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>>>


Paying interest to the director, Pensions lifetime allowance, RTI reporting

Last week we explored the tax implications of paying interest to a director of an owner-managed company. We looked ahead to the reduction in the pension lifetime allowance from 6 April 2016, which may catch-out those who plan to retire shortly after that date. The reporting requirements for RTI are also changing for micro businesses on 6 April 2016.

This is an
extract from our topical tax tips newsletter dated 25 February 2016
(5 days before we publish an extract on this blog). You can obtain future issues by registering here>>>

RTI reporting 
HMRC believe that all employers should be familiar with the RTI reporting system now, so they are removing the relaxation for late filing of the FPS (full payment submission) by micro businesses. This was expected, but you may need to remind your clients about the detailed rules for reporting on or before the date of payment. 

Employers with fewer than 10 employees, who were registered for PAYE before 6 April 2014, are currently permitted to submit their FPS on or before the last payment date in the month, rather than on or before each day employees are paid in the month. Thus this relaxation only affects small employers who pay their employees more frequently than monthly. From 6 April 2016 those employers will have to submit an FPS for each payday in the month, on or before those payment dates. 

There are other RTI relaxations that continue after 6 April 2016 (see link below), including for casual employees such as harvest workers who are paid according to their efforts on the working day. If the FPS is submitted later than the payment day it’s important to include a code in the late reporting reason field. For the harvest workers this would be code F. 

The latest Employer Bulletin (no. 58) explains what the law determines to be the payment date for PAYE (ITEPA 2003 s 686 rules 1&2). This is the earlier of:
  • the time the payment is made; and
  • the time the employee becomes entitled to the payment.
This means that if the employee is paid later than the day they are entitled to be paid, the regular pay day should still be reported. Bank holidays that fall around the end of the month, such as Christmas and Easter, can mess-up payment dates. Page 3 of Employer Bulletin no. 58 includes a handy grid to determine the reportable payment date, when employees are paid just before or just after the Easter holiday. 

This is an
extract from our topical tax tips newsletter dated
25 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>>>


Really Timely Intervention, Rentals and renewals, Pension Freedoms

Groundhog Day is celebrated on 2 February in Pennsylvania, but HMRC thinks it falls on 17 February in the UK, as once again they have changed the conditions for RTI penalties, as we explain below. We also re-examine the application of the renewals basis to the cost of valuable items in unfurnished let properties, and supply words of warning for clients who are getting excited about accessing their pension savings.

Really Timely Intervention

In our newsletter on 11 September 2014 we said that RTI is a SNAFU mess, and so it continues. The fact that HMRC have introduced yet another penalty concession is evidence that the system still is not working as it should. 

Late filing penalties for RTI returns came into effect for employers with 50 or more employees from 6 October 2014, and are due to apply for all other employers from 6 March 2015. Those dates still apply but HMRC has said it will not issue a late filing penalty if the FPS is submitted within 3 days of the payment date (the date the employees are contractually due to be paid), or there is another valid reason for submitting a late FPS.  

If a late filing penalty notice has already been issued, for a period since 6 October 2014, the employer (or you or their behalf) can ask for the penalty to be removed. Do this by logging an appeal via the online appeals system. Complete the “other” reason box with the statement “return filed within 3 days”, the penalty should be cancelled.  

Late payment penalties were also due to apply automatically from 6 April 2015. However, HMRC is now going to hold-back on the automatic button and issue late filing penalties on a risk-assessed basis. We assume this means HMRC will only issue a late filing penalty when it is very clear that PAYE was deliberately paid late. This should avoid penalties being issued for the many disputed amounts showing up on employers’ business tax dashboards (online accounts) as underpaid or estimated PAYE.  

This is an
extract from our tax tips newsletter dated 19 February 2015. The newsletter
itself contained links to related source material for this story and the
other two topical, timely and commercial tax tips. It’s clearly written
and extremely good value for accountants in general practice. Try it
for free by registering here>>>


RTI spaghetti, Holiday pay, Auto-enrolment

The frantic personal tax season is almost over so this week we are looking at issues relating to payroll and pensions. RTI late filing penalties are starting to arrive with large employers for the quarter beginning 6 October 2014. Claims for unpaid holiday pay are also a worry for some employers. Auto-enrolment a nightmare you have tried not to think about, but those staging dates are just around the corner, so action is needed now.

RTI spaghetti
The good
RTI was supposed to make the PAYE reporting ìinstantî i.e. in ìreal timeî. So why do we still have to answer those end-of-year questions on the final FPS or EPS submitted for the year? Surely HMRC have all the information they need as it has been reported during the tax year.
Thatís true and HMRC have admitted they donít use the data provided by the end-of-year questions for compliance purposes, so those questions have been scrapped (by SI 2015/02). Thus when you submit a final FPS or EPS after 6 March 2015 in theory you shouldnít have to answer those annoying questions.
However, this change was announced too late to be included in most payroll software for 2014/15. Even HMRCís free Basic PAYE Tools software will not be updated for this change to the end of year procedures until July 2015. So it looks like you will have to answer those pointless questions for 2014/15 although HMRC will do nothing with the information.
The bad 
RTI requires every employer to report to HMRC at least once per tax month by the ìpayment dateî for the employeesí salary, unless the PAYE scheme has been registered as ìannualî. This creates 12 filing deadlines for the tax year instead of one end-of-year deadline.
If a filing deadline is missed there is a potential late filing penalty. From 6 October 2014, large employers (50 or more employees) have been charged penalties for late filed RTI reporting deadline, although those employers are permitted one late filing per tax year. The penalty notices for October to January will start to arrive with employers this month. But HMRC are not sending copies tax agents, so you should remind your clients to tell you if they receive a penalty notice.
Smaller employers (up to 50 employees) will be charged penalties for missing RTI filing deadlines from 6 March 2015. Those smaller employers are not granted one late filing in 2014/15, so if the RTI report due in the period 6 March 205 to 5 April 2015 is late, it will generate a late filing penalty. 
The ugly 
There is a new online system to appeal against RTI penalties. The penalty notice includes an ID number to use to log the appeal. You should be able to do this for your clients using PAYE online. However, remember to take a screen print of the information you have keyed-in with the appeal ñ ie the reasons for appeal, as there is no prompt to print a copy for your records.

This is an
extract from our tax tips newsletter dated 22 January 2015. The newsletter
itself contained links to related source material for this story and the
other two topical, timely and commercial tax tips. It’s clearly written
and extremely good value for accountants in general practice. Try it
for free by registering here>>>