May Tax Tips & News

Welcome to the Benedicts Tax Tips & News monthly newsletter, bringing you the latest news to keep you one step ahead of the taxman.

If you need further assistance just let us know or send us a question for our Question and Answer Section.

We’re 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 on your own specific circumstances. We’re here to help!

Newsletter issue - May 2013.

Real time information (RTI) has had a bumpy start. In brief these are the major problems and work-arounds discovered so far.

Annual PAYE Schemes

If you expect to pay all of your employees just once in the tax year, and all on the same date, you can register your PAYE scheme with the Tax Office as an annual scheme.

HMRC's official guidance was that annual schemes only had to submit one FPS (full payment submission) under RTI for the month the payments were made, no nil EPS (employer payment summary) were required for the other 11 months of the year.

However, in practice any PAYE schemes registered as annual in 2013/14 are not acknowledged as 'annual' by the RTI system. This means nil EPS returns have to be submitted for every month when employees are not paid.

The RTI system will be fixed on 17 May 2013 to cope with registrations of annual PAYE schemes, but you need to wait until after that date to tell HMRC you want the PAYE scheme to be annual. In the meantime carry on submitting nil EPS returns.

Forms P45 and P46

Under RTI forms P45 and P46 are not required to be submitted, even if the starting or leaving date of the employee fell before you were mandated to use RTI. If you have employees who started or left in 2012/13, and you didn't submit a P46 or P45 before 6 April 2013 you should:

• If possible, enter the leaving date on your ex-employees' 2012/13 form P14.
• Do not submit revised P14s for 2012/13 if these have already been submitted.
• Don't include the ex-employee on your first FPS or EAS (employer alignment submission). The employment will be then be automatically ceased at 5 April 2013.
• Include details of the new employee in the EAS and/or first FPS and either show a date of starting of 6 April or leave this field blank.

NI Numbers

You don't need your employee's NI number in order to pay him, or to submit the FPS report under RTI.

If the worker arrives without an NI number, you should complete the other data fields for that worker; name, address, and (if you need to check the worker's eligibility to work in the UK) - the worker's passport number. You should leave the NI number field blank if no NI number has been provided. The worker should be told to apply for an NI number as soon as possible.

You can run an NI number verification request (NVR) under RTI, but this should only be attempted once you have sent the first FPS under RTI. If HMRC finds an incorrect NI number on the FPS you will be informed. In that case the worker can be asked to check if the NI number they have provided is correct. This can be done by using the HMRC form CA5403.

Newsletter issue - May 2013.

In the past sleeping partners and inactive partners didn't have to pay NI contributions on their partnership profits. However, HMRC changed its view on this in April 2013 and it now considers that all partners are liable to pay NICs in respect of their taxable profits, whatever their level of activity within the business. The implications for inactive and sleeping partners are:

• if not already registered as self-employed, the person must register with HMRC and arrange to pay class 2 NICs from 6 April 2013;
• exemption from paying class 2 NICs can be claimed if the taxable profits are low, or the individual has another employment; and
• class 4 NICs will be due on their profits from 2013/14 onwards and will be collected through the normal self-assessment for 2013/14.

Newsletter issue - May 2013.

If you are uncertain about whether you can make a claim for VAT you have incurred, or how to treat a certain transaction for VAT purposes, you could try searching the HMRC website for a solution to your query. Alternatively you may ring the HMRC VAT helpline but the adviser is likely to send you a copy of a VAT leaflet which is available on the HMRC website. This may, or may not, answer your query.

If you do get a straight answer out of the VAT helpline, be careful to record what you said, and exactly what the HMRC adviser to told you. This is important as if the advice from the helpline is later found to be incorrect you need to be able to prove you presented the full facts for the reply which you relied on. Even then a subsequent VAT inspection may determine you were wrong all along and charge you penalties and interest on any under-paid or over-claimed VAT.

The courts have recently decided that taxpayers cannot legitimately expect the advice given verbally by HMRC to be 100% correct, and this can include advice given in a VAT leaflet or online on the HMRC website. The only way you can count on advice given by HMRC is to apply for a written ruling known as a 'clearance'. To get a clearance you have to set out the full facts in writing, in a clear and unequivocal fashion.

We can help you with this clearance application, or we may be able to answer your VAT question ourselves.

Newsletter issue - May 2013.

Have you been approached by firms that promise you instant cash from your pension fund? This is known as pension liberation, and involves taking cash from your pension fund before you reach the retirement age set by your pension scheme.

Unscrupulous firms persuade individuals to apply to move their pension funds out of their current scheme, in order to permit an early release of funds, either by a direct transfer out or by a loan. In some case the individual is told there are no tax implications - but there are.

If an individual gains access to their pension savings before their scheme-set retirement age, that individual will be liable to a 55% tax charge on the extracted funds. This tax rate applies to all taxpayers whatever their marginal rate of income tax. It also applies if the monies are repaid back to the pension scheme. It is the individual who must pay this tax charge, not the new or old pension scheme, or the firm that organised the switch of funds.

Pension funds can be safely transferred from one scheme to another, but if you want to do this you should get advice from a qualified financial adviser who is registered on the financial services register.

Newsletter issue - May 2013.

Q. My company has been trading since 1 March 2013, but my first sales invoices haven't been paid yet, so there is no cash available to reimburse me for the expenses I've incurred personally. Do I have to complete a P11D for 2012/13?

A. The annual form P11D reports expenses reimbursed to, and benefits in kind made available to the employees and directors. As you haven't been paid any expenses by the company, there is nothing to report on the form P11D. If you have any benefits in kind provided by the company such as a car a P11D would be required.

Q. I've heard about the great tax breaks available under the SEIS scheme. Is this something I can use for my business?

A. The seed enterprise investment scheme (SEIS) provides investors in small companies with 50% income tax relief, and an exemption from tax for 50% of the gains they reinvest in SEIS shares (for 2013/14). However, you can't use SEIS to invest in a company you control, as the investor and his associates (basically close relatives), must not own more than 30% of the company. The trade undertaken by the company must also be less than two years old, so to use SEIS the company has to be undertaking a new venture, and be a new clean company.

If you have an idea for a new business and you are willing to involve other investors, you may be able to use SEIS to fund that business. But please talk to us first, as there are a number of trades that can't use SEIS, and other conditions to meet.

Q. I am employed by my company M Ltd, and my wife's company T Ltd. M and T have completely separate trades and operate independently. I currently take no salary from M Ltd and have a modest salary from T Ltd. However, HMRC have split my personal allowance 2/3 to the PAYE code issued to M Ltd and 1/3 to T Ltd. Can I get this changed, and if so how?

Newsletter issue - May 2013.

2 - Last day for car change notifications in the quarter to 5 April - Use P46 Car

19 - Deadline for Employers' 2012/13 end of year PAYE Returns (P35, P14, P38 & P38A). Penalties for non submission.

19/22 - PAYE/NIC and CIS deductions due for month to 5/5/2013

31 - Deadline for copies of P60 to be issued to employees for 2012/13

Benedicts Accountants are based in London, offering local business owners and individuals a wide range of services.

All clients are entitled to fixed fees, work delivered on time and unlimited phone support. Visit our website jbenedict.co.uk for more information.