06 September 2010

National insurance holiday for new businesses in the regions begins

Today (06 September 2010) a new regional National Insurance Contributions (NICs) holiday for new businesses came into effect.

New business set up outside London, the South East and East of England will be eligible for a holiday worth up to £5,000 for up to the first ten employees they hire in their first year of business. This means a maximum saving on their national insurance payments of up to £50,000.

The scheme will run for three years. It is estimated that 400,000 new businesses will benefit by having a lower tax bill from employing new staff.

New businesses established since the announcement in the Budget on the 22nd June, and which meet the qualifying criteria, will also be eligible to apply.

The regional NICs holiday, announced in the June Budget, will encourage the creation of private sector jobs in regions reliant on public sector employment by reducing the cost to new business of employing staff.

Exchequer Secretary to the Treasury, David Gauke:

“We need to rebalance our economy which has become over reliant on public spending and jobs provided by the public sector.

“The NICs holiday for new businesses in addition to cuts in corporation tax will provide a valuable boost to start up businesses and help foster the private sector led recovery that will drive growth in the UK over the coming years”

Notes for editors

The Regional Employer NICs Holiday for New Businesses was announced by the Chancellor at the June 2010 Budget.

For more information on the National Insurance Contribution Holiday from the 6th September you can go to the Business Link website.

Employers will be able to make holiday deductions each time they are due to make monthly or quarterly payments to HMRC.

Most kinds of new business will be eligible for the holiday, providing they employ staff and meet certain criteria, which are set out in the detailed HMRC guidance.

HMRC published a technical note on the National Insurance Holiday on the 27th August.
Business Link is the official government website for businesses of all sizes. It provides people with easy access to authoritative information, transactions and support to help them conduct their dealings with government and to find the information they need.

www.jcmartinassociates.co.uk

Equality Act 2010

Over the last four decades, discrimination legislation has played an important role in helping to make Britain a more equal society. However, the legislation was complex and, despite the progress that has been made, inequality and discrimination persist and progress on some issues has been stubbornly slow.

The Equality Act 2010 provides a new cross-cutting legislative framework to protect the rights of individuals and advance equality of opportunity for all; to update, simplify and strengthen the previous legislation; and to deliver a simple, modern and accessible framework of discrimination law which protects individuals from unfair treatment and promotes a fair and more equal society.

The provisions in the Equality Act will come into force at different times to allow time for the people and organisations affected by the new laws to prepare for them. The Government is considering how the different provisions will be commenced so that the Act is implemented in an effective and proportionate way.

Provisions coming into force on 1 October 2010:

* The basic framework of protection against direct and indirect discrimination, harassment and victimisation in services and public functions; premises; work; education; associations, and transport.
* Changing the definition of gender reassignment, by removing the requirement for medical supervision.
* Levelling up protection for people discriminated against because they are perceived to have, or are associated with someone who has, a protected characteristic, so providing new protection for people like carers.
* Clearer protection for breastfeeding mothers;
* Applying the European definition of indirect discrimination to all protected characteristics.
* Extending protection from indirect discrimination to disability.
* Introducing a new concept of “discrimination arising from disability”, to replace protection under previous legislation lost as a result of a legal judgment.
* Applying the detriment model to victimisation protection (aligning with the approach in employment law).
* Harmonising the thresholds for the duty to make reasonable adjustments for disabled people.
* Extending protection from 3rd party harassment to all protected characteristics.
* Making it more difficult for disabled people to be unfairly screened out when applying for jobs, by restricting the circumstances in which employers can ask job applicants questions about disability or health.
* Allowing claims for direct gender pay discrimination where there is no actual comparator.
* Making pay secrecy clauses unenforceable.
* Extending protection in private clubs to sex, religion or belief, pregnancy and maternity, and gender reassignment.
* Introducing new powers for employment tribunals to make recommendations which benefit the wider workforce.
* Harmonising provisions allowing voluntary positive action.

The National Minimum Wage sets minimum hourly rates that employers must pay their workers. It covers almost all workers in the UK and is divided into three rates that apply to workers of different ages.

Important Updates and Changes

The adult minimum wage rate has been extended to workers aged 21 or over from October 2010. Previously the qualifying age for the adult national minimum wage was 22.

Apprentice Rate

These rates apply from 1 October 2010 to all apprentices as follows:
for apprentices aged under 19: £2.50 per hour
for apprentices aged 19 and over, but in the first year of their apprenticeship: £2.50 per hour

National Minimum Wage Rates

There are currently three different national minimum wage rates and an apprentice rate, which are usually updated in October each year. The rates that apply from 1 October 2010 are as follows:
for workers aged 21 years or more: £5.93 per hour
for workers aged 18 to 20 inclusive: £4.92 per hour
for workers aged under 18 (but above compulsory school age): £3.64 per hour
for apprentices aged under 19: £2.50 per hour
for apprentices aged 19 and over, but in the first year of their apprenticeship: £2.50 per hour.

Who’s entitled to the national minimum wage?

Almost all workers who work in the UK are entitled to the national minimum wage. But there are some groups who aren’t entitled, including:
self-employed people
children who are still of compulsory school age
For a full list of all the exceptions, follow the link at the end of this section.
It makes no difference to a worker’s entitlement to the national minimum wage whether they work for you full time or part time, or whether they are an agency worker, a temporary or casual worker, a piece worker or a home worker.
Apprentices aged 19 or over who have completed at least one year of their apprenticeship are entitled to receive the full national minimum wage rate applicable to their age.

Which payments count towards the national minimum wage?

National minimum wage pay is calculated in a certain way. Many of the payments that you make to a worker will count towards their national minimum wage pay, but some won’t. For example, a worker’s basic pay (before deductions of tax and National Insurance) counts towards national minimum wage pay, but any payments for expenses do not count.

How many hours has your worker worked?

Every worker who’s entitled to the national minimum wage must be paid at least their national minimum wage rate on average for every hour worked in each pay reference period. (The pay reference period is the interval at which you pay them – such as weekly or monthly, but it cannot be longer than a calendar month.)
This means that to work out how much you’re required to pay a worker, you need to calculate how many hours they have worked. For national minimum wage purposes, there are four different types of work, and there are different rules for calculating the number of hours worked for each of these.

The four types of work are:
time work
salaried hours work
output work
unmeasured work

Enforcement and Penalties

HMRC enforces the national minimum wage. From 6 April 2009, if HMRC finds you have underpaid the national minimum wage it will issue a notice of underpayment. This will show the arrears you must pay to your workers and the penalty you must pay to HMRC.
The penalty is 50 per cent of the total underpayment that has occurred from 6 April 2009. This figure will be shown separately on the notice of underpayment. There is a minimum penalty of £100 and a maximum of £5,000. If you pay the arrears and the penalty within 14 days of the date on which the notice of underpayment is served, you only need to pay half of the penalty.

If you receive a notice of underpayment you have a right of appeal. You can appeal against:

HMRC’s decision to issue a notice of underpayment
any requirement imposed by the notice of underpayment

Details of how and where to appeal will be included with the notice of underpayment.

Tax gap has reached £42bn, says HMRC

The amount of tax that went uncollected rose in the last financial year to £42bn, HM Revenue & Customs (HMRC) has estimated.

That was £2bn more than estimated for 2008-09 and meant HMRC failed to bring in nearly 9% of all potential taxes.

The biggest shortfall was in VAT, where £15.2bn, or 16%, of all the potential tax was uncollected.

The next largest loss was nearly £6bn of income tax due to inaccurate self-assessment returns.

‘Making progress’
HMRC recently admitted that because of the complexity of the PAYE income tax system, it had failed to collect nearly £2.2bn from 2.3 million people in the two years between 2007-09. About 1.4 million of them are now being asked to pay extra income tax amounting to £2bn.

But the latest report suggests that inaccurate returns from employers under the PAYE system cost the Revenue £3.2bn in 2008-09 alone.

In the past three years, the HMRC has staged high-profile campaigns to flush out unpaid income tax from people with foreign bank accounts and from groups such as doctors and dentists.

However, the annual amounts of income tax lost to deliberate evasion are relatively small.

Of the £14.5bn of direct taxes (income tax, national insurance and capital gains tax) not collected last year, only £1.3bn was attributed to ghosts (people who fail to declare their taxable income) and £1.8bn to moonlighters (people who fail to declare income from a second job).

“The Revenue is making progress and UK tax authorities are doing quite well compared to other countries,” said John Whiting of the Chartered Institute if taxation (CIOT).

“But there is more to be done, especially in deciding if the estimates of how much VAT should be collected are right in the first place.”

Businesses failed to hand over an estimated £6.9bn in corporation tax, according to the HMRC report.

The least effective tax was on hand-rolled tobacco. Because of smuggling, nearly half (£600m) of all the tax due went uncollected.

HMRC explained that the overall losses on all types of taxation were due to a combination of factors such as:

• mistakes or failure to take reasonable care by the taxpayer

• evasion – the deliberate under-declaration of tax

• the hidden economy – traders who fail to register for VAT or tax losses due to “ghosts” and moonlighters

• legal avoidance strategies and legal challenges by taxpayers

• and criminal attacks such as VAT carousel fraud.

The Public and Commercial Services union (PCS) argued that the overall tax-gap was nearer £130bn each year.

“What is clear is that insufficient resources are being dedicated to collecting tax, including that which is being avoided or evaded, largely by very wealthy individuals and organisations,” said the PCS leader Mark Serwotka .

“In the five years since HMRC was formed, 30,000 jobs have been cut, the majority of which were directly responsible for tax collection.

“Starting to collect these massive sums lost to our economy every year would be a major contribution to the alternative to the government’s devastating plans to cut public spending,” he added.

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It seems a long time since we debated the proposed changes to the PAYE system, released for consultation on 27 July. The closing date for responses is 23 September 2010, and AccountingWEB.co.uk will be submitting a response to the consultation in the next week or so.

The responses to Rebecca Benneyworth’s last article setting out the proposals in some detail were pretty much split on whether the suggested developments would work or were even necessary, but of course developments since then perhaps shed a different light on things.

To recap briefly on the proposals; the consultation is entitled “Improving the operation of PAYE” and is centred on two premises :

That PAYE systems have essentially been unchanged since PAYE was introduced some 66 years ago and this means that in some respects the current system is not fit for modern employment patterns, and

That the new PAYE computer system – NPS – offers the chance to make some significant changes to the way PAYE is operated.
The objectives of any changes to be made are set out in para 2.2 of the consultation document :

To reduce costs for employers and HMRC by making the system easier to administer;
To improve service levels for individual taxpayers (customers); and
To ensure accurate tax deductions.

The recent furore over tax calculations (P800) being sent out to taxpayers in respect of 2008-09 and 2009-10 as a result of new capabilities introduced by the most recent phase of NPS is worth analysing against the backdrop of proposals to improve the system. A number of issues are clear :

The premise (expressed in comments on my last article) that “if it ain’t broke…” doesn’t stand up. If several million need their tax adjusted after the end of the tax year, then PAYE is quite clearly “broke”. This is not a result of HMRC “cock ups” or inefficiency, indeed this is a result of the tax authority doing a job which it has long been criticised for not getting around to – ensuring that taxpayers within the PAYE system have paid the right amount of tax. The lax attitude of employers to forms P45, the inappropriate application of emergency codes and indeed the failure by some employers to adequately engage with the process of getting their staff’s tax right, combined with economic mobility and the necessity of having several jobs means that the PAYE system just cannot cope. Unless some changes are made the current ruckus will become an annual event.

Any changes which generate significant levels of doubt and questions in the minds of individual taxpayers will need adequate staff available to provide support and detailed explanations if things go wrong. Unfairly perhaps, but Rebecca’s current view is that HMRC neither has the staffing levels nor the expertise to deal with this. Experience of manning a helpline dealing with lay taxpayers is that in order to enable them to understand tax issues, a very high level of knowledge and communication skills indeed is necessary.

There is a more general point to be made here – in fairness to HMRC. The level of understanding of the most basic tax (and NIC) issues in the general public is absolutely appalling. Visiting a local secondary school to talk about some basic tax education brought this home to Rebecca clearly. In planning a lesson to explain payslips, PAYE, tax codes and NIC it was clear that many of the teachers I met would also like to sit in on the lesson, as they knew little and understood less about their own tax position. This puts huge burdens on the tax authority when tax issues hit the headlines as most people are unable to check their tax code – even when provided with resources on HMRC’s website.

So where does all of that leave us? Lets go back to the main proposals :

Real time information

Under this part of the proposals, employers would provide information on gross pay, tax and NIC deducted in respect of every employee (including those paid below the thresholds) to HMRC as the payment is made. Employers who do not use electronic payment methods would be able to use an enhanced HMRC offering to submit the same information.

HMRC’s view is that this would allow NPS to keep better track of employees, issuing amended codes automatically and significantly reduce the number of employees needing an annual calculation. Other benefits of the system to Government have also been identified in that information can be made available automatically to other departments such as tax credits DWP in respect of benefit claimants.

An assessment of this proposal is that it is hard to resist – particularly in view of the current experience with P800’s. It imposes little change from the perspective of the employee. For employers, the additional information required can normally be programmed in by third party software providers and they are relieved of the burden of forms P45 and P46. The reduction in under and over payments is a significant benefit to all, and the additional provision of information for tax credit and DWP purposes has to be good news. There is slightly more work for employers to keep records for those staff paid below the tax and NIC thresholds, but this is manageable. Of course those employers keeping manual payrolls will have to change their ways but they already have to file online – this is just and extension of that.

Centralised deductions

This more radical proposal would lead to HMRC taking over the calculation of PAYE, NIC and student loan deductions, rather than passing the information to employers to allow them to perform the task. Without going any further into the offered benefits of such a proposal (which are set out in paras 5.11 to 5.18 of the consultation document) I see an immediate problem. The consultation document already identifies the information flows with employees as potentially tricky – with employees needing to understand which questions to direct at their employer and which to HMRC. It is not currently my belief that HMRC could cope with the potentially significant extra contact this would generate. Would it be correct to think it would generate additional contact? Strong belief is that it will – perhaps purely because HMRC is now in the “hot seat”; perhaps because current adverse publicity will lead taxpayers to distrust the tax authority.

In Rebecca’s view, the development of centralised deductions will not contribute to achieving the objectives set out above. On paper it could reduce costs for employers, and has the potential to make tax calculation more accurate. But a better substitute in my view would be a rigorous analysis of P800’s issued in respect of 2008-09 and 2009-10 and then action taken to address where the real issues lie. It is not, I suspect, with errors in calculation of tax and NIC per se. Much more likely the culprit (and the solution) lies in the correct application of the correct tax code – bring on real time reporting and suitable corrective action and this should resolve itself.

Please do submit your views for inclusion in our final response to HMRC – or indeed submit your own response to the document.

HM Revenue & Customs briefs accountants on PAYE appeals to avoid a potential avalanche of unexpected demands

Written by David Jetuah – Accountancy Age, 10 Sep 2010

Tax officials last night tried to stop people hit by the PAYE blunder successfully appealing against unexpected demands.

In a briefing to accountants,The Times reported, officials clarified the rules, in effect limiting the number of people likely to be able to evade the new demands.

The rules state H M Revenue & Customs must issue demands for underpaid tax within 12 months of the end of the tax year in which it became aware of the situation.

If the Revenue does not comply with these rules, it has to consider applications not to repay tax owed if the people could have reasonably assumed that their tax code was correct and if they are in financial hardship.

The taxman issued a series of examples to leading accountants in efforts to clarify who qualifies for the concession as fears grew that HMRC would be inundated with unfounded applications.

The current PAYE system, which caused millions of errors in employee tax payments, is “outdated” says Exchequer secretary David Gauke

Published in Accountancy Age: 09 Sep 2010

The government is considering radical reforms to PAYE in an attempt to adjust individuals’ tax payments in almost “real time” as their circumstances change, minimising the need for end of year adjustments.

The proposals were revealed by Exchequer secretary David Gauke while making a Commons statement on the flood of demands for extra tax payments or notices of rebates resulting from delayed reconciliations two years ago and the use of a new system unifying individual taxpayer records.

The new system – costing close to £400m – automatically consolidates individuals’ records instead of relying on manual reconciliation of records in different offices dealing with employers’ records. It threw up a much larger number of end of year adjustments, with 4.3m identified overpayments totaling £1.8bn in tax since April 2008, and 1.4m further demands for an average of £1,428 each.

Gauke told MPs he had been “aware” of problems with Pay-As-You-Earn “since day one” and had raised proposals for reform. He said “inefficient and clerically intensive” reconciliations required every year to bring estimates of income in line with actual income for the year were not carried out last year requiring catchup now.

He said PAYE was introduced when most people had only one job — many for the whole of their working lives. But now it was common for taxpayers to have income from multiple sources. He attacked the last Labour government for having failed to modernise the system to cope with this.

He said: “The system is outdated, inefficient and burdensome to the Exchequer and taxpayer alike. We need PAYE to reflect the employment issues of the 21st century and that will be a focus of reforms that we take forward as part of our wider strategy for reform.”

Gauke said Commons Treasury Committee member and Tory MP Michael Fallon was “absolutely right” that “we need to move to a system that reflects modern working and allows tax payments in real time rather than on the guesswork in advance of the tax year or reconciliation a year or two later”.

He cautioned against claims that taxpayers will be able to use the A19 concession to object to demands for more tax. He warned it was a measure that ” in practice doesn’t apply that often”, adding: “I don’t want people to build up their hopes that it will be some kind of panacea.”

He said the government “are not in a position to wave goodbye to £2bn” and to do so would not be fair to those who had paid the right amount of tax.

A short story to remind you all that all dealings with staff need to be at the highest standard.

Accountant with Internet Habit Gets Let off Hook

The World Wide Web is a wonderful source of knowledge, but excessive use of the internet during working hours can land you in big trouble…….or maybe not as the case may be. According to a story in this month’s Credit Management magazine, an Employment tribunal has awarded almost 40, 000 pounds to an accountant wrongly dismissed for excessive use of the internet. Bosses at the man’s employer Scottish and Southern Energy claimed he had been spending a ridiculous amount of time on the internet and had reached 27, 500 website hits. Apparently, the Employment Tribunal ended up ruling in the employee’s favour, as the basis for the accountant’s dismissal was an IT report on his internet use that the company had “no idea” how to interpret. Managers should have asked their IT colleagues for advice before taking action against the accountant in question the Employment Tribunal argued.
It would appear that HR decisions can sometimes be just as risky as credit management ones!

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‘The Government will shortly announce details of a scheme to help new businesses in targeted areas of the UK that need it most. During a three year qualifying period, new businesses which start up in these areas will get a substantial reduction in their employer National Insurance Contributions (NICs).
Within the qualifying period, these employers will not have to pay the first £5,000 of Class 1 employer NICs due in the first twelve months of employment. This will apply for each of the first 10 employees hired in the first year of business and operate in selected countries and regions.
Subject to meeting the necessary legal requirements, the scheme is intended to start no later than September 2010. Any new business set up from 22 June which meets the criteria set out in the forthcoming announcement will benefit from the scheme.’
The countries and regions which will benefit will be Scotland, Wales, Northern Ireland, the North East, Yorkshire and the Humber, the North West, the East Midlands, the West Midlands and the South West.

Questions and Answers

Q1 What is the Regional Employer NICs Holiday for New Businesses?

The NICs Holiday is a scheme applying in certain regions that will provide for new businesses to enjoy a substantial reduction in their employer National Insurance Contributions.

Q2 What countries and regions will the Holiday cover?

The countries and regions which will benefit will be Scotland, Wales, Northern Ireland, the North East, Yorkshire and the Humber, the North West, the East Midlands, the West Midlands and the South West.

Q3 Why does the Holiday not apply in London, the South East and the East?

The scheme is intended to promote the formation of new businesses employing staff in those countries and regions most reliant on public sector employment. The proportion of jobs in the public sector is higher in other countries and regions than it is in the Greater South East (London, the South East and the East).

Q4 What do you mean by a “new business”?

A business that commences a trade, profession or vocation on or after the date that the Holiday scheme begins and that is able to meet certain criteria will be regarded as a new business and will be able to enjoy the Holiday but the Government will take steps to ensure that only businesses which undertake a sufficient degree of new economic activity will benefit.

Q5 What are the eligibility criteria?

Full details of the how the Holiday scheme will work and who is eligible to participate will be made available shortly.

Q6 When and where will draft clauses and guidance about this new scheme be available?

HMRC intends to publish a Technical Note containing an overview of the Holiday scheme and the draft legislation as well as detailed guidance for new businesses on its website before the scheme is launched.

Q7 Would I be regarded as a new business if I set up my business after 22 June but before the scheme starts?

If you meet the criteria that will be published shortly and set up between now 22 June and the time the Holiday scheme starts, you will be liable to pay employer NICs in the period before the start of the scheme but you will receive a Holiday of equal duration once the scheme starts.

Q8 How long will the Holiday scheme last?

The Holiday scheme will end after three years

Q9 How many Holidays can a new business enjoy?

Every new business will be able to claim a Holiday in respect of each of the first 10 employees it hires in its first year of business

Q10 How long will individual employees Holidays last?

Each Holiday will last for the first 52 weeks of the employee’s employment, providing these fall within the three year Holiday period.

Q11 Is there any restriction on the type of employee I can hire?

Most employees will be within the scope of the proposed scheme, but there will be some specific exclusions e.g. employees operating under companies caught by the IR35 rules (the deemed payment rules), employees engaged through Managed Service Companies, etc. More details will be available shortly.

Q12 Is there any restriction on how much I can pay my employees?

No. However, there is a maximum amount you can benefit by for any employee: £5,000.

Q 13 How can I claim the Holiday?

Full details will be available shortly.

Q 14 How much will the Holiday save me?

Up to £50,000. Within the qualifying period, if you are eligible you will not have to pay the first £5,000 of Class 1 employer NICs due in the first twelve months of employment. This will apply for each of the first 10 employees hired in the first year of business.

Q 15 Are all kinds of businesses covered, including e.g. investment and property businesses?

Most kinds of business activity (including the examples mentioned) will be eligible for the Holiday provided they employ staff and meet other criteria.

Q 16 What are the kinds of business activity that will be excluded?

Further details will be available shortly about which sectors are to be excluded and why. At this stage, it is clear that businesses in the coal sector will be excluded, and that there will have to be restrictions for the agriculture and fisheries sectors.

Q 17 When will the holiday start?

The Government intends the Holiday to start as soon as is practicable, probably from 6 September 2010, but this is subject to meeting the necessary legal requirements, and is YET TO BE CONFIRMED. Prospective new businesses should not assume this will be the start date. However, if you meet the criteria that will be published shortly, you will be eligible to benefit if you set up between now and the time the Holiday scheme starts. If you do set up in this period, you will be required to pay employer NICs before the start of the scheme but, if you meet the criteria, you will receive a benefit of equal duration once the scheme starts.

Q 18 Will all new businesses benefit?

No. New businesses are potentially eligible, but individuals employing staff, e.g. for personal services, and existing businesses will not be eligible.

Q19 Will existing businesses benefit?

No; only new businesses set up on or after 22 June are potentially eligible.

As extracted from HMRC Website – 100806

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All the key points from the chancellor’s emergency Budget speech

• Calling it an “unavoidable Budget”, George Osborne says Budget details will not be buried in the book.

• Everyone will have to contribute to the recovery, but everyone will also share in the eventual prosperity.

• Estimated growth in the UK economy should hit 1.2% this year, 2.3% next year, 2.8% in 2012, 2.9% in 2013 and 2.7% in both 2014 and 2015.

• CPI rates will be 2.7% at the end of the year before returning to target “in the medium term”, which remains at 2%.

• The UK’s borrowing will fall to 1.1% of GDP within five years.

• Public sector net debt to fall to 67% of GDP by 2015/2016, compared to increases proposed by the previous government.

• Unemployment to peak at 8.1% this year before falling back to 6.15 by 2015.

• Most of the deficit reduction will come from spending cuts. 77% of the reduction will come from savings, while 23% will come from tax rises.

• George Osborne says the structural deficit will be plugged by 2015/16 and is set to be cleared one year early.

• The Civil list will be subject to the same audit by the National Audit Office and will be frozen at £7.9m annually.

• An extra £17bn in savings in public services has been found, equivalent to a 25% across the board cut. Final details will be in the spending review released on 20 October.

• Public sector pay will be frozen for two years, but the 1.7m people earning up to £21,000 will receive a pay rise of £250 a year.

• The small companies rate will be cut to 20%.

• Housing Benefit to be reduced by £1.8bn by the end of Parliament.

• Corporation tax will fall to 24% by 2014, dropping 1% a year.

• Tax relief for the video games industry has been repealed.

• Plans to increase broadband access across the country will be funded by the private sector and not through a broadband levy

• The threshold for employers National Insurance Contributions will be increased.

• Employers outside of London and the South East will be exempt from National Insurance Contributions for the first £5,000 up to ten employees.

• About £2bn will be raised via a new banking levy charged to large banks.

• The standard rate of VAT will rise to 20% from 17.5% on 4 January 2011, bringing in £13bn a year of extra revenue.

• The increase in cider duty will be reversed at the end of the month

• Duties on alcohol, tobacco and petrol will remain the same.

• There will be a review of oil prices in time for the next Budget aimed at stabilising pump prices. A further announcement on aviation tax by the next Budget is also expected to change a tax structure which charges each passenger to a per flight tax.

• Personal tax allowance to rise to £7,475 in April, making 23 million taxpayers an extra £170 a year better off and taking nearly a million people out of income tax.

• Capital Gains Tax stays at 18% for standard rate taxpayers but from midnight, those paying the higher rate will see CGT rise to 28%

• The chancellor has announced that while the CGT rate for entrepreneurs’ relief will remain at 10%, the limit is to increase from £2m to £5m.

• Capital allowances are cut to mitigate more a generous corporation tax regime.

• Allowances for plant and machinery operations are reduced from 20%-18% and from 10%-8% for longer lived assets.

• Pensions will be re-linked to earnings, the state pension will increase in line with the consumer price index or 2.5% whichever is greater.

Given that most other aspects of the announcements made in the Budget were promoted within the detail of this interview, it is fascinating that the attitude to VAT is the one major change of heart within a few short weeks. Our own belief is that this was made possible by the continuous hype of the media, and George Osborne adopted a simple choice to meet the expectations of the country given where they had been led by the pundits. Interesting times!

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Extract from article in Accountancy Age by Rachael Singh – 10th May 2010

HMRC is adopting a hard line on companies requesting “time to pay” their taxes, according to information supplied to IT finance providers and consultants, Syscap.

Obtained by Syscap under the Freedom of Information act (FOI), the data reveals the number of rejected time to pay applications to the taxman has doubled compared to the same period last year, a report in The Independent claims.

Under the FOI, Syscap found HMRC rejected more than 11% of applications during the first quarter of this year compared to just 5.3% for the same period in 2009.

“SMEs are still finding it incredibly hard to borrow money from their bank to pay HMRC VAT so news that the HMRC refusal rate has shot up is worrying,” said Philip White chief executive of Syscap.

“GDP growth of 0.2 per cent [in the first quarter of the year] shows the economy is weak, not strong, and that more needs to be done to help SMEs, not less,” he added.

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A consistent approach to compliance checks and penalties.

HM Revenue & Customs (HMRC) has introduced legislation to standardise powers, deterrents and safeguards across our taxes where it makes sense to do so.

The changes followed consultation with agents, customers, representative bodies, and staff. Over time they will make the tax system more consistent.

Compliance checks

Every year HMRC carries out checks to see if the correct tax has been paid. From 1 April 2010 there will be one system across many of our taxes:

to obtain information about your tax
to inspect your business records
for the amount of time you have to make tax claims
for the amount of time we have to make tax assessments

* Find out more about the new compliance checks.

New penalties

From 1 April 2010 there will be:

* an inaccuracy penalty for inaccurate tax documents and returns across most taxes – see list of taxes
* a failure to notify penalty across most taxes when people don’t tell us about a relevant obligation at the correct time, e.g. to register for a tax – see list of taxes
a new VAT and Excise wrongdoing penalty

* Find out how you can take care to avoid a penalty.

Publishing details of deliberate defaulters

From 1 April 2010 under strictly controlled circumstances HMRC can publish the details of taxpayers who are penalised for deliberately evading more than £25,000 of tax.

* Find out more about publishing details of deliberate defaulters.

PAYE late payment penalties

From 6 April 2010 new penalties will apply to all employers who do not pay PAYE, NICs, Construction Industry Scheme deductions and student loan deductions on time and in full. It replaces an existing penalty under the Mandatory Electronic Payment (MEP) scheme, which affected employers with 250 or more employees.

* Find out more about late payment penalties

What you can do if you disagree with HMRC decisions

In most cases if you disagree with HMRC decision’s, including the decision to charge a penalty, you can appeal. From 1 April 2009 HMRC has also offered the option of an internal review of tax decisions that can be appealed, with the aim of resolving issues as quickly as possible.

Follow the link below to find out what you need to do and when. The process is different depending on the type of decision you disagree with.

* What to do if you disagree with HMRC decisions

Employees are urged to check April payslips to ensure they are paying the correct amount of tax. It is possible that they may not have been sent the same PAYE code number as the one sent to their employer or pension provider.

Employees are warned to look out for any unexpected changes to the amount they are paid and to phone HMRC if they believe there is a problem.

Owner says the club has reached agreement with HMRC over £1m tax bill

Written by Gavin Hinks
Accountancy Age, 23 Apr 2010

Wasps Rugby Football Club has been forced to issue a denial after rumours circulated suggesting the club was facing a winding up petition from HM Revenue & Customs over a £1m tax bill.

A statement on the club’s website from owner Steve Hayes said: “We remain very confident in the future of London Wasps both on and off the pitch. There is no winding up petition and I am surprised by these reports given we already have an agreement in place with HMRC.

“We have enjoyed great form recently and look forward to a hugely exciting St George’s Day fixture at Twickenham on Saturday. The short and long term prospects at the Club, including development of a new stadium, are very exciting and show the good health of London Wasps.”

The last significant rugby club to enter administration was Coventry in 2008 with Moore Stephens.

J C Martin & Associates Comment – This article is fascinating, given yesterday’s blog regarding Portsmouth Football Club. Wasps admit that they have “an agreement” in place with HMRC. Yet another sign of the times. Watch this space.

PAYE, Portsmouth and the taxman

Cast your mind back to the Budget earlier this year and you will remember a proposal from HMRC to force organisations to offer security (read our story here). against their PAYE payments.
This was a clear effort by the taxman to stop businesses using PAYE as part of their cashflow management.
Now look at the creditors report out yesterday detailing the appalling finances of Portsmouth Football club.

Total debt is around £92m, which is fine if you can service it all. The club couldn’t. A big chunk of that money owing however is £17m in VAT, NICs and PAYE.
And there you have the reason why HMRC wants security. PAYE returns were being held up by the club, along with VAT and NICs.

The administrator says quite explicitly that the club had working capital difficulties.
The figures bear this out. In the ten months to February this year turnover was £39.6m. Staff costs were £38.9m, or roughly 98% of the total. Add some additional overheads of £9m and you have a club spending well above its means.
Is it any wonder then that we speculated that the new demands for security against PAYE would hit football clubs particularly hard?
The taxman can see from a mile away that once the race is on to acquire top players obligations to the state are not exactly a top priority when it comes up against paying big wage bills.
Crystal Palace remains in administration. Liverpool is up for sale saddled with huge debts. Could there be another so called professional sport where the financial management is so parlous?
Portsmouth club will shortly play in of the FA Cup final. Let’s hope it’s not a last hurrah before a long spell in the football backwaters.

J C Martin & Associates Payroll Bureau Comment –
Ever since the Government Agencies lost their preferred creditor status when a company becomes insolvent, they have been trying to find ways of improving their position. Our previous blog covered the move by HMRC to privatise PAYE, and to use the BACS system to pay all wages (and the PAYE at the same time). Most businesses that have been liquidated have been brought to account by HMRC, with the government usually picking up the tab. One statistic that we have never seen is the value of unused corporation tax losses that are automatically written off by the liquidation event. Individual shareholders may gain some tax relief by off-setting their capital losses against tax, but generally the shareholders lose everything.

The new penalty regime that started on April 6th 2010 is another method now being deployed by HMRC in an attempt to stop the haemorrhaging earlier … or is it to profit along the way?

Times are changing. Keep in step with the changes by utilising our up to date Payroll Bureau and allow our payroll services to help you control your business.

The Conservatives have raised the idea of taking PAYE responsibility away from HMRC, but would it really work? – Posted by Simon Sweetman in Tax, In business on Wed, 21/04/2010 – 09:14

George Osborne suggested privatising PAYE.

BACS would be used instead of the current system.

Banks would run it rather than HMRC.

However, the idea could cause more problems than it solves.

The Conservatives have raised the idea of taking PAYE responsibility away from HMRC, but would it really work? Simon Sweetman assesses the case.

It’s not in the Conservative manifesto and when George Osborne suggested it a few weeks ago everyone thought this was one of his pre-breakfast good ideas which had gone cold by lunchtime, but no – his boys have been going round explaining how they are going to take PAYE away from HMRC and give it to the banks. The banks are probably the only organisations in Britain commanding less respect than HMRC for their day to day operations (and HMRC can hardly be blamed for stuffing up the economy).

The idea is to use BACS (run by VocaLink, owned by a cartel of banks). This idea is not new. On the whole, BACS works (though remarkably slowly when you’re waiting for the payment). HMRC was actually thinking about it as the future of PAYE a few years ago and rejected it as too expensive, which leads us to the extra ‘are they sure they know what they’re talking about?’ bit – these proposals would presumably involve scrapping the expensive new PAYE computer system which is just coming online and will hopefully get through its teething troubles (which seem to be caused by legacy work) and start functioning properly next year. Junking a system that actually appears to work is a new one.

What will happen?

The accompanying guff says that 96% of salaries are paid using the BACS system already – a figure that must have been subjected to some sleight of hand, as far more than 4% of wages are paid in cash. I suspect the 96% of salaries applies to those paid by big business, and let us not forget that half the employees in the UK work for SMEs. Let us also not forget that PAYE also applies in particular to pensions.

They claim very particularly that this will end delays in payment of PAYE at a stroke. It might solve the problem of those who won’t pay if the banks whistle the money straight out of the employer’s bank account without so much as a by your leave, but what about those who can’t pay yet? It then goes on to say that there will be increased tax revenues of £1bn a year through the collection of correct tax, as if suddenly everybody is going to get everything right. It talks about everyone having a ‘personal account’.

What’s in it for employers?
They wouldn’t have to do the calculation but what they would need to do is report the gross pay for each employee – or more precisely the taxable and NIC-able amounts of gross pay. Unfortunately this is the difficult bit, with employers already having software to do the next bit. Just about everything it takes away is already done by software, and by free software for the smallest.

One thing that is not in it for employers is cash flow – the gross amount is whistled out of the employer’s account first thing, so there’s no hanging on until the 19th to pay the tax. But what if the money’s not all there on payday?

What is in it for employees?
Nothing much – they get their net pay in the same way, even if it comes to them from VocaLink rather than the employer. However, what if they think it’s not right? They can’t ask the employer any longer, because the employer won’t know anything. They can’t ask HMRC, because HMRC won’t have worked it out. Are the banks going to have extra call centres?

It will also save money because 25,000 payroll staff can be made redundant – whether that includes the payroll staff of businesses, people working for payroll bureaux and people working in accountants’ offices as well is not clear. However, a lot of small accounting firms rely on payroll services as bread and butter work. A rough survey of payroll professionals found that 90% were against the proposals, while the other 10% didn’t understand it; although, to be fair, one would hardly expect them to applaud something that could make them redundant.

Other problems:
What about other deductions from pay, CIS, SMP, student loans, and attachment of earnings? I think most people would cavil at the thought of the state controlling a bank account in their name and deciding what goes in and out of it. I suspect that they might be even less keen on the idea of a private company doing it.

Another consideration is where the figures come from – for instance, for the reintroduced married couples’ allowance? Presumably it would come from tax returns, so there would have to be some kind of mutual access between the individual taxpayer’s account and the tax return data.

There are a lot of questions, and one suspects that this has been set up by people whose only experience is with big business. This is set up for a world where everyone is online and their broadband works, which is not where we live now.

Oh, and who’s going to pay for it? Finally, why (given it will affect almost everyone in the country and supposedly will save billions) is it not in the manifesto for people to discuss?

Interesting thought processes from Simon, but there’s a lot more left in that debate. Is this change for the sake of change, or the way forward? Here at J C Martin & Associates we’re naturally interested in your thoughts? Share them – John

J C MARTIN AND ASSOCIATES WISH ALL OUR CLIENTS A HAPPY NEW YEAR !

FISCAL year that is!!

5th April 2010 has come and gone, heralding the start of a new fiscal year and the “open season” for PAYE form filing. It is our busy time when we perform all the compliance duties on your behalf for 2009/10, and have a spring clean of our data files in preparation for the new year 2010/11.

A new year brings new resolutions, so we thought we’d share some of ours with you.

1 – Communications – as good as we think they are we intend to improve them:
Our website, www.jcmartinassociates.co.uk has been live now for a couple of months. We have already made a few changes to it since it’s launch, and further changes will be rolling out this week. If you haven’t seen our website yet, please take a peek and let us know what you think.
The website will be carrying a Blog from today. The Blog is designed to keep you abreast of news that might affect you and your payrolls (and we intend to update this at least weekly). There will be sections for Payroll, HR, Tax, and any other relevant subject matter that you might need information on.
We are now on Twitter – http://twitter.com/jcmartinassoc . Feel free to follow us there. All postings are and will be business related and, again, are designed to provide a quick means of communicating with pertinent news and views from our payroll environment.
Email is used by many of you to communicate with us. We will provide a regular email newsletter to those of you that feel you might benefit with a summary of all our news. Let us know the email addresses of anyone else within your organisation that might benefit from this service.
A new domain means a new email address. To send us an email please change our email address to payroll@jcmartinassociates.co.uk .
We want your feedback. After looking at our website, we would be delighted if you would spare us 10 minutes to complete a Client Survey at http://www.surveygalaxy.com/surPublishes.asp?k=TQIQX12TP75A .
We have always endeavoured to keep abreast of changing times and now is no different. Times are changing and we need to change with them.

We have been working quietly and efficiently with our clients for over twenty years, delivering a service that we have been proud of. We have often been unsung pioneers in the West Country. Our Bureau was the only authorised independent commercial BACS Bureau throughout Devon, Cornwall, Somerset and Dorset for over fifteen years. We were the first local bureau to use security payslips, and then mailers. Regardless of our size, we intend to continue setting the pace and being one or even two steps ahead of our local competition.

2 – Future Developments – within the next few weeks we hope to be piloting a new payroll system that will deliver:
Payroll, Personnel and Time & Attendance options, all sharing one database
Secure, online time sheets
Secure, online time and attendance recording
Secure, online time and attendance reporting
Secure, online employer enquiries
Secure, restricted online employee enquiries
Secure, online historic payslips
Secure, online printable payslips
Full human resources management
Big changes with big ambitions. We will be organising a suitable presentation for you once we are ready to launch. In the meantime, if any of our clients are interested in piloting the software with us please let us know. We welcome your involvement.

With our best wishes for another satisfying year ahead,

For the month of April 2010, J C Martin & Associates have announced an introductory offer for all new one-employee payrolls established using our outsourced payroll services. Aimed at Nannies, Carers, Domestic Staff, and one-person companies, the payroll bureau will register the payroll with the Revenue, provide weekly or monthly payslips, record and monitor absence days (including holidays).

The service will be provided for a special introductory offer of £100 (YES – ONE HUNDRED POUNDS ONLY) for the first year. There will be no other costs in the first 12 months of operation.

Our friendly and experienced service is ideal for the small employer. We take away all the worries of payroll administration.

Give us a try. 01752 849797 or payroll@jcmartinassociates.co.uk

However, the right will only apply where:

• their partner is due to give birth on or after 3 April 2011
• they and/or the other adoptive parent receive notification on or after 3 April 2011 that they have been matched with a child for adoption

Additional paternity leave (APL) will allow an employee to take up to 26 weeks leave to care for the child.

The employee will only be able to start their APL:

• 20 or more weeks after the child’s birth or placement for adoption
• once their partner has returned to work from statutory maternity leave (SML) or statutory adoption leave (SAL) and/or ended their entitlement to statutory maternity or adoption pay, or maternity allowance

The employee’s ASPL will have to have ended by the end of the 52nd week after the child’s birth or placement for adoption.

The employee will only receive additional statutory paternity pay (ASPP) during the time their partner would have been receiving statutory maternity or adoption pay, or maternity allowance.

The eligibility criteria for APLP are the same as they are for ‘ordinary’ paternity leave.

However, there will be additional notification requirements for employees wishing to take APLP.

Eight weeks before they wish their APL to start, the employee must provide you with:

• notice of when they wish their leave to start
• a declaration stating that they are taking the leave to care for the child
• a declaration from the mother or other adoptive parent stating certain information

If they are also eligible for ASPP, the employee will also have to state when they expect their ASPP period to begin and end.

JCM/10/04/08

1 – Qualification

To qualify for a full State Pension, men used to need 44 years of National Insurance Contributions and women 39 years.  From now on you will only need 30 qualifying years of National Insurance contributions.

From now on a single qualifying year of National Insurance contributions will provide entitlement of at least some basic State Pension.

People of 55 or full-time carers should establish how this might affect them now.

2 – Retirement Age

State Pension Age used to be 65, for men born before 6 April 1959 and 60 for women born before 5 April 1950.

Between 2010 and 2020 the State Pension Age for women will now increase gradually to 65 if born on or after 6 April 1950.

From 6 April 2020 the State Pension Age will be 65 for both men and women.

Between 2024 and 2046 the State Pension Age will be gradually increases for both men and women.  Between April 2024 and April 2026 the State Pension Age will increase from 65 to 66.  Between April 2034 and April 2036 the State Pension Age will increase from 66 to 67.  Between April 2044 and April 2046 the State Pension Age will increase from 67 to 68.

The age that you can claim a State Pension will be determined by when a person was born.

A State Pension Calculator can be found at:

http://pensions.direct.gov.uk/en/state-pension-age-calculator/home.asp

JCM/10/04/05

This replaces what was previously known as the “Personal Accounts Pension Scheme”.  The driving factor behind the scheme is the prediction that the over 65’s will double between now and 2055.  Statistics indicate that 7 million future pensioners are not currently saving enough to meet their needs through retirement.

The onus will be on the employer to administrate the scheme, with (surprise surprise) heavy penalties as the stick.  Not only will employers be responsible for administration, they will also be required to contribute to the employee’s pension.  “Opt Out” is an option that only the employee can choose, but a scheme still needs to be in place to opt out from.  Most SME employers will be affected from 2014.

The Rollout is scheduled as:

Payroll Size (E/ees)   Staging Dates

10,000+    Between 01/10/12 and 01/03/13

500 – 9,999    Between 01/04/13 and 01/11/13

50 – 499    Between 01/01/14 and 01/07/14

< 50     Between 01/01/14 and 01/02/16

New Companies (ALL SIZES) From 01/04/2012

The Scheme will result in a minimum of 8% of earnings between £5,035 and £33,540 going into the Pension pot for each “Eligible Job Holder aged between 22 and 65”.  The 8% will be constructed from 3% Employer contributions, 4% Employee contributions, and 1% tax relief from the Employee’s contribution.  This level of mandatory contribution will be in place by October 2017.

An Eligible Job Holder is anyone with a contract of employment (written or implied) working in the UK and between the ages of 16 and 75.

The Government intends to make a charge on all schemes of 2% to recover costs of their administration (NB 2% is significantly higher than most private pension schemes).  TATA (an Asian owned organaisation) were the only organisation in the final tender round for the job of handling the scheme.  Formal contracts were alledgedly signed just over a week ago.

Employers need to start thinking seriously about their strategy for this new regime.  The impact on any business might be bigger than expected if it is not planned and handled sensibly.

JCM/10/04/05