HMRC Tax Campaigns – Will You Be Targeted?

Following on from the success of the Plumbers Tax Safe Plan (PTSP) earlier this year, HMRC have announced that they will now be targeting electricians in a similar scheme.

The Tax Safe Plans give businesses and individuals the chance to get their tax affairs up to date and in order, and give HMRC the chance to reclaim any unpaid tax without opening enquiries.

As at 24^th October 2011, HMRC had received almost £2,000,000 via the PTSP with more tax expected to be paid, so this is proving to be a fruitful campaign. 

The Plumbers Tax Safe Plan ended a few months ago, and now electricians are next on HMRC’s target list.

For those that do take part in the schemes, they will benefit from reduced penalties and will be looked upon much more favourably by HMRC – which is definitely a good thing!

Although the thought of paying historic taxes may be unappealing for some, if you do have any unpaid tax you should take advantage of the schemes immediately – now that the Plumbers’ scheme has closed, HMRC have continued to target those in the plumbing trade who did not choose to come forward, and opened enquiries into their affairs.  They have even made a number of arrests.

If HMRC find any unpaid tax, not only will this tax have to be paid, but interest may be charged, as well as penalties being issued – HMRC have the powers to issue penalties of up to 100% of their lost revenue if they find the errors and you haven’t disclosed them first. 

It’s not only those working in trades that are being targeted by HMRC; in the past they have ran a similar scheme for those in the medical profession, and currently there is a focus on tutors and coaches.  They have also announced that e-traders and restaurants will be targeted. 

Don’t wait for HMRC to approach you!  If you think the Electricians Tax Safe Plan could help you, or you are an e-trader that may not be paying the correct taxes, contact Axel on 01565 755255 or email us at blog@axel.co.uk.

Pensions - Are You Ready?

In recent times, the Government has become concerned that people are not saving enough for their retirement, so changes are being made to the pension system.

Shortly, employers will be required to automatically enrol eligible job holders into a qualifying workplace pension, and make minimum contributions into it.

Don’t be put off by the jargon!  Below we will explain how this will affect employers.

What is an eligible job holder?

An eligible job holder is a job holder aged at least 22 years old, who hasn’t reached State Pension age, and earns more than £7,475 per annum.  These job holders must be automatically enrolled into the employer’s workplace pension scheme.

Job holders between 16 and 22 who are earning more than £7,475, or any employee earning below £7,475 can opt in to the employer’s workplace pension if they wish.

What is a qualifying workplace pension?

Employers can choose the pension scheme (or schemes) they want to use – including their current pension scheme if one is already set up – providing it meets certain quality criteria. 

When will I be affected?

Changes are planned to start from 2012, and will be phased in, starting with large employers, then medium, and then small.  To help employers adjust to these changes, the employer contribution levels are also to be phased in, starting at one per cent, then rising to two per cent, and finally reaching three per cent.

Employers with less than 50 employees will be phased in as of August 2014.

The Pensions Regulator plans to write to employers around 12 months in advance of theirs automatic enrolment start date.

We recommend that you speak to an independent financial advisor before making any decisions regarding pensions.  Please feel free to contact Axel on 01565 755255 or via email at blog@axel.co.uk should you require any further information.

The figures stated on this page are subject to pending legislation.

Mileage Allowances – Are You Reclaiming VAT Correctly?

Employees and directors of a business can be reimbursed for the business miles they travel in each tax year.  For the 2011/12 tax year, HMRC has published rates of 45p per mile for the first 10,000 miles they travel, followed by 25p per mile for all miles thereafter.  If you reimburse your employees at the HMRC published rates (or lower), no taxable benefit occurs.

The 45p and 25p rates are intended to cover all costs involved in an employee using their personal car, both capital and running costs.  You should note that if you do pay mileage, you should not pay any other costs relating to that vehicle, such as fuel, servicing, insurance, etc.

If you are a VAT registered business, HMRC allow you to reclaim VAT on the fuel element of the allowances.

So how do you calculate how much VAT you can reclaim?

The amount of VAT you can recover depends the engine size and the type of fuel the car uses.  HMRC issue advisory fuel rates which show how many pence per mile can be attributed to fuel costs.

These rates are revised every quarter to reflect changes in fuel prices.  They can be found on the HMRC website by following the link below.  If the link does not work, you can copy and paste this into your browser.

http://www.hmrc.gov.uk/cars/advisory_fuel_current.htm

An example of calculating the amount of VAT you can reclaim is below:

An employee travels business 500 miles in a 1600cc petrol car on 1^st September 2011.  The employee has not been reimbursed for any other mileage within this tax year.

• The employee can be reimbursed 500 miles x 45p = £225 with no further tax implications.

• The business can reclaim some VAT on the £225.  If we look at HMRC's table for a 1600cc petrol car, the advisory fuel rate is 18p for the quarter starting 1st September 2011, therefore: 

         500 miles x 18p = £90.  This is the fuel element, inclusive of VAT.

         Whilst the standard VAT rate is 20%, to work out the VAT amount we simply 

         divide the gross figure by 6:

         £90 ÷ 6 = £15 VAT

• So, although the business reimburses the employee the full £225, it can reclaim £15 via its VAT Return.

 

By using HMRC’s advisory rates, you can be sure that in the event of any investigation, the correct amounts of VAT have been reclaimed.

VAT: Should you be registered?

For some time now, HMRC have known the annual turnover of all limited companies, as it’s reported on their corporation tax returns.  They’ve also had a list of all businesses that are registered for VAT.  It’s taken a while, but they have finally compared these two pieces of information.  The result?  A list of over 40,000 limited companies with an annual turnover of over £73,000 (the current VAT threshold) that are not registered for VAT.

HMRC have sent letters to some of these companies asking them to consider whether they should be VAT registered.  If you should be VAT registered but are late in applying for registration, you should look at taking advantage of HMRC’s VAT Initiative, but be quick – you must inform HMRC that you would like to take part by 30^th September 2011.  If you do this, you can take advantage of lower penalties than would usually be charged.  In some cases HMRC have advised penalties won’t be issued at all. 

Now that HMRC have a list of businesses they expect to be VAT registered, they have revealed that should these business not become VAT registered, they will be targeted to find their reasons for not doing so. 

Here at Axel Chartered Accountants, we would advise anyone with a turnover over or approaching the £73,000 threshold in a rolling 12 month period, to contact us to look at your circumstances and assist in any actions that need to be taken.  If you do need to become VAT registered, we can also advise of the different VAT schemes that may beneficial to you and your business, such as the Flat Rate Scheme, Cash Accounting Scheme and the Annual Accounting Scheme.

Contact us on 01565 755255 or via email at blog@axel.co.uk