HMRC have revealed that 1,566 UK tax payers filed their 2013 self-assessment tax returns on Christmas day. Are we to take this as evidence that the “bah humbug” mentality is alive and well in the UK?

In order to file their returns these reluctant revellers will have needed to switch on their computer, as the only way to file a return after October each year is to use HMRC’s online gateway.

Even if you had already completed your filing obligations for 2013, prior to Christmas, you may have been tempted to spend your Amazon and iTunes gift vouchers over the Christmas break. Again, logging into your accounts online is a prerequisite.

And what about presents you may have received that were, shall we say, unwanted, surplus to requirements? Be interesting to know how many new items were added for sale on eBay Christmas day.

There is a message here that businesses should pick up on: how could you benefit from this 24/7, online activity. Whether you sell services or widgets there is probably a product or information download that you could sell from your website?

Who knows, next Christmas your business may be achieving sales as you tuck into the festive turkey

In a recent report prepared by the Public Accounts Committee HMRC was accused of pursuing smaller businesses with more vigour than larger concerns. HMRC was also criticised for under estimating the amount of uncollected tax, over estimating amounts due from the holders of Swiss bank accounts, and collecting tax credit debt.

A summary of the Committee’s comments is set out below:

“In pursuing unpaid tax, HM Revenue & Customs (HMRC) has not clearly demonstrated that it is on the side of the majority of taxpayers who pay their taxes in full. It does not use the full range of sanctions at its disposal to pursue vigorously all unpaid tax, and its measure of the tax gap does not capture all the avoided tax that it should be collecting. HMRC massively over-estimated how much it would collect from UK holders of Swiss bank accounts, and in 2013-14 has so far collected only £440 million of the £3.12 billion predicted in the 2012 Autumn Statement. HMRC is not doing enough to collect tax credits debt or to tackle tax credit error and fraud.

When determining the tax regime for businesses, HMRC needs to strike the right balance between support and enforcement. It has not considered adequately the impact that measures designed to make the UK a more attractive place for large businesses to operate would have on the way companies structure their business, and how this would affect tax receipts from them. While HMRC has made good progress towards implementing Real Time Information (RTI), it must continue to support small and medium-sized enterprises (SMEs) with the transition to the new system.”

The comments regarding smaller businesses are particularly ironic: that our tax system discriminates against this sector whilst letting larger concerns off the hook.

Most business people are aware that if they keep the “per head” expenditure below £150 for the annual bash, and if they follow the other HMRC guidelines, then there should be no risk that HMRC will seek to treat the payments as a taxable benefit.

However, if the cost creeps over £150, to say £200 per head, the total amount will be taxable not the excess of £50. This is because the £150 is not an allowance. And watch out for VAT. The £150 cost ceiling is VAT inclusive.

The following examples are taken from HMRC’s website and highlight some of the issues that need to be born in mind:

Example 1

A company holds an annual Christmas party for all its staff. The average cost per employee is £50. This is exempt.

In addition the directors hold an annual party at Christmas for its directors at which the cost per head is £75. This function is not open to staff other than directors. Consequently it is not covered by the exemption because it is not available to staff generally. The full benefit is chargeable on directors attending.

Example 2

A company holds two annual dinner dances open to all its employees in the tax year. The total cost of the first, including transport and accommodation provided for certain guests, was £10,000 including VAT. The total number of persons attending was 100 and the cost per head was therefore £100.

The second dinner dance cost £8,000 including VAT, and 100 people attended this. The average cost was therefore £80.

The total cost per head for both functions was £180 so they cannot both qualify for exemption. Since the cost per head of each party on its own was not more than £150, either event can qualify for exemption on its own but it is more beneficial overall for the first to be exempted. So the benefits arising from that function will not be charged and those arising from the second function will be charged.

For employees who attended:

• both events, they will be chargeable only on the benefit of £80 for the second event
• only the first event, there will be no chargeable benefit because that event is exempt
• only the second event, they will be chargeable on the benefit of £80.

If the average cost per head of each of the functions exceeded £150 the full amount of the benefit of both functions would be chargeable. The £150 is not an allowance to be set against an amount that exceeds that figure.

If you are concerned that your annual party may be running close to the tax limit please contact us and we will run through the figures with you.

Merry Christmas…

• VAT receipts to be matched against sales to catch possible tax evaders
• HMRC’s Big Brother approach leaves no hiding place for businesses

HMRC has started to analyse ‘chip and pin’ data from small businesses’ and restaurants’ credit and debit card sales as part of its tax investigations toolkit.  The ‘Big Brother’ technology is being used to unearth any discrepancies between businesses’ actual sales and what they are declaring for VAT purposes.

Using the new ‘Connect’ computer system, HRMC will be able to analyse retail businesses’ chip and pin transactions without them knowing, and without the need for a court order, as the data will come straight from their payment services firm.

This will be the first year in which HMRC will have free rein to scrutinise the surge in chip and pin spending generated from Christmas shopping sprees and office Christmas parties at restaurants and bars.

In light of HMRC’s recent announcement, some retailers may feel under even more pressure than usual to make sure their VAT payments are spot on.

HRMC have recently undertaken a well-publicised clampdown on tax evasion, saying that they suspect that tax evasion and the hidden economy cost the taxpayer £9 billion a year. 

As the UK increasingly becomes a cashless society, with contactless payment technology making it convenient to use debit cards for even very small purchases, HMRC’s new chip and pin surveillance capabilities will become an extremely powerful tool in investigating businesses it suspects of trying to hide revenue.

Although HMRC has said it will be targeting businesses that have been identified as potential ‘high-value’ tax evaders, there is a risk that honest businesses could get caught up too.  Because of HMRC’s powerful new investigation tools, the New Year could see businesses facing the most unexpected and thorough VAT tax investigations to date.

HMRC’s aggressive approach means that tax investigation insurance cover, such as that provided by PFP, the experts in tax investigation insurance, should be a must-have on any business’s list for Santa this year.

Not covered for fee protection…..? Ask us now!!

On the 10 December 2013 HM Treasury announced that the long awaited additional payment, to pre-1992 Equitable Life annuitants, will be made this week. The details below are the formal confirmation from H M Treasury’s website:

The government has confirmed that it will make ex-gratia payments by next week to those Equitable Life With-Profits policy holders who are excluded from the wider scheme because their annuity began before 1st September 1992.

First announced by the Chancellor at the 2013 Budget, the government finalised legislation in November and has worked closely with the Prudential Assurance Society to allow the payments to be made before the end of the year, well in advance of the original timetable of April 2014.

Speaking in the House of Commons today, Financial Secretary to the Treasury, Sajid Javid confirmed that over 9000 people will receive lump sum payments of £5000. A further 450 in receipt of Pension Credit will receive an additional £5,000.

Financial Secretary to the Treasury, Sajid Javid, said:

“In many cases the pre-1992 policy holders, the vast majority of who are very elderly, are facing financial hardship having received less than they expected from their Equitable Life policy.

Having announced that we would make ex-gratia payments to this deserving group in the Budget, we have pulled out all the stops to make this happen. I am delighted that we are going to be able to make them next week, before Christmas.”

Although the UK tax year runs from 6 April to the following 5 April, there is another which ends 31 January each year – it’s the online filing deadline for self assessment purposes.

The 31 January 2014 is also the date on which any outstanding self assessment tax unpaid for the tax year 2012-13 falls due for payment, together with any payment on account due for 2013-14.

The lead up to the filing deadline is a busy period for tax practitioners, who work hard to complete and file outstanding returns. If by chance you, the reader, have not yet submitted your paperwork to your advisor, now would be a good time to get things together.

There are automatic penalties if you fail to file on time, even if you manage to pay any outstanding tax before the 31 January.

The following penalties applies to self assessment returns that are filed late:

• From day one: taxpayers will be charged a £100 penalty even if they have no tax to pay or have paid any tax due on time.
• From 3 months late: taxpayers will be charged an automatic daily penalty of £10 per day up to a £900 maximum.
• From 6 months late: taxpayers will be charged additional penalties which are the greater of 5% of tax due or £300.
• Over 12 months late: there are additional penalties based on greater of 5% of tax due or £300. In serious cases this penalty may be increased up to 100% of tax due.

Understanding how to forecast your cash flow is a crucial part of the platform for a successful business.

The number one rule of cash flow planning is to know as much in advance as possible what will be coming in and going out of your bank accounts and when things are likely to happen.

1.  Make a list

A lot of businesses have a relatively similar spending pattern month on month. Print out  a list of your current account and credit card statements. Highlight and then make a list of all the direct debits, standing orders, regular payments, salaries, that come out of your bank account and credit cards each month. 

Next make a list of all the things you spend money on, but aren’t fixed or regular payments – things like travel, entertainment, marketing, advertising, legal costs etc.

Finally, make a list of any recurring revenue that you expect to generate in each month.  

2.  Compare this to your accounts

Do a cash summary report and compare what you have in your list.   Does anything stand out that you hadn’t spotted? 

Make a list of any “one-off’s” and see if there is a pattern that you weren’t aware of. 

3.  When are your invoices really going to get paid?

Look at your invoices, and list when you expect it to be paid. How reliably can you predict this? What invoices are overdue? Is there anything that you’ve forgotten to invoice for? What milestones do you need to hit to generate the next payment?

4. Finally: the pipeline

What sales have you got on the horizon? What pitches are you waiting to hear back on?

Be conservative here – factor in the costs of completing the sale (i.e anything that costs you more because you’re doing the job). For instance, if you run a digital agency make sure you include any materials, freelance costs, and likely travel expenses. 

That's the basics of setting up a forecast. 

Accounting software can help you model your cash flow and there are also add-on products that make cash flow forecasting so much easier to prepare.

Let us show you what is available…..

From January 2014 the Bank of England and H M Treasury will redirect the Funding for Lending Scheme away from mortgage lending, and instead provide funding for hard pressed small businesses.

There has been significant press commentary about the likely “over-heating” of the UK property market. Basic economics would seem to dictate that if you increase demand, and do nothing (or very little) to increase supply, then prices will increase.

This has caused repeated “property bubbles” in the past. The Bank’s governor, speaking last week said:

“In the past year the Funding for Lending scheme has contributed to the recovery by helping to improve credit conditions significantly, especially for households.

“The changes to the scheme will refocus it where it is most needed – to underpin the supply of credit to small businesses over the next year – without providing further broad support to household lending that is no longer needed.”

Hopefully, this change will calm down the demand pressures in the housing market, and provide much needed working capital for small businesses.

 1 December 2013 – Due date for Corporation Tax due for the year ended 28 February 2013.

 19 December 2013 – PAYE and NIC deductions due for month ended 5 December 2013. (If you pay your tax electronically the due date is 22 December 2013.)

 19 December 2013 – Filing deadline for the CIS300 monthly return for the month ended 5 December 2013.

 19 December 2013 – CIS tax deducted for the month ended 5 December 2013 is payable by today.

 30 December 2013 – Deadline for filing 2012-13 Self Assessment online to include a claim for under payments (under £3,000) be collected via tax code in 2014-15.

 1 January 2014 – Due date for Corporation Tax due for the year ended 31 March 2013.

 19 January 2014 – PAYE and NIC deductions due for month ended 5 January 2014. (If you pay your tax electronically the due date is 22 January 2014.)

 19 January 2014 – Filing deadline for the CIS300 monthly return for the month ended 5 January 2014.

 19 January 2014 – CIS tax deducted for the month ended 5 January 2014 is payable by today.

 31 January 2014 – Last day to file 2013 Self Assessment tax returns online.

 31 January 2014 – Balance of Self Assessment tax owing for 2012-13 due to be settled today. Also first payment on account for 2013-14 due today.

 From October 2013, PAYE schemes will automatically be closed where

• No real time PAYE submissions have been made
• No payments have been made to HMRC
• The employer is not an annual payer
• There is no evidence that the employer wants to claim Construction Industry Scheme deductions
• The employer has not received an advance from HMRC
• There have been no periods of Construction Industry liability
• There is no evidence that the employer has any employees
• There is no evidence that Class 1A NIC is due.

HMRC’s Director General for Personal Tax, Ruth Owen, said

“Closing schemes that are no longer needed is really important for businesses and for HMRC as it means that HMRC won’t waste employers’ or taxpayers’ time and money by needlessly pursuing returns or debts when in fact none are due.

Since April, employers or agents (acting on behalf of their clients) who have set up PAYE schemes that are no longer needed can easily close the scheme by reporting this on their final submission. This new process helps further as it means we can identify and remove unnecessary schemes earlier.”