Glover Stanbury & Co

Late tax return penalties

We would remind individuals and businesses about new Self-Assessment penalties for late returns and late payments which came into effect this autumn.The changes affect Self -Assessment returns for 2010/11, and all future financial years.

The new penalties for late filing of Self- Assessment returns are:

-an initial £100 fixed penalty, which will now apply even if there is no tax to pay, or if the tax due is paid on time

-after 3 months, additional daily penalties of £10 per day, up to a maximum of £900

-after 6 months, a further penalty of 5% of the tax due or £300, whichever is greater

-after 12 months, another 5% or £300 charge, whichever is greater. In serious cases, the penalty after 12 months can be up to 100% of the tax due.

New penalties for paying tax late are 5% of the tax unpaid at:

-30 days;

-6 months; and

-12 months.

Interest will also be charged on top of these penalties.

The deadline for paying any tax due also remains the same at 31 January.

VAT on Customer Deposits - especially relevant to hotels and guest houses

HM Revenue & Customs have recently made a change in the rules relating to the VAT treatment of non-refundable deposits received from customers.

The change applies where the customer forfeits a non-refundable deposit by either subsequently cancelling their booking or by being a “no show”, following a European Court case. HM Revenue & Customs have now stated that in such cases no VAT supply has taken place to the customer and the amount retained therefore becomes compensation - which is outside the scope of VAT. Under their previous guidance you would have accounted for VAT on the receipt of such deposits and as the previous guidance was incorrect you can now go back a maximum of 4 years and reclaim the VAT involved.

We therefore suggest that if you have declared VAT on any such deposits then you should review your bookings and business records for the last four years and reclaim the VAT element. If you require our assistance in making such a claim then please let us know.

Please note that this revised guidance also applies proportionately where a booking has been taken, and a deposit paid, but the guest then stays for less time than they booked for. However, HMRC do take the view that VAT is correctly accountable if the deposit relates to the reserving of a particular type of room such as “ground floor” or “sea view” as this is regarded as a guaranteed reservation granted for an optional payment.

The ruling only applies to forfeited deposits and does not change the position regarding deposits paid by customers who actually complete their stay. VAT will still apply on these deposits in the normal way.

For the future, VAT will still need to be declared on deposits at the time they are received. You should then reclaim the VAT element of any deposits withheld if the booking is subsequently not taken up, in the normal way on your VAT Returns.

Medical consultants - and payments to their secretaries.....

Another doctor client this week has commenced private practice - but fortunately he has asked the right questions before starting up - including - "how should I pay my secretary?"

 

This is a common payment for their help in the private practice. Quite often a payment is just made with no deductions without consideration of the tax or NI position. Is the recipient secretary really self-employed, and does she declare the income and pay tax and self -employed NI contributions?

 

If this were to be looked at closely by HMRC- an increasingly likely scenario - they would almost certainly insist that the secretary was an employee rather than self-employed. She may be paid different amounts each month, or she may “work for three or four other consultants and is therefore self-employed”, but the facts are that the consultant is providing work on a regular basis and the arrangement bears most of the important badges of employment.

 

HMRC have several tests to determine employed or self-employed, such as the requirement to receive sick or holiday pay, the right to provide a substitute worker, etc. It is not a question of simply ticking off on a checklist - if you have a steady arrangement with someone who works for just a few people, the position risks being classed as employment.

 

From a tax viewpoint, both parties would probably prefer to be dealing with a self-employed arrangement. The consultant would not need to run a payroll and would not need to potentially pay Employers National Insurance Contributions, while the secretary would pay a lower rate of NIC and could be claiming for business expenses that are not available as an employee.

 

Anyone doing this is at risk. The worst case scenario would be for HMRC to insist the secretary should have been treated as an employee, and the gross amount paid by the consultant is viewed as net salary, with the consultant then being held liable for the tax and NIC that should have been deducted, as well as potentially interest and penalties.

 

Take the appropriate action now and get a PAYE scheme in place. If the consultant's wife is paid (a justifiable salary commensurate with the work done) it may be beneficial to ensure a PAYE scheme is in place for her salary too, as she may be entitled to state benefits at no cost.

 

Ask us for details.....

 

 

TAX REVIEW FORM 810

If you are lucky enough not to have to fill in a Self Assessment tax return every year, HMRC may still decide to check your income every so often to make sure you do not pay too much tax or too little tax.

The form they use is a review form 810 which they may issue every three years - sometimes, more frequently. It has now become known that for the tax year to 5 April 2010 HMRC have not generated the bulk issue of the form 810, and this may be due to the fact that they report that only about half of the forms issued are actually completed. There is no penalty for not filling in the form itself, but of course if further tax is due there can be interest and penalties charged. On the other hand, many people will lose a tax refund which the completion of form 810 might otherwise generate.

If you are not asked to complete a tax return but perhaps you pay tax under PAYE with some taxable benefits; and/or you pay charitable donations; and/or you have other sources of income, ask us to do a review in case the tax you paid at source in the tax year to 5 April 2010 is not the same as the tax actually due.

 

Tax Update - February 2010

EMPLOYERS TAX CODE NUMBERS

 

You are probably well used to us telling you that your Code Number is wrong and that we will get it altered. Now the 2010/11 Notices of Coding are being issued, HMRC boast that if you have more than one job you should no longer  suffer the usual mistakes where multiple codings are needed, as there is a new system which creates a single record for you.

 

The transition to this new system is creating big problems and HMRC admit that you may still receive a wrong Code Number - or even more than one notice for the same employment! They insist this is due to data mismatches rather than being an IT issue.

 

NORMAL MINIMUM PENSION AGE TO RISE TO 55 FROM APRIL 2010

 

As part of the pension reforms announced by the Government in 2003, the normal minimum pension age will rise from 50 to 55 from 6 April 2010.

 

After that date, people will normally only be allowed to start receiving their pension payments from an occupational or personal pension scheme whether they are 55 or older. There are certain exceptions, for example, ill health.

 

Please contact us if you want to talk about your retirement.

 

MEDICAL PROFESSIONALS - TAX HEALTH PLAN

 

If you are a medical professional who has not declared all of your income or capital gains, there is a one-off chance to do so with a fixed penalty of 10% of the tax instead of the normal 30% to 100%. This scheme was originally announced as applying to those regulated by the GMC, but it is now being extended to dentists and indeed all health professionals.

 

It doesn’t matter whether or not the undeclared income relates to your professional income. It also covers the situation where there is tax underpaid because you may feel that you have claimed too high a % of business use of your car.

 

You have to notify HMRC by 31 March 2010 of your intention to make a disclosure, and then actually do so by 30 June when the extra tax plus interest and the 10% penalty has to be paid.

 

Personal Tax Liabilities- have you paid?

Any 2007/08 tax (but not 2008/09 payments on account) unpaid by 28 February 2009 attracts a 5% surcharge as well as interest (interest also applies to 2008/09 payments on account). This is costly for being a month late in paying,so we advise you settle as soon as possible. Alternatively call the Business Support Helpline if you want time to pay.

With regard to the 2008/09 payment on account we may have reduced it already based on known circumstances. For those with December 2008 through to April 5 2009 year ends (and indeed any year ended in the tax year to 5 April 2009) we reecommend having accounts prepared as early as possible so that the 2008/09 tax liability can be quantified as accurately as possible before the July 2009 instalment becomes payable. This may ease your cash flow, and, if you have made a loss given the current economic climate we will be able to decide how best to utilise this and possibly obtain a repayment of tax already paid.  

Contact us for assistance or to discuss further.

Problems paying HMRC?

HMRC are sympathetic to those that are facing problems in paying VAT, Corporation Tax, Income Tax etc. They have launched a Business Payment Support Service on 0845 302 1435. Lines are open Monday to Friday 8am to 8pm and 8am to 4pm at weekends.

They claim to be able to give a decision in about 10 minutes.

Further details can be found here.