Newsletter October 2009

New penalties

Having recently introduced a completely new regime for penalties on incorrect tax returns, HM Revenue and Customs has now decided to introduce a new regime for late filing of tax returns and late payments.

The new rules will be much more stringent than the existing rules and will see much higher penalties.

For most tax returns other than CIS returns the penalty regime is as follows:
• Initial £100 (no mitigation for returns where no tax is due)
• After 3 months, £10 per day up to £900
• After 6 months, 5% of the liability on the return subject to a minimum of £300
• After 12 months, a penalty of between 5% and 100% of the tax due ( subject to a minimum of £300) depending on cooperation with HMRC

For CIS returns the penalty regime is as follows:
• Initial £100
• After 2 months, £200
• After 6 months, 5% of payments subject to a minimum of £300
• After 12 months, a penalty of between 5% and 100% of the tax due ( subject to a minimum of £300) depending on cooperation with HMRC

For late payment of all taxes other than corporation tax and PAYE/CIS the new penalty regime is as follows:
• Immediate penalty on penalty date of 5% of tax
• After 5 months, a further 5%
• After 11 months, a further 5%

For late payment of corporation tax the new penalty regime is as follows:
• Immediate penalty of 5% of tax
• After 3 months, a further 5%
• After 9 months, a further 5%

For late payment of PAYE/CIS the new penalty regime is as follows:
• The penalty is linked to the number of defaults made by the employer or contractor
• The first default is ignored
• For 1,2 or 3 defaults, 1% of the total of the defaults
• For 4,5 or 6 defaults 2% of the total of the defaults
• For 7,8 or 9 defaults 3% of the total of the defaults
• For 10,11 or 12 defaults 4% of the total of the defaults
• Any tax unpaid 6 months after the end of the period, a further 5%
• Any tax unpaid 12 months after the end of the period, a further 5%

Where there is a reasonable excuse the above penalties may be waived.

Where the tax payer has entered into a managed payment plan with HM Revenue and Customs, the penalties will be waived, unless the taxpayer breaks the terms of the agreement. If you need to spread your payments, contact the Business Payment Support on 0845 3021435.

Under this regime, the penalty will increase for every late return or payment, so for this reason it may be advisable to move to quarterly payments if you are eligible to do so for PAYE/CIS.

Collection of tax via PAYE

New rules have been introduced to allow HM Revenue and Customs to collect small debts through the PAYE system. HM Revenue and Customs will be allowed to collect up to £2,000 per year without the authority of the tax payer and this can be increased if consent is given.

EC sales lists

From 1 January 2010 there will be a much shorter deadline for EC Sales lists for VAT.

Currently the deadline is 42 days, however this will be decreased to only 14 days (21 days if filed online).

Also for anyone with over £70,000 EC sales per quarter they will be expected to make the returns monthly rather than quarterly.

Sub contractors

HM Revenue and Customs have issued a consultation document to deal with the issue of employment status for sub-contractors, which can be viewed here;

http://www.hm-treasury.gov.uk/d/consult_falseselfemploymentconstruction_200709.pdf

To summarise the document, unless a contractor/sub-contractor fits one or more of three criteria he will be deemed to be in receipt of employment income. The criteria are

• Provision of all materials for the job
• Provision of all plant and machinery required to carry out the job, including own tools
• Provision and payment of additional workers required to carry out the contract

This is likely to lead to a position where many sub-contractors are to find themselves as employees despite the length of the contract being relatively short.

Responses are requested by 12 October 2009 to the document, and it could become law very soon after this.

SAGE 2010 released

This month has seen the release of SAGE Line 50 2010. There are many new features, some of which can be explored through a series of mini videos at;

http://www.sage.co.uk/software_and_services/finances/sage_50_accounts_family/workshop.aspx#top

There is also a product tour available at;
http://www.sage.co.uk/software_and_services/finances/sage_50_accounts_family/sage_50_accounts.aspx

Employer-provided childcare vouchers

At the labour party conference this year Gordon Brown announced an extension of free nursery places to all 2 year olds in addition to the existing free provision for 3 and 4 year olds.
However this is to be financed by the phased withdrawal of the current tax and national insurance exemption for childcare vouchers provided by employers.
At present employees are exempt from tax and NIC on childcare vouchers provided by employers, to the extent of £55 a week per employee (and provided a range of conditions are met). If the value of the vouchers is more than £55 a week, the excess is liable to tax and to NIC (both employees’ and employers’ contributions).
From April 2011, employees who join an employer-supported voucher scheme will not be entitled to the existing tax and NIC exemptions. Existing recipients of vouchers will be unaffected until April 2015, when the exemptions for vouchers will be withdrawn completely. Obviously the final outcome of this may change again before being fully withdrawn, as the changes are still a long way off.
It should be noted that the voucher schemes themselves are not being withdrawn, just the tax breaks on them. The changes will just apply to childcare vouchers. No change has been announced to other tax-exempt employer-provided childcare arrangements, such as workplace nurseries.