Welcome
Whilst traditionally the Summer break may tend to be a little quiet there remains plenty to update you on and we hope that you will find the articles in our August Newsletter useful and interesting.
We are delighted to announce that our website www.edge-tax.com has had something of a makeover and now includes information about the full range of services we provide. Please do take a look and if you would like any more information or would like to meet us please do contact us on 01454 777831 or email newsletter@edge-tax.com.
Employer National Insurance Holiday – can you apply?
Did you know that for a limited period new businesses may apply for a deduction in employer NICs provided certain conditions are met? Under this voluntary scheme the business may qualify for a deduction for each of the first ten employees it employs of up to £5,000 per employee. If your business is in a qualifying region this NIC saving may be available if you started up after 22 June 2010. The scheme actually started on 6 September 2010 so only employer NIC on earnings paid on or after that date may be excluded.
What is a Qualifying Region?
There are a number of designated regions in the UK and the South West is one of them. This includes Bath and North East Somerset, Bristol, the Cotswolds, Christchurch and Bournemouth. If a new business is a qualifying one and is in one of these areas it may be able to take advantage of the available holiday.
What is a Qualifying Business?
Broadly a qualifying business will include a sole trader, partnership or company that begins to carry on a trade, a property or investment business. There are of course a number of conditions that need to be met and if you would like to see if a business is eligible, or would simply like some more information, please do let us know.
Will you meet your Employment Taxes submission deadlines?
Under the terms of a PAYE Settlement Agreement (PSA) an employer agrees with HM Revenue & Customs to settle by means of a single payment the income tax (and associated Class 1B National Insurance) on particular expenses and benefits provided to employees. For the year ended 5 April 2011 (2010/2011) the PSA needed to be signed off by both the employer and HMRC by 6 July 2011 and it therefore follows that if you do not have a PSA in place for 2010/2011 then it is too late to apply for one retrospectively and those expenses and benefits should have been included on forms P11D, or had PAYE operated on them. The deadline submission for forms P11D was also 6 July 2011.
Where a PSA has been agreed the next step is to gather the relevant data required to enable the liability arising to be calculated. Whilst payment does not need to be made until 19 October 2011, in agreeing your application the Inspector will have set a date by which he expects to receive a computation of the liability arising. Typically this will be 31 August but it may vary depending on the individual agreement. Our experience is that although the calculation itself is fairly straight-forward the gathering and analysis of the data around the areas included in the PSA can be complex and time-consuming. This is an area where we can add our expertise, having been through the review, analysis and computation process for a range of clients. We would therefore be pleased to assist in this process for you or advise on any elements which will aid your technical analysis.
What PAYE Tax clearances do you have in place?
Do you have a P11D current dispensation and a PAYE Settlement Agreement (for the year ended 5 April 2012) in place? Both are invaluable, will significantly ease your overall reporting requirements and perhaps more importantly can go some way to reducing your risk profile with HMRC. If you have a dispensation, whilst it does not need to be renewed annually, it should be reviewed regularly to ensure it remains relevant to your requirements and that you are complying with the terms under which it was agreed. A separate application must be made every year for a PSA.
If you would like any assistance in making an application for the current income tax year or generally reviewing your current arrangement please contact Dave on 07717 798506 or email him at dhedges@edge-tax.com.
We are here to help….
Running a business is a time consuming and increasingly complex affair. HMRC regulations are becoming more and more complex and it seems that more and more PAYE reviews by the Authorities are being triggered as a consequence of simple compliance failures - perhaps PAYE payments have been made a day or two late, end of year returns have been submitted outside of the submission deadline, or show some inconsistencies with those submitted for previous years.
Minimising your compliance risk can help to reduce your chances of review by HMRC. To help you do this we are able to offer a solution in the form of a PAYE helpline. Under this we are available, either on the end of the telephone or by email, to provide you with answers to your day to day queries around the operation of your payroll and your expenses and benefits procedures. We have provided this facility for a number of employees and believe that this provides employers with a good element of certainty in complex and somewhat uncertain tax environment. Getting the visible things right can help enormously.
If you would like to discuss the possibility of establishing a helpline please contact Dave Hedges on 07717 798506 or dhedges@edge-tax.com.
"The elaborate protestations in the contractual documents that the men were self-employed were odd in themselves, and when examined, bore no practical relation to the reality of the relationship” – Sedley L J.
The above statement made in the Court of Appeal nicely summarises the judgement handed down in the Supreme Court in Autoclenz v Belcher in July 2011, and the case provides another piece in the never ending puzzle that is “employment status”. Perhaps however it’s one of the more defining pieces that we have seen in recent years….
In summary, Autoclenz provided valeters to motor retailers and engaged them under agreements which they purported demonstrated that they were self-employed. These were roles that were advertised as being provided on a self-employed basis and into which the valeters readily stepped on that basis. A number of the individuals took their cases to Employment Tribunal claiming that they were workers and therefore had National Minimum Wage entitlement.
In the Supreme Court it was adjudged that they were employees despite the fact that the agreement under what they were engaged contained clauses, particularly around substitution, the intention and relationship between the parties, and mutuality of obligation.
What does this mean?
Essentially the judgement was that the documents did not reflect the true agreement between the parties, and based on the facts the individuals had been working under contracts of employment. In practical terms what this means is that if a term or terms of a contract do not reflect the reality of the relationship between the parties then the term is to be disregarded on the basis that it is no more than a sham.
The other important point to flow from the judgement in the Supreme Court was that the courts are more able to disregard terms written into the contracts where they believe they are not reflective of reality as invariably such contracts are written by the engager who dictates the engagement terms.
The fact that the engager has such influence over the drafting is at odds with perhaps a commercial contract between two “equal” parties. The contract must therefore reflect the true nature of the relationship between the parties if it is to stand a chance of resisting a robust challenge from HMRC.
Swiss bank accounts and tax
It has recently been announced that Switzerland and the Government in the UK have reached an agreement on a basis by which to deal with undisclosed bank accounts held by UK residents. The main details of the agreement, which is to be published within the next few months, are set out below. It should however be borne in mind that it does not appear at this stage, that those individuals who are resident in the UK but are not domiciled here will be caught by these charges.
If an individual has declared his income to HMRC no further action should result although e HMRC will ask the individual to allow the Swiss to advise HMRC of the amounts to enable full declaration by the individual to be checked.
In terms of undisclosed funds the charges are intended from 2013 and will be deducted by the Swiss Banks and paid to the UK Exchequer. The individuals will not be individually identified but the deduction (effectively at source) will be deemed to satisfy the liability.
The Charges
1. Firstly a single charge. This should be categorised really as a charge which is aimed at setting any liability arising in regard to the account and as such it is intended that the rate will vary depending on the length of time the account has been open. The appropriate rate will be between 19% and 34%. Whilst the rate is intended to cover income, inheritance, capital gains and value added taxes it remains open to the individual to negotiate his precise position with HMRC should he so wish, based on information provided by the Swiss Bank to HMRC,
2. The second charge is an annual charge and this will vary in rate depending on the income source - 48% for interest, 40% on dividend income and 27% on capital gains. Whilst this is intended to satisfy the liability arising we will need to wait and see if this will be treated as fully satisfying the individuals overall tax liability.
Clearly these are significant changes and reflect HMRC’s on-going commitment to tackling tax avoidance. Further updates are awaited but in the meantime if you would like to discuss any aspects at present please do contact Anton Lane on 01454 777831.
And finally a date for your diary
Whilst we are enjoying the heady delights of summer the end of the income tax year may seem a distant speck on the fiscal horizon but (…without wishing to depress you as you reach for another cold beer….) it will soon be with us. On 25th and 26th April 2012 we will be running a P11D work-shop during which we will cover the key issues that employers need to consider in preparing all of their end of year returns. In addition we will provide an update of changes over the last few months and run through a suite of current tax planning opportunities. These morning events will be run in the Bristol area on 25th April and in Southampton on 26th April. If you would like to reserve your place now please do so by emailing kvowles@edge-tax.com.