To July’s Tax Tips & News, our newsletter designed to bring you tax tips and news to keep you one step ahead of the taxman.
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 and associates don’t pay a penny more in tax than is necessary.
Please contact us on 01484 723783 for advice in your own specific circumstances. We’re here to help!
Summary July 2013
• Expenses and Benefits Reporting
• Research and Development Claims
• RTI Relaxation Extended
• Machine Games Duty
• July Question and Answer Section
• July Key Tax Dates
Expenses and Benefits Reporting
The deadline for submitting the annual returns of expenses and benefits (forms P11D and P9D) to HMRC is 6 July 2013.
The form P11D (P9D for those paid less than £8,500), is used to report the provision of benefits such as company cars or health cover to your employees, and to you where you are a director of your own company. Other benefits which may have to be reported include loans from the company to the employee/director, or the loan of assets such as a motorbike, boat or accommodation.
In theory all expenses paid to employees also need to be reported on the forms P11D. To avoid being taxed on those expense payments as income, the employee (or you on their behalf) has to make a claim for the amount paid to be treated as a valid tax deduction using a form P28 or P810, or by letter. This paper-chase can be avoided by applying for a dispensation from HMRC. We can help you with that.
Even if a dispensation is in place, any benefits provided such as; cars, fuel or health cover must be reported on the form P11D. Also class 1A NI must be paid by the employer at the rate of 13.8% on the value of the benefits provided, and reported on form P11D(b).
All of these forms can now be submitted online using an online service on the HMRC website. If you previously used the HMRC software: PAYE Basic Tools to submit forms P11D you now need to use this new online method, as PAYE Basic Tools does not include the P11D forms for 2012/13 or later years.
If you want to submit paper forms P11D and P9D you need to send them to:
HMRC (NIC&EO) Room BP2101
Benton Park View
Newcastle upon Tyne
If you need and help or advice please contact us.
Research and Development Claims
Did you know there is a tax relief for companies which invent stuff? The process of inventing and solving the associated problems is called research and development (R&D). Companies can more than double the tax deduction given for the costs of R&D.
The new ‘stuff’ could be a product, a material or a process which has been changed or improved. For example if you find a way of speeding up a production line, or changing the process to cope with a new type of material, the work to achieve that aim is R&D which should qualify for the tax relief.
Many innovative ideas don’t actually work. That doesn’t matter. The costs expended when working on your new idea are tax allowable as R&D, if you can show you were pushing the boundaries of knowledge or capability in the fields of science or technology.
Working on some types of computer programming can count as R&D, particularly where you are making previously unrelated computer systems work together. The key is that no-one else has done what you are trying to, or if they have achieved it, they have kept their discovery to themselves.
Talk to us about your innovative work. Even small costs are worth claiming as there is now no minimum claim for each year.
RTI Relaxation Extended
The temporary relaxation of the RTI reporting requirements for small employers has been extended to 5 April 2014. It was due to apply only until 5 October 2013.
Under RTI you are supposed to send a full payment submission (FPS) report to HMRC every time you pay employees, on or before the date of payment. This could mean sending a FPS every week, or even every day if you pay some casuals daily.
The relaxation applies to employers with fewer than 50 employees who pay staff weekly, or more frequently, but who run their payroll once a month. These employers can submit their full payment submission (FPS) at the time of the payroll run. However, the FPS must reach HMRC by the end of the tax month (5th).
The Taxman’s own figures show that one in six payments under RTI has been reported using the current relaxation. In spite of this strong evidence that the reporting relaxation is needed, HMRC has insisted that all employers will be required to make RTI reports on or before each payment day from 6 April 2014.
If you have still not sent any reports under RTI, you will shortly receive a letter from HMRC and possibly an estimated tax demand. Ask us for advice before paying any tax demanded!
Machine Games Duty
If you run a pub or other establishment which contains gaming machines, you should have already registered to pay machine games duty (MGD), which replaced the amusement machine licence duty (AMLD) from 1 February 2013.
MGD duty is charged at 5% or 20% on the machine’s net takings, but VAT is not also due on those takings. The lower rate is due where the maximum stake for the machine is 10p and the cash prize is £8 or less.
Once registered you have to pay the MGD over to HMRC every quarter, within 30 days of the end of the quarter. The quarters you have to report for are shown on the back of your MGD registration document. The first MGD quarter for most existing businesses ran from 1 February to 30 April 2013, with the MGD return and payment due by 30 May 2013.
However, many small businesses had difficulties with the MGD online reporting system. Therefore the business may not have submitted the first MGD return and payment on time. In a rare display of compassion the Taxman has decided not to collect any penalties due for the late submission of the first MDG return.
The Taxman has also admitted that there have been technical problems at his end of the MGD online reporting system. Some valid MGD returns have been rejected leading to a tax demand for unpaid MGD being sent out. If you have paid the MGD due ignore any demand you have received for the same quarter.
If you are struggling with your MGD return or registration, ask us to help.
July Question and Answer Section
Q. My company provides website hosting for businesses based in the UK and in other countries. For VAT purposes is this treated as a sale of goods or services?
A. There is an easy rule of thumb to decide whether something is goods or services for VAT purposes: can you pick it up and hold it? Yes: goods, No: services. Website hosting can’t be physically picked-up therefore it’s a service. There are some complex VAT rules for selling services across international borders. You need to know whether your customer is in business or not. Broadly if the customer in another country is a business you do not charge VAT. We need to talk through the detail of what you declare on your invoice and what evidence to collect from your customer.
Q. I run my own consulting company in the UK, which pays my Brazilian wife a small wage for answering the phone and preparing marketing materials. Can the company pay for her to complete an advanced English course at the local college?
A. Training for any employee can be charged through the company if it is relevant to the employee’s duties or future duties. An ability to speak and write correct English is necessary for your business so the proposed English course is work-related training for your employee. Your company can pay for the course, and receive a tax deduction for that cost. There will be no benefit in kind charge for your wife. The company can also pay for travel to the course. You should list the duties your wife performs for the company, and both sign the document as part of her employment terms with the company. This description of her duties will justify the training cost, should the Taxman ever ask.
Q. I bought a 200 acre farm last year, where I will be raising rare-breed animals for the high-end restaurant market. I’ve incurred a lot of costs on fencing and equipment. Can I claim back the VAT on those costs? I’ve not registered for VAT yet, as my sales have been low so far. I understand there is a simple flat rate scheme I could use.
A. You can’t claim back VAT on your costs until your business is VAT registered. However, at VAT registration you can reclaim VAT paid on goods purchased in the four years before registration which are still held at registration date. VAT on pre-registration services can be reclaimed but only for services purchased in the 6 months before registration.
As your main product will be meat, which is zero rated for VAT purposes, you are likely to reclaim VAT every quarter, rather than paying VAT to HMRC. The flat rate scheme for small businesses is not suitable for businesses that regularly reclaim VAT. There is a flat rate scheme just for farmers, but it is very rarely used. We need to discuss the details of your proposed sales to see which VAT scheme may be suitable.
July Key Tax Dates
5 – Deadline for PAYE settlement agreement for 2012/13
6 – Deadline for 2012/13 forms P11Db, P11D and P9D to be submitted and copies of P11D and P9D to be issued to relevant employees
Deadline for employers to report share incentives for 2012/13 – form 42
14 – Return and Payment of CT61 tax due for quarter to 30 June 2013
19/22 – PAYE/NIC and CIS deductions due for month to 5/7/2013 or quarter 1 of 2013/14 for small employers Class 1A NIC due in respect of the tax year 2012/13
31 – Second self assessment payment on account due for 2012/13
Second 5% penalty surcharge on any 2011/12 outstanding tax due on 31 January 2013 still unpaid
Deadline for Tax Credits to finalise claims for 2012/13 and renew claims for 2013/14
Half yearly Class 2 NIC payment due
Penalty of 5% of tax due or £300, whichever is greater for 2011/12 personal tax returns still not filed