New tax incentives for childcare have been announced. To be eligible, families will have to have all parents in work, with each earning less than £150,000 a year and not already receiving support through Tax Credits or Universal Credit.
The relief will be 20% of the costs of childcare up to a total of childcare costs of £6,000 per child per year. The scheme will therefore be worth a maximum of £1,200 per child.
The scheme will be phased in from autumn 2015. For the first year of operation, all children under five will be eligible and the scheme will build up over time to include children under 12.
The current system of employer supported childcare will continue to be available for current members if they wish to remain in it or they can switch to the new scheme. Employer supported childcare will continue to be open to new joiners until the new scheme is available.
The Government will consult on the detail of the new scheme but it is expected that parents will be able to open an online voucher account with a voucher provider and have their payments topped up by the Government. Parents will be able to use the vouchers for any Ofsted regulated childcare in England and the equivalent bodies in Scotland, Wales and Northern Ireland.
The existing system of employer supported childcare is offered by less than 5% of employers and used by around 450,000 families. It provides an income tax and national insurance contributions (NIC) relief. The maximum relief is an exemption from income tax and NIC on £55 a week. This relief is per employee so if both parents are in employment the maximum exemption is £110 per week. In the new scheme the limit is per child.
In April 2013, employers must start sending PAYE information to HMRC in real time. This means sending details to HMRC every time you pay an employee, at the time you pay them.
By providing this information in real time, HMRC will be able to tell you how much you should pay each month. This will make it easier for you to pay the right amount each time and help you to avoid making late payments and incurring penalties.
This checklist will help you to start sending your PAYE information to HMRC in real time from 6 April 2013. Start preparing your business by doing these things now, ticking them off as you go.
From 6 April
You need to change some of the ways you report PAYE, including:
• providing new information in your payroll records, such as hours worked
• completing employee information for temporary and casual workers and employees paid below the National Insurance Lower Earnings Limit
• letting HMRC know whenever you change a payroll ID – otherwise HMRC will treat the change as a new employment, which will result in duplicate employment and incorrect tax codes
• how you tell HMRC about starters and leavers.
If you use an agent, payroll bureau or payroll service provider, you must talk to them now about the service they will provide for you in future, and ask what you need to do to get ready for RTI.
If you pay by Bacs using your own Service User Number, you need to speak to your solution supplier or bureau.
If you run your own payroll system, you need payroll software that is ready for RTI in order to send your PAYE information to HMRC online, every time you pay an employee. You can do this in three ways:
1. Using commercial payroll software, upgrading your existing software if necessary (your provider can advise on this).
2. Using a payroll service provider, such as an accountant or a payroll bureau, who will do it for you.
You need to get prepared by making sure you hold accurate and up-to-date information about all your employees (name, date of birth, gender, address and valid National Insurance number).
If you are planning to send your returns yourself, you need to register for PAYE Online to get your PAYE login details (if you have not done so already).
HMRC
Have recorded a webinar (online presentation) which will take you through the changes and help you get ready for Real Time PAYE. You can watch our webinar whenever it suits you – it is available 24 hours a day.
It is easy to view the webinar
All you need to do is follow the link below to the HMRC YouTube channel.
Get ready to operate PAYE in real time.
This webinar will help you to prepare for reporting PAYE information to HMRC in real time. It concentrates on the key actions you need to take to get ready for the changes coming in. It also explains about the different types of submission that will be made in real time.
After viewing the recording you can take part in a Q&A session at the time shown below. This is a live session with HMRC staff and they will give you the opportunity to ask any questions you may have. Simply follow the link below to take part in this live session.
It has never been more important to keep good VAT records, with HMRC vowing to scrutinise the tax affairs of those who have payments outstanding after 28 February.
When it comes to VAT, this can be an expensive problem, as the business has no right to claim input VAT unless it holds a valid VAT invoice.
HMRC’s VAT Outstanding Return campaign is focused on businesses that have VAT returns outstanding.
Over 50,000 businesses that have failed to submit VAT returns will have their tax affairs closely scrutinised by the Revenue from 28 February if they fail to voluntarily come forward.
According to HMRC, records businesses should keep are:
• VAT records of sales and purchases
• Separate summary of VAT, or VAT account
• No set way of keeping records, but can be adapted from normal business records
HMRC has the discretion to accept alternative evidence in the absence of a valid VAT invoice, but in this case the tribunal would only allow for around £6,000 of the claim.
While the VAT Act 1994 was amended in 2003 to allow HMRC to accept additional information as alternative evidence, what it accepts as this is tightly controlled.
Input tax deduction without a valid VAT invoice – HMRC Statement of Practice
1. Do you have alternative documentary evidence other than an invoice (e.g. supplier statement)?
2. Do you have evidence of receipt of a taxable supply on which VAT has been charged?
3. Do you have evidence of payment?
4. Do you have evidence of how the goods/services have been consumed within your business or their onward supply?
5. How did you know that the supplier existed?
6. How was your relationship with the supplier established? For example:
7. How was contact made?
8. Do you know where the supplier operates from (have you been there)?
9. How do you contact them?
10. How do you know they can supply the goods or services?
11. If goods, how do you know the goods are not stolen?
12. How do you return faulty supplies?
For more information on VAT records and record keeping, see:
Under this scheme, for a limited period and subject to meeting certain conditions, new businesses may qualify for a deduction of up to £5,000 from the employer NICs that would normally be due – for each of the first ten employees they take on.
The NICs you are entitled to withhold under the scheme does not have to be repaid at a later date.
The NICs holiday is voluntary – you do not have to take advantage of the scheme. If you decide not to apply or you do not meet the qualifying conditions, you must simply calculate Class 1 employer NICs in the normal way and pay them to HM Revenue & Customs (HMRC) with your monthly/quarterly payment.
Business location – why it’s important
You can only apply for the NICs holiday if your principal place of business is located within designated areas of the UK at the time your business starts up. The included countries and regions are:
•Northern Ireland
•Scotland
•Wales
•East Midlands
•North East
•North West
•South West
•West Midlands
•Yorkshire and Humber
The NICs holiday is available to new businesses that start up during the period from 22 June 2010 to 5 September 2013.
If you are unsure whether your business falls within a qualifying region, you can check by reading more about this in the guide on checking your business location.
A business that joins the scheme avoids having to account internally for VAT on all purchases and supplies, and instead calculates its net liability by applying a flat rate percentage to the tax inclusive turnover. The flat rate percentage depends on the trade sector into which a business falls for the purposes of the scheme. There is a wide spread of applicable percentages ranging (on introduction of the scheme) from 5% to 14.5%.
Under the flat rate scheme businesses:
Continue to charge their customers the normal rate for the supply (i.e. not the flat rate percentage) on all taxable supplies of goods or services.
Issue tax invoices to their VAT registered customers, and also to all other customers if the business chooses to do so (these invoices show the normal rate for the supply and are used for the customers’ VAT reclaim).
They do not have to record all the details of the invoices issued or purchase invoices received to calculate the amount of VAT they must pay to HMRC.
Capital assets
If capital assets are purchased with a VAT inclusive value of £2,000 or more, the VAT can be recovered in the normal way. This concession, however, cannot be used where the assets were:
•acquired for resale, or for incorporation in goods to be sold,
•acquired to be hired out, leased or let,
•for consumption within one year, or
•covered by the capital goods scheme.
Further information
Full details of the scheme are included in VAT Notice 733 ‘Flat rate scheme for small businesses’,, which is available on the HMRC Internet site.
Computation of trading profits
The flat rate scheme removes the necessity to calculate VAT on each individual input and output for the VAT account. Instead only the flat rate VAT will need to be passed to the VAT account. Where the concession for capital assets is adopted, the VAT reclaimed will also pass through the VAT account.
Expenses will probably be shown inclusive of VAT as it is irrecoverable (similar to a business not registered for VAT), and it is likely that turnover will be shown net of the flat rate VAT payment. You may however find that the flat rate VAT payment is shown as a profit and loss expense rather than deducted from total turnover.
Where there is irrecoverable VAT on capital items it will form part of the cost of the asset on the balance sheet and of the cost for capital allowances purposes.
Example
A business has gross sales of £96,000 (including output VAT at 20% of £16,000), and expenses of £58,750 (including irrecoverable VAT). The flat rate VAT @ 6% is £5,760. A new machine is purchased (qualifying for capital allowances) at a cost of £2,400 including VAT of £400.
The accounts will show:
Turnover £90,240 (£96,000 less £5,760 flat rate VAT)
Expenses £58,750
Profit £31,490
If VAT is not reclaimed on the asset the cost for capital allowances purposes will be £2,400. If VAT is reclaimed the cost will be £2,000
The pros and cons of the Flat Rate Scheme
Benefits of using the Flat Rate Scheme
Using the Flat Rate Scheme can save you time and smooth your cash flow. It offers these benefits:
•You don’t have to record the VAT that you charge on every sale and purchase, as you do with standard VAT accounting. This can mean you spending less time on the books, and more time on your business. You do need to show VAT separately on your invoices, just as you do for normal VAT accounting.
•A first year discount. If you are in your first year of VAT registration you get a one per cent reduction in your flat rate percentage until the day before the first anniversary you became VAT registered.
•Fewer rules to follow. You no longer have to work out what VAT on purchases you can and can’t reclaim.
•Peace of mind. With less chance of mistakes, you have fewer worries about getting your VAT right.
•Certainty. You always know what percentage of your takings you will have to pay to HMRC.
Potential disadvantages of using a Flat Rate Scheme
The flat rate percentages are calculated in a way that takes into account zero-rated and exempt sales. They also contain an allowance for the VAT you spend on your purchases. So the VAT Flat Rate Scheme might not be right for your business if:
•you buy mostly standard-rated items, as you cannot generally reclaim any VAT on your purchases
•you regularly receive a VAT repayment under standard VAT accounting
Even the smallest business can host an annual, tax-free social function for its entire staff, including the directors and their partners. As long as the cost per head is less than £150, employees are not taxed for having a good time, well not yet anyway, and the company benefits from full tax relief on the expense incurred.
Remember, however, that the figure of £150 is an exemption, not an allowance. If the £150 figure is exceeded, the whole amount becomes taxable for inclusion on the P11D.
Strictly speaking, all benefits are subject to tax and NICs, unless there is a specific exemption.
However, sensible practical administration of the tax system determines that benefits of a trivial nature (for example, a seasonal gift of a turkey or an ordinary bottle or two of wine) should not be treated as a benefit.
Anything more lavish in quality or quantity remains chargeable. Helpfully, there is no monetary limit to determine what a trivial benefit is.
From October 2012, National Minimum Wage rates will rise for apprentices and for workers over the age of 20.
About the National Minimum Wage
.
New rates from October
The new rates will come into force on 1 October 2012, as follows:
£6.19 per hour for workers aged 21 and over – a rise of 11p
£4.98 per hour for 18-20 year olds – no change
£3.68 per hour for workers above school leaving age but under 18 – no change
£2.65 per hour for apprentices – a rise of 5p
If your employer provides you with accommodation, they can count some of its value towards your NMW pay. This is called the accommodation offset. From October, the maximum that employers can count towards NMW pay will be £4.82 – a rise of 9p.
The annual investment allowance is not available in respect of cars. However, it is still possible to obtain a 100% deduction against profits for a car purchased for your business by choosing a car with very low CO2 emissions, Cars purchased on or before 31 March 2013 qualify for the first-year allowance if the CO2 emissions are 110g/km or less. However, for cars purchased on or after 1 April 2013 and on or before 31 March 2015, the FYA is only available for cars with CO2 emissions of 95g/km or less. Make sure you keep all receipts for expenses incurred in this way.
Example:
John has a small family business and is looking to buy a company car.
He chooses a car that has CO2 emissions of 105 g/km and which cost £15,000.
As the car’s CO2 emissions are less than 110 g/km he can claim a 100% first-year allowance thereby obtaining an immediate write-off against profits of £15,000.
If he pays tax at the small profits rate of 20% (financial year 2012) claiming the 100% FYA rather than an 18% WDA will save tax of £2,460 in that year. Choosing a low emission car also minimizes the benefit in kind tax that John will pay on the company car.
Mismanagement of cash flow is the single biggest reason that small businesses go under. Therefore, a good credit control system is an essential part of any business’ accounting procedures. Maintaining consistent cash flow, avoiding bad debt and minimising late payments are essential for survival. Use the following checklist to set up a system.
Things to do
1. Set up a detailed credit control system
It must allow you to identify
Invoices that have been raised,
sent to customers
Paid
Need chasing
Train several people on the system and test it thoroughly.
2. Credit-check your customers
To do this, you can approach their bank for a reference; use a credit reference agency; or ask their other suppliers. Establish how solvent the customer is and whether they are likely to have any problems paying their invoices on time.
3. Decide on your general payment terms
Most importantly, decide on a payment date. Bear in mind that new customers should only be given a short time in which to pay. Go through the terms with each customer.
4. Send invoices promptly
Try to send all of them out the same day as goods are sent or delivered or service provided. Make sure the invoice is sent to the correctly named and titled person, at the right address.
5. Start an automatic reminder procedure
Flag invoices that are due; Phone, to chase up payment.
6. Appoint a ‘debts person’
This should be a trusted employee in charge of following up bad debts. They should keep a record of all calls and letters sent. Remember you can charge interest under the Late Payment of Commercial Debts legislation.
7. Have a stop list for late-paying customers
Circulate this list to all appropriate employees to prevent further credit or goods being supplied. Inform the late payer that they are on the list.
9. Organise a sufficient overdraft
You should have enough overdraft to cover the worst possible periods of cash flow.
Best practice
Educate yourself/your staff with credit control training.
Employ the services of a credit management consultant at least once every year to see if there are improvements you can make.
Keep talking to debtors. Don’t lose your temper with them, but make it clear you are prepared to take debt recovery action if they do not settle the invoice.
By Liquid Recovery
Guest Blog Telephone 0844 811 9463 ask to speak to Lorna
From October 2012 you must automatically enrol certain members of your workforce into a pension scheme and as an employer, you will need to make a contibution towards it.
The law will come into force first for large employers and smaller employers will follow.
It is important to sign up to the e-mail mews that will keep you informed on what & when changes will come in to force.
Table 2: List of staging dates for PAYE schemes with fewer than 250 persons
The dates in this table are indicative and under consultation. You should therefore check your date again once the consultation is complete and the dates have been finalised by Parliament. Sign up to news-by-email so we can tell you when this happens.
Employer by PAYE scheme size or other description
Staging date
160-249
1 April 2014
90-159
1 May 2014
62-89
1 July 2014
61
1 August 2014
60
1 October 2014
59
1 November 2014
58
1 January 2015
54-57
1 March 2015
50-53
1 April 2015
Fewer than 30 with the last 2 characters in their PAYE reference numbers 92, A1-A9, B1-B9, AA-AZ, BA-BW, M1-M9, MA-MZ, Z1-Z9, ZA-ZZ 0A-0Z or 2A-2Z
1 June 2015
Fewer than 30 with the last 2 characters in their PAYE reference number BX
1 July 2015
40-49
1 August 2015
Fewer than 30 with the last 2 characters in their PAYE reference number BY
1 September 2015
30-39
1 October 2015
Fewer than 30 with the last 2 characters in their PAYE reference number BZ
1 November 2015
Fewer than 30 with the last 2 characters in their PAYE reference numbers 02-04, C1-C9, D1-D9, CA-CZ or DA-DZ
1 January 2016
Fewer than 30 with the last 2 characters in their PAYE reference numbers 00 05-07, E1-E9 or EA-EZ
1 February 2016
Fewer than 30 with the last 2 characters in their PAYE reference numbers 01 08-11, F1-F9, G1-G9, FA-FZ or GA-GZ
1 March 2016
Fewer than 30 with the last 2 characters in their PAYE reference numbers 12-16, 3A-3Z, H1-H9 or HA-HZ
1 April 2016
Fewer than 30 with the last 2 characters in their PAYE reference numbers I1-I9 or IA-IZ
1 May 2016
Fewer than 30 with the last 2 characters in their PAYE reference numbers 17-22, 4A-4Z, J1-J9 or JA-JZ
1 June 2016
Fewer than 30 with the last 2 characters in their PAYE reference numbers 23-29, 5A-5Z, K1-K9 or KA-KZ
1 July 2016
Fewer than 30 with the last 2 characters in their PAYE reference numbers 30-37, 6A-6Z, L1-L9 or LA-LZ
1 August 2016
Fewer than 30 with the last 2 characters in their PAYE reference numbers N1-N9 or NA-NZ
1 September 2016
Fewer than 30 with the last 2 characters in their PAYE reference numbers 38-46, 7A-7Z, O1-O9 or OA-OZ
1 October 2016
Fewer than 30 with the last 2 characters in their PAYE reference numbers 47-57, 8A-8Z, Q1-Q9, R1-R9, S1-S9, T1-T9, QA-QZ, RA-RZ, SA-SZ or TA-TZ
1 November 2016
Fewer than 30 with the last 2 characters in their PAYE reference numbers 58-69, 9A-9Z, U1-U9, V1-V9, W1-W9, UA-UZ, VA-VZ or WA-WZ
1 January 2017
Fewer than 30 with the last 2 characters in their PAYE reference numbers 70-83, X1-X9, Y1-Y9, XA-XZ or YA-YZ
1 February 2017
Fewer than 30 with the last 2 characters in their PAYE reference numbers P1-P9 or PA-PZ
1 March 2017
Fewer than 30 with the last 2 characters in their PAYE reference numbers 84-91, 93-99
1 April 2017
Fewer than 30 unless otherwise described
1 April 2017
Employer who does not have a PAYE scheme
1 April 2017
New employer (PAYE income first payable between 1 April 2012 and 31 March 2013)
1 May 2017
New employer (PAYE income first payable between 1 April 2013 and 31 March 2014)
1 July 2017
New employer (PAYE income first payable between 1 April 2014 and 31 March 2015)
1 August 2017
New employer (PAYE income first payable between 1 April 2015 and 31 December 2015)
1 October 2017
New employer (PAYE income first payable between 1 January 2016 and 30 September 2016)
1 November 2017
New employer (PAYE income first payable between 1 October 2016 and 30 June 2017)
1 January 2018
New employer (PAYE income first payable between 1 July 2017 and 30 September 2017)
