Tax Diary July/August 2014

  • 1 July 2014 – Due date for Corporation Tax due for the year ended 30 September 2013.
  • 6 July 2014 – Complete and submit forms P11D return of benefits and expenses and P11D(b) return of Class 1A NICs.
  • 19 July 2014 – Pay Class 1A NICs (by the 22 July 2014 if paid electronically).
  • 19 July 2014 – PAYE and NIC deductions due for month ended 5 July 2014. (If you pay your tax electronically the due date is 22 July 2014.)
  • 19 July 2014 – Filing deadline for the CIS300 monthly return for the month ended 5 July 2014.
  • 19 July 2014 – CIS tax deducted for the month ended 5 July 2014 is payable by today.
  • 1 August 2014 – Due date for Corporation Tax due for the year ended 31 October 2013.
  • 19 August 2014 – PAYE and NIC deductions due for month ended 5 August 2014. (If you pay your tax electronically the due date is 22 August 2014.)
  • 19 August 2014 – Filing deadline for the CIS300 monthly return for the month ended 5 August 2014.
  • 19 August 2014 – CIS tax deducted for the month ended 5 August 2014 is payable by today.

Replacement of white goods items in unfurnished, let property

This reminder will affect landlords of unfurnished let property who are considering the replacement of standalone white goods (fridges etc) and similar items.

 Following the withdrawal of a tax concession from April 2013, there is effectively no tax relief for the replacement of defective, free-standing white goods in unfurnished properties.

 In some respects this absence of relief is difficult to justify but HMRC are clear that, at present, expenditure to replace free standing white goods etc from April 2013 will not be tax deductible.

 However, if a fridge is incorporated into a fitted kitchen, any replacement of defective white goods will be allowed as a repair. The distinction is that a fitted fridge is only part of the overall fitted kitchen, whereas a free standing fridge is an item in its own right.

 A genuine repair to keep an item in a working or usable condition will, of course, still be tax deductible.

 Replacement of white goods in furnished property is covered by the annual 10% “wear and tear” allowance.

Penalty for just one day

 Consider the following facts:

  • The filing deadline for a Stamp Duty Land Tax return was a Sunday.
  • A member of the advisor’s staff forgot to file the return by the end of the Friday – two days before the deadline.
  • Realising their mistake, the staff member took the file home with the intention of filing over the weekend.
  • Due to problems with internet access it was impossible to file the return before the deadline expired.

The return was subsequently filed the next working day, a Monday – one day late.

HMRC charged a late filing penalty and the tax payer appealed.

The court decided that the penalty had been charged in accordance with legislation and the tax payer had no grounds to appeal. The fact that internet access was not available did not affect the issue. The First-tier Tribunal noted that “leaving matters to the last minute was a recipe for disaster” and that it did not have jurisdiction to decide on the fairness of a penalty.

Discontinuance of trade and the Annual Investment Allowance (AIA)

In a recently decided tax case a self-employed air conditioning engineer, David Keyl, was denied a claim for AIA. He had purchased a van in July 2008 and on 31 March 2009 (the end of his trading year) he transferred his sole trader business to a limited company.

Unfortunately, the legislation setting up the AIA includes a provision that relief will be denied in the year in which a trade discontinues.

In the case of David Keyl his sole trader business ceased to trade 31 March 2009 and therefore no claim could be made for AIA in the tax year 2008-09. The fact that Mr Keyl had continued to provide maintenance under existing contracts made no difference to this judgement.

The lesson to be learned here is that a decision to incorporate a business should not be taken lightly. If Mr Keyl and his advisors had reviewed the larger transactions he had entered into during 2008-09, they may well have delayed incorporation to the following year.

Business use of employees\’ cars

Many employers pay their employees a monthly car allowance to compensate them for the business use of their private vehicles. In most cases this car allowance is treated as remuneration and is subject to PAYE and National Insurance deductions.

 Additionally, employers may also pay a nominal amount per mile as a contribution to fuel costs.

 Employers are entitled to pay their employees a tax free mileage allowance for the business use of their private vehicles. The rates are:

  • 45p per mile for the first 10,000 miles in any tax year, and
  • 25p per mile for any additional use.

In a recently decided case, an employer that paid less than the 45p (25p) tax free rates, was enabled to deduct the difference between the actual rate paid and tax free rates available, from the monthly car allowance, before working out any employer’s or employee’s National Insurance Contributions due on the monthly car allowance.

 If the amount being paid for business use of fuel is nominal, this can make quite a difference to National Insurance Contributions that are due.

 Employers reading this article, whose circumstances match the following criteria, may be able to claim refunds for overpayment of past NIC deducted from car allowance payments. The outcome of such claims will depend on how closely their circumstances mirror the decided case mentioned above, and HMRC’s interpretation of the ruling:

 The criteria are:

  • You pay or have paid employees a regular car allowance.
  • You have also paid nominal mileage rates to cover business related fuel costs, below the current tax free rates of 45p (25p) per mile.

Please note that in the decided case discussed in this article, the allowance was only paid to employees travelling more than 2,500 business miles each year though the mileage rate they received was correspondingly reduced to 12p per mile from 40p. It was thus aimed at compensating those incurring additional costs for using their cars substantially for business purposes.

Avoid and report internet scams and phishing

Internet fraudsters are using ever more intricate messages to trick you to part with private information. For example: your bank details and passwords. They may also hide viruses in email attachments that will give them access to your personal computer files. The viruses will usually be activated if you open the attached files.

The best way to combat this activity is to adopt a rigorous system for opening emails. We suggest:

  1. Never open attachments on an email from an unrecognised source.
  2. Government departments should never ask for personal information in an email. Follow their guidance, see below.
  3. It is never wise to send personal information by email. If you get a request from your bank or other, ostensibly genuine source call them to confirm the approach is authentic.
  4. If an email is obviously from an unknown or unreliable source add the sender address to your “Junk mail” filter in Outlook or similar software.
  5. Scan your PC on a regular basis to make sure that any suspicious files are quarantined.

A summary of advice from GOV.UK follows:

Misleading websites

Some websites can look like they’re part of an official government service or that they provide more help than they actually do. This might mean you pay for services that you could get cheaper or for free if you used the official government service.

Search on GOV.UK to find official government services – e.g. if you want to apply for a driving licence or a European Health Insurance Card (EHIC). Use the GOV.UK contact form to report misleading websites. You must include:

  • the website address or URL
  • how you found the website
  • why you thought it was an official government website

HMRC phishing emails and tax scams

HM Revenue and Customs (HMRC) will never use texts or emails to:

  • tell you about a tax rebate or penalty
  • ask for personal or payment information

Forward any suspicious emails to phishing@hmrc.gsi.gov.uk or call one of the help lines.

Report a disclosure of personal details to HMRC

Contact HMRC at security.custcon@hmrc.gsi.gov.uk if you think you’ve given any personal information in response to a suspicious email or text. Include brief details of what you disclosed (e.g. name, address, HMRC User ID, password) but don’t give your personal details in the email.

Visas and immigration

You’ll never be asked to pay for a visa using:

  • cash
  • money transfer

Use the GOV.UK contact form to report visa and immigration scams. You should include:

  • a copy of the suspicious email you received, the sender’s email address and the date and time it was received
  • details of what you sent in a reply, if you replied – e.g. whether you sent your bank details, address or password

Contact Action Fraud

You can also report suspicious emails, letters or telephone calls to the police through Action Fraud.

Business rates exemptions

Certain property, whether occupied or out of use for a period, may be eligible for exemption from payment of business rates. The GOV.UK website lists the following as potentially eligible:

Exempted buildings – certain properties are exempt from business rates. Exemptions include:

  • agricultural land and buildings, including fish farms

  • buildings used for training or welfare of disabled people

  • buildings registered for public religious worship or church halls

Empty properties – you don’t have to pay business rates on empty buildings for 3 months. After this time, most businesses must pay full business rates. Some properties can get extended empty property relief:

  • industrial premises (e.g. warehouses) are exempt for a further 3 months

  • listed buildings – until they are reoccupied

  • buildings with a rateable value under £2,600 – until they are reoccupied

  • properties owned by charities – only if the property’s next use will be mostly for charitable purposes

  • community amateur sports clubs buildings – only if the next use will be mostly as a sports club

If you are concerned that you may be missing on these exemptions contact your local council to find out more.

Do you need to fill in a tax return?

HMRC have determined that you must complete a self assessment tax return if any of the following circumstances apply to your personal, financial circumstances:

 

     1.    You're a company director, minister, Lloyd's name or member.

  1. Your annual income is £100,000 or more.
  1. You have income from savings, investment or property. 

If you are an employee or a pensioner and already pay tax through a PAYE code, you can sometimes ask for tax that you owe on income, such as savings and property, to be collected through your code number. You'll need to complete a tax return instead if the income you receive is:

  • £10,000 or more from taxed savings and investments
  • £2,500 or more from untaxed savings and investments
  • £10,000 or more from property (before deducting allowable expenses)
  • £2,500 or more from property (after deducting allowable expenses) 

If you don't pay tax through a PAYE code you’ll need to complete a tax return if all of the following apply:

  • you have income to declare, for example income from savings, trusts or abroad, rental income from land or property
  • your total income exceeds your total allowances and reliefs
  • you have tax to pay on this income 
  1. You need to claim expenses or reliefs.
  1. If you or your partner or spouse receives Child Benefit and either of you has income over £50,000.
  1. You get income from overseas.
  1. You have income from trusts, settlements or estates.
  1. You have Capital Gains Tax to pay.
  1. You’ve lived or worked abroad or aren’t domiciled in the UK.
  1. You’re a trustee.

 Quite a list…

 One benefit of submitting a return is an automatic reconciliation of your overall tax position for the tax years affected.

For those tax payers that are not required to submit a tax return, and who have a number of income streams – all taxed at source – HMRC should send you a tax calculation at least once a year, showing your various income sources, tax paid and any balance of tax owing or due back to you.

Whichever situation applies to your circumstances take care to check HMRC’s calculations, either yourself or by seeking professional advice, HMRC do not always get it right.

 

Construction Industry and tax

All active building contractors and building subcontractors are subject to HMRC regulation. The rules they have to abide by are set out in the Construction Industry Scheme (CIS). Essentially, contractors cannot pay their subcontractors without stopping tax. Only in specific circumstances can payments be made without deduction of tax.

The scheme operates a little like the PAYE system with one important difference – contractors are not required to deduct National Insurance Contributions from the payments they make to subcontractors.

Unfortunately, your business can still be considered a contractor (and therefore subject to the CIS) even if your main business is nothing to do with construction. Under the CIS rules you are a contractor if:

  • you run a business that engages subcontractors for construction operations – a 'mainstream' contractor
  • you run a business that spends an average of £1 million or more a year over a three year period on construction operations – a 'deemed' contractor

Businesses that are deemed to be engaged in construction include:

  • businesses like manufacturers or retailers
  • local authorities
  • government departments
  • housing associations and 'arm's length' management organisations (ALMOs)

If your business or organisation becomes a deemed contractor then it'll remain one until it can show HMRC that its spending on construction work has fallen below £1 million a year for three years in a row.

The normal CIS rules for contractors also don't apply when:

  • a deemed contractor pays for a small construction contract of less than £1,000 – excluding materials costs – and has authorisation from HMRC to exempt it
  • a contractor pays a subcontractor less than £1,000 – excluding materials costs – to do construction work on the subcontractor's own property – or on any agricultural property where the subcontractor is the tenant – and has authorisation from HMRC to exempt it
  • the governing body or head teacher of a local education authority maintained school pays for construction work on behalf of the local education authority
  • a charitable body or trust – but not its trading subsidiary – pays for construction work

Private householders are never treated as CIS contractors, no matter how much they spend on construction operations.

European Commission ventures opinion on UK economy

In March 2014 the European Commission published a report entitled Macroeconomic Imbalances United Kingdom 2014. The text includes a few observations on the UK property market that have been greeted with less than enthusiasm by the UK Government.

The report includes the following introduction:

“The United Kingdom continues to experience macroeconomic imbalances, which require monitoring and policy action. In particular, developments in the areas of household debt, linked to the high levels of mortgage debt and structural characteristics of the housing market…”

The report points out that:

  • House price inflation continues to outstrip the Consumer Price Index by a wide margin.
  • The main driver of house price inflation is demand for properties outstripping supply.
  • The Government Help to Buy scheme and continuing low interest rates have increased availability of mortgage funding.
  • House price inflation is highest in London and the South-East. Property owners in other areas of the UK would be particularly vulnerable to interest rate increases.

Recommendations to deal with the potential over-heating in the UK property market include:

  • Increase the supply of housing.
  • Reform of the Council Tax system
  • Release of more land for development

The concluding statement of risks associated with the property market are reproduced below:

“In conclusion, levels of activity remain below previous peaks.  Nevertheless, house prices are rising and the increase in prices and level of activity is likely to be reflected in rising levels of mortgage debt (and that rise is occurring from an already elevated base). The main risk on the demand side is households' vulnerability to a rise in the cost of borrowing while the response of the authorities has mitigated risks associated with an excessive lowering of credit standards. The main risk on the supply side is that reforms to the planning system and other initiatives to increase supply do not deliver increases in new housing of the amount required, or do so sufficiently quickly, to forestall further rises in house prices and mortgage indebtedness.”