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Inside... RTI is coming,ready or not
Real Time Information (RTI), the biggest shake up in payroll legislation since the introduction of PAYE in 1944, comes into effect from April 2013, fundamentally changing the way in which organisations pass pay details and other information to HMRC.
The latest developments in accounting and commerce and what they mean to your business
proActivityIssue 24 Spring 2013
Foxley KinghamFoxley Kingham
We’re ready... are you?how it affects you - STOP PRESS - Don’t forget to visit our website at www.fkca.co.uk for details of last week’s budget announcement and how it affects you. - STOP PRESS - Don’t
RTI
Annual InvestmentAllowance
Universal Credit
Child Benefit
Cap onIncome Tax
Or, if it all seems too much don’t forget that we do offer a complete bureau service, which could not only spare you a great deal of time and effort, but is likely to be a far more cost-effective option than you may realise. To find out more please e-mail [email protected] to request a brochure, or use the fax back form on page 8.
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RTI IS COMING, READY OR NOT
RTI ChecklistRTI Checklist
We recently wrote to all clients who operate a PAYE scheme with details of the new system and the steps they’ll need to take to be ready in time for their enrolment deadline. These steps vary depending on whether your payroll is operated in-house or outsourced, and how sophisticated your existing system and/or procedures are. However, whatever your situation certain tasks will have to be undertaken ahead of your allocated switchover date, which could be as early as April 2013, so time is rapidly running out... Not surprisingly employers operating their own payroll and with more outmoded systems currently in place will have to make the biggest leap, with essential preparation including having RTI-ready software in place, registering for online PAYE submissions, understanding the new regime and what’s required of them, and the alignment of employee information with data held by HMRC. If you’ve mislaid your pack or for additional copies, please call Lisa Taylor on 01582 540800 or e-mail [email protected] and I’ll get one straight out to you. In the meantime the checklist above sets out the key tasks you’ll need to have completed before your enrolment date. And of course, we’re here to help with any questions or
queries you may have so please don’t hesitate to call one of our payroll experts on 01582 540 800. We can even set you up with a software system that will make both the transition and future submissions as simple and stress-free as possible, but you’ll need to be quick!
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Please contact us if you would like to discuss how your business would best make use of
this new opportunity
One of the surprise announcements in the Autumn Statement 2012 was the decision to increase the Annual Investment Allowance (AIA) from
1 January 2013 to £250,000. The increase will apply for two years.
Obviously, this is an attempt to focus the minds of entrepreneurs on investment. For profitable, self-employed
traders it could also be a useful tax planning tool, providing a means to drastically reduce higher rate tax payments. Indeed
all businesses should consider this change as an opportunity to bring forward the tax relief on qualifying equipment purchases.
There may be an opportunity to quite legitimately create tax
losses if the AIA claimed exceeds taxable trading profits for the year. If the losses can be carried back, perhaps tax paid in earlier
years can be reclaimed... However, beware if your accounting period falls in the tax year 2013/14 or later, as loss
relief may then be restricted by the new cap.
We would advise business owners to consider a rounded approach to investment decisions as it would be imprudent
for the “tax tail” to unduly influence other commercial considerations. For example, how would the capital
expenditure be funded without depleting working capital?
CAP ON INCOME TAX RELIEF
Draft clauses recently published for the Finance Bill 2013 outline the way in which the Government proposes to limit the amount of tax relief an individual can claim. Capped reliefs will be limited to the greater of £50,000 or 25% of net taxable income – this is income less pension payments and charitable donations. The cap will commence 6 April 2013 and will include claims to carry back losses from 2013-14 to 2012-13.You may remember that it was originally intended to include charitable donations in the capped reliefs but after successful lobbying by charities this proposal was dropped. We are pleased to report that two further reliefs will be excluded from the cap.These are:1. Certain trade loss reliefs that are created by a claim for overlap relief – these losses generally occur when
a self-employed trader changes their accounting year end date or ceases trading.2. Losses incurred on shares that qualify as Enterprise Investment or Seed Enterprise Investment Schemes.
TEN-FOLD INCREASE INANNUAL INVESTMENT ALLOWANCE
As we wrote in the Autumn issue, a significant change has come into effect which could result in a loss of income of on average £1,300 per annum for an estimated 1.2 million households in the UK. The High Income Child Benefit Charge (HICBC), effective from 7th January, reduces or eliminates the benefit if a parent or their spouse/partner has an adjusted net income (ANI) of over £50,000. If both partners have an ANI of over £50,000, the partner with the higher income is liable for the charge. The charge will be calculated in a sliding scale for incomes between £50,000 and £60,000 on the basis that for every £100 of ANI in excess of £50,000, a parent (or their partner) will be taxed 1% of the Child Benefit received. The amount owed will be collected by way of an additional income tax charge and anyone liable will have to complete a Self Assessment tax return to notify HMRC of his/her chargeability and ensure their tax code is calculated correctly. Once Adjusted net income reaches £60,000 or more, the charge will equate to the full amount of Child Benefit received, a total of £1,752 for two children or £2,449 for three.
loss of income of on average £1,300 per annum for an
If both partners have an ANI of over £50,000, the partner
Once Adjusted net income reaches £60,000 or more, the charge will equate to the full amount of Child Benefit
Universal Credit will be paid into a claimant’s designated bank account on a monthly basis. Claimants will manage their claims online and will be required to disclose any monthly earnings.
But what if you are self-employed?It is common for new businesses to be run on a loss-making basis in the early years and many businesses are badly affected by the current downturn in economic activity. The Department of Work and Pensions (DWP), who are responsible for managing UC, will apparently require claimants to declare their current earnings, online, each month. The self-employed will need to report the number of hours they work in their business
and this will be valued at the National Minimum Wage (NMW) rate. If the actual profits of their business are higher, the higher amount will need to be declared. Hopefully, the DWP will reconsider these monthly reporting obligations for the self-employed, for two reasons:1. Setting a minimum income for the self-employed (hours times the NMW) means that benefits may be reduced even though actual earnings may be lower, and2. How many small businesses are going to be able to cope with the need to produce monthly accounts? It will be interesting to see how the final regulations are drafted...
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UNIVERSAL CREDIT AND THE SELF-EMPLOYED
If you think you may be affected please speak to a member of our tax team on 01582 540800. Whether you are an employee or a business owner/sole trader, an expert review of your finances may identify ways to reduce
or avoid the charge and the sooner we act the more you could save, so give us a call TODAY!
HIGH INCOME CHILD BENEFIT CHARGE
A new Universal Credit (UC) benefits system will be introduced in the UK this year, in three phases:● The Greater Manchester and Cheshire regions from April 2013● All new claimants from October 2013● All existing claimants will be transferred to the new system on a phased approach to be completed in 2017.
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NEW FLAT RATE STATE PENSION ANNOUNCED
It has been proposed that from 2016 a new flat-rate state pension will be paid – worth in today’s money £144 a week. Details will no doubt change over time but some of the information available so far is listed below:• As stated above the starting rate from April 2016 will be £144 per week, £7,488 annually, based on current value of money. This will most likely rise to approximately £160 per week when changes in the value of money are taken into account. • This is good news for self-employed retiring after April 2016 as currently they are only entitled to the basic state pension of £107.45 per week. We will have to wait and see if self-employed National Insurance contributions, Class 2 and 4, will increase to compensate. • Contracting out and the present second state pension will be abolished and this will increase National
Insurance costs for those employers with contracted out employees.
• The minimum number
of years that you need to make National Insurance contributions is increasing from the present thirty
years to thirty five years. • Government is also reintroducing a minimum qualification period. Persons with less than ten years of NI contributions
will not get a state pension. • Persons retiring before
April 2016 will continue to receive benefits previously paid. If this is
less than the flat rate they will lose out, if more the higher amount will continue to be paid. A 65 year old would need a pension pot of over £200,000 to generate a weekly pension of £144 so the new flat rate scheme is not ungenerous. However, there will be winners and losers.
50,000 BUSINESSES TARGETED BY HMRC
Businesses that have failed to submit their VAT returns by the due date will also be targeted by HMRC this month. An estimated 50,000 businesses may be affected by this latest campaign by HMRC. Registered traders who have outstanding returns to file may find that their tax affairs will be closely scrutinised and without prior warning. According to HMRC more than 600,000 businesses have to file VAT returns each month and most do so on time. From 28 February, the 50,000 who have not filed on time may find their tax affairs attracting greater attention. The VAT Outstanding Returns campaign is aimed at businesses that have one or more VAT return outstanding and that have been told to submit their returns but have not done so. Some will have received an assessment of VAT for these periods. These businesses are being given an opportunity to get up to date and pay the tax they owe by 28 February.
After this date HMRC will target them and take a much closer look at their tax affairs. If traders do come forward voluntarily they may receive better terms – lower penalties.
HMRC’s online progress report on current and previous tax evasion campaigns states that the ‘Trades Sweep Up’ targeting skilled tradespeople planned for December 2012 has been postponed, but a property sales campaign targeting those who have profited through owning and selling second homes or multiple properties is due to start in March 2013.The “campaign”, which offers those who have failed to comply an opportunity to come clean on advantageous terms under voluntary disclosure protocols, follows targeted taskforces that looked at property transactions in London a year or so ago, and property rentals in several regions during the summer. These must have confirmed HMRC’s suspicions enough to justify a switch to the new disclosure strategy.It isn’t clear yet which property owners will be targeted; ‘multiple properties’ could include owners who have moved from one PPR property to another a ‘multiple’ number of times, however the concentration is more likely to be on buy-to-let landlords.And be warned! If your property tax affairs aren’t completely in order, it’s easier than ever for HMRC to find you out...Amongst the resources at investigators’ disposal is the Connect computer system, which draws and analyses data from multiple sources, including property ownership and transaction data. This system has been linked for a few years now to the Valuation Office in Worthing, bringing together information that was previously spread over the UK in separate district councils.
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HMRC’S PROPERTY TAX CAMPAIGN: THE LOWDOWN
Other methods of gleaninginformation include:
Banks - these are required to provide more information now than just details of interest over a set amount
Property websites - a mine of information not only for house purchasers and renters, some even produce an estimate of the capital appreciation of a house since the last transaction
Credit agencies - such as ‘Experian’ are required to give details of loans and mortgages as well as identifying linked names and addresses
Databases - the Northgate Public Services Information System is just one used by HMRC that contains details of housing benefits paid to landlords by any UK council
Land Registry - the case of Moore v HMRC 2010 showed use by HMRC of documents held
Electoral Register
Property purchase documents - since July 2011, these require the declaration of NI numbers for individuals and URT and/or VAT registration number for companies and partnerships
On foot - during Wimbledon fortnight, HMRC investigation teams apparently knock door-to-door to ascertain whether homes have been rented out or are being used as unofficial boarding houses. This information is then retained and checked when the property is finally sold.
Every year brings with it some important new legislation for employers to negotiate. Whether related to employment tribunals, employee-shareholder contracts, family-friendly rights, payroll or criminal record checks, 2013 presents new legislation relevant to organisations both large and small.Read our guide to the 10 key updates to make sure you are ready for the year ahead. 1. Real-time information for payroll Employers are required to use real-time information to report payroll deductions before or when they make them, from 6 April 2013 unless a different date is agreed. See article on page 2 for more...2. Enterprise and Regulatory Reform Bill is implemented Among other things, the wide-ranging Enterprise and Regulatory Reform Bill implements various reforms to the employment
tribunal system; permits employers
to have a “protected conversation” with an employee with a view to terminating his or her employment under a settlement agreement; and allows the secretary of state to change the limit on the unfair dismissal compensatory award.3. New tribunal award limits come into force An increase in the limit on the amount of the compensatory award for unfair dismissal is among the changes that came into effect on 1 February 2013.4. Employee-shareholder contracts are introduced The Government is introducing a new type of employment contract, under which employees will be given shares in exchange for waiving certain employment rights.5. Unpaid parental leave increases to 18 weeks The right to unpaid parental leave increased from 13 weeks to 18 weeks from 8 March 2013.6. DBS checks (formerly CRB checks) are portable Disclosure and Barring Service (DBS) checks (formerly Criminal Records
Bureau (CRB) checks) are now portable between employers (from March 2013).7. Collective consultation period is reduced to 45 daysThe 90-day consultation period where 100 or more redundancies are proposed
reduces to 45 days from 6 April 2013. 8. Statutory maternity, paternity, adoption pay increase 9. Rate of statutory sick pay increases
The standard rate of statutory sick pay increases from April 2013.10. Fee for bringing employment tribunal claim imposed The charging of a fee in employment
tribunals, under which the claimant has to pay an initial fee to issue a claim and a further fee if the claim proceeds to a hearing, is introduced in summer 2013.
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HMRC’S PROPERTY TAX CAMPAIGN: THE LOWDOWN 2013 EMPLOYMENT LAW CHANGES: 10 THINGS EMPLOYERS NEED TO KNOW
FKCA LimitedRegistered office: Prospero House, 46-48 Rothesay Road, Luton LU1 1QZ
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Lisa Taylor
Editor [email protected]
Chris Howe
Director
Your editorial team
Please note that we cannot be held responsible in any way for any consequence arising from the information provided in this newsletter. Whilst every effort is made to ensure the accuracy of the content of all FK publications, no decisions should be taken on the basis of information given without reference to specialist advice.
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New Foxley Kingham website coming soon!It has been a long time in development but our new, state-of-the-art website is due to go live later this month, and we’re really looking forward to showing it off to our clients and, of course, the world at large! Not only does the site look great but it contains a wealth of news, information and features which could really help give your business or personal finances a boost and even simplify the way you interact with us.
Highlights include: ● Daily updated business articles ● Huge number of factsheets and guides – topical, reliable advice on a wide range of business, tax and financial matters (in case you don’t feel like talking to us direct!) ● Content recommendation engine that puts on screen material, services, contact details and so on relating to the content you are viewing to help you navigate around the site and make the most of the information available ● Customised newswires and alerts so you can handpick the topics that are relevant or of interest to you ● Sign and send function enabling you to add Companies House-compatible electronic signatures to documents and submit them online, or send large files securely and direct to the relevant department, saving valuable time and money.We’ll write and let you know when it’s up and running and we’d really value your feedback on this new addition to our service.
