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Insight - April 2012

´╗┐Child Benefit Changes for those with incomes over £50,000

It was announced in last month’s Budget that the Child Benefit, which is currently available to all, will be withdrawn in certain circumstances. The withdrawal will apply to taxpayers with income in excess of £50,000. Broadly, the income will be measured by deducting pension contributions, gift aid payments or trading losses in the same year and adding back any payments to trade unions or police organisations.

The withdrawal will be in the form of a tax charge of 1% for every £100 of income in excess of £50,000. For those with income in excess of £60,000 the charge will equal the child benefit paid.

The operative date for the charge is 7 January 2013. The first charge will be for the tax year 2012/13 and will be based on the full income for that year and the Child Benefit in the period from 7 January 2013 to 5 April 2013.

The information released following the Budget suggested that the charge will be collected via self assessment or PAYE. This would mean that the charge would be dealt with via PAYE for those not already within self assessment. However, it appears that this may not be the case. HMRC’s website now suggests that they will send a self assessment tax return in April 2013 to those in receipt of Child Benefit with income in excess £50,000. This will bring a potential half a million individuals within the self assessment regime.

The charge for 2012/13 will be payable during the 2013/14 tax year, which should, presumably, be under the usual self assessment payment deadlines.

The higher earner in a partnership (generally married couples and civil partners living together and unmarried couples living together) will be subject to the charge, regardless of who the Child Benefit is paid to. There is the option to opt out of receiving Child Benefit for those wishing not to pay the new charge.

There is no need to do anything regarding the charge now as HMRC will be contacting those earning more than £50,000 in the Autumn.

If you would like further information, please get in touch with your usual Henderson Loggie contact, or email fiona.boyle@hendersonloggie.co.uk

Capping Tax Reliefs

Budget 2012 contained an important announcement about tax reliefs: a proposal to put a cap on unlimited tax reliefs at £50,000 or 25% of income. Although a recent Government press release provides more information, full details will only be available when the consultation document is published in the summer.

The cap on income tax reliefs for individuals will take effect from 6 April 2013. The cap will only apply to reliefs which are currently unlimited, and will be set at 25% of income or £50,000, whichever is greater.

The principal reliefs affected are loss reliefs that can be claimed against total income, qualifying loan interest relief and reliefs for charitable giving.

One major concern raised by the consultation is how the proposals may affect charitable giving generally. In addition, if relief for genuine business losses is capped, this could cause cash-flow problems for small businesses in the current economic climate.

We will report back again once the detailed consultation is released. If you would like further information, please get in touch with your usual Henderson Loggie contact, or email fiona.boyle@hendersonloggie.co.uk

New Disclosure Opportunities for Electricians and Online Retailers

Over the past few years, HM Revenue & Customs (HMRC) has offered a variety of disclosure opportunities to different sets of taxpayers. Campaigns are designed to tackle tax evasion by encouraging people with undeclared tax to bring their affairs up to date. Each campaign focuses on a particular group.

HMRC launched two campaigns recently. They are targeted at two different sectors:

  • Electricians and electrical fitters: the Electricians’ Tax Safe Plan was launched on 14 February 2012, and HMRC have issued letters to electricians warning them to pay any undisclosed tax. The plan is aimed at anyone who installs, maintains and tests electrical systems, equipment and appliances – and covers any tax owed, for whatever reason. Electricians can now register under this campaign and have until 15 May 2012 to do so. They will then have until 14 August 2012 to make a full disclosure and pay the outstanding tax, interest and penalties;
  • E-marketplaces: the e-Markets Disclosure Facility offers people trading on the internet who have not paid all the tax they owe the opportunity to come forward and pay their tax. This facility is aimed at online marketplace traders. Taxpayers that use this facility will benefit from lower penalties than if HMRC were to catch up with them later. People who only sell a few items and who are not traders are unlikely to be liable to tax and are not be targeted by this campaign. To utilise this campaign, an internet trader must notify HMRC between 14 March and 14 June 2012. The deadline for making a full disclosure and paying the tax, interest and penalties due is 14 September 2012.

HMRC uses information from other sources to seek out people who it thinks should have come forward in response to the campaigns but did not make a disclosure. Such people will face much higher penalties and possibly a criminal investigation.

Even if there is no campaign that applies to you, it should be noted that if you have not declared all of your income and gains, it is better to come forward on a voluntary basis. This is because the penalties in respect of an ‘unprompted’ disclosure are much lower than if the Revenue discovers the under declared income itself.

If you would like further information, or would like Henderson Loggie to review your records to ensure you have paid the correct tax due or to assist with any disclosures, please get in touch with your usual Henderson Loggie contact, or email fiona.boyle@hendersonloggie.co.uk

Business Records Checks

Following their review of Business Record Checks (BRCs), HM Revenue and Customs (HMRC) plans to carry out at least 60,000 BRCs between now and 2015. BRCs focus on the quality of record-keeping by SMEs, and although they partly serve an educational purpose, HMRC reserves the right to issue fines to businesses with inadequate records.

As part of a drive to boost revenue collection by £120 million over the next three years, HMRC intends to check the mileage records of thousands of small fleets within the BRC framework, and it will be essential for those businesses that are targeted to have accurate mileage records.

The move underlines the need for businesses to keep detailed and accurate logs of business journeys. HMRC has also announced it is adopting a tougher stance on mileage claims in particular, and to back this up has already issued several fines for overstated business mileage by employees.

Businesses with fleet cars will need to ensure they maintain accurate ‘to’ and ‘from’ locations, record the reason for each business journey, and detail the number of miles travelled. The records should also indicate whether or not free fuel for private use is provided to company car drivers.

Any business concerned that it may not be keeping accurate mileage records could be risking a large tax bill and penalties. It is very important to implement robust processes for mileage capture and reporting if these are not currently in place. Some drivers admit to exaggerating their mileage claims according to market research, meaning the system must be strong enough to remove the opportunity for inaccurate claims from staff. If an employee over-claims on fuel or mileage expense, they are liable to tax on a Benefit in Kind, because the employer has effectively been paying for some of the employee’s private mileage or fuel.

If you would like assistance in devising an administratively simple but effective system, or in complying with a BRC by HMRC, Henderson Loggie’s team can help. Please get in touch with your usual Henderson Loggie contact, or email fiona.boyle@hendersonloggie.co.uk

Latest Taskforce targets Takeaway Hot Food sector

HMRC have recently announced a campaign targeted at raising £6million additional VAT and penalties from the Scottish takeaway and hot food sector. This comes on top of the existing restaurant campaign. This will see HMRC officers conducting visits to business premises and these will commonly be conducted unannounced and late at night, generally on Thursday, Friday and Saturday nights.

During these visits the HMRC officers will;

  • Interview all staff on the premises
  • Reconcile electronic till data including running a ‘Z report’
  • Conduct tests on the cash in all tills and on site, and
  • Take copies of any documents they consider to be important or relevant to their investigations

The stated aim of these HMRC visits is to identify understated income, raise assessments, and charge a 100% penalty as it is expected that they will attempt to treat these as deliberate attempts to conceal cash. In the worst of the cases they identify they will seek to take criminal proceedings against the owners of the business, which may carry a prison sentence as punishment.

If you would like further information, please get in touch with your usual Henderson Loggie contact, or email fiona.boyle@hendersonloggie.co.uk

HMRC get tough on ‘Failure to Notify’ change of status cases

Recent evidence suggests that HMRC are applying penalties when a business changes legal entity and fails to notify them within 30 days, despite no tax loss actually existing. The VAT Act states that a person taking over an existing business must notify HMRC within 30 days of the transfer unless there is a reasonable excuse. Historically HMRC have focused their attention on such cases where there was a clear loss of revenue, however they now appear to be applying a penalty of up to 30% in all cases where there has been late notification regardless of whether there is a tax loss or not. The current penalty regime was put in place to act as a deterrent against poor compliance, however if a business has continued to pay the correct amount of tax at the correct time then they clearly do not fall into the bracket of poor compliance. It appears that HMRC are purely using the new penalty regime as a means of raising additional revenue and are punishing compliant businesses.

If you would like further information, please get in touch with your usual Henderson Loggie contact, or email fiona.boyle@hendersonloggie.co.uk

VAT Anomalies identified in Budget 2012

In the recent Budget the Chancellor announced that they would be addressing certain VAT anomalies and closing VAT loopholes where they felt businesses had a tax advantage. The following gives a brief summary of these apparent anomalies and the steps taken to address them;

  • Hot food – The measure to ensure all hot food is standard rated has quickly become known as the ‘pasty tax’, however this measure does not only include items commonly sold in bakeries. Previously some items that were cooked without the intention of being consumed hot qualified for zero rating. These changes have been put in place to ensure all food that is heated to be sold to the consumer will now carry 20%. This will only apply to food that is ‘above ambient air temperature’ when sold to the consumer, however it will be interesting to see how HMRC intend to record the temperature of such food at the point of sale.
  • Sports drinks – prior to the Budget certain sports drinks qualified for zero rating by being classed as nutritional rather than a drink to quench thirst. In order to bring consistency to this area all drinks of this nature will be taxed at the standard rate from 01 October 2012.
  • Self-storage space – Providers of such services allocate their customers and area of land to occupy, therefore their service can qualify for exemption. Providers of other types of storage (such as removal companies) which do not supply a specific area of land have always had to tax their supply. The new legislation will make all supplies of storage space taxable.
  • Hairdressers chair rental – Many salons charge chair rental to stylists to use their premises and facilities. The new legislation ensures that this supply will be taxable at the standard rate and cannot be treated as an exempt licence to occupy land.
  • Approved Alterations to listed buildings – The zero rating benefit of alterations to listed buildings will be removed from 1 October 2012. This benefit was originally in place to restore or enhance listed buildings, however HMRC have felt that the alterations that were covered by this were unnecessary for heritage purposes. There is also a proposal to remove the zero rated supply of a substantially reconstructed protected building.
  • Holiday Caravans – At present the sale of holiday caravans qualifies for zero rating, however from 1 October this will only apply to caravans that are designed for year round occupation, which have to meet a specific British Standard. Any holiday caravan that does not meet this will be taxed at the standard rate.

If you are affected by any of these changes and wish further advice on these then please contact a member of the HL VAT team who can help you with these, or any other issues, or email fiona.boyle@hendersonloggie.co.uk

Changes to Intrastat declarations

From 1 April 2012, Intrastat (the collection of statistics of EU trade) declarations must be submitted by the 21st day of the following month. This means declarations will be due 21 days after the month in which there has been EU trade. For example HMRC must receive your declarations for trade in March 2012 by 21 April 2012.

From 1 April 2012, HMRC will not accept Intrastat declarations on the existing paper forms. Declarations will now need to be made using online forms or other electronic formats (CSV or EDI).

If you would like further information, please get in touch with your usual Henderson Loggie contact, or email fiona.boyle@hendersonloggie.co.uk

iXBRL

Since 1 April 2011, all companies and organisations have had to file their Company Tax Return online for any accounting period ending after 31 March 2010. Most companies have to submit their accounts in iXBRL format too. From the same date, companies and organisations have had to pay any Corporation Tax and related payments due electronically (for example by Direct Debit).

Inline eXtensible Business Reporting Language (iXBRL) is a way of embedding and displaying accounting/financial information in an HTML document, the universal language for web browsers. It allows data to be 'read' intelligently by a computer and also presented in a human-readable form.

An XBRL tag must be attached to the following data where there is an XBRL tag within the minimum tagging list corresponding to the data item:

  • all instances of data within the balance sheet, profit and loss account and notes to the accounts
  • the Directors' report and Auditor's report (to the extent that data within these are within the Directors' report and Auditor's report sections of the taxonomy).

To comply with the legislation the accounts and computations must be tagged at least in accordance with the Minimum Tagging Lists. However, the legislation also provides HMRC with the authority to accept returns where XBRL tagging falls short of this standard of accuracy and completeness. During a 2 year transition period, HMRC will not reject returns where XBRL tagging is inaccurate or incomplete.

Paying Corporation Tax electronically - electronic payment doesn't just mean online payment. It can also include BACS, Direct Debit, CHAPS, debit and credit card payment along with any other approved electronic means.

If you would like further information on implications for your business, please get in touch with your usual Henderson Loggie contact, or email fiona.boyle@hendersonloggie.co.uk

Real Time Information

Real Time Information (RTI) is being introduced to improve the operation of PAYE. It should make the PAYE system easier for employers and HM Revenue & Customs to operate, and employees will receive information more quickly.

The fundamentals of PAYE are unchanged; RTI just changes how and when employers and pension providers report information to HMRC. Under RTI, employers and pension providers will tell HMRC about tax, National Insurance contributions (NICs) and other deductions when or before the payments are made, instead of waiting until after the end of the tax year.

Although RTI should make the PAYE process simpler, less burdensome and more accurate in the long term, it is inevitable that the transition will involve cost to employers, whether in terms of time or money.

Employers and pension providers will begin to use the RTI service in the period April 2013 to October 2013. All employers will be using the RTI service by October 2013.

If you would like further information on implications for your business, please get in touch with your usual Henderson Loggie contact, or email fiona.boyle@hendersonloggie.co.uk

Seed Enterprise Investment Scheme

A new tax-advantaged venture capital scheme, similar to the Enterprise Investment Scheme (EIS) was outlined in the Chancellor’s Autumn Statement in November 2011. This is aimed at encouraging investment in smaller, early stage companies, by individuals.

The Seed Enterprise Investment Scheme (SEIS) will be focused on smaller, early stage companies carrying on, or preparing to carry on, a new business in a qualifying trade. The scheme will make available tax relief to investors who subscribe for shares and have a stake of less than 30% in the company.

The relief will apply to investments made and shares issued on or after 6 April 2012.

For the first year of the new scheme, the Government will offer a Capital Gains Tax (CGT) holiday, meaning that gains realised on the disposal of assets in 2012-13 that are invested through SEIS in the same year will be exempt from CGT.

Investors may invest up to £100,000 in a tax year into a qualifying company, and receive immediate Income Tax Relief at 50%, even if their own tax rate is lower.

If you would like further information, please get in touch with your usual Henderson Loggie contact, or email fiona.boyle@hendersonloggie.co.uk


Please remember when investing your capital or the income produced is not guaranteed and can fall as well rise. Any references to tax and legislation is based on our understanding of law and HM Revenue & Customs practice at the date of publication. Tax and legislation are liable to change. Tax relief may be altered and the value to the investor depends on their financial circumstances. The purpose of this article is to provide technical and generic guidance and should not be interpreted as a personal recommendation or advice.

Henderson Loggie Financial Services Ltd is authorised and regulated by the Financial Services Authority.
 

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Henderson Loggie Financial Services

Contact us about our full range of financial services including wealth management, pensions and insurance advice for both private individuals and corporate clients. Our professionally qualified, independent advisers provide a personal service to clients across Scotland.

Contact Susan Pringle on 01382 207067

Registered office:
Royal Exchange
Panmure Street
Dundee
DD1 1DZ
Registered in Scotland No: SC200834
Financial Conduct Authority No: 192409
VAT No: 828 7626 88

Henderson Loggie Financial Services Limited is authorised and regulated by the Financial Conduct Authority.  Trust and tax planning are not regulated by the Financial Conduct Authority.