July’s Tax Tips & News
Welcome to our newsletter designed to bring you tax tips and news to keep you one step ahead of the taxman.
If you need further assistance just let us know or you can send us a question for our Question and Answer Section.
We are committed to ensuring none of our clients pay a penny more in tax than is necessary and they receive useful tax and business advice and support throughout the year.
Please contact us for advice.
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Real Time Information (RTI) Penalty Notices
As an employer you may have received an RTI penalty warning letter accusing you of not submitting all of the RTI returns required for 2013/14. However, that letter may be incorrect.
HMRC has admitted that its computer has churned out inappropriate penalty warning letters to employers who have submitted employer payment summaries (EPS) during 2013/14. If you have submitted all the required RTI returns for the tax year you can ignore the warning letter, as a penalty will not be charged. – read more >>
VAT on Digital Services
Do you sell digital services such as: music or software downloads, e-books or online videos? If so, do you know where your customers are, and whether they are businesses or individuals?
From 1st January 2015, when you sell digital services across international borders you will have to collect information about your customers to determine if they are businesses or not, and where they are based. – read more >>
If most of your income is taxed under PAYE (Pay As You Earn) you may soon receive a reconciliation of the income tax you have paid compared to the amount that was due to be paid for 2013/14. This calculation arrives on a form P800, which should be checked very carefully for errors and omissions. If mistakes are missed they can be carried forward for several years, resulting in escalating amounts of tax over or under-paid. – read more >>
Have you received a scary letter from HMRC lately? Perhaps all HMRC letters are scary, but this latest nudge-letter really takes the biscuit.
In it HMRC says the taxpayer’s effective rate of income tax is lower than the average for taxpayers with similar levels of income. It goes on to suggest that there could be something wrong with the self-assessment tax return for 2011/12 – read more >>
July Questions and Answers
Q. Our company’s board has decided it needs some expert input to help with the next stage of expansion. We have approached an individual to act as a non-executive director. He wants to invoice us from his personal service company for that work, but I would rather pay him via our company’s payroll. Which is the correct approach?
A. The work that individual performs through his personal service as an officer holder (i.e. director or non-executive director) is now subject to IR35, which means his company must apply PAYE and NIC to that income earned as a non-exec. The tax and NI the individual ultimately bears will be the same; whether his company invoices your company, or if your company pays him via its payroll. There is no “correct” approach.
Q. I am thinking of selling a flat that has been let since I acquired it in 2012. I do not own another property. My tenant is moving out soon, after which I will either stay in it myself or sell it. Will I get lettings relief to reduce the capital gains tax (CGT) payable?
A. Lettings relief only applies if you have lived in the property as your main home for some period. So if your tenant moves out and you sell the property immediately you will not get lettings relief, or any relief from CGT, other than the annual exemption.
However, if you move into the property and make it your own home, the gain relating to your period of occupation will be free of CGT. The last 18 months of ownership will also be free of CGT even if you are not living in the property during that period. The total gain on sale can also be reduced by lettings relief, which is limited to the lowest of these three amounts:
- the part of the gain which is exempt because the property was your main home;
- the gain attributed to the period it was let; and
There are thus large tax savings to be made by occupying the property as your main home, but you must show that you intended the property to be a permanent residence, not a temporary occupation while the property was on the market. It is the quality of occupation not the length of time that demonstrates the property was your main home.
Q. I do some educational consultancy work in Africa for a business based in Ireland. My UK-based company will issue the invoice for that work, but it’s in the flat rate scheme for VAT. Should that invoice be included in the turnover I apply the flat rate to?
A. The invoice your UK Company sends to Ireland for your work in Africa is outside the scope of VAT. You should not add VAT to that invoice, and you should exclude that invoice from the turnover used to calculate your flat rate payment of VAT for the quarter.
July Key Tax Dates
5 – Deadline for PAYE settlement agreement for 2013/14
6 – Deadline for 2013/14 forms P11Db, P11D and P9D to be submitted and copies of P11D and P9D to be issued to relevant employees
Deadline for employers to report share incentives for 2013/14 – form 42
14 – Return and Payment of CT61 tax due for quarter to 30 June 2014
19/22 – PAYE/NIC, student loan and CIS deductions due for month to 5/7/2014 or quarter 1 of 2014/15 for small employers
31 – Second self-assessment payment on account due for 2013/14
Second 5% penalty surcharge on any 2012/13 outstanding tax due on 31 January 2014 still unpaid
Deadline for Tax Credits to finalise claims for 2013/14 and renew claims for 2014/15
Half yearly Class 2 NIC payment due
Penalty of 5% of tax due or £300, whichever is greater for 2012/13 personalstill not filed