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The Ask Howards Archives 

At Howards our expert team is available to help you whenever you need it. With nearly 20 years’ experience our firm is the best choice for local advice on business, accounting, tax, and payroll issues. As a successful Stafford firm of accountants, we add value by sharing best practice and advice with those who need it. Here is our archive of useful questions that we have been asked over the years.

These are some of the most pressing questions that our team of nearly 50 consultants, directors, managers, seniors, semi-seniors and trainees have been presented.

 If you have a question that you feel others will benefit from knowing the answer, please contact us and we will take a look.

CONSTRUCTION INDUSTRY SCHEME

Q: I AM A SELF-EMPLOYED KITCHEN FITTER DOING WORK FOR PRIVATE HOME OWNERS, AND AT TIMES I NEED TO USE AN ELECTRICIAN OR PLUMBER. DO I NEED TO DECLARE THESE PAYMENTS THROUGH THE CONSTRUCTION INDUSTRY SCHEME (CIS)?

Where work undertaken is contracted between yourself and a private householder, the work you do will be classified as outside the scope of CIS.

However where you have to subcontract a part of the job to another, this will be treated as a new contract and dependent on the specific work undertaken for that job then it could fall within the Construction Industry Scheme.

For example, if the work undertaken involved the moving of the sink or the installation of additional electrical sockets in a pre-existing kitchen then the work would not fall within the scope of CIS.

However, potential situations where the work would fall within the scope of CIS, would be –

The electrical work undertaken in the kitchen was part of a contract to rewire the whole house.
The fitted kitchen was being installed in a new extension to the property. (In this case you could fall within CIS as both a contractor and subcontractor if the extension was contracted to a third party).
Of course, in these circumstances if you were to recommend a plumber or electrician to the householder and they themselves agreed the job to be done, the price and paid them direct, t

They would not fall within your contract and you would have nothing to report.

Q: I HAVE JUST BOUGHT A HOUSE FOR RENTING OUT WHICH REQUIRES WORK DOING ON IT TO BRING IT UP TO THE REQUIRED HABITABLE STANDARD. WILL I HAVE TO BE REGISTERED WITH HMRC AS A CONTRACTOR UNDER THE CONSTRUCTION INDUSTRY SCHEME FOR THE WORK DONE?

If it the work to be undertaken is of a minor nature (for example, painting, electrical work etc.) then you would have no need to register as a contractor, however should the work be more extensive for example changing the floor plan by for example adding an extension or another floor, or converting a property into individual flats then you may fall within the construction industry and we would recommend that you requested further advice before you undertake the project.

TAX & VAT

Q: I KNOW MY TAX CODE IS IMPORTANT, BUT HOW DO I CHECK IT AND WHAT SHOULD I DO IF I THINK IT’S WRONG?

Employers and pension providers use tax codes to tax earnings and pensions correctly at source and they also help HM Revenue & Customs (HMRC) to collect taxes due. If your tax code is incorrect you could end up paying too much. Reimbursements are not automatic so you will have to make a claim to get your money back. On the other hand, if you’ve underpaid, you could receive an unexpected tax bill.

Check what your tax code means at https://www.gov.uk/tax-codes. If you think your code is wrong talk to your accountant or contact HMRC direct on 0300 200 3300.

Q: ONE OF MY EMPLOYEES WILL FOR THE FIRST TIME BE WORKING ABROAD IN EUROPE FOR THE NEXT 5 MONTHS. WHAT ARE THE TAX AND NATIONAL INSURANCE CONSEQUENCES?

For tax purposes as the employer is still contracting to you, in most cases you will continue to deduct PAYE tax through the payroll as normal, however you should provide the employee with a statement that shows:-

The date the work starts abroad.
The gross pay and the tax deducted from the 6 April to the date they left the country.

In addition you must notify HMRC of the details by contacting the employers helpline and HMRC will tell you if you meet one of the exemptions from operating PAYE.

If the employee is on a overseas contract, then the country where the work is undertaken may require tax to be paid there, it is worth checking with the relevant tax authority.

In any case for European countries double tax agreements do apply and the employee can request any overseas tax is offset against his UK tax liability.

For National Insurance purposes, National Insurance is normally deducted in the country where the work is undertaken however where the work abroad is temporary you will need to obtain a CA3822 from HMRC through your Government Gateway account, this will allow the NIC deductions to continue to be deducted and paid in this country. If the employment is extended and exceeds 1 year then dependent on the European country is in the EU or not (for example Iceland) you should seek advice due to potential rule changes.

If you do not obtain the CA3822 you and the employee will end up liable for both the NIC in this country and the social security costs in the country where the work is undertaken.

Q: IT'S THE END OF THE TAX YEAR AND I HAVEN'T RECEIVED A P60. WHAT SHOULD I DO?

Your employer is legally obliged to provide your P60 no later than May 31 following the end of the tax year. It may be a paper or electronic document.

Check if your employer has issued your P60 and when you can expect it. If it has been issued, check how your employer sent it. If it was issued electronically, for example, has it gone to the right email address? If it was posted and has gone astray or you have lost it, ask your employer for a duplicate. Employers are required to keep these records for 3 tax years.

Also, if your employer has notified HMRC of your P60 details, you will be able to view them via your personal tax account. Find it at https://www.gov.uk/personal-tax-account. Your income from employment is held here for 5 years.

If your employer doesn’t provide a copy of your P60 and you can’t find the details via your online tax account, notify HM Revenue & Customs (HMRC).  It can’t supply a copy of your P60 but can provide a statement of your total employment earnings. HMRC can penalise employers who fail to provide their employees with a P60.

Q: NOW WE ARE HEADING BACK TO NORMAL I WISH TO SAY THANK YOU TO MY EMPLOYEES FOR THEIR HARD WORK DURING THE PANDEMIC BY TAKING THEM ON AN AWAY DAY TO A THEME PARK, ARE THERE ANY TAX IMPLICATIONS TO ME IN DOING THIS?

Yes, I am afraid there are, as the thank you would be treated as a tax benefit subject to tax and National Insurance. The reasons are the event can’t be treated as staff training, or as part of the staff entertainment annual allowance, (as this been deemed as a one-off event rather than an annual event).

Rather than having to complete P11d’s for the employee’s tax and a P11Db for the National Insurance due, you can arrange with HMRC to pay the tax and National Insurance through a PAYE Settlement Agreement.

There is an alternative though, instead of saying thank you for the work they have done, you could instead give the employees on an occasion (in this case we will say Easter or their birthday), a voucher for the theme park, up to the value of £50.00. In doing it this way, there will be no tax or National Insurance to pay by the employer or the employee.

Q: ONE OF MY EMPLOYEES WHO RENTS A CYCLE FROM US FOR USE QUALIFYING WORK JOURNEYS IS CURRENTLY WORKING FROM HOME. WILL HE HAVE TO RETURN THE BIKE TO AVOID A BENEFIT IN KIND?

No, as long as the employee joined the scheme prior to 20 December 2020, they will not have to return the bike and can still use it for their personal use for example exercise. This will apply until 5 April 2022 when the previous conditions will be reapplied.

Q: I WILL NO LONGER TO BE ELIGIBLE TO BE VAT REGISTERED FROM THE END OF THE MONTH, BY WHEN DO I NEED TO NOTIFY HMRC AND WHAT DATE SHOULD I USE?</p> <p>

You need to notify HMRC of your cancellation request within 30 days otherwise you may get a penalty.

As VAT will strictly apply until 23:59 hours on the last day of the month, (or whatever date you use). The correct notification date would be the day after, for example in your case it would be the 1st of the following month.

Q: I am late in notifying HMRC that I have to register for VAT, what are the consequences?

If your registration for VAT is late, (that is 30 days after you exceeded the VAT threshold), you could end up with a failure to notify penalty.

These penalties are based on the reason for the delay, (known as your behaviour), how you help HMRC with resolving the problem and the amount of tax due.

For example, if you had been ill when the 30 days period expired, and you immediately registered when you were well again, you would not incur a penalty as you would be able to demonstrate you had a reasonable excuse.

If you don’t have a reasonable excuse, then dependent on why you had failed to register you are looking at a minimum penalty of 30% based on the tax you owe. However all is not lost, for example if the reason for delay was non-deliberate, you notify HMRC within 12 months of tax becoming due, and you fully co-operate with HMRC you would end up with no penalty to pay.

Q: AS A LARGER BUSINESS i puT IN A FORECAST OF MY profits for this year and have a rather large corporation tax bill to pay. Given that my profits have slumped during the coronavirus crisis, will I be overpaying tax and if so what should I do about it?

UK businesses overpaid £9bn in corporation tax last year. This is a 12.4% increase on the previous year. Could you have been one of them? Moreover, the CT you pay this year is even more likely to have been overpaid, given the slumping profits during lockdown.

Many larger businesses are required to pay CT based on forecast profits for the forthcoming year and are thus likely to overpay if profits suddenly fall. If you made estimates of your profits prior to lockdown, you may well have overpaid, you should revise your estimate and adjust your payments. In addition, any losses you make this year can be carried back to reduce liabilities- so you should be claiming a refund.

With CT instalment payments there is no system for overpayments to be refunded automatically. So if you don’t proactively claim a refund, HMRC could hold on to your money. It might be best to file your year end tax return as soon as possible as this will speed up the process of reclaiming an overpayment. Where the tax return has not been submitted the process becomes more tortuous.

Q: ONE OF MY EMPLOYEES HAS A COMPANY VAN PROVIDED FOR BUSINESS JOURNEYS ONLY, THERE IS A PROHIBITION ON PRIVATE USE IN PLACE AND HE KEEPS MILEAGE RECORDS. HE HAS ASKED TO USE IT WHEN HE MOVES HOUSE? ARE THERE ANY TAX CONSEQUENCES IF WE ALLOW THIS?

Even though there is a prohibition in place on private use of the van, some private incidental use is allowable.

Incidental private use can be a difficult to interpret as the general rules are

  • it only taking place a few days per year.
  • the use is intermittent and irregular.
  • does not follow a regular pattern.
  • the use is insignificant when taking into account the overall use of the van.

For example you may think using the van for a week’s holiday would be insignificant, however that is not the case, and this would lead to a van benefit being charged.

HMRC do supply some examples of what they class as insignificant private use for example calling at a newsagent on the way to work, a trip to the dentist or a trip to the tip once or twice a year to take rubbish.

As long as permission was obtained first from you, the house move was local and it was dealt with in a day, we would consider the conditions were met and therefore no tax or national insurance would be due.

PAYROLL

Q: I AM ABOUT TO TAKE A NEW MEMBER OF STAFF ON AND BEFORE I DO I WANT THEM TO UNDERTAKE AN UNPAID WORK TRIAL. CAN I DO THIS?

Yes, you may be able to undertake an unpaid work trial for the employee, however there is nothing in the legislation that states exactly how long a work trial should last, before the work should be treated as employment subject to the National Minimum Wage (NMW).
Factors which should be considered if a work trial is to become paid employment include–
1. The length of the work trial, should not exceed the length of time for the employer to test the person’s ability to do the job. This could be as little as 1 hour; in most cases the unpaid trial should not last longer than a day.
2. The extent to which work trial is observed.
3. How do the work trial tasks relate to the job offered?
4. Do the tasks undertaken offer value to the employer and exceed the actual test needed for the job?
5. Can the trial be shown as a way that the employer is trying to reduce their costs?
Whilst there are potential administration costs by treating the work as employment, due to the fact if you did get this wrong, (HMRC National Minimum Wage enquiry or employment tribunal), we would recommend it would be cheaper to operate the NMW for the hours if you are not certain the trial would meet the necessary tests ultimately to the satisfaction of a tribunal.

Q: One of my employees on the trade counter who is on the national minimum wage has asked if he can purchase goods at a cost and have the payment deducted from his wages. Are there any implications from this?

Yes, there are, even though as an employer you will not profit from the transaction and the employee has agreed to this, the deduction will be treated as a benefit to the employer and therefore will reduce the earnings below the National Minimum Wage.

Should however the employee purchase and make payment direct to you from the wages he has received, this would not result in you paying below the minimum wage.

COVID SUPPORT

q: What records do I need to keep to ensure my claim to the Self-Employed Income Support Scheme (SEISS) is correct?

There are 2 grants made under the SEISS and for both of them to apply you will have to demonstrate you will were adversely affected financially by COVID 19.

Whilst the same criteria applies to each grant, the timing of eligibility does have a bearing on which grants you can apply for. The first grant covers the period from March 2020 to 13 July 2020. The second grant covers the period from 14 July 2020 until the 19 October 2020.

Whilst health matters and a reduction in your work could lead to you being financially impacted. Don’t forget that if you have had an increase in costs due to the pandemic, then this would also lead to you having a valid claim. Such additional costs could include having to buy protective equipment to ensure you can trade following social distance rules.

The records we would recommend you keep are –

  • Shielding letters – If you have had to shield or haven’t been able to work as you have had caring responsibilities due to COVID 19.
  • Any NHS correspondence or a record of the dates if you have been incapacitated or have had to self-isolate due to COVID 19 and unable to work.
  • Bank statements, business accounts which show a downturn in your turnover.
  • Confirmation of any coronavirus related business loans received.
  • Emails/letters if you have any work cancelled/delayed, or payment has been delayed.
  • Dates that your business was closed due to lockdown restrictions.
  • Invoices/receipts of all protective equipment purchased.

Finally don’t forget the grants are treated as income for tax purposes and will need to be included as such in your tax returns for the accounting period in which they were received.

Q: I am worried someone may have set up a limited company in my name and fraudulently received Coronavirus Loan. Can I check if any company has been set up in my name?

Yes you can check digitally. Just go to Companies House website at the following link (https://find-and-update.company-information.service.gov.uk/ ) and type in your name. Should you unfortunately find an entry using your name, which doesn’t belong to you, then immediately contact companies house by email enquiries@companieshouse.gov.uk or by telephone on 0303 1234500 between the hours of 8.30 a.m. and 6.00 p.m. Monday-Friday.

We would also recommend that you immediately report the fraud to ActionFraud -https://www.actionfraud.police.uk/