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Your Most Important Questions Answered.
Here are some of the most pressing questions that our team of nearly 50 consultants, directors, managers, seniors, semi-seniors and trainees have been presented.
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Companies
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.
Yes, you do need to carry out a tax check code and it’s your responsibility; your advisor or agent can’t do it for you. One check is valid for more than one licence application so long as the applications cover the same type of licence. Apply online through HMRC online services. Be aware that you’ll need to confirm certain details, including the original issue date of your licence, the length of your previous licence and how you pay tax on your income.
For all business entertaining keep a record of who attended, the nature of the entertainment and its purpose. We would also suggest keeping a copy of the invitation and reply, for example emails, to demonstrate that the activity should be treated as business entertainment.
Failure to demonstrate that the entertainment was for business purposes would leave the company and directors/employees attending with duties to pay. Also, you can’t reclaim VAT on these expenses.
Employers and employees
There is no set answer regarding the overall cost of the bonus plus the tax and National Insurance, as it depends on the individual employee’s tax code and the rate of NIC which they pay. Generally, the company will be expected to gross up the net bonus payment to arrive at the correct tax and NIC to be paid by the company.
For an employee subject to basic rate tax (20%) and NIC Category A, the total cost of tax and NIC (employer’s and employee’s) will be £361.79, making the total cost to the company £861.79. For an employee paying tax at the higher rate of 40% and subject to NIC Category A, the total cost of tax and NIC will be £401.53. Therefore, the total cost to the company is £901.53.
Any electricity provided to charge all the vehicles whether it is for business or private use will not
be treated as a taxable benefit and will not be required to be reported to HMRC.
You had no choice about the change of workplace and your daily commute is now excessive so yes, you can claim for expenses incurred in working from home. Claim the full allowance of £312 per tax year if you work from home every day. Otherwise, claim it proportionally for those days you operate from home. If you work at home 2 days a week and spend 3 days in the office, you can claim £125.
Remember you can’t claim the WFH tax allowance if it’s your choice to work from home.
As you already have an internet connection, you cannot claim. The fact that you already use it personally takes precedence, so any work use is treated as incidental.
However, should you need to increase the bandwidth in order to undertake the work you will be doing, you will be able to claim the additional costs incurred as a taxable expense.
If you had never previously had a personal internet contract at home, but internet connection was required for your job, then work use would take precedence. Any private use would be treated as incidental and the cost could be claimed as a taxable expense.
For tax benefit purposes all mobile homes are treated as company cars. A benefit applies on the availability of the vehicle for private use so, based on what you say, the vehicle will be treated as a company car all the year round. However, if you only intend to use it personally at certain times, for example Easter or in the summer holidays, with planning you can reduce the potential car benefit to be paid.
When using the vehicle for purely work reasons (including travel to a temporary place of work) you could avoid the benefit by putting in place a private use prohibition notice for the dates when it will be used for business use only. Also, keep full mileage records of actual vehicle use during this time.
When you decide to use the vehicle privately, remember that any period of private use must last at least 30 consecutive days.
As long as the event is expected to be annual and not a one off the event will be non-
taxable for employees.
That said, there are other rules to follow for example there is an annual limit of £150.00 and all
employees need to be invited (but not all need to attend).
To establish the correct employment status it’s vital to take into account individual factors relating to the client business, such as working practices and contractual terms and conditions. Also consider a contractor’s potential work circumstances.
HMRC’s ‘The check employment status for tax (CEST)’ tool is very useful. If the tool can’t provide the information you need, call the Employment Status and Intermediaries helpline on 0300 123 2326.
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.
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.
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.
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.
Benchmark scale rates reduce the burden on employees and employers to produce receipts whenever employees work away from the office and purchase a meal or drink. The rates were last updated in 2016/17 and a review is due.
Although the ‘one meal amount’ remains sufficient for a lunchtime sandwich and drink, the breakfast and evening meal rates and two meal allowance don’t always cover the cost of a hot meal and drink. Unfortunately, there’s no leeway so you’ll need to apply to HMRC for a bespoke benchmark rate. If the payments meet the other conditions, we’d say it’s reasonable to increase the allowance by 10% until HMRC replies.
Basically, the Government is aligning the point at which employees start paying National Insurance contributions (NICs), known as the Primary Threshold, with the income tax personal allowance. It means workers can earn £12,570 a year without paying Class 1 NICs or the Health and Social Care Levy. So far this year you will have paid £19.00 in NICs. Therefore, you will save £5.88 per month or £53.00 during the rest of the year.
Whilst the amount you are receiving is not a great deal, it’s worth noting that once you earn more than £6,396 a year you will receive credits, which count towards the State Pension and Jobseekers’ Allowance, even though you’re no longer making NICs personally.
Yes, you do! An employee’s entitlement to holiday pay commences from the day they start work. The statutory minimum holiday leave for a full year’s employment is 5.6 weeks. You can, of course, provide additional holiday entitlement through their contract of employment. It makes no difference if someone works a standard working week or variable hours. The leave entitlement is unaffected.
It’s easy to check the holiday entitlement of an employee who has worked for you for, say, less than a year. Use the ‘calculate holiday entitlement’ tool.
The calculation for holiday pay for employees who work variable hours is based on the number of weeks worked in the last two years. This is 104 weeks, on a rolling basis. It is known as the holiday pay reference period.
To arrive at the holiday pay reference period, determine whether the employee has worked some days every week in the past 52 weeks. Alternatively, they may have worked for more than 52 weeks, but not every week. Or they may have worked for less than 52 weeks over the full 104-week cycle.
There are 2 methods to avoid the charge, both using the same principle of the company car driver keeping comprehensive business/private mileage records.
The major difference is as to how any business/private fuel used is provided in the first place. If the company provides all the fuel then the director/employee needs to repay the private miles undertaken at the advisory fuel rate. If the director/employee pays for all the fuel, then the employer will refund the business miles at the advisory rate.
As a fuel benefit charge becomes available even if 1 mile of private mileage is paid for by the company, (for example if a business journey was re-classified as ordinary commuting), we would always recommend the second option, as any payment refunded incorrectly would be treated as a taxable expense.
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.
If your temporary place of work alters and you feel your new place of work should still be considered as temporary and the 24 months rule kicks in again then you must take into account the additional time and travel costs. To be allowed, HM Revenue & Customs (HMRC) states that any changes should have a substantial effect on your journey to work.
HMRC have stated substantial means more than 10 miles
Typically, a pool vehicle will be kept at or near to the company premises overnight and at weekends. If the car is available to and used by more than one employee for work on day-to-day business journeys, it will be accepted as a company car. The exception would be if the company premises happen to be a director’s or employee’s home. Then the car wouldn’t be treated as a pool car and you would need to demonstrate it was not available for private use.
However, there are occasions when a pool car can be kept overnight at a director’s or employee’s address. For example, if an employee has a long business journey the following day requiring an early start. Then, the employee can take the pool vehicle home the night before and start the business journey from home. Whilst this would normally be classified as ordinary commuting, in this case HM Revenue & Customs would class it as part of the business journey. Therefore, there would be no private element and no car benefit would apply.
You do have to be careful, though. If employees regularly take the car home (approaching 60% of the time), HMRC will argue that the journeys are no longer incidental and should be treated as private journeys.
You need to meet the criteria to receive statutory maternity pay, which lasts up to 39 weeks, although you will receive less if you return to work before then. You’re entitled to maternity pay from the day your maternity leave commences, although it may be paid beforehand if you’re sick in the 4 weeks prior to your due date.
The first 6 weeks of maternity pay is calculated at 90% of your average weekly pay before tax. For the following 33 weeks you will receive either £151.97 a week or 90% of your average weekly pay before tax (if this is less than the statutory amount). If there’s a rate increase, you’ll get the higher amount from the date the rise takes effect.
Average pay includes sick pay, holiday pay, back pay, bonuses, and statutory maternity pay from a previous pregnancy. For employees who have been furloughed, average weekly pay is based on your usual regular wage, rather than your furlough pay.
You can extend your maternity period for a further three months, up to 12 months in total, but this will be unpaid. During this time, you will accrue holiday pay, which can be added to the end of the paid maternity period, with consent from your employer. Your employer is legally bound to pay this holiday pay and it does transfer forward over the holiday year end.
Ten KIT (Keep In Touch) days are allowed whilst you’re in receipt of statutory maternity pay and do not affect it. Agree KIT days beforehand with your employer.
Give your employer a minimum of 2 weeks’ notice if you change the date of your return to work, since maternity cover may be required for longer. Good written communication is important to clarify how long you will be away and your expected return.
This would not be part of a Cycle to Work scheme, as there is no rental agreement or purchase option. Therefore, there would be no benefit in kind to record, irrespective of the cost of the bike. You can include it as a business asset and claim capital allowances. You do not need to keep records of your journeys. The key point is that the company would own the bike, which would be on loan to you as a director. However, make sure that the electric bike is generally available to any employees.
Yes you can make a deduction for the cost of the provision of the accommodation however you do need to ensure that any deduction doesn’t fall foul of the National Minimum Wage regulations.
For NMW purposes the value of the provision of accommodation, is £8.20 per day or £57.40 per week. This covers rent, laundry, utility bills and furniture.
If you do not charge the £8.20 per day, you can add this ‘amount’ to the earnings paid per hour and as long as the average wage plus the daily allowance provided over the relevant pay period exceeds or equals the NMW then there will be no problem.
There are 2 areas where problems can arise though.
1) If you deduct above the rate of £8.20 per day. You will need to pay the employee a higher rate than the official NMW to take into account any additional accommodation cost you charge.
2) If the employee is paid solely according to the number of hours they work, (known as time work), then for absences for example, sickness or holidays), special rules apply whether you continue to pay them the full pay for the pay period or if you reduce the pay.
More in how to calculate the National Minimum Wage rates during absences can be found at https://www.gov.uk/government/publications/calculating-the-minimum-wage/calculating-the-minimum-wage#sleep-in-shifts.
There are a number of ways and it depends on 2 main factors are the employees only undertaking jobs where they return at home each night or do, they spend nights away.
Taking the first option, there are 2 ways which their expenses can be refunded, the first is by keeping a record and refunded the cost on production of receipts of any meals/drinks they have purchased.
The 2nd which involves considerably less paperwork is using the HMRC benchmark rates this pays £5.00 for one meal (minimum journey time 5 hours), £10.00 for 2 meals (10 hours or more) and where the journey continues after 8.00 p.m. either an extra £10.00 can be paid (£20.00 total), or if the journey exceeds 15 hours a total of £25.00 can be paid. The only paperwork required for this is evidence of the times the journey(s) were undertaken.
If the business journey starts before 6.00 a.m. then £5.00 can be paid for breakfast.
In regards to overnight journeys, there is a third option and this is the approved overnight subsistence allowance. This used to be straightforward however the rules in regards to operating this have been tightened in recent years, resulting in an increased administrative burden for HGV employers.
For these journeys the employer can pay either £34.90 if the HGV doesn’t have a sleeper cab, or £26.20 when there is a sleeper cab used. The problems with this is that to use these rates you need to obtain an approval notice from HMRC (renewed every 5 years) and you need to have a system in place where you periodically check that employees are incurring expenses for meals/drinks and that the payment is a reasonable sum of the subsistence expenditure.
As an employee could receive £25.00 per day anyway for been away over 15 hours, with a lot less paperwork for both the employer and the employee we would recommend this is the best system to use.
In addition, an extra £5.00 per night tax free to cover any incidental overnight expenses without the need for any records identifying the expenses incurred.
You can of course pay a sum higher than the benchmark rates, however the additional sums paid would be subject to tax and national insurance through the employees’ payroll.
Strictly speaking, the rules include the condition that for a staff event to be non-taxable it must be an annual event. However, due to the lockdown last year, as you have stated, hospitality businesses were closed.
If you can demonstrate that an event was held in previous years, or you can show you will or have the intention to hold the event in future years, this will remain non-taxable to your employees and any members of their family or household who attend as guests.
That said, please remember the annual limit of £150 per person. Also, the event should be open to all employees (even if all don’t attend).
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.
Individuals
For earlier tax years to 23/24 no you don’t have to report this to HMRC.
From 23/24 onwards though. The limit previous £2,000.00 dividend allowance will be reduced to £1,000.00 and will further again be reduced to £500.00 from the tax year 24/25.
Providing you don’t already fill out a tax return and still receive less than £10,000.00 in savings interest or dividends you will not need to do a return. If the dividend income or you do have other taxable income that puts you over your tax threshold then you will need to contact HMRC to notify them of the dividends you will receive. Any tax should then be taken care of through your tax code.
If you’re using, say, a bedroom as an office or sell goods by post, then no. However, you may have to pay business rates if you sell goods or services to people who visit your home or if you employ people to work from your property. Find out by contacting the Valuation Office Agency.
Business rates may be due if you make changes to your home to accommodate your business, such as converting a garage into a hair salon, or if your property is part business and part residential, e.g. you live above their shop.
There is no set answer regarding the overall cost of the bonus plus the tax and National Insurance, as it depends on the individual employee’s tax code and the rate of NIC which they pay. Generally, the company will be expected to gross up the net bonus payment to arrive at the correct tax and NIC to be paid by the company.
For an employee subject to basic rate tax (20%) and NIC Category A, the total cost of tax and NIC (employer’s and employee’s) will be £361.79, making the total cost to the company £861.79. For an employee paying tax at the higher rate of 40% and subject to NIC Category A, the total cost of tax and NIC will be £401.53. Therefore, the total cost to the company is £901.53.
We Are Switching Our Small Company Car Fleet To Plug-in Electric. What Is The Tax Position If We Install A Charging Point At Our Office?
If your business was not already required to operate Making Tax Digital (MTD) then you will need to comply with the MTD rules from your first VAT return period starting on or after 1 April 2022. Your first VAT return period starting on or after 1 April 2022 will be for the period June, July and August 2022. So, this will be the return you’re required to submit using MTD compatible software.
Making Tax Digital for VAT has applied to all VAT-registered businesses since 1 April 2022. However, the key point here is the quarter end date. Since yours is February 2022, you don’t have to submit your next return to HMRC digitally, although you can do so if you wish. However, you will need to use compatible software to send in your June quarter end VAT return (covering July, August and September) due on 30 September 2022.
You had no choice about the change of workplace and your daily commute is now excessive so yes, you can claim for expenses incurred in working from home. Claim the full allowance of £312 per tax year if you work from home every day. Otherwise, claim it proportionally for those days you operate from home. If you work at home 2 days a week and spend 3 days in the office, you can claim £125.
Remember you can’t claim the WFH tax allowance if it’s your choice to work from home.
As you already have an internet connection, you cannot claim. The fact that you already use it personally takes precedence, so any work use is treated as incidental.
However, should you need to increase the bandwidth in order to undertake the work you will be doing, you will be able to claim the additional costs incurred as a taxable expense.
If you had never previously had a personal internet contract at home, but internet connection was required for your job, then work use would take precedence. Any private use would be treated as incidental and the cost could be claimed as a taxable expense.
For tax benefit purposes all mobile homes are treated as company cars. A benefit applies on the availability of the vehicle for private use so, based on what you say, the vehicle will be treated as a company car all the year round. However, if you only intend to use it personally at certain times, for example Easter or in the summer holidays, with planning you can reduce the potential car benefit to be paid.
When using the vehicle for purely work reasons (including travel to a temporary place of work) you could avoid the benefit by putting in place a private use prohibition notice for the dates when it will be used for business use only. Also, keep full mileage records of actual vehicle use during this time.
When you decide to use the vehicle privately, remember that any period of private use must last at least 30 consecutive days.
If you can pay the amount off in 12 months, you can apply through your online Government Gateway account to pay in instalments. You will still have interest to pay, however if you set up a Time to Pay arrangement before 1st April and keep to the agreed payments you will avoid paying the 5% late payment penalty on what you owe.
If you need more time, phone the Self-Assessment Payment Helpline on 0300 200 3822, Monday-Friday 8am to 6pm.
Also, if your profits are going to be less for the year don’t forget to reduce your payments on account accordingly. But bear this in mind, if you reduce them by too much HMRC will charge interest on any amounts found to be due.
Yes, you can. Ask HMRC to reduce the payments on account to the figure you think will be due. You can do so online through the Government Gateway, via telephone or webchat with HMRC, or by post using Form SA303.
If you reduce your payments on account too much, be aware that you will have to pay interest on the extra amount of the payment of account that may become due once your tax liability is known. If your tax liability on next year’s return does not exceed £1,000, you will not be required to make payments on account for that year.
To establish the correct employment status it’s vital to take into account individual factors relating to the client business, such as working practices and contractual terms and conditions. Also consider a contractor’s potential work circumstances.
HMRC’s ‘The check employment status for tax (CEST)’ tool is very useful. If the tool can’t provide the information you need, call the Employment Status and Intermediaries helpline on 0300 123 2326.
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.
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.
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.
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.
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.
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.
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.
VAT
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.
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.
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.
Construction Industry Scheme
Yes. However, there are certain steps you need to take before agreeing the amount of material costs you allow in the deduction. It is part of the contractor’s responsibilities to ensure that any material costs claimed do not include a ‘mark up’ or profit element. Therefore, if a subcontractor will not confirm the actual cost of the materials, you will need to estimate the costs claimed. The potential problem is that HM Revenue & Customs (HMRC) does not provide guidance on how to arrive at these estimates. However, as long as the estimated costs appear to be reasonable, HMRC will usually accept them. That said, please note that HMRC can challenge any material costs claimed and, ultimately, take the matter to a tax tribunal if disagreement continues. In such cases, we always recommend that you keep a record of how you calculated the estimated material costs provided, for example referencing supplier cost lists.
This will all depend on who pays the costs of any transport, accommodation and subsistence.
If you, as the contractor, provide expenses to subcontractors to cover any of the above, then you will be required to include the amounts paid to them as part of the overall gross payment to the subcontractor when calculating what should be deducted at the appropriate CIS tax rate.
If, however, you as the subcontractor either provide the accommodation or the means of transport (for example, the use of one of your vans), or you arrange the accommodation and pay for it direct yourself, then you will not need to include any of these costs or payments in the gross payment calculation for CIS purposes.
One further point, if you do look to pay this on behalf of subcontractors, or provide the transport or accommodation, then do ensure that the employment status of the subcontractors is still showing as self-employment.
A: From the tax year 20/21, the delayed operation of the new IR35 legislation will come into force.
Firstly, IR35 supersedes, the operation of the CIS scheme if this is appropriate.
However, unless you meet 2 of the following 3 criteria (and you may do in the future with your expansion plans) your own responsibilities will not change.
- Your business has a turnover of not exceeding £10.2 million.
- You have a balance sheet total not more than £5.1 million.
- You have over 50 employees.
As you are currently likely to not meet any of the above criteria, then the decision if IR35 applies will remain with the engaged. Therefore for example if an electrician you engage trades through his own limited company then you will operate CIS as normal.
If a subcontractor or a professional service outside the scope of CIS (for example a quantity surveyor) does ask your IR35 status you should tell them that you are exempt under the small company rules. We would recommend you do this by email or in writing.
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.
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.
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