April 2011 - E-NEWS

Please browse through this month’s articles using the links below and contact us if any issues or questions arise.

• Online Filing Plans under Fire
• Employers Set To Say ‘You’re Hired’ To More Apprentices
• HMRC Told ‘Go Back To Drawing Board’ On Record-Keeping Drive
• Advisory Fuel Rates For Company Cars
• New Disclosure Opportunity
• The Office of Tax Simplification
• Delay to new time to train rules gets a welcome
• Sickness absence system to undergo a health check
• Corporation tax still too high

Online Filing Plans under Fire

Government plans to impose online filing on all the main businesses taxes have been criticised by tax campaigners.

The 23 March Budget confirmed that all businesses will be required to register and de-register for VAT and notify changes online from 1 August 2012, as well as filing VAT returns online and paying VAT electronically for VAT periods beginning on or after 1 April 2012.

Online VAT filing and electronic payment are already compulsory for businesses with a VAT-exclusive turnover of £100,000 or more, and those newly registering for VAT, regardless of turnover.

The government is also to consult on mandating use of the new online Registration Wizard for corporation tax, income tax self-assessment, class 2 National Insurance contributions, PAYE and VAT.

Robin Williamson, technical director of the Low Incomes Tax Reform Group said: “We have seen people with disabilities that prevent them from using computers and very small businesses whose profit margins are so small that the cost of computers, broadband and training, or of appointing a professional agent, would have to be paid for by the proprietors in person.

“This they may not be able to afford, if (as is often the case) the proprietors themselves are on low incomes. Any move by the Government to compel online filing in such cases is disproportionate, and risks driving those people out of business altogether.”

He added that last November, Minister for the Cabinet Office Francis Maude had said that every government service must be available to everyone “no matter if they are online or not.”

LINK: HMRC online services

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Employers Set To Say ‘You’re Hired’ To More Apprentices

Business organisations have welcomed plans, announced in the March Budget, to increase the number of apprenticeships over the next four years.

Chancellor George Osborne said there would by £180 million for up to 50,000 extra apprenticeships over the next four years. They include 40,000 places to support young employed people, particularly as they move on from work experience programmes.

The government will also support business consortia with grants to set up and main advanced and higher apprenticeship schemes, creating a further 10,000 apprenticeships.

Research has shown that 80 per cent of those who employ apprentices agree that they make the workplace more productive.

The Federation of Small Businesses said that with almost seven in ten existing apprenticeships currently taking place within small firms, the extra places were a “significant development for the small business community and young people alike” while the British Retail Consortium – representing a sector that employs a million under-25s – said that the government was “right to support apprenticeships”.

Currently, there are more than 85,000 employers offering apprenticeships in England in 130,000 locations and in 200 job roles.

LINK: National Apprenticeship Service

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HMRC Told ‘Go Back To Drawing Board’ On Record-Keeping Drive

A proposal by HM Revenue and Customs (HMRC) to start making large-scale checks of business records before relevant tax returns are submitted is misguided, according to the Chartered Institute of Taxation (CIOT).

HMRC is proposing to use powers in the Finance Act 2008 to check the business records of up to 50,000 SME businesses annually, beginning in the second half of 2011, and to impose penalties for poor record keeping.

Anthony Thomas, CIOT deputy president, said the CIOT supported efforts to improve business record-keeping.

But he added: “We do not believe this project will meet that objective. Its purpose seems to be more about raising money through penalties than about helping businesses improve their systems.

“HMRC are putting forward a blunt instrument designed to deliver punishment when what is needed is a collaborative process focused on providing education, guidance and support. We think they need to revert to the drawing board on this.

“We think that the legal basis for levying penalties as a result of such a check prior to submission of a return is questionable unless there is a failure to keep any records at all or there has been a failure to preserve them.

“A penalty should only be levied once it has been proved that the bookkeeping records have led to an incorrect return.”

HMRC says that although keeping adequate and accurate business records allows businesses to comply properly with their tax obligations, its random enquiry programme suggests that poor record keeping is a problem in around 40 per cent of around five million SME cases.

With research indicating that poor business record keeping generally leads to an underassessment of tax, HMRC estimates that it could be losing out on tax payments in up to two million SME cases each year.

LINK: Consultation on business record checks

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Advisory Fuel Rates For Company Cars

Published guidelines are issued by HMRC. The stated aim is to save time for all concerned by setting out figures which they reckon can be used in the majority of cases

They are only advisory, and can apply where the employer reimburses the employee for fuel for business travel in a company car or where the employer requires the employee to repay the cost of fuel for private travel in a company car.

They are reviewed every 6 months, but more frequently at HMRC’s consideration if fuel prices fluctuate by 5% from the current rate and that is likely to be sustained. Indeed the 1 December 2010 rates, based on petrol at 119p per litre, were increased from 1 March 2011 as follows in view of the substantial fuel price increases.

They are based on an average petrol price of 128.9p per litre. At the time of writing that already looks too low, so we can expect more increases in the advisory rates.

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New Disclosure Opportunity

Any taxpayers who have some undeclared income should take a serious look at the latest opportunity offered by HMRC to get their tax affairs sorted out with usually no questions asked and lower penalties applying than would be the case if HMRC approached them.

Although this new opportunity is supposedly aimed at plumbers, (hence the name “Plumbers Tax Safe Plan), HMRC makes it clear that in fact it is open to anybody whatever the source of income or capital gains and whether an individual or limited company.

To take advantage of this scheme there is a requirement to notify by 31 May with the actual disclosure plus payment being made by 31 August. Penalties will normally be 0%, 10% or 20%, depending on the circumstances. This is less than would normally be the case, and there is the added aspect that if the taxpayer can show that the extra tax to pay arose despite him or her taking reasonable care it means that HMRC can only go back 4 years.

We will be pleased to assist any taxpayer who has something to disclose. And we will make sure they get the best deal available.

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The Office of Tax Simplification

They have published their interim report on simplifying the tax system for small businesses, and the likely response is a feeling of disappointment that so few specific ideas are being put forward.

To be fair, the OTS makes it clear that they now seek the Chancellor’s views and further instructions, and they also ask for views to help them develop their final report which is due later this year, but even so one could have expected more to come out at this stage.

There is consideration of a simpler tax regime for very small businesses with turnover below £20,000, and the future of IR35, but the tone of the report does not suggest the existence of any real commitment to simplify.

Let us hope that this will not turn out to be an opportunity missed. As and when any real changes are announced we will see exactly how we can use them to your advantage.

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Delay to new time to train rules gets a welcome

One of the continuing complaints of British firms is the level of red tape they face, and the time and resources that complying with the rules take up.

There has, however, been some good news on the employment law front. The Government has decided to delay the introduction of new rules on the right of employees to request time off work to train. The right for employees to request time for training to improve their skills has been available to workers in large firms (those with 250 or more staff) since April 2010. But following a recent consultation, the Government is to take further time to examine the potential impact of the regulation on smaller firms. As a consequence, moves to extend the right to employees of smaller firms, due to be introduced in April 2011, have been postponed.

John Hayes, the Skills Minister, said: “It is vital that the right balance is struck between support for training and the need to minimise the burden of regulation for smaller companies. We have delayed implementation to allow further, thorough discussion, scrutiny and evaluation.” David Frost, director general of the British Chambers of Commerce, (BCC) applauded the decision: “The Government’s move to delay the Time off to Train regulations for small- and medium-sized firms is a good start, but we must go further if we are to get companies recruiting and growing their businesses.”

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Sickness absence system to undergo a health check

The Government has announced that the current employee sickness absence system is to be the subject of a comprehensive review.

The main remit of the review will be to examine how the system can be reformed so that more people can be helped to stay in work and costs for employers can be reduced. Due to report later this year, the review will also examine whether the balance of the costs of sick leave is appropriately shared between individuals, employers and the state.

Employment Relations Minister, Edward Davey said: “Managing sickness absence more effectively will be a win-win situation for all - businesses, individuals, the taxpayer and, crucially, the economy.”
The EEF, manufacturing employers’ group, argued that, despite the recent introduction of the fit note, many barriers still remain to getting people back to work. And that while large firms often have access to occupational health support, the same is often not true for SMEs. In particular, EEF wants the review to ensure that private treatment to speed up rehabilitation is not treated as a taxable benefit as it is now; and that GPs continue to assess work-related needs when issuing fit notes.

The EEF’s chief medical adviser, Professor Sayeed Khan said: “The replacement of the sick note with a ‘fit note’ has been positive by improving communication between GPs and employers. We now need to maintain this momentum by helping medical professionals take into account the part work plays in good health as well as providing smaller employers with ready-access to appropriate treatments such as physiotherapy.”

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Corporation tax still too high

The CBI has welcomed the Government’s pledge to introduce a phased reduction in corporation tax to just 24 per cent but wants to see more done to ease the tax burden on businesses, large and small.
In its submission to the Government’s consultation document – Corporate Tax Reform – the employers’ group said that the reduction in the main corporate tax rate was a good move. However, the CBI also insisted that the Government should eventually go further, once the public finances have been stabilised. To make the UK truly competitive, the rate should fall below 24 per cent at some future stage.

The CBI gave its backing to the proposed introduction of the Patent Box which will complement the existing R&D tax credit scheme by making the UK a more attractive home for holding and exploiting intellectual property.

Remember that we are here to provide expertise on all aspects of business tax.

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