NIC avoidance, Late filing penalties, VAT MOSS TAN/newsletters

Tax was in the
news again last week for all the wrong reasons: the BBC uncovered a
blatant NIC avoidance scheme, and The Telegraph newspaper published a
leaked HMRC memo concerning late filing penalties. We explain how both
these issues could affect you and your clients. We also have news of
developments relating to the operation of VAT MOSS.

VAT MOSS


New rules for applying
local rates of VAT to digital services supplied across EU borders came
into effect on 1 January 2015, but guidance on how to account for the
VAT due under VAT-MOSS was released very late. A concession for UK
traders who aren’t VAT registered, to allow them to use VAT-MOSS without
having to charge VAT to their UK-based customers, was issued almost at
the last minute.


 


A second concession
concerns the records required to determine where the customer is based.
Small businesses are allowed to rely on the customer location
information provided by their payment service provider (eg PayPal). This
concession was announced as a temporary measure to apply to 30 June
2015, but it is now permanent for UK businesses who are not VAT
registered.


 


The role of the tax
agent in helping clients to comply with VAT-MOSS appears to have been
added as an after-thought in the design of that system. As a tax agent
you can’t register your clients for VAT-MOSS, but you can submit
VAT-MOSS returns on their behalf if you register as a VAT-MOSS agent.
Details of how agents can register were published on the GOV.UK website on 21 May 2015. The first deadline for submitting a VAT-MOSS return was 20 April 2015.


 


If your clients are
providing digital services they are likely to be invoicing
electronically as well. Take a look at the new guidance on electronic
invoicing in VAT Notice 700/63.


 


Finally for clients who
are disgruntled about the VAT-MOSS regime, there may be light at the
end of the tunnel. The EC has acknowledged in a report on the digital
single market the administrative burden that VAT imposes, and has
recommended there should be a common EU-wide VAT threshold to help small
e-commerce businesses. 

This is an
extract from our tax tips newsletter dated 4 June 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>>>


Lessons in CGT, Auto-enrolment, P11Ds and RTI

As a professional
adviser you can’t afford to stop learning, as the tax and regulatory
landscape is constantly moving underneath your feet. Last week we shared a
lesson to learn from CGT, and addressed the huge issue of auto-enrolment.
We also had some tips for a painless P11D season.

Auto-enrolment


Auto-enrolment is not
like VAT-MOSS, it can’t be ignored on the assumption that no one will
check whether such a small employer is complying with the rules (not
that we would recommend that!). If the employer fails to implement a
pension scheme for his employees he is messing with their future
pensions, and the penalties are severe.  


 


There is a fixed
penalty of £400 if the employer doesn’t comply with statutory notices,
which escalates up to £500 PER DAY for employers with up to 49
employees. Those same employers can also be subject to fixed penalties
of up to £1,500 for not paying contributions or for encouraging
employees to opt out of the pension scheme. Third parties such as
payroll bureau can also be fined if the pension deductions aren’t made
correctly.     


 


The frightening part
about auto-enrolment is that the Pensions Regulator, which is tasked
with getting the 1 million small employers who are ignorant of their
obligations to comply, believes that accountants and lawyers will bridge
that knowledge gap. That means you.


 


You may protest that
you don’t “do” pensions so auto-enrolment is somebody else’s problem. If
you offer a payroll service you will have to process the pension
deductions for your clients, who will expect you to get the calculations
right. Clue: it is not a matter of deducting a straight percentage of
net pay; there are options for the employer to choose which define
pensionable pay in different ways.


 


The employees’
employment contracts will be key to minimising the cost of the
employer’s contributions, but many employees in small businesses don’t
have detailed employment contracts. Someone (perhaps you) will have to
help those businesses work with employment lawyers and human resource
advisers to get suitable employment contracts in place.


 


Finally remember that
auto-enrolment pension contributions will have to be made for employees
who earn above £10,000 in 2015/16. The auto-enrolment threshold was not
increased in line with the personal allowance, so employees will pay
pension contributions before they become liable for income tax, unless
the thresholds are aligned again in the future.

This is an
extract from our tax tips newsletter dated 28 May 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>>>


VAT on goods for staff, Challenging penalties, Budget forecast

Last week we considered
the VAT implications of providing free goods to employees and the
circumstances in which HMRC’s behaviour creates a reasonable excuse for
taxpayers. We also polished our crystal ball to look ahead to the
next Budget on 8 July 2015. Certain clients should be advised to take
action before that date.

Challenging penalties
The HMRC machine spits
out automatic penalties when tax returns or tax payments are delivered
late. Unless the taxpayer can prove he has a reasonable excuse, HMRC
won’t cancel the penalties. But what if HMRC itself is the cause of the
reasonable excuse?  
 
HMRC are reluctant to
admit that they can be in the wrong or that their “helpline” has misled
the taxpayer. The Tax Tribunals tend to take a more sympathetic view of
the taxpayer’s position, as illustrated in two recent cases: Joanna
Porter and John Crangle, which were both heard by the same judge: Peter
Sheppard.
 
When trying to file her
tax return Ms Porter received the message “access denied” from   the
HMRC’s online filing system. The online helpdesk told her the problem
was an IT error and was not her fault. They eventually sent her with a
new ID number which she was able to use to submit her return. However,
HMRC still issued a late filing penalty, and refused to accept her
appeal against the penalty. The Tribunal agreed Ms Porter did her best
to file her tax return and cancelled the late filing penalty.     
 
Mr Crangle ticked the
box on his 2012/13 tax return requesting that tax due of £1442 be
collected through his PAYE code for 2014/15. This return was submitted
online on 20 December 2013, before the cut-off point for altering the
2014/15 code (30 December 2013) but HMRC ignored that request.
 
Mr Crangle believed the
tax due would be coded out until he received a letter from HMRC dated 1
April 2014, which was after the tax due date of 31 January 2014. That
letter was apparently promoted by the taxpayer ringing HMRC on 11 March
2014, but HMRC still issued a late payment penalty on 24 April and
charged interest. The taxpayer had to appoint a tax agent to sort the
mess out.
 

Where your client has
suffered shoddy treatment by HMRC and as a result has received
penalties, it’s worth challenging those penalties at internal review and
through to Tribunal. Our personal tax experts can advise you how to do
this.

This is an
extract from our tax tips newsletter dated 21 May 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>>>


Share scheme reporting, Pension withdrawal forms, VAT refunds for charities

The work of the tax adviser is not all about annual tax returns, you also need to advise clients on the circumstances in which they don’t need to submit an annual return, when the official form may be wrong, and how to claim a tax refund. All those situations are covered in the current issue of our tax tips newsletter for accountants in general practice.

Pension withdrawal forms 
There has been huge press coverage of the new pension freedoms which allow those aged 55 or more to withdraw their pension savings as cash lump sums. What has received less attention is the tax effect of doing this. If your clients have already accessed their defined contribution pension pots they may have suffered an unexpected tax charge. 
  
Unless the individual can provide a current form P45 which tells the pension company what PAYE code to use, the pension company will deduct tax using an emergency code. That will generally mean that too much tax is deducted and the individual needs to claim a tax refund either on their self-assessment return after the end of the tax year, or by using one of these new forms within the tax year: 

  • P50Z- if the entire pension pot is taken and the individual has no other income;
  • P53Z – if the entire pension pot is taken and the individual has some other income;
  • P55 – in other circumstances such as where only part of the pension pot is taken.

There are further illustrations of circumstances in which each form should be used in the HMRC Pension Schemes newsletter, number 68. 
  
All three of the new refund forms must be completed online, and then printed off to submit to HMRC. However, there is a problem with form P55 which has incorrect instructions. 
  
Form P55 should allow the taxpayer to reclaim the tax deducted within 30 days, but the online form said this was not possible. Following an article in the FT newspaper at the weekend it appears that form P55 has been temporarily withdrawn from the GOV.UK website to fix the wording.
This is an
extract from our tax tips newsletter dated 14 May 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>>>


Financial reporting standards, Professional conduct, Reclaiming input VAT on commercial vehicles

This is a time of major upheaval to financial reporting standards, and we summarise changes fundamental in quantifying and reporting on business profits on which tax computations are to be based. Last week the tax profession updated its guidance on professional conduct and we look at how this affects everyone working in tax. Finally, we update you on HMRC’s latest list of car-derived vans and combi vans for input VAT purposes.

Transition to new accounting standards 
  
Beware of the tax repercussions which follow the changes summarised in this week’s newsletter. 

Reported profits of a business are the starting point for computing taxable profits for income tax or corporation tax purposes. On transition from one valid basis of accounting to another, a significant number of accounting adjustments may be required and these could have a crucial impact on your clients’ tax liabilities. Positive adjustments (i.e. those that increase profits or reduce losses) are taxed as receipts, and negative adjustments are allowed as expenses.

This is an
extract from our tax tips newsletter dated 7 May 2015. The newsletter
itself contained more details and links to related source material for this story. And, of course there were 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>>>


CGT for non-residents, RTI error – whose fault is it?, Employment Allowance

What Numpty invented a new form of CGT that requires the gain and tax due to be reported within 30 days? We explain what your clients need to know about this new tax. We also look at the latest position regarding RTI errors and penalties. Finally we have an update on the employment allowance.

CGT for non-residents 
A new capital gains tax charge came into force on 6 April 2015: non-resident CGT (NR CGT). This could impact a range of clients including; property developers, conveyancing solicitors, as well as non-resident owners of UK residential property. 
  
The NR CGT applies to gains made on the disposal of residential property in the UK by owners who are not resident for tax purposes in the UK. The new tax is restricted to gains that relate to the period from 6 April 2015 to disposal date, so it is unlikely to be payable on property sales made early in 2015/16. 
  
However, the NR CGT reporting regime requires a NR CGT return to be made to HMRC within 30 days of the conveyance of the property. This applies whether there is any NR CGT to pay or not, where there is a loss on the disposal, and even where the taxpayer is due to report the disposal on their own personal or corporate self-assessment tax return or under the ATED regime. 
  
A non-resident vendor who completes a residential property sale on say 1 May 2015 must complete the online NR-CGT return (you can do this on their behalf) by 31 May 2015. The non-resident vendor can be an individual, partner in a partnership, trustee, personal representative of non-resident who has died, a closely-held company or a fund. 
  
Where the vendor is not registered for UK income tax, corporation tax or ATED, the NR-CGT charge must be paid with 30 days of the conveyance date. This payment can only be made once the NR-CGT return has been submitted and HMRC have replied with a reference number to use when making the payment. There are penalties for failing to file the NR CGT return on time, and failing to pay the tax on time. 
  
If the taxpayer is registered for UK tax they can opt to pay the NR CGT due at the same time as the tax due for their normal self-assessment, so by 31 January 2017 for gains realised by individuals/ trustees/ PRs in 2015/16. 
  
Conveyancing solicitors need to be aware of these new very tight reporting and payment deadlines. Property developers need to warn their non-resident customers that they will be liable to tax on any gain made when they sell the property and that gain includes any discount in the price achieved by buying “off-plan”. 

This is an
extract from our tax tips newsletter dated 29 April 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>>>


To P11D or not, Penalties for not declaring CGT, EIS assurance

In last week’s newsletter we looked forward to the P11D submission deadline on 6 July 2015. If the forms aren’t due you need to tell HMRC to avoid penalties. Taxpayers who avoid telling HMRC about CGT due will also be hit with high penalties, as we explain below. Finally we have news of a change in HMRC’s procedure for EIS investments which anticipates a change in the tax law.

To P11D or not

It’s the P11D and P9D season again. Those forms need to be submitted to HMRC by 6 July 2015 where expenses or benefits were provided to employees in 2014/15, which are not covered by a dispensation, or are not otherwise exempt from tax. If the P11Ds are not submitted on time, penalties will be issued.
But how does HMRC know whether a P11D/P9D is due to be filed? In pre-RTI years when completing the end of year form P35 you had to say whether a P11D was due. Those questions were carried over to the “final” RTI return, but from 6 March 2015 there has been no legal requirement to complete those end of year questions (see our newsletter 22 January 2015). 
If you didn’t complete the “Is a P11D due?” question on the final FPS for 2014/15, HMRC may assume a P11D is needed anyway. To avoid any nastiness with automatic penalties you can tell the HMRC computer that no P11D/ P9D is needed and no Class 1A NIC is due by completing an online declaration (see link below).
The latest Employer Bulletin (no. 53) contains lots of tips for getting the P11Ds right first time, and its worth a read through as it contains some surprising facts. For instance, did you known that a P9D is not needed where an employee is provided with a medical benefit such as health insurance, and that employee earnsless than £8,500 per year?

This is an
extract from our tax tips newsletter dated 23 April 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>>>


Share scheme reporting, Non-resident landlords scheme, ATED reporting

This newsletter looked ahead to the next tax form filing deadlines. July brings two deadlines for share scheme registration and reporting, which is particularly complicated this year. The non-resident landlord scheme annual return must also be made by 5 July. Finally don’t forget the more pressing deadline for ATED return forms on 30 April 2015!

Non-resident landlords scheme 
The non-resident landlords scheme (NRL) has been in place for many years, but it still comes as a surprise to property owners who move abroad, and to many letting agents who ought to know better. 
  
The “non-resident” condition for a landlord to fall under the NRL is not aligned with the statutory residence test which determines whether person is not resident in the UK for tax purposes. A landlord is non-resident for the NRL if his normal place of abode is outside the UK. An absence from the UK for as little as six months can make the landlord fall under the NRL (see chapter 2 of NRL guidance), but that person may be still technically resident in the UK for other tax purposes. 
  
Unless the landlord has approval from HMRC to receive their rent gross, basic rate income tax must be deducted from rents paid to the landlord by the agent, or where there is no letting agent, by the tenant. The letting agent or tenant must make an annual report (form NRLY) to HMRC by 5 July 2015 for the year to 31 March 2015, and also account to HMRC for the tax deducted each calendar quarter. 
  
This year HMRC are not sending out reminders to letting agents to complete NRLY, so this will be an easy deadline to miss. Interest will be charged on the late payment of tax by agents, and penalties are due for errors in returns. 
  
An application to have rent paid gross must now be made online using an interactive PDF form NRL1i (for individuals), NRLi2 (for corporate landlords) or NRL3i (for all trustees). The rent must only be paid gross once permission is granted by HMRC, and that permission will only be back dated to first day of the quarter in which the application is approved. 

This is an
extract from our tax tips newsletter dated 16 April 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>>>


Pension withdrawals, Employment intermediaries, VAT-MOSS or cancel registration

The new tax year has brought new opportunities for pension withdrawals, and new burdens for engagers of self-employed workers, as we explain in this week’s tax tips newsletter. We also highlight new VAT-MOSS guidance from the EU and look at how someone can deregister for VAT.

Employment intermediaries 
A new quarterly reporting requirement came into force from 6 April 2015 for agencies and employment intermediaries. It is designed to provide HMRC with information on who is working as “false self-employed” or through off-shore agencies, but the regulations could catch many businesses who don’t think of themselves as employment intermediaries.      
  
The Income Tax (Pay As You Earn) (Amendment No. 2) Regulations 2015 (SI 2015/171) define an intermediary for this purpose as: “a person who makes arrangements under or in consequence of which an individual works for a third person or if an individual is remunerated for work done for a third person.” This could apply to any contractor company in many industry sectors, including construction or security. 
  
There are exceptions in the regulations which exempt the contractor company from the reporting requirements if: 
·     it does not provide more than one person’s services to a client; or 
·     those persons are all its employees; or 
·     it applies PAYE to the pay of the workers it places with clients.     
       
Thus one-person personal service companies (PSC) don’t have to a worry about this new regulation, but if the PSC engages a substitute who is not an employee a reporting requirement may kick-in.   
  
The definition of an agency in the regulations is very broad: ”a person other than the worker, the client or a person connected with the client”. This could catch almost any business where there is another client in the contractual chain, even an organisation that connects clients with tax advisers for specific pieces of work. 
  
The contracting company which has the potential to be deemed to be an “agency” for these regulations needs to show it is the “client” for the services it commissioned, rather than an agent, in order that the reporting regulations do not apply. 
  
Our employment tax experts can help you decide if these new reporting regulations apply to you or your clients. 
 
This is an
extract from our tax tips newsletter dated 9 April 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>>>


VAT-MOSS returns, RTI penalties, Auto-enrolment exemptions

The Parliamentary candidates are out banging on doors, appealing for votes. If you are bothered by such a call why not ask the candidate about: VAT-MOSS, RTI or auto-enrolment for pensions. These new processes have all made life more difficult for small businesses in the last five years. We also have further updates on these issues this week.

VAT-MOSS returns 
The first period for submitting VAT-MOSS returns opened on 1 April 2015. Those businesses who have registered for VAT-MOSS must submit their return by 20 April 2015, and pay any VAT due as reported under VAT-MOSS by the same date. Are you and your clients ready? 

The VAT-MOSS returns are always due by 20th of the month following the end of the calendar quarter, irrespective of when the UK VAT return is due. The VAT-MOSS return can be done online or by completing a very simple spread-sheet like template. If no digital sales have been made to non-business customers in other EU countries a nil VAT-MOSS return is required. 

The online version of the return may be easier to use as it contains some automatic calculation, which is missing from the spreadsheet template. The online return also has links to EU VAT rates, but you may find it easier to use the more direct link below. However, the trader also needs to report which VAT rate applies to their sale e.g. standard rate, reduced rate, zero rate etc. The same product will not necessarily attracted the same type of VAT rate in all EU countries. 

The value of each digital sale made from the UK and the amount of VAT due on each of those sales must be reported in pounds sterling. So if your client has priced their European sales in euros or other local currencies, those sales will have to be translated into £s. But which date should the business pick for calculating the relevant exchange rate: the date of sale or the end of the VAT period? 

In fact either date appears to be acceptable to HMRC. The VAT-MOSS guidance says if the trader has invoiced in currency other than sterling, that invoiced amount must be translated into sterling at the end of the calendar quarter. However, if the business automatically converts the foreign currency amount into sterling using an agreed daily or other periodic rate to use in their business accounts, those translated amounts should be used in the VAT-MOSS return.

This is an
extract from our tax tips newsletter dated 2 April 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>>>