New proposals obliging large and listed companies to publish detailed information about their payment practices and performance were unveiled 27 November 2014 by the Business Minister Matthew Hancock.

The proposed changes will provide robust information making it easier for small businesses to compare the role models with the less reputable. Specifically, the average payment time; the proportion of invoices paid beyond terms; and the proportion of invoices paid within 30 days, over 30 days, over 60 days and over 120 days.

The new reporting requirement has been developed in response to feedback from an earlier consultation, where a clear majority supported increased transparency. The new proposals show how the government intends to use the prompt payment power in the Small Business, Enterprise and Employment Bill which is currently going through Parliament. Reporting on a quarterly basis will be a mandatory requirement for all large and quoted companies.

Business Minister Matthew Hancock said:

Tackling late payment is at the heart of our drive to help small businesses. Coming from a small business background, I know just how critical late payment can be for small firms’ cash flow. We know that small businesses are often reluctant to risk losing business by using the redress measures we’ve put in place, so we want to tackle the underlying culture by increasing transparency on payment practices and performance.

The measures we are consulting on will make it clear to small businesses and consumers alike which large businesses behave properly, and those that think they can ride roughshod over their suppliers.

Employers who owe their workers thousands of pounds for failing to pay them the National Minimum Wage (NMW) have been named by Business Minister Jo Swinson.

On the 27 November 2014, a further 25 employers who failed to pay their workers the National Minimum Wage were named under the revised naming scheme – introduced in October 2013. The scheme was revised to make it simpler to name and shame employers that do not comply with minimum wage rules. Between them they owe workers a total of over £89,000 in arrears and have been charged financial penalties totalling over £36,000.

The government has already named 30 employers since the new regime came into force. They had total arrears of over £50,000 and total penalties of over £24,000

Business Minister Jo Swinson said:

“Paying less than the minimum wage is wrong and illegal. Employers need to know that they will face tough consequences if they break the law.

All workers are entitled to the minimum wage. This isn’t a generous gesture, this is the law. Government takes the enforcement of workers’ rights seriously and those who don’t pay will be named, shamed and fined.

If anyone suspects they are not being paid the wage they are legally entitled to, they can call the Pay and Work Rights Helpline for free and confidential advice and to make a complaint.”

The government has introduced a series of tougher measures to crack down on employers that break National Minimum Wage law. As well as being publicly named and shamed, employers that fail to pay their workers the National Minimum Wage also face penalties of up to £20,000.

The government is also legislating through the Small Business, Enterprise and Employment Bill so that this penalty can be applied to each underpaid worker rather than per employer.

1 December 2014 – Due date for Corporation Tax due for the year ended 28 February 2014.

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

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

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

 30 December 2014 – Deadline for filing 2013-14 Self Assessment online to include a claim for under payments (under £3,000) be collected via tax code in 2015-16.

 1 January 2015 – Due date for Corporation Tax due for the year ended 31 March 2014.

 19 January 2015 – PAYE and NIC deductions due for month ended 5 January 2015. (If you pay your tax electronically the due date is 22 January 2015.)

 19 January 2015 – Filing deadline for the CIS300 monthly return for the month ended 5 January 2015.

 19 January 2015 – CIS tax deducted for the month ended 5 January 2015 is payable by today.

 31 January 2015 – Last day to file 2013-14 Self Assessment tax returns online.

 31 January 2015 – Balance of Self Assessment tax owing for 2013-14 due to be settled today. Also first payment on account for 2014-15 due today.

HMRC have started to distribute personal tax summaries that set out how much tax you have paid and how the revenue collected is spent by government. According to a recent press release:

1.Personal tax summaries show you how your tax is calculated and what it is spent on

Personal tax summaries show you how much Income Tax and National Insurance Contributions (NICs) you paid over the financial year 2013-2014, and how this is calculated. The back of the summaries show you how your tax contributed to public spending, for example, how much of the tax you paid went on health, defence, overseas aid and more.

2.Overall, 24 million people will receive a personal tax summary

This is the first year that the government is sending out personal tax summaries, and from now on, they will be sent out once each year.

3. You don’t have to do anything with them

The personal tax summary is for reference only – you don’t have to do anything with it. Apparently, the government is sending them out to improve the transparency of the personal tax system, so that you know how much tax you pay, how it is calculated, and how the government spends it.

4. It’s all part of a wider aim of the government to make the tax system fair and simpler

In future, HMRC will provide everyone with a digital account which will include their tax summary.

5.Not everybody will get theirs on the same day

Personal tax summaries will be sent in batches over several weeks. The first tax summaries were delivered on 3 November, and most will have been sent by mid-December.

If you prepare a tax return, then your summary will not yet be available unless your 2013-14 return has been filed.

The online filing deadline for 2013-14 Self Assessment tax returns is 31 January 2015. However, if you are still filing a paper version of the return, the 2013-14 deadline was 31 October 2014.

 As the 31 October paper-filing deadline has passed, even if you have no tax to pay, or you eventually pay your tax on time, and if you file a paper return for 2013-14 between now and the 31 January 2015, it will still land you with a £100 penalty.

 The only way to avoid a penalty is by submitting your tax return online by 31 January 2015. To send an online tax return yourself, you must be registered for HMRC’s Online Services. This involves HMRC sending you an Activation Code in the post, so allow time for this to arrive. If you haven’t registered for online filing, you can do so by visiting the GOV.UK website and following the instructions.

 If you would like professional help in filing your return please contact us – we are already registered with HMRC.

In the past companies have tended to base holiday pay payments on a worker’s basic pay, excluding overtime. In a recent landmark case an Employment Tribunal has ruled that past, non-guaranteed overtime should be included in the calculation of holiday pay.

 Here’s what ACAS have to say:

 “Non-guaranteed overtime is where there is no obligation by the employer to offer overtime but if they do then the worker is obliged by the contract to work overtime.

 On 4th November 2014 the Employment Appeal Tribunal handed down judgment in the case of Bear Scotland v Fulton which covers how holiday pay should be calculated when non-guaranteed overtime is worked.

 The judgment has clarified that:

• Workers should have their normal non-guaranteed overtime taken into account when they are being paid annual leave. 
• Anybody making a claim must have had an underpayment for holiday pay that has taken place within three months of lodging an employment tribunal claim.
• If a claim involves a series of underpayments, any claims for the earlier underpayments will fail if there has been a break of more than three months between those underpayments.
• Only the 4 weeks' annual leave entitlement under the original Working Time Directive apply to this judgment, rather than the full 5.6 weeks' leave provided by the Regulations as they operate in Great Britain.

This judgment may have an impact in situations where non-guaranteed overtime is carried out by workers on a regular or consistent basis. It is unlikely to have an impact in situations where non-guaranteed overtime is either already factored into holiday pay, or possibly where non-guaranteed overtime is only used on genuinely one-off occasions.”

Economic indicators

Employment

Employment is at a record high of 30.8 million, up 1.7 million since the Government came into office, and more than 1 million above its pre-recession peak. Since 2010, employment has increased faster in the UK than in any other G7 country, and the working-age labour market participation rate has risen to levels last seen over 20 years ago.

 Growth

 UK GDP grew 3% in the third quarter of 2014 compared to a year ago. The Office for Budget Responsibility (OBR) has revised its forecast for UK growth as follows:

• in 2014 from 2.7% to 3.0%,
• in 2015 from 2.3% to 2.4%.

 The OBR forecasts growth of:

• 2.2% in 2016,
• 2.4% in 2017,
• 2.3% in 2018 and
• 2.3% in 2019.

 The OBR has revised down its forecast for unemployment in all years to 2018, and expects a rate of 6.2% in 2014, falling to 5.3% at the end of the forecast period.

The OBR expects business investment growth of 7.7% in 2014. It also expects Consumer Price Index inflation to be below target in 2014 through to 2017 and then to stay at target from 2017 to 2019.

 Deficit

 The Government seems committed to a gradual reduction in the deficit over the next 5 years. The deficit estimates for each year are set out below:

• 2014-15 a deficit of £91.3bn
• 2015-16 a deficit of £75.9bn
• 2016-17 a deficit of £40.9bn
• 2017-18 a deficit of £14.5bn
• 2018-19 a surplus of £4bn.

 Stamp Duty Land Tax (SDLT) changes

As expected, SDLT has been reformed and the changes announced will provide a significant reduction in the charge for most home owners when they buy their next property. The new rules come into force 4 December 2014, but if you have exchanged on a property purchase you will have the choice to pay SDLT under the old or the new rules. In the majority of cases you will pay less tax under the new rules.

 Before this announcement, SDLT was charged on the “slab” basis: whatever rate applied to the total value of the property was applied to the entire purchase price. So if your purchase was £275,000 you would  pay a 3% charge on the total price, £8,250.

 The new rates that apply to residential property sales are:

• £0 to £125,000 – rate is 0%
• £125,001 to £250,000 – rate is 2%
• £250,001 to £925,000 – rate is 5%
• £925,001 to £1.5m – rate is 10%
• Over £1.5m – rate is 12%

 These rates are applied on a graduated basis, like Income Tax. In the above example, the SDLT charge for a property purchase of £275,000 would be £3,750, a saving of £4,500.

 This is calculated as:

• £125,000 no charge
• £125,000 at 2%, and
• £25,000 at 5%

 In Scotland, the new rates will apply until 1 April 2015 when SDLT is devolved to the Scottish Parliament.

 Personal taxes and related matters

 Personal Tax and National Insurance 2015-16

1. The personal allowance for persons born after 5 April 1948 is confirmed as £10,600 from 6 April 2015 (Presently £10,000).
2. The higher rate threshold (the basic personal allowance plus the basic rate limit) will be £42,385. With the basic personal allowance at £10,600 this means that the basic rate limit will be £31,785 from 6 April 2015. There are no changes to the basic, higher rate or additional rate of Income Tax which remain at 20%, 40% and 45% respectively.
3. There will be no percentage increases in the rates of National Insurance Contributions (NICs) (Class 1, Class 1A, Class 1B and Class 4) for 2015-16, but there will be minor changes to the various thresholds. The weekly rates for Class 2 are £2.80, and Class 3 £14.10.
4. From April 2015, the Government will also extend the £2,000 annual NICs Employment Allowance to those households that employ care and support workers. This means that a family will be able to employ a care worker on a salary of up to £22,500 and pay no employer NICs. In addition, care workers will be exempted from the impacts of removing the £8,500 threshold below which employees do not pay Income Tax on benefits in kind.
5. The Government will abolish employer NICs up to the upper earnings limit for apprentices aged under 25. This will come into effect from April 2016.

Tax Credit, Child Benefit and Guardian’s Allowance 2015-16

 There are minor changes to the Tax Credit rates for 2015-16.

 The income threshold for those entitled to Child Tax Credit only is increased to £16,105.

 There are no changes to the income disregard which remains at £5,000.

 Transferrable Tax Allowance

 From April 2015 a spouse or civil partner, who is not a tax payer, or who does not pay tax above the basic rate, will be entitled to transfer up to £1,060 of their personal allowance to their spouse or civil partner. This will not advantage higher rate tax payers as the recipient of the transfer cannot be subject to tax at higher than the basic rate.

 Entrepreneurs’ Relief (ER) – transfer of goodwill to a close company

 The Government will prevent individuals from claiming ER on disposals of the reputation and customer relationships associated with a business (‘goodwill’) when they transfer the business to a related close company. This will affect transfers on or after 3 December 2014.

 Entrepreneurs’ Relief – extended to eligible investments

 The Government will allow gains which are eligible for ER, but which are instead deferred into investments which qualify for the Enterprise Investment Scheme (EIS) or Social Investment Tax Relief (SITR), to remain eligible for ER when the gain is realised. This will benefit qualifying gains on disposals that would be eligible for ER but are deferred into an EIS or SITR on or after 3 December 2014.

 Investment Incentives

 The Chancellor announced that from 3 December 2014, if an ISA saver in a marriage or civil partnership dies, their spouse or civil partner will inherit their ISA tax advantages. In addition from 6 April 2015, surviving spouses will be able to invest as much into their own ISA as their spouse used to have, on top of their usual allowance.

 ISAs: The subscription limits increase to £15,240 (currently £15,000) from 6 April 2015.

 Junior ISAs and Child Trust Funds: The investment limits increase to £4,080 (currently £4,000) from 6 April 2015.

 Fuel Duty

 The planned September 2014 increase in fuel duty was cancelled. No further increases will be made during the current Parliament.

 State Pension changes

 The basic State Pension will rise by £2.85 a week from April 2015.

 Non-Residents

 The Government is to increase the charge it makes to long-term, non-domiciled tax payers who take advantage of the remittance basis.

 It will therefore increase the remittance charge for non-domiciles who have been resident in the UK for 12 of the past 14 years (from £50,000 to £60,000), and introduce a new charging point for those who have been resident for 17 of the past 20 years (£90,000). The charge for those resident for 7 of the past 9 years will remain unchanged (at £30,000).

 Death and taxes

 The Chancellor confirmed that the 55% tax charge that presently applies to pension funds left to beneficiaries will be scrapped from April next year.

 Additionally, from April 2015, beneficiaries of individuals who die under the age of 75 with remaining uncrystallised or drawdown defined contribution pension funds, or with a joint life or guaranteed term annuity, will be able to receive any future payments from such policies tax free where no payments have been made to the beneficiary before 6 April 2015. The tax rules will also be changed to allow joint life annuities to be paid to any beneficiary. Where the individual was over 75, the beneficiary will pay the marginal rate of Income Tax, or 45% if the funds are taken as a lump sum payment. Lump sum payments will be charged at the beneficiary’s marginal rate from 2016-17.

 Small pension pots withdrawal

 As announced on 21 July 2014, the Government will continue the small pots rules for withdrawals from defined contribution pension savings from 6 April 2015. These rules allow individuals to take up to 3 small pension pots from non occupational schemes, or an unlimited number from occupational schemes, of up to £10,000 as a lump sum without being subject to a reduced annual allowance of £10,000. The Government will also lower the age at which an individual can make use of these rules from 60 to 55 from 6 April 2015.

 Pensions – the age 75 rule

 Following informal consultation since Budget 2014, the Government has decided not to make changes to the age limit at which tax relief can be claimed on pension contributions. This will remain at age 75.

 Inheritance Tax (IHT) exemption extended to aid workers

 The existing IHT exemption for members of the armed forces whose death is caused or hastened by injury while on active service is to be extended to members of the emergency services and humanitarian aid workers responding to emergency circumstances. It will have effect for deaths on or after 19 March 2014.

 Air Passenger Duty (APD) changes

 An APD exemption is to be introduced from 1 May 2015 for children under 12 on economy flights and from 1 March 2016 for children under 16.

 Business taxes

 Diverted Profits Tax

 Where multinationals use artificial arrangements to divert profits overseas in order to avoid UK tax, the Government will now act. The Autumn Statement announces the introduction of a new Diverted Profits Tax to counter the use of aggressive tax planning to avoid paying tax in the UK. The Diverted Profits Tax will be applied at a rate of 25% from 1 April 2015.

 Restrictions to banks tax losses

 When a company makes a loss for Corporation Tax purposes, this loss can be carried forward and offset against profit arising in future periods. Many banks operating in the UK have built up exceptionally large carried-forward losses – a result of their performance during the financial crisis and the costs associated with subsequent misconduct and mis-selling scandals. The Government considers it unreasonable that these losses are now being used to eliminate tax on current profits. Corporation Tax receipts from the banking sector have already fallen from £7.3 billion in 2006-07 to £1.6 billion in 2013-14, and it is unsustainable that some banks will not be making Corporation Tax payments for another 15 to 20 years.

 Accordingly, the Government will restrict the amount of banks’ profits that can be offset by carried-forward losses to 50%, increasing banks’ contribution to fiscal consolidation through Corporation Tax payments.

 Corporation Tax Northern Ireland

 The Government is giving serious consideration to the strongly held arguments for devolving Corporation Tax rate-setting powers to Northern Ireland, including its land border with the very low Corporation Tax environment in the Republic of Ireland, and the shared goal of the UK Government and the Northern Ireland Executive of rebalancing the Northern Ireland economy and securing the peaceful economic progress made in Northern Ireland since the Good Friday Agreement. In practical terms, further work by HMRC and HM Treasury has concluded that this proposal could be implemented provided that the Northern Ireland Executive is able to manage the financial implications.

 R&D Tax Credits

 The Government will increase the rate of the above the line credit from 10% to 11% and will increase the rate of the Small and Medium Enterprise (SME) scheme from 225% to 230%, from 1 April 2015.

 The Government will also restrict qualifying expenditure for R&D tax credits so that the costs of materials incorporated in products that are sold are not eligible, with effect from 1 April 2015.

 Small Business Rate Relief

• The Government will increase the business rates discount to £1,500 for retail and food and drink premises with a rateable value of up to £50,000 from 1 April 2015.
• The Government will continue the 2% cap on the RPI increase in the business rates multiplier for an additional year from 1 April 2015.
• The doubling of the small Business Rate Relief will continue until April 2016.

  Social Investment Tax Relief (SITR)

 The Government is to seek EU approval to increase the investment limit for the SITR from £5 million per annum per organisation up to a maximum of £15 million per organisation and to extend the relief to small-scale community farms and horticultural activities. The changes will come into effect on or after 6 April 2015, subject to state aid clearance.

The Scottish parliament is to take over responsibility for income tax and welfare benefits in the most significant devolution of taxes thus far.

Changes to the management of income tax and other taxes, as published by the Smith Commission last week, are listed below. Any reference to a tax being “reserved” means it will be controlled by the UK parliament:

Income Tax

1.  Income Tax will remain a shared tax and both the UK and Scottish Parliaments will share control of Income Tax. MPs representing constituencies across the whole of the UK will continue to decide the UK’s Budget, including Income Tax.
2. Within this framework, the Scottish Parliament will have the power to set the rates of Income Tax and the thresholds at which these are paid for the non-savings and non-dividend income of Scottish taxpayers (as defined by the Scotland Acts).
3. As part of this, there will be no restrictions on the thresholds or rates the Scottish Parliament can set. All other aspects of Income Tax will remain reserved to the UK Parliament, including the imposition of the annual charge to Income Tax, the personal allowance, the taxation of savings and dividend income, the ability to introduce and amend tax reliefs and the definition of income.
4. The Scottish Government will receive all Income Tax paid by Scottish taxpayers on their non-savings and non-dividend income with a corresponding adjustment in the block grant received from the UK Government, in line with the funding principles set out in paragraph 95.
5. Given that Income Tax will still apply on a UK-wide basis, albeit with different rates and thresholds in Scotland, it will continue to be collected and administered by HMRC. In line with the approach taken for the Scottish rate of Income Tax, the Scottish Government will reimburse the UK Government for additional costs arising as a result of the implementation and administration of the Income Tax powers described above.

 National Insurance

 All aspects of National Insurance Contributions will remain reserved.

 Capital Taxes

 All aspects of Inheritance Tax and Capital Gains Tax will remain reserved.

 Corporate Taxes

 All aspects of Corporation Tax will remain reserved.

 All aspects of the taxation of oil and gas receipts will remain reserved.

 Value Added Tax

The receipts raised in Scotland by the first 10 percentage points of the standard rate of Value Added Tax (VAT) will be assigned to the Scottish Government’s budget. These receipts should be calculated on a verified basis, to be agreed between the UK and Scottish Governments, with a corresponding adjustment to the block grant received from the UK Government in line with the principles set out in paragraph 95.

 All other aspects of VAT will remain reserved.

 Air Passenger Duty

The power to charge tax on air passengers leaving Scottish airports will be devolved to the Scottish Parliament. The Scottish Government will be free to make its own arrangements with regard to the design and collection of any replacement tax, including consideration of the environmental impact.

Many business readers of this blog will have their accounting year end set to coincide with the tax year end. For convenience, the end of March. As we approach the end of the calendar year you might want to consider the value of an interim review of your accounts to see what planning strategies are available to you. For example:

1. Keeping your bank informed: If your business is constantly pushing towards the top end of its overdraft or loan facilities your bank manager will be much more sympathetic to your requests for more support if you can provide up-to-date accounts.
2. Buying new plant, equipment or vehicles: The tax allowances you can claim for capital purchases can vary significantly. The date on which you buy, the specification of the vehicle or equipment. Well worth taking professional tax advice before you make any significant investment in this area.
3. Paying yourself: The options you have available to minimise tax and National Insurance on any income you draw from your business depends on the type of business structure you have opted to work with. Self-employed traders will pay tax on their profits regardless of the amount of cash they withdraw for personal needs; directors and shareholders of Limited Companies will pay tax on the amount of salary or dividends they take. Dividends, however, do not attract a National Insurance charge. Each business offers its own opportunities to minimise state deductions and maximise take home pay. You should certainly take advice prior to your year end to make sure you choose the right strategy. Waiting until after the year end will likely close down beneficial options.
4. Reduced profits reduced tax payments: If you are self employed you will be making tax payments on account for the current tax year in January and July each year. These payments are always estimated and based on the amount of profit you made in the previous tax year. Another reason to estimate your current year’s profits, before the end of your trading year, is that you can elect to have the payments on account reduced if current year’s profit is lower than the previous year.
5. Dividends and available reserves: When accountants talk about reserves they mean accumulated profits from past and current year’s trading after corporation tax has been paid. When you take a dividend payment you are actually drawing on, and reducing these reserves. It is illegal to take or vote a dividend if you have insufficient reserves to cover it. Keeping an eye on your accounts is therefore essential and at minimum you should be preparing draft or interim accounts at least once before the end of your trading year.

Whether you divert your own time and energy or ask your accountant to do the work for you it is wise to see the financial cost of producing interim accounts as an investment. It should be possible to identify the benefits of the process so that you can make an objective choice. Time will rob you of the planning opportunities discussed in this article, and there are many more. Don’t wait until after your year end to discover what might have been, the horse is still safely locked in the stable…

The government has launched a public information campaign to ensure everyone knows what the State Pension changes mean for them.

With just over 500 days to go, Work and Pensions Secretary Iain Duncan Smith and Pensions Minister Steve Webb have recently launched a major new drive to help people understand the historic reforms that will introduce a flat-rate State Pension.

According to a recent press release the reforms will tackle inequalities of the past, with women, carers, lower earners and the self-employed to benefit the most.

In the first 10 years, Department for Work and Pensions (DWP) analysis suggests that around 650,000 women are expected to benefit from the transition valuation, receiving on average £8 a week more in State Pension.

Ministers are urging everyone – and the over-55s in particular – to look at what the changes will mean for them and to secure a detailed State Pension statement so that everyone can plan accurately for retirement.

Under the new system, pensioners would in time receive around £150 a week or over if they have 35 years of full-rate National Insurance contributions, but those soon to retire will need to check what it means for them, with transitional arrangements in place as the system switch over.

Some 42% of people yet to retire admit they need to find out more about saving for retirement, while 38% concede they “try to avoid thinking about” what will happen when they stop working. And only 60% of all adults surveyed realise it is possible to take action to increase their State Pension.

Work and Pensions Secretary Iain Duncan Smith MP said:

“The new State Pension is one of this government’s boldest reforms; it will give people clarity over their retirement income, significantly reduce the means testing of pensioners and put right inequalities affecting women, low earners and the self-employed.”