There are a host of new employment related regulations coming into force on 6 April 2010. This is a brief summary of those regulations that are likely to affect you or your business.
Fit notes – these replace sick notes issued by GPs and will state what the worker can do, rather than what he or she is prevented from doing.
Pension date - the date from which the individual can draw the state retirement pension will not necessarily fall exactly on a woman's 60th birthday. For example, a women who reaches age 60 between 6 April 2010 and 5 May 2010 will have a state pension date of 6 May 2010. This date also affects the payment of the employee's NI contributions.
NI contribution years - individuals who reach state retirement age only have to accumulate 30 full years of NI contributions or credits to gain a full state pension.
A single year of NI contributions will count towards the state pension. Until now a person had to accrue at least one quarter of their working life (about 11 years for a man, 10 for a woman) to be entitled to any state retirement pension. Each year of NI contributions will be worth roughly £3.20 of weekly pension at current rates. It will be essential to accurately record the NI number for every employee, so that each individual can collect their pension entitlement when they retire.
Home responsibility protection credits (HRP) will be given on a weekly basis. This will allow the HRP credit to be combined with actual NI contributions to make up a full year of NI credits. HRP credits are given where a person stays at home to look after a child and claims child benefit.
Thursday, 13 May 2010
New Rateable Values from 1 April
Business rates are a big fixed cost for many small businesses and it is not easy to move to smaller premises if your sales decline. What's more, the rateable value of commercial properties is revised every five years, normally upwards. The latest revaluation takes effect from 1 April 2010, but it is based on the market value of the property at 1 April 2008, when the value of all commercial property was at an all time high!
If you think you property has been valued too highly for business rates, you can appeal against the rateable value of the property. This can be done online through the website of the Valuation Office Agency (VOA): http://www.2010.voa.gov.uk/rli. However, before you decide to launch into an appeal you should check what your neighbouring businesses are paying, and whether they have already submitted an appeal against their premises value. You can also do that online on the VOA website.
You need to have good grounds for your appeal. For example, perhaps something in the property's immediate surroundings has altered and had a detrimental effect on trade. Perhaps there are a high number of empty neighbouring buildings, or there has been a change in the size or use of the premises. The VOA also encourages you to talk to your local valuation office before submitting a formal appeal against your business rates.
You can also apply for small business rates relief where the rateable value of the property is less than £18,000 (for properties in England). This normally needs to be done through your local rating authority. There are different small business rates relief schemes for properties in Wales and Scotland, which will have various caps for the relief available.
The Budget also announced a temporary increase in business rates relief for properties in England with rateable values of up to £6,000. Businesses occupying such properties can claim full exemption from business rates for 12 months from 1 October 2010. In addition businesses occupying English properties with rateable values of up to £12,000 will be able to claim a tapered reduction in their business rates from that date.
If you think you property has been valued too highly for business rates, you can appeal against the rateable value of the property. This can be done online through the website of the Valuation Office Agency (VOA): http://www.2010.voa.gov.uk/rli. However, before you decide to launch into an appeal you should check what your neighbouring businesses are paying, and whether they have already submitted an appeal against their premises value. You can also do that online on the VOA website.
You need to have good grounds for your appeal. For example, perhaps something in the property's immediate surroundings has altered and had a detrimental effect on trade. Perhaps there are a high number of empty neighbouring buildings, or there has been a change in the size or use of the premises. The VOA also encourages you to talk to your local valuation office before submitting a formal appeal against your business rates.
You can also apply for small business rates relief where the rateable value of the property is less than £18,000 (for properties in England). This normally needs to be done through your local rating authority. There are different small business rates relief schemes for properties in Wales and Scotland, which will have various caps for the relief available.
The Budget also announced a temporary increase in business rates relief for properties in England with rateable values of up to £6,000. Businesses occupying such properties can claim full exemption from business rates for 12 months from 1 October 2010. In addition businesses occupying English properties with rateable values of up to £12,000 will be able to claim a tapered reduction in their business rates from that date.
VAT Payments and New Penalties
From 1 April 2010 most businesses will be required to file VAT returns online and also pay the VAT due online. However, existing businesses with a turnover of less than £100k can continue to file paper returns and pay by cheque.
From 1 April 2010 all VAT payments made by cheque will be treated as being paid on the day the cleared funds reach the Taxman's account. Previously the VAT was treated as being paid on the working day the cheque reached the VAT Office. A cheque will normally take at least three working days to clear. Where VAT payment is received late more than once in 12 months you may have to pay a default surcharge (a penalty).
The Taxman will exercise his discretion not to charge a default surcharge for VAT periods that commenced before 1 April 2010, where the paper VAT form and the cheque payment are both received on time. VAT cheque payments for periods that begin on and after 1 April 2010 will have to clear the Taxman's bank account by the due date, or surcharges may apply.
Where the VAT return is submitted online the payment for any VAT due must also be made online. However this can cause problems where the VAT due for the quarter exceeds £10,000.
Many banks impose a daily limit of £10,000 for electronic payments for both business and personal accounts. Larger electronic payments can be made by CHAPs but this may involve bank charges of up to £35 per transaction. You need to check with your bank in advance about the best way to pay a large VAT bill electronically.
If your business is not already VAT registered but your sales are edging up towards the VAT compulsory registration threshold, (£70,000 from 1 April 2010), you need to be particularly careful about when you register. From 1 April 2010 there is a new set of penalties for failing to register for VAT on time. The penalty is based on the underpaid VAT. The minimum penalty will be 10% of the VAT due, and the maximum penalty 100%. The highest penalty will be charged where there has been deliberate concealment of the need to register for VAT.
From 1 April 2010 all VAT payments made by cheque will be treated as being paid on the day the cleared funds reach the Taxman's account. Previously the VAT was treated as being paid on the working day the cheque reached the VAT Office. A cheque will normally take at least three working days to clear. Where VAT payment is received late more than once in 12 months you may have to pay a default surcharge (a penalty).
The Taxman will exercise his discretion not to charge a default surcharge for VAT periods that commenced before 1 April 2010, where the paper VAT form and the cheque payment are both received on time. VAT cheque payments for periods that begin on and after 1 April 2010 will have to clear the Taxman's bank account by the due date, or surcharges may apply.
Where the VAT return is submitted online the payment for any VAT due must also be made online. However this can cause problems where the VAT due for the quarter exceeds £10,000.
Many banks impose a daily limit of £10,000 for electronic payments for both business and personal accounts. Larger electronic payments can be made by CHAPs but this may involve bank charges of up to £35 per transaction. You need to check with your bank in advance about the best way to pay a large VAT bill electronically.
If your business is not already VAT registered but your sales are edging up towards the VAT compulsory registration threshold, (£70,000 from 1 April 2010), you need to be particularly careful about when you register. From 1 April 2010 there is a new set of penalties for failing to register for VAT on time. The penalty is based on the underpaid VAT. The minimum penalty will be 10% of the VAT due, and the maximum penalty 100%. The highest penalty will be charged where there has been deliberate concealment of the need to register for VAT.
Company Car and Van Changes
The taxable benefit charged for the use of company cars and fuel for those vehicles is increasing from 6 April 2010. Say you drive a petrol-powered car with CO2 emissions of 160g/km. In the tax year to 5 April 2010 you are taxed at 20% of the vehicle's list price. From 6 April 2010 the taxable benefit for driving the same car will be 21% of its list price.
The tax position for those who have free fuel with their vehicles is even worse. Until 5 April 2010, the value of the fuel-benefit for all company cars is based on a fixed value of £16,900 multiplied by the percentage used to calculate the car benefit. So there is the combined effect of the increased percentage and the increased multiplier. From 6 April 2010 this value increases to £18,000. This means the taxable benefit of having free fuel for a petrol car with emissions of 160g/km will increase from £3,380 to £3,780.
Company van drivers are also hit by the rise in the fuel benefit. Previously where free fuel was provided in a company van, and the van is used for some non-business journeys, the driver is taxed on £500 per year for the use of that fuel. From 6 April 2010 the van driver is taxed on £550 per year for use of the fuel.
You can reduce these high tax charges by switching to a low emissions car. Where the CO2 emissions are 120g/km or less the car benefit for petrol cars is just 10% of the list price, and half that amount where CO2 emissions are 75g/km or less. We could only find one car with emissions in that bottom category: Toyota plug-in Prius, which has an official CO2 emissions rating of only 67g/km.
If your vehicle has zero emissions such as an electric car or van, there is no tax charge at all from 6 April 2010. What's more, when your business buys a new electric vehicle it can write-off the full cost for tax purposes in the year of acquisition.
The tax position for those who have free fuel with their vehicles is even worse. Until 5 April 2010, the value of the fuel-benefit for all company cars is based on a fixed value of £16,900 multiplied by the percentage used to calculate the car benefit. So there is the combined effect of the increased percentage and the increased multiplier. From 6 April 2010 this value increases to £18,000. This means the taxable benefit of having free fuel for a petrol car with emissions of 160g/km will increase from £3,380 to £3,780.
Company van drivers are also hit by the rise in the fuel benefit. Previously where free fuel was provided in a company van, and the van is used for some non-business journeys, the driver is taxed on £500 per year for the use of that fuel. From 6 April 2010 the van driver is taxed on £550 per year for use of the fuel.
You can reduce these high tax charges by switching to a low emissions car. Where the CO2 emissions are 120g/km or less the car benefit for petrol cars is just 10% of the list price, and half that amount where CO2 emissions are 75g/km or less. We could only find one car with emissions in that bottom category: Toyota plug-in Prius, which has an official CO2 emissions rating of only 67g/km.
If your vehicle has zero emissions such as an electric car or van, there is no tax charge at all from 6 April 2010. What's more, when your business buys a new electric vehicle it can write-off the full cost for tax purposes in the year of acquisition.
Changes to the EC Sales List
If you regularly sell goods to VAT-registered businesses in other countries you will be familiar with the form VAT 101, also known as the EC Sales List. This form has been used to record the cross-border movement of goods for Government statistical purposes. It does not require a payment to be submitted with the form. However, you can be charged a penalty if you don't submit your EC Sales List on time.
For sales made on and after 1 January 2010 the EC Sales List must also record the value of certain services supplied to VAT registered businesses in other EU countries, as well as goods. The services affected are those where the reverse charge applies, which means the customer charges themselves VAT at their own local rate, the supplier of the service does not add VAT to the invoice. This reverse charge procedure applies to most services supplied to business customers across international borders from 1 January 2010.
The EC sales list must be completed monthly if the value of the goods supplied to overseas businesses exceeds £70,000 per year, otherwise the form must be submitted for each calendar quarter, which are not necessarily your VAT quarters. If your annual turnover is less than £145,000, and your overseas sales of goods and services amounts to less than £11,000 you can ask the Tax Office for permission to submit the EC sales list on an annual basis.
You are not given much time to complete an EC sales list, as the paper form must reach HMRC within 14 days of the end of the quarter, so that's by 14 April 2010 for the quarter ending on 31 March 2010. If you chose to submit your EC Sales List online you have 21 days from the end of the quarter to submit the form, which is still not long. We can submit the EC sales list on your behalf, but we need details of all your overseas sales and customers to do so.
For sales made on and after 1 January 2010 the EC Sales List must also record the value of certain services supplied to VAT registered businesses in other EU countries, as well as goods. The services affected are those where the reverse charge applies, which means the customer charges themselves VAT at their own local rate, the supplier of the service does not add VAT to the invoice. This reverse charge procedure applies to most services supplied to business customers across international borders from 1 January 2010.
The EC sales list must be completed monthly if the value of the goods supplied to overseas businesses exceeds £70,000 per year, otherwise the form must be submitted for each calendar quarter, which are not necessarily your VAT quarters. If your annual turnover is less than £145,000, and your overseas sales of goods and services amounts to less than £11,000 you can ask the Tax Office for permission to submit the EC sales list on an annual basis.
You are not given much time to complete an EC sales list, as the paper form must reach HMRC within 14 days of the end of the quarter, so that's by 14 April 2010 for the quarter ending on 31 March 2010. If you chose to submit your EC Sales List online you have 21 days from the end of the quarter to submit the form, which is still not long. We can submit the EC sales list on your behalf, but we need details of all your overseas sales and customers to do so.
Time Runs Out for Tax Claims
For as many years as we can remember individuals have had six years from the end of the tax year to claim most allowances and tax reliefs in respect of that tax year, (some tax claims have to be made within two years). That long claims period was shortened to five years from 31 January following the end of the tax year when self-assessment was introduced in 1996/97, but that change meant the loss of just two months. Now the long claims period is changing to four years from the end of the tax year with effect for claims submitted from 1 April 2010.
Thus claims and elections for the tax years 2004/05 and 2005/06 need to be made by 31 March 2010 and 5 April 2010 respectively. Such claims could include an error or mistake claim where tax has been overpaid, claims for personal allowances for marriage, age or blindness, and a number of capital gains tax reliefs.
Confusingly these new claims periods do not apply to everyone from the same date. If you have only recently come within the self assessment system, but you want to make a claim for an earlier year when you were taxed only under PAYE, you will have a further two years to make the claim. For example, claims from PAYE taxpayers for the tax year 2004/05 run out of time on 31 January 2011.
The long claims period for limited companies is also changing from six years from the end of the accounting period, to four years from the end of the accounting period, for claims submitted on and after 1 April 2010. Thus claims for accounting periods that end between 31 March 2004 and 31 March 2006 all need to reach the Tax Office by 31 March 2010.
The period during which the Taxman can normally raise a tax bill for a particular tax year has also been cut back to four years from the end of that year. However, where the extra tax is due because the taxpayer has made a careless or deliberate error, the Taxman has six years, extending to 20 years for deliberate errors, to raise the tax bill.
Thus claims and elections for the tax years 2004/05 and 2005/06 need to be made by 31 March 2010 and 5 April 2010 respectively. Such claims could include an error or mistake claim where tax has been overpaid, claims for personal allowances for marriage, age or blindness, and a number of capital gains tax reliefs.
Confusingly these new claims periods do not apply to everyone from the same date. If you have only recently come within the self assessment system, but you want to make a claim for an earlier year when you were taxed only under PAYE, you will have a further two years to make the claim. For example, claims from PAYE taxpayers for the tax year 2004/05 run out of time on 31 January 2011.
The long claims period for limited companies is also changing from six years from the end of the accounting period, to four years from the end of the accounting period, for claims submitted on and after 1 April 2010. Thus claims for accounting periods that end between 31 March 2004 and 31 March 2006 all need to reach the Tax Office by 31 March 2010.
The period during which the Taxman can normally raise a tax bill for a particular tax year has also been cut back to four years from the end of that year. However, where the extra tax is due because the taxpayer has made a careless or deliberate error, the Taxman has six years, extending to 20 years for deliberate errors, to raise the tax bill.
How to Keep Accounting Records
The Taxman is very keen for all businesses and individuals who need to submit a tax return, to keep complete and accurate records. He has recently issued a new leaflet that summarises all the records different types of businesses should keep, and those they are required to keep by law. See: http://www.hmrc.gov.uk/factsheet/record-keeping.pdf
If you do not keep complete and accurate records of all your income, sales, gains, expenses, and business costs, you will not be able to prove the figures reported on your tax return are correct. If the Taxman challenges the entries on your tax return, and you cannot produce the evidence to back up those figures, he will assume they are incorrect. The Taxman will then think up a more reasonable figure (in his eyes), and look to tax you on that. You may then have to pay the additional tax, interest for late paid tax, and a penalty of up to 100% of the underpaid tax.
You can avoid such a nightmare if you keep accurate and complete records. Talk to us if you are uncertain about what paper and electronic records you should keep.
If you do not keep complete and accurate records of all your income, sales, gains, expenses, and business costs, you will not be able to prove the figures reported on your tax return are correct. If the Taxman challenges the entries on your tax return, and you cannot produce the evidence to back up those figures, he will assume they are incorrect. The Taxman will then think up a more reasonable figure (in his eyes), and look to tax you on that. You may then have to pay the additional tax, interest for late paid tax, and a penalty of up to 100% of the underpaid tax.
You can avoid such a nightmare if you keep accurate and complete records. Talk to us if you are uncertain about what paper and electronic records you should keep.
Filing VAT Returns Online
You may have recently received a letter from the VATman that officially notifies your company or business to file its VAT return online, or face penalties. If your business had a turnover of £100,000 or more in the year ending 31 December 2009 you are legally required to file your VAT returns online, rather than as a paper form, for all periods beginning on or after 1 April 2010. So you can file your VAT return for the quarter to 31 March 2010 on paper, but VAT returns for later periods must be submitted online.
If you don't agree that your turnover was £100,000 or more in the year to 31 December 2009, you need to appeal against the VATman's decision within 30 days of the date of his letter. The VATman has not sent a copy of his letter to us, so please forward it on if you have concerns about this turnover threshold. If you want us to submit your VAT returns online on your behalf we will need that letter as it contains some key details for the registration process.
Even if you have already filed several of your VAT returns online, and your turnover is over £100,000, you will still receive the notification letter from the VATman, including the expensive glossy brochure. If your turnover is currently less than £100,000 per year, you will not have to file your VAT returns online until 2011. The Government has announced that all VAT registered businesses will be required to file their VAT returns online from April 2011, but that requirement is not law yet.
If your business first registers for VAT on or after 1 April 2010 you will be required to file all your VAT returns online from your first VAT return, even if your turnover is way below the £100,000 threshold.
If you don't agree that your turnover was £100,000 or more in the year to 31 December 2009, you need to appeal against the VATman's decision within 30 days of the date of his letter. The VATman has not sent a copy of his letter to us, so please forward it on if you have concerns about this turnover threshold. If you want us to submit your VAT returns online on your behalf we will need that letter as it contains some key details for the registration process.
Even if you have already filed several of your VAT returns online, and your turnover is over £100,000, you will still receive the notification letter from the VATman, including the expensive glossy brochure. If your turnover is currently less than £100,000 per year, you will not have to file your VAT returns online until 2011. The Government has announced that all VAT registered businesses will be required to file their VAT returns online from April 2011, but that requirement is not law yet.
If your business first registers for VAT on or after 1 April 2010 you will be required to file all your VAT returns online from your first VAT return, even if your turnover is way below the £100,000 threshold.
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