of more than £7,475 a year.  If these individuals ask to be enrolled their employer will have to make a minimum contribution.
• workers aged at least 16 but who are under 75 and who do not have earnings of more than £7,475.  If these individuals ask to be enrolled their employer will not have to make a minimum contribution, but it can if it chooses.

Once a worker has been automatically enrolled, they can choose to opt out in which case they will no longer be a member of the scheme and any payments made into the pension pot will be refunded. Opting out can only be done within a month of being auto enrolled. Opted out workers may re-join at a later date.

After the opt-out period, workers can choose to leave the pension scheme at any time. Payments already made in this circumstance will not be refunded and will remain in their pension pot.

Workers who have opted out or left the scheme must be auto enrolled again ever three years as long as they continue to be an ‘eligible’ worker.

Who should be automatically enrolled?
Fiona
Fiona is aged 27 and earns £37,000 per year.

Fiona’s employer is required to automatically enrol her because of her age and her earnings level. Her employer must make at least the minimum contribution.

Raj
Raj is 20 and earns £17,000 per year.

His employer is not required to auto enrol him because he is not old enough. However, Raj can ask his employer to put him into the workplace pension scheme and will have to make a contribution to his pension.

Peter
Peter is 42 and earns £25 a week.

Peter’s employer is not required to automatically enrol him because he doesn’t earn enough.
However, Peter can ask to be enrolled but his employer does not have to make contributions, but can do so if they wish

Employees and the internet

This is good advice for what can be a difficult area.

http://www.peninsula-uk.com/bottomlineexpress/457/Directors-Cut:.html

New employment tribunal rules

http://www.peninsula-uk.com/blog/blogentries/43/Are-Proposed-New-Employment-Tribunal-Reforms-Going-To-Be-Good-For-Business?.html

These are some thought provoking comments on the new employment tribunal rules

IR35 CASES

Interesting update on IR35

http://www.ion.icaew.com/TaxFaculty/23116

IR35 cases

Interesting update on IR35

http://www.ion.icaew.com/TaxFaculty/23116

Watch out if you are dissolving a company!

From the ICAEW:

The Treasury Solicitor removes its concession so you must sort out the Share Capital before applying for a company to be struck off under C16

Technically speaking if a company is struck off under Extra Statutory Concession (ESC) C16 any share capital distributed as part of the ‘pay-out’ is treated as an unauthorised distribution under company law and this element of the payout can be recovered from the shareholders by the Crown as bona vacantia.

The Treasury Solicitor has in recent times exercised a concession under which they will not seek to recover share capital paid out during a company strike off if the amount of share capital involved is less than £4,000.

This concession is being withdrawn by the Treasury Solicitor with effect from 14 October 2011.

In future if you use ESC C16 to have a company struck off then if any of the money paid out represents share capital that amount can be recovered by the Treasury under the bona vacantia procedure.

The new arrangement is set out in a Notice published on the Treasury Solicitor website.

Unfortunately the explanation given in the Notice is not as clear as it might be and is likely to cause confusion.

Paragraph 2 states

In practical terms, can I now distribute share capital of any amount prior to dissolution without approval from TSol?

Yes. The TSC has been removed so there is no need to contact the Bona Vacantia Division regarding distributions of any amount. However, as noted above, depending on the circumstances, you will still need to comply with HMRC‘s ESC C16, or any successor legislation, and any other applicable rule in relation to share capital distribution.

But the key provisions you have always had to comply with in relation to share capital are the company law provisions and if you fail to comply with those provisions as to when share capital can, or cannot, be reduced or repaid then any money paid out is an unauthorised distribution and can be covered by the Crown. That covers any share capital paid out under the ESC C16 route as this has no standing as far as company law is concerned.

Before the Treasury Solicitor revoked their concession the company law position could be ignored as long as the amount of share capital that was distributed was less than £4,000.

The Treasury Solicitor has changed its mind, and revoked their Concession, on the grounds that the new provisions in Companies Act 2006 make it easier to reduce or pay back share capital and so the £4,000 de minimis concession is no longer necessary.

In future if you are going to take advantage of ESC C16 you can pay out any amount of distributable reserves, subject to capital gains tax, but you should reduce the share capital of the company to a nominal £1 if you want to avoid any problem with bona vacantia.

In the background to all this is the consultation on the potential statutory enactment of ESC C16. The proposal in the HMRC consultation document is that if the concession is enacted the amount that you will be able to distribute under the new statutory provision will be limited to an absolute maximum of £4,000 even if the distributable reserves are much greater than that.

Over half of all VAT fines wrong

According to figures obtained by Hacker Young, during the 18 months to 31 October 2010 the VAT Internal Review Team considered almost 29,000 appeals against penalties imposed by HMRC for incorrect returns and late payments. In just over 50% of these appeals, the penalties were cancelled because they had been wrongly imposed. In most cases the penalties were cancelled because the mistakes made by businesses were not as a result of carelessness but rather a genuine mistake.

If that weren't bad enough, the penalties were overturned by HMRC's review team who are hardly likely to be independent!

Update on the economy

Courtesy of RBS Group Economic Research

The Governor of the Bank of England is hoping that increasing monetary stimulus will help steer the economy into calmer waters. By injecting more funds into the UK economy, and quickly, Mr King aims to counteract some of the drags on growth coming from weaker global activity and worries about banking and sovereign debt conditions in the Eurozone. Meanwhile, his European Central Bank (ECB) counterpart, Jean Claude Trichet, also took action to increase liquidity in the Eurozone banking system in an attempt to promote some stability. But overall, there is little prospect of a strong recovery. Choppy times lie ahead.

Audit exemption savings

The Department of Business, Innovation and Skills (BIS) have today published proposals which could help 100 thousand UK businesses save in excess of £600 million in accountancy and administration costs every year.

The consultation on Audit Exemptions and Change of Accounting Framework sets out plans to allow more small companies and subsidiaries to decide whether or not to have an audit.

Current EU rules mean that to classify as ‘small’ for accounting purposes, a company must comply with two out of three criteria relating to their turnover, balance sheet total and number of employees. However, to obtain an audit exemption in the UK, small companies must fulfil both the balance sheet and turnover criteria. Under the new proposals, UK SMEs would be eligible for audit exemption by meeting any two of the three criteria, saving them an estimated £206m per year.

The Government is also proposing to introduce legislation in 2012 to exempt most subsidiary companies from mandatory audit, provided their parent is prepared to guarantee their debts. Savings are estimated at £406m per year.

Furthermore, following the consultation by the UK Accounting Standards Board on changes to UK Generally Accepted Accounting Principles (UK GAAP), the Government is also seeking views on whether to allow companies which currently prepare accounts under International Financial Reporting Standards (IFRS) more flexibility to change their accounting framework to UK GAAP.

The consultation is open for comments and responses until the 29 December 2011.

The consultation documents are available from BIS.

Red Tape day

From Accounting Web

1 October is often called "Red Tape Day" because of the new regulations that come into effect on that day. Here is a roundup of relevant changes for businesses and their advisers.

Company annual returns

Companies House will adopt the 2007 version of the UK SIC codes. The latest version will introduce five-digit codes to classify company business activities, rather than the existing four digits. All companies filing an annual return on or after 1 October will need to use the new codes, which will be asked of you when filing in your annual return via WebFiling. If you use the new codes prior to 1 October, Companies House will automatically convert the code, but this is not encouraged. Further details: Companies House filing errors: Check and check again

Aside from the Annual Return, other forms that will be using the SIC 2007 version after 1 October are: SE FM01, SE FM02, SE FM03, SE FM04, SE FM05, SE TR02, and SE TR03. The new regulations also contain changes to shareholder details required on the annual return. Unlisted companies must 'provide a full list of all shareholders on the first annual return following incorporation and on every third annual return thereafter. Any details of transfers of shares that have taken place during the year will be required for intervening annual returns. Listed companies must provide name and address details of shareholders who hold 5% or more of the company’s share capital. Those companies subject to the FSA's DTR5 Vote Holder and Issuer Notification Rules (whose share register is available online on the National Storage Mechanism) do not have to provide Companies House with the same details.

Agency worker rights

After some last minute posturing, agency workers will indeed see their benefit rights extended from 1 October. Once agency staff have completed 12 continuous weeks of service, they will gain similar rights to permanent staff including pay, overtime, shift allowances, maternity rights, holiday pay and individual performance-bonuses. However, agency workers will still not be able to enjoy benefits such as occupational sick pay, redundancy pay and health insurance.  It was the talks between the TUC and the government that led to the benefit extension. The Agency Workers Regulations apply to hirers and companies involved in the supply of temporary agency workers, either directly or indirectly in England, Wales and Scotland.

National Minimum Wage

Adding to the employment regulation changes will be a change in the National Minimum Wage, applicable to all in the UK. The following rates will be effective from October 1:

• £6.08 an hour for workers aged 21 and over
• £4.98 an hour for workers aged 18-20
• £3.68 an hour for workers aged below 18 who are no longer of compulsory school age

For apprentices, £2.60 per hour must be paid to apprentices who are under the age of 19, or for those over 19 or over and in the first 12 months of their apprenticeship.

Abolition of default retirement age

With effect from 1 October, the default retirement age (DPA) of 65 was repealed by the Employment Equality (Age) Regulations that prohibit age discrimination in the workplace. Further guidance can be found on the BIS website and in the ACAS guide, Retirement Process and the removal of the Default Retirement Age.

Carrier Bag levy

A 5p charge is being introduced by the Welsh Assembly on single-use carrier bags for customers in Wales. The charge is compulsory and is also applicable to retailers outside Wales who deliver to customers in Wales when using single carrier bags. BusinessZone reported that business groups have reacted angrily to the new regulations. Non Rhys, Wales Policy Manager at FSB, told the BBC: “Not all retail businesses will have had the packs from the Welsh Government because there's not a list of all the retailers in Wales, so we have been trying to contact as many businesses as possible. But there will be some small businesses that do not know."

The new regulations will be published on the legislation.gov.uk website on October 1. 

Employment Law update from EMW Law

The Chancellor, George Osborne, in this week’s speech at the Conservative Party Conference announced 2 significant reforms to current Employment Law, including:

• from 6 April 2012 increasing the length of service an employee must have before bringing a claim for unfair dismissal from 1 year to 2 years; and 
• workers having to pay fees in order to bring a claim at the Employment Tribunal. Although the exact detail of how this will work has not yet been provided it has been stated that the fees will be set at £250 to lodge an application and £1,000 payable when the hearing is listed; both of which could be increased in the event that the value of the claim is over £30,000.00. However, where the claim is successful the fees will be refunded, and claimants with insufficient means will have the fees waived. 

Purpose of the reforms

Such changes to the law have been made in an attempt to discourage speculative claims being made in the Employment Tribunal. The Government claims that the reforms will save UK businesses £6 million per annum and decrease the number of claims made by 2,000 a year.

Potential consequences

Several issues may arise out of these changes to the law.

Firstly, in relation to how the fees will be waived, if the test for a fee-waiver is simply that they need to be in receipt of income support, then most ex-employees will automatically qualify for the waiver, but those still in work would be required to pay. Such a policy could therefore arguably be seen to encourage individuals to remain unemployed, rather than attempt to mitigate their losses and find employment elsewhere.

Secondly, in relation to the increase in qualifying time, there has been some discussion as to whether this will actually reduce the number of claims being made at the Tribunal. Individuals with less than 2 years service could seek to bring a claim under alternative jurisdictions (e.g. under discrimination legislation), where no service requirement exists. Furthermore, there may also be a sharp increase in employees resigning and bringing constructive dismissal claims in the lead up to April 2012 in circumstances where they have between 1 and 2 years service and believe that they will be dismissed shortly after the reforms come into force.

Lastly, there has been some concern that the reforms will encourage employers to maintain a high turnover of staff, providing employees with less job security, so that they are unable to qualify to bring a claim for unfair dismissal.

The Euro

Just been told by a client that a friend of his who works for De La Rue (the security printers) that they've been ordered to print billions of Deutsch Marks by the German Government. Could be they are getting ready to abandon the Euro...........

Harristick

HARRISTICK Ends Tax Red Tape Misery

Small businesses owners across Northamptonshire are finding more time to run and grow their business thanks to a new USB-based solution.

Harris & Co’s innovative new service enables micro and small businesses to ditch red tape, save time and slash their bookkeeping costs.

No longer do businesses have to slave over long and tedious tax forms - they simply sign up at www.harrisandco.biz and get Harris & Co to do the hard work:

• Harris & Co sends each businesses a Harristick USB memory stick containing some simple pre-prepared electronic record sheets
• Businesses simply list their sales and purchases - it can take as little as just 15 minutes a month - then email them back to Harris & Co
• Harris & Co calculates each businesses' VAT, wages, business tax and personal tax.

Harris & Co launched the 'Harristick ' solution after realising that small firms across a wide range of sectors needed much cheaper and simpler accountancy services than the market currently offers.

Harristick’s service starts from £85 + VAT per month - half the cost the market currently charges many start-ups and small firms.

It covers not just VAT returns but also wages, annual accounts and "everything else the average small business needs".

Each Harristick contains four electronic record sheets: sales invoices, purchase invoices, cash receipts and cash payments.

They also come with lots of other useful calculators and information relating to items such expenses/mileage claims, payroll and personal tax.

Principal Phil Harris said: "The feedback has been very positive. Our clients like the simplicity of it - and they certainly like the fact that it is a fixed monthly fee.

"We started our business in my spare bedroom and are still a small business ourselves so we know the challenges that start-ups and small businesses face. Even so, we did extensive research with our clients to ensure that our new service meets their needs.

"This has been developed with small businesses for small businesses."

Principal Phil Harris said: "It's simple - we worry so you don't have to.

"We take care of all your dealings with HM Revenue & Customs and Companies House - including VAT returns, tax returns, annual returns and wages paperwork.

"That frees up your time and allows you to concentrate on running your business."

Harris & Co  provides businesses across Northamptonshire with professional, high quality accountancy services in a friendly, approachable way.

For more information, contact Phil Harris at Harris & Co, 01604 660661

 http://www.harrisandco.biz

EIS scheme extended

£100m tax break to help fast-growing small firms

Following the green light from the European commission, the chancellor is to go ahead with proposals floated in the 2011 budget to expand the Enterprise Investment Scheme (EIS).

The plan involves raising the income tax relief from 20% to 30% for EIS investments, backdated to April 2011, and doubling investor limits to £1m, which will come into effect in April 2012.

Osborne said: "We want to make the UK the best place to start, finance and grow a business. These changes will give a bigger tax break to those who take risks for growth and jobs in Britain by investing in the small companies that have the potential to be fast growing."

The Treasury said high-growth companies account for only 6% of businesses in the UK employing more than 10 people, but in the past three years had been responsible for creating 54% of all jobs in firms with more than 10 staff.