The View from No 50

 

 

 

 

January 2011

K P Bonney & Co

Chartered Accountants and

Chartered Tax Advisers

50 Cleasby RoadMenston

IlkleyLS29 6JA

Tel:01943 870933

Fax:01943 870925

Email:keith@kpbonney.co.uk

www.kpbonney.co.uk

 

 


LATE PAYE WARNING

 

Are you one of those employers who pays over your PAYE, NI and student loan deductions late?In years up to 2009/10 this was a shrewd tactic as HMRC only charged interest on payments made after 19th April after the end of the tax year. ††But from 2010/11 onwards late in year payments will attract a penalty.

 

††† Number†††††† Penalty†††††††††††††† Amount to

†† of times††† percentage†††††††† which penalty

payments††††††††††††††††††††††††††††† percentages

††† are late†††††††††††††††††††††††††††††††††††† apply

††† in a tax

††††† year

 

†††††††† 1†††††††† No penalty††††††††† Total amount

††††††††††††††††††† (as long as††††††††††††† that is

††††††††††††††††† the payment††††††††††††† late in

†††††††††††††††††† is less than††††††††† the tax year

††††††††††††††††††† six months†††††††††††† (ignoring

†††††††††††††††††††††††† late)†††††††††††††††††† the first

††††††††††††††††††††††††††††††††††††††††††††††††††††† late

†††††† 2-4††††††††††††† 1%†††††††††††††††††† payment

††††††††††††††††††††††††††††††††††††††††††††††††††† in that

†††††† 5-7††††††††††††† 2%†††††††††††††††††† tax year)

†††††††††

††††† 8-10†††††††††††† 3%†††††††††††††††††††††††††

 

11 or more†††††††† 4%

 

If you have been late with your payments for every month in 2010/11 you have already accumulated penalties of 3% of the amount paid late.

 

HMRC will issue penalty charges after 5 April 2011.

 

Paying your PAYE and NI late is no longer a shrewd tactic.

 

Our Advice:If you canít pay your PAYE and NI on time contact HMRC before the due date.They may allow you time to pay.If they do, the penalty provisions will not apply to the amounts paid under the time to pay arrangement.

 

 

SELF EMPLOYED NATIONAL INSURANCE

 

Self employed people pay class II national insurance contributions.The system for collecting class II national insurance works well and is easily understood by all concerned.Most people pay by monthly direct debit.Payments are made in the month for the month. ††Itís so straight forward it really needs no explanation.

 

In its wisdom HMRC has decided to change things.From 2011/12 payments will still be made monthly but they will be made three months in arrears.This means there will be a gap of three months in May, June and July 2011 when no contributions will be taken.

 

When a taxpayer ceases to trade he or she is going to have to remember to leave the direct debit arrangement in place for three months before instructing the bank to cancel it.This compares with the situation now where you cease trading and you instruct your bank to cancel the direct debit.

 

What was simple is now confusing.

 

No doubt somebody at HMRC has earned a promotion out of this.

 

 

SERVICE!

 

This is an extract from a recent issue of Taxation magazine.

 

ďI have been advised by H M Revenue & Customs that they are hoping to open the post for the week commencing 23 August 2010 by 19 November 2010

 

Following the comprehensive spending review HMRC has been challenged to lose 13,000 more jobs over the next four years.

 

I predict a meltdown.

 

 

P2 GONE

 

HMRC has decided to stop sending copies of clientsí notices of coding (forms P2) to accountants with effect from December 2010.Clients will continue to receive notices as before.

 

HMRC hopes to plough some of the savings into developing a facility for accountants to view the notices on the HMRC website.Unfortunately this wonít happen before October 2011.

 

Our Advice: If you receive a notice of coding and if you think it is wrong or if you simply donít understand it, send us a copy and we shall make sure any necessary action is taken.

 

 

RECHARGING EXPENSES

 

John is a consultant.He is registered for VAT.†† In January 2011 he travels from London to Edinburgh to give advice to a client.Afterwards he sends his client this invoice

 

Fees††††††††††††††††††††††††††††††††††††††††††††††††† 5,000

 

VAT at 20%†††††††††††††††††††††††††††††††††††††† 1,000

 

Rail fares††††††††††††††††††††††††††††††††††††††††††††† 500

 

Total amount due††††††††††††††††††††††††††††† 6,500

 

Johnís thinking is that rail fares are zero rated therefore he should not charge VAT when he recharges the expense to his client.

 

John is obviously not a VAT consultant because his thinking is wrong.

 

John is making a supply of consultancy services.He is not making a supply of rail services.Only the likes of Virgin Trains and Northern Rail do that.So Johnís invoice should have looked like this

 

Fees††††††††††††††††††††††††††††††††††††††††††††††††† 5,000

 

Rail fares††††††††††††††††††††††††††††††††††††††††††††† 500

 

VAT at 20%†††††††††††††††††††††††††††††††††††††† 1,100

 

Total amount due††††††††††††††††††††††††††††† 6,600

 

 

Recharged expenses form part of the main supply, which in this case is a supply of standard rated consultancy services.The expenses should therefore be charged at the standard rate.

 

Our Advice:If you have made a mistake like this you should speak to your customer.If your customer is willing to accept a corrected invoice from you and to make a further payment you will not lose out.If your customer is not willing to cooperate you will have to bear the extra VAT yourself.

 

 

TAX INVESTIGATIONS

 

HMRC recently announced it is diverting £900m of its limited resources to tax enquiries and investigations.

 

Whether you keep your nose clean or not the chances of getting selected for an enquiry have just increased.

 

Our Advice:Our professional fee protection scheme renews on 31 January.It doesnít pay your tax but it does pay for the cost of your professional representation in an enquiry.

 

The VAT inclusive cost is

 

Private individual†††††††††††††††††††††††††††† £30

 

Sole trader†††††††††††††††††††††††††††††††††††† £120

 

Partnership or limited company††††† £132

 

For partnership and limited company subscribers the protection extends to the personal returns of the partners and the directors.

 

If you would like to join the scheme please get in touch.

 

 

MATCH OFF

A supporter arrived at the ground one Saturday to find the place completely empty. He went to the office to find out what was going on.

'What time does the match start?'

'There's no match today,' replied the official.

 

'But there must be!' exclaimed the fan. 'It's Saturday.'

 

'I'm telling you there's no match today,' repeated the official.

 

'But there's always a match on Saturday afternoon,' said the fan, 'even if it's only a reserve game.'

'Watch my lips,' shouted the irate official. 'There is no M-A-T-F-C-H today!'

'Well, for your information,' the would-be spectator shouted back, 'there's no F in match.'

 

'That's what I've been trying to tell you!' yelled the official.

Copyright:K P Bonney & Co LLP 2011.All rights reserved.No part of this publication may be produced, stored in a retrieval system, or transmitted in any form or by any means, electronic mechanical, photocopying, recording or otherwise without prior written permission of the publishers.Disclaimer:The publishers have taken all due care in the preparation of this publication.No responsibility for loss occasioned to any person acting or refraining from action as a result of any material in this publication can be accepted by the authors or the publisher.

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