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January 2014

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To the January Tax Tips & MYOB News.

We still have a few spaces on our training sessions in February. These will be small courses with plenty of hands-on experience and opportunities to ask questions.  Our MYOB/ Acclivity expert Mark Hill will guide you through the advanced features of MYOB and the new developments of Acclivity and Mamut (Mac) AccountEdge.

These full-day courses cost just £85* Surrey, or £70* Manchester including a hot buffet lunch. Our Business Companion clients can each send one user for free. *(+ VAT)

-Mon 17th Feb – Horsley Park, Surrey
-Tues 18th Feb
– Horsley Park, Surrey 
-Weds 12th Feb – The Hive, Manchester

Email Jennifer for more details or ring us on 01422 847500. 
January 2014
· How to use a PAYE dispensation
· Capital Allowances on Fixtures
· Disguised Employment
· Partly-exempt Businesses
· January Question and Answer Section
· January Key Tax Dates
How to use a PAYE Dispensation
PAYE dispensations – how not to use them
Directors and employees are entitled to claim tax deductions for business expenses. However, HMRC says that some employers have been incorrectly using dispensations to shortcut this procedure. What’s the problem?
Reducing Admin
Where an employer pays or reimburses the cost of travel or other business expenses to a director or employee, this counts as taxable income. But this produces an unfair result for the worker who ends up with a tax bill on a payment he receives no benefit from. To resolve this workers can claim a deduction for the expense to cancel the tax charge. The trouble is that this tax-and-reclaim process is cumbersome and can go wrong. To simplify matters the Taxman created a dispensation procedure which saves the employer from having to declare expenses on Form P11D and employees needing to make a corresponding claim on their tax returns.

Applying for a Dispensation
Employers can apply to the Taxman at any time for a dispensation. The Taxman also benefits from this because there’s less paperwork to check and process. We have applied on behalf of all our Business Companion clients for dispensations – another advantage of being on our Business Companion service.

However, dispensations are being used by some employers to reduce the tax and NI on normal pay as well as on expenses.

Acorn Ltd is a property maintenance firm that employs several staff who work almost exclusively at its clients’ premises. Acom pays each worker a salary which is intended to cover their business travel and subsistence costs. It should deduct PAYE tax and NI from the full salary; but because it has a dispensation Acorn knocks off an amount in respect of expenses. The Taxman says this isn’t correct.

Where the Taxman finds evidence of the misuse of a dispensation he will withdraw it altogether. This will mean more work for employers as they’ll have to complete a P11D for each employee or director receiving an expenses payment, even if this is just for a few pounds. Plus, of course, the recipient must keep a record and report the details via self-assessment (SA).

Alternative way to get tax relief
In a situation like Acorn’s, the Taxman says workers must obtain their tax deduction through their SA return or, where they aren’t in the SA system, by sending a letter, or Form P87, containing the details (see The next step). The trouble with this is that it means waiting until after the end of the tax year to make a claim and then for HMRC to process it.

There’s nothing to stop workers claiming expenses during the tax year. The expenses can be estimated and notified to the Taxman who must include them in their tax code. This means a worker can obtain tax relief a year or more sooner than under SA.

Harry works for Coma Ltd. He meets certain business expenses which aren’t reimbursed by Coma. In 2012/13 these amounted to £2,500; in 2013/14 it was £2,700. He expects a similar amount for 2014/15. He can ask the Taxman to increase his tax code for 2014/15 to include estimated expenses of say, £2,900. In fact, the Taxman will usually accept a claim to adjust a code over the telephone, although if you choose to do this we recommend you keep a record of your conversation.

PAYE dispensations only apply to expenses reimbursed to or paid on an employee’s behalf. They can’t be used to reduce the PAYE due on normal pay. The Taxman will withdraw all dispensations where he spots this happening. Instead, workers can ask the Taxman to amend their tax code to take expenses into account.

Apply to the HMRC for a PAYE dispensation

Reprinted with permission Indicator Tax Tips Magazine 
Capital Allowances on Fixtures top
Disguised Employment top
There are a number of capital allowance claims firms targeting businesses which have recently bought or sold commercial property. These ‘experts’ suggest the business needs to pay for a special survey to claim all the capital allowances they are entitled to, and this must be done quickly in order to claim all the allowances due.

In most cases a special survey is not needed. However, it is true that for commercial building sales made since 1 April 2012 the vendor and purchaser must take formal steps (usually an election) to agree the value of fixtures including in that building. This value must be agreed within two years of the transfer of ownership, if agreement cannot be reached the two parties can go to the tax tribunal where the judge will make a decision. Read More
The Government is cracking down on situations in which workers are treated as self-employed for tax purposes, and hence pay low amounts of NICs, but from the outside they appear to act as employees. The following changes in the tax law are proposed to block the use of ‘self-employed’ workers working through LLPs or who are hired-out through employment agencies.


All individual members of LLPs are currently taxed as self-employed persons, even if they receive a regular ‘salary’. This is the default position of the law and nothing is being ‘fiddled’ to put workers in this position. However, HMRC believe this rule is being abused, and the workers involved may not realise that they are technically self-employed. Read More
Partly-exempt Businesses top
January Question and Answer Section top
If your business supplies some goods or services which carry VAT, and other items which are exempt from VAT (such as charitable events and financing), the business is likely to be partly-exempt for VAT purposes. Being partly-exempt means you may not be able to reclaim all of the VAT on your purchases (input VAT).

Where the input VAT that relates to your exempt sales is no more than £625 per month, and it is also less than half of your total input VAT, you can reclaim all of the input VAT. In other cases you can only reclaim the input VAT which relates to the supplies that carry VAT. There are various methods to apportion input-VAT which can be agreed individually with HMRC, or you can use the standard method. Read More
Q. I have four rental properties, and I have recently remortgaged one property to provide funds for my son’s education. Can I set the professional fees and charges connected with this re-mortgage against my letting income? Answer

Q.I’ve got into a muddle over childcare vouchers. When I started the voucher scheme in 2012 all my employees were taxed at 20%, so they all received vouchers worth £55 per week. Now some are paying tax at 40%, but they are still all getting the full amount of tax-free vouchers. What should I do? Answer

Q. All my employees are entitled to a bonus for exceeding performance targets in 2013, including those who left before the end of the year. How should I report the bonus due to the former employees to HMRC, and do I have to deduct tax?Answer
January Key Tax Dates top
19/22 – PAYE/NIC and CIS deductions due for month to 5/1/2014 or quarter 3 of 2013/14 for small employers.

31 – Deadline for filing 2013 Self Assessment personal, partnership and trust Tax Returns – £100 first penalty for late filing even if no tax is due or tax due is paid on time.
Balancing self assessment payment due for 2012/13.
Capital gains tax payment due for 2012/13.
First self assessment payment on account due for 2013/14.
Interest accrues on all late payments.
Half yearly Class 2 NIC payment due.
Further penalty of 5% of tax due or £300, whichever is greater for personal tax returns still not filed for 2011/12.
5% penalty for late payment of tax unpaid for 2011/12 self assessment.
Need Help? top
New Clients Welcome top
Please contact us if we can help you with these or any other tax or accounts matters.

In addition, if there’s anyone else who you think would benefit from the newsletter, please forward the email to them or ask them to contact us to be added to the newsletter list.
If you are not already a client and are interested in becoming one, we would love to discuss how we can help and provide you with a competitive quote for our services.

See details of our Business Companion Service.
About Us top
Simple Accounting Limited offers a cost effective Business Companion service to business owners who use MYOB, Acclivity, Mamut, Solar Accounts, Quickbooks or Clearbooks. We offer a range of accountancy services despite being specialists.

‘All clients using these software packages can benefit from our support. Visit our website for a look at the resource on offer.’

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