P800 calculation, Travel and subsistence and umbrella companies: the SDC test, Partial exemption

Last week we took a look at the P800 calculation and why you should check  that your clients’ P800s are correct. We also explored changes to the travel and subsistence rules insofar as they affect workers who provide their services through umbrella companies. Finally, we took a look at the risk areas in relation to VAT returns for partially exempt clients.

This is an
extract from our topical tax tips newsletter dated 28 July
2016 (5 days before we publish an extract on this blog). You can obtain future issues by registering here>>>

P800 calculation 
HMRC’s annual PAYE reconciliation process for 2015/16 is now underway and your clients will be receiving their P800 calculations between now and November. As HMRC can and do make mistakes, it is important that you encourage your clients to pass their P800 on to you and that you check it to make sure everything is in order. During the reconciliation process, HMRC compare the tax that they think is due with what has actually been paid and send out a P800 to taxpayers who show and overpayment or and underpayment. 
  
So, what should you look for when checking the P800? 
  
The P800 shows the total income, which according to HMRC’s records, the taxpayer should have paid tax on. This will include wages or salary, any benefits in kind, any pension or taxable state benefits received and any interest on savings. Check the figures against the your client’s P60, P11D, bank statements etc to verify that they are correct. If the figures are wrong, you will need to tell HMRC. 
  
The P800 calculation may show that your client has paid too much or too little tax. There are various reasons why this may be the case and in checking whether the figures are right you should consider whether: ……….

This is an
extract from our topical tax tips newsletter dated 28 July
2016 (5 days before we publish an extract on this blog). You can obtain future issues by registering here>>>
  
The
full newsletter contained the remainder of this item plus links to related source material and the
other two topical, timely and commercial tax tips. We’ve been
publishing this newsletter weekly since 2007; it’s clearly written
and focused on precisely what accountants in general practice need to
know about each week.
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PAYE codes, CIS returns, ATED returns

RTI was supposed to produce more accurate PAYE codes, but the evidence so far is quite the opposite, as we explain below. We have an update on compulsory online filing for CIS returns and the subcontractor verification process. Finally, a warning about ATED returns, which are now overdue for 2016/17. 

This is an
extract from our topical tax tips newsletter dated 12 May
2016 (5 days before we publish an extract on this blog). You can obtain future issues by registering here>>>

PAYE codes 
It’s been a bumper year for PAYE coding errors. Here is summary of all the known issues, and what to do resolve them. 

Allowances 
In spite of an application to transfer 10% of the allowance to a spouse, PAYE codes have not been altered for the couple. 
  
The personal allowance should be restricted where the taxpayer’s income exceeds £100,000. However, the RTI system estimated 2016/17 income from February 2016 year to date figures which excluded any year-end bonuses. Thus the taxpayer’s total income for 2016/17 is underestimated and allowances are not restricted. 
  
Dividend income 
This will be estimated based on the 2014/15 tax return. Taxpayers can ask for dividend income to be excluded from their code, in which case they will need to pay any dividend tax due by 31 January 2018. 
  
Interest received 
Interest is also estimated from the 2014/15 tax return. The personal savings allowance of £1000 or £500 may have been ignored.   
  
Ceased job 
The date of leaving can’t be reported under RTI until the FPS for the last employment period is submitted. The taxpayer may be recorded as starting new job before the notice of his leaving date filters through to the RTI computer. 
  
Benefits in kind 
All benefits included in payroll and taxed as income should be removed from the code, but this is not happening. Some taxpayers are seeing random benefits appearing in their code which they have never received. 
  
Pension withdrawals 
Where the taxpayer has taken a one-off cash withdrawal from their pension fund, this may be incorrectly treated as a regular recurring withdrawal. 
  
Scottish taxpayers 
Taxpayers who don’t use the word “Scotland” in their residential address logged with HMRC may not be registered as Scottish taxpayers, and thus don’t receive a S prefix to the code, as they should do. 
  
All of the above issues can be reported to HMRC using the PAYE code notice correction form (see below). But the Scottish address issue may need to be corrected using the change in personal details form. For the ‘old’ address use that on the P2 notice of coding form.

This is an
extract from our topical tax tips newsletter dated 12 May
2016 (5 days before we publish an extract on this blog). You can obtain future issues by registering here>>> 
 
The
full newsletter contained links to related source material for this
story and the
other two topical, timely and commercial tax tips. We’ve been
publishing this newsletter weekly since 2007; it’s clearly written
and focused on precisely what accountants in general practice need to
know about each week.
You can obtain future issues by registering here>>>


PAYE coding notices, The right structure for entrepreneurs’ relief, Changing domicile rules

The PAYE coding notice for 2016/17 contains a nasty shock for taxpayers who receive interest or dividends, as we explain below. A recent tax case illustrates that capital gains arising from business deals may not qualify for entrepreneurs’ relief. Finally we have advanced warning of a change in the domicile rules, which could affect your clients earlier than you think. 

This is an
extract from our topical tax tips newsletter dated 18 February 2016
(5 days before we publish an extract on this blog). You can obtain future issues by registering here>>>

PAYE coding notices 
When your owner/director clients receive the form P2 that sets out their PAYE code for 2016/17, they are likely to be confused by the following new deductions: 
  
Untaxed interest 
All bank interest will be “untaxed” in 2016/17 as tax won’t be deducted by the bank. However, basic and higher rate taxpayers will have a savings allowance of £1,000 or £500 which should be set against the interest received. Only interest exceeding the savings allowance should be set against the personal allowance in the PAYE code. 
  
Dividend tax 
The notes on the back of the P2 say this deduction: “is to collect the basic rate of tax due on your dividend income.” However, dividends won’t be taxed at the basic rate of tax: 20%, the tax rate will be 7.5% for a basic rate taxpayer. For higher rate taxpayers the P2 notes may refer to higher rate tax. 
  
To check the dividend tax deduction multiple it by the taxpayer’s highest marginal tax rate. This how much dividend tax HMRC believes the taxpayer will be due to pay in 2016/17. Perform your own calculation of the taxpayer’s dividend tax for 2016/17 based their expected dividend income for 2016/17. If the two figures are approximately the same, the PAYE code is roughly correct. 
  
The taxpayer can object to having dividend income or interest included in their PAYE code. To get the PAYE code changed you can ring HMRC, or complete the online form on behalf of your client. 

This is an
extract from our topical tax tips newsletter dated
18 February 2016 (5 days before we publish an extract on this blog). You can obtain future issues by registering here>>>

The
full newsletter contained links to related source material for this
story and the
other two topical, timely and commercial tax tips. We’ve been
publishing this newsletter weekly since 2007; it’s clearly written
and focused on precisely what accountants in general practice need to
know about each week.
You can obtain future issues by registering here>>>