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March 2011 - E-NEWS
Please browse through this month’s articles using the links below and contact us if any issues or questions arise.
- Childcare Support Changes
- Time Running Out On Retirement at 65
- Right to Request Flexible Working Extended
- ‘Game Up’ Warning on Offshore Non-Compliance
- Deliberate Defaulters Told ‘Taxman Will Be Watching You’
- SMEs Urged To Keep Business Records in Shape
- Higher rate taxes to scoop up more people
- Penalties for Late Filing of Your Income Tax Returns
- Is Your Business Base Your Home?
Businesses are reminded that the rules on employer-supported childcare will change for higher and additional rate taxpayers from 6 April 2011.
The new rules will apply to the following types of employer-supported childcare:
- childcare vouchers provided to the employee by their employer for qualifying childcare.
- an arrangement where an employer arranges directly with a registered provider to offer qualifying childcare to employees.
Both forms of employer-supported childcare are currently free of tax and national insurance contributions on the first £55 per week and, at present, higher rate taxpayers benefit from at least double the amount of income tax relief received by basic rate taxpayers.
The changes HM Revenue & Customs (HMRC) is introducing from 6 April mean that any new entrants to such schemes from this date will receive the same level of tax relief, regardless of earnings.
Employees already in a scheme prior to 6 April will receive their current level of tax savings unless they leave the scheme or are no longer eligible to participate.
From 6 April, employers will need to assess employees’ basic employment earnings for the coming tax year, including pay and taxable benefits but excluding potential bonus and overtime payments. An assessment will also be required when an employee joins the scheme other than at the start of a new tax year.
The basic employment earnings figure, after deducting the employee’s personal allowance, sets the amount of employer-supported childcare on which the employee receives tax relief, with the end result that all employees will receive relief equivalent to basic rate relief at 20 per cent on £55.
The maximum value of exempt income in the form of childcare vouchers or directly contracted childcare from 6 April, for new joiners of such schemes, is set out in the table below.
|
|
Basic rate (20%) |
Higher rate (40%) |
Additional rate (50%) |
|
Weekly |
£55 |
£28 |
£22 |
|
Monthly |
£243 |
£124 |
£97 |
|
Annual |
£2,915 |
£1,484 |
£1,166 |
LINK: More information from HMRC
Time Running Out On Retirement at 65
Employers are reminded that they only have a limited time remaining to set in motion procedures to retire staff at the age of 65.
The Default Retirement Age (DRA) is being phased out this year, which means that employers will no longer be able to automatically retire employees because they have reached 65.
From 6 April, employers will no longer be able to issue notifications of retirement using the DRA procedure.
If notifications are made before 6 April 2011 in accordance with DRA procedures, employers will be able to continue with the retirement process as long as the retirement is due to take place before 1 October 2011 and the employee will be aged 65 by the same date. No retirements using the DRA procedure will be possible from 1 October 2011.
From 1 October 2011, employers will not be able to compulsorily retire their employees, unless the retirement can be objectively justified in their particular circumstances.
LINK: Guidance from Acas
Right to Request Flexible Working Extended
Workers’ right to request flexible working is to be extended under a change to be introduced from 6 April, businesses are reminded.
Employees are currently eligible to request flexible working to care for a child aged under 17, a disabled child aged under 18 who receives disability living allowance or certain adults who require care.
From 6 April 2011, the right to request flexible working will be extended to workers where the child involved is under the age of 18, whether the child is disabled or not.
Also from 6 April 2011, employers will be able to recruit a job candidate or promote an existing employee who has a protected characteristic if they are of equal merit to another candidate or employee and the employer reasonably thinks that people with that characteristic:
- are underrepresented in their existing workforce or
- suffer a disadvantage connected to that characteristic.
The relevant protected characteristics are:
- age
- disability
- gender reassignment
- marriage and civil partnership
- pregnancy and maternity
- race, ethnic or national origin, colour and nationality
- religion/belief or lack of any religion/belief
- sex
- sexual orientation.
From 3 April 2011, employees will gain the right to additional paternity leave and pay (APL&P) where their partner is due to give birth on or after 3 April or they have been notified on or after 3 April that they have been matched with a child for adoption.
Additional paternity leave (APL) will allow an employee to take up to 26 weeks' leave to care for the child. They will only be able to start APL 20 or more weeks after the child's birth or placement for adoption and/or after their partner has returned to work from statutory maternity or adoption leave or ended their entitlement to statutory maternity or adoption pay, or maternity allowance.
The APL must also end by the end of the 52nd week after the child's actual birth or placement for adoption.
Additional statutory paternity pay (ASPP) will only be paid during the time their partner would have received statutory maternity or adoption pay, or maternity allowance.
LINK: Business Link regulation updates
‘Game Up’ Warning on Offshore Non-Compliance
New penalties of up to 200 per cent could be imposed on anyone hiding money offshore, HM Revenue & Customs (HMRC) has warned.
From 6 April 2011, penalties for offshore non-compliance – for income tax and capital gains tax – will be linked to the tax transparency of the country involved, with higher penalties introduced for under-declared income and gains from territories that do not automatically share tax information with the UK.
David Gauke, Exchequer Secretary to the Treasury, said: "The game is up for those going offshore to evade tax. With the risk of a penalty worth up to 200 per cent of the tax evaded, they have a great incentive to get their tax affairs in order.”
Dave Hartnett, Permanent Secretary for Tax at HMRC, said: "These new penalties will increase the deterrent against offshore non-compliance. They build on other activity, including signing tax information exchange agreements, requiring information about offshore bank accounts and disclosure opportunities, including the Liechtenstein Disclosure Facility (LDF)."
The new penalties for income tax and capital gains tax non-compliance classify territories into three groups that determine the level of penalty that applies to non-compliance. These are:
- where the income or gain arises in a territory in category 1, the penalty rate will be the same as under existing legislation
- where the income or gain arises in a territory in category 2, the penalty rate will be 1.5 times that in existing legislation - up to 150 per cent of tax
- where the income or gain arises in a territory in category 3, the penalty rate will be double that in existing legislation - up to 200 per cent of tax
The first self assessment returns to which the penalties would apply are those concerning the 2011-12 tax year (filed by January 2013).
LINK: Details of new penalties
Deliberate Defaulters Told ‘Taxman Will Be Watching You’
Tax cheats have been warned they face up to five years of detailed scrutiny by HM Revenue & Customs (HMRC).
Starting in February, letters have been going out to 900 known evaders, warning them they will be subject to increased levels of personal scrutiny as part of the new Managing Deliberate Defaulters (MDD) programme.
The programme will closely monitor the tax affairs of individuals and businesses who have deliberately evaded tax to ensure that they are complying with tax obligations on an ongoing basis.
HMRC said that anyone tempted to break tax rules could face continued and close scrutiny for five years if they do so.
The level and term of monitoring will depend on the seriousness of the offence but HMRC does not anticipate that anyone will be released from the programme within two years.
HMRC will continue to check that returns are filed on time and that any tax that is due is paid on time, with regular reviews of deliberate defaulters’ tax affairs to check that any errors or failings have been put right.
Safeguards are also being put in place to ensure that deliberate defaulters do not escape scrutiny by simply starting up a new business under a different name or identity. In these instances, HMRC may continue to monitor the new business.
LINK: The Managing Deliberate Defaulters Programme
SMEs Urged To Keep Business Records in Shape
HM Revenue & Customs (HMRC) have launched new tools to help small businesses, sole traders and the self-employed keep their records in shape.
Four new products were launched in February, ahead of the introduction of HMRC’s new Business Record Checks programme later this year, which will impose penalties for significant record-keeping failures.
Brian Redford, HMRC’s acting director, Business Customer Unit, said: “It may seem like a challenge, particularly when you’re starting out, but keeping good records will bring real advantages to your business.
“Get a proper system in place and you’ll not only be confident that you are paying the right tax, but you’ll keep up-to-date with how much you owe suppliers and how much you are owed.
“Later this year, HMRC will start a programme of Business Records Checks that will look at the adequacy and accuracy of business records in SMEs to bring about a major improvement in the standard of record-keeping. Now is the time to invest a bit of effort to make sure your business records are perfect.”
LINKS
Keeping records for business - what you need to know: www.hmrc.gov.uk/factsheet/record-keeping.pdf
A general guide to keeping records for your tax return: www.hmrc.gov.uk/sa/rk-bk1.pdf
Set up a basic record-keeping system: www.businesslink.gov.uk/recordkeeping
Find out what records you should be keeping: www.businesslink.gov.uk/recordkeepingcheck
Higher rate taxes to scoop up more people
As many as 750,000 income taxpayers could find themselves in a higher tax bracket this April, a new study has claimed. According to the Institute for Fiscal Studies (IFS), three-quarters of a million will see some of their earnings lifted into the 40p in the pound tax band come 6 April.
The threshold at which people start to pay the 40 per cent tax rate is to drop from £43,875 to £42,475 from that date. As a result, once the rise in the personal allowance is taken into account, the higher 40 per cent rate will apply to incomes above £35,001.
IFS calculations pointed out that the best-off 10 per cent of households will, on average, shed 3 per cent of their net income as from April compared with an average of 1 per cent for the rest of the country.
A senior research economist at the IFS said: “The way that the government has increased the personal allowance to ensure that higher rate taxpayers don’t gain will increase the number of higher rate taxpayers by 750,000. We calculate that a further 850,000 would be brought into this higher rate bracket by 2014-15 if the government reaches its ambition of a £10,000 allowance in the same way.”
With several changes planned for the tax system, now may be a good time to look at your own personal tax planning. We are here to make sure that you pay no more tax than you should be paying.
Penalties for Late Filing of Your Income Tax Returns
New late filing and late payment penalties will apply from 6 April 2011 (in relation to tax years ending after 5 April 2010) for personal, trust and partnership returns.
The existing rule that the late filing penalty is the lower of £100 and the balance due will be replaced. That is hardly a surprise, but the good news is that the level of the basic £100 penalty remains.
The penalties for late filing will include:
- £100 penalty immediately after the due date for filing (whether or not the tax has been paid)
- Daily penalties of £10 per day for returns that are more than 3 months late, running for a maximum of 90 days
- Penalties of 5% of tax due for the return period (or £300 if greater) for prolonged failures, which arise after 6 months and again after 12 months
- Higher penalty of 70% of tax due where a person fails to file for over 12 months and has deliberately withheld information necessary for HMRC to assess the tax; this is 100% if deliberate with concealment)
Rest assured, we will do all we can to file your tax returns on time, but the consequences of that not happening are about to get worse.
Is Your Business Base Your Home?
If you are self-employed and do the core work at the premises of the client, there may have been doubts before in being able to claim that your business base is your home. That can seriously restrict the scope for claiming tax relief on travel costs to and from your home to your various places of business.
Following a new tax case that could change this, it was decided that a sub-contractor must have a base for his business. The same could be said of other businesses, where your work on issues such as plans and quotes at home must be a part of your trading activity which does not therefore cease when you arrive at home to deal with these. Accordingly your base for the business is your home.
We will have to wait and see whether this decision is appealed against, but subject to that, we will ensure that any claim for tax relief for you is fully explored.
HWB
Chartered Accountants, Highland House, Mayflower Close, Chandlers Ford, Eastleigh,
Hampshire, SO53 4AR.
