HM Revenue & Customs vs ‘Pringles’
May 29, 2009 by Scott
Filed under Accountancy News
The Court of Appeal issued its decision in this case on 20 May 2009. The judgment is in HM Revenue & Customs (HMRC) favour and confirms that the sale of regular ‘Pringles’ is standard-rated for VAT.
Background
Proctor & Gamble manufacture ‘Pringles’, a savoury snack product, commonly sold in retail outlets.
Although food is generally zero-rated, some items, including potato crisps and similar products made from the potato or from potato flour or from potato starch are excluded from zero-rating and charged with VAT at the standard rate.
Procter & Gamble appealed to the VAT Tribunal on the grounds that a ‘Pringle’ was not similar to a crisp and that it was not wholly or mainly made from a potato product. The Tribunal did not accept this argument and found in favour of HMRC.
Procter & Gamble subsequently appealed to the High Court which found in their favour and decided that regular ‘Pringles’ were eligible for zero-rating because they were not wholly or mainly made from potato.
HMRC appealed to the Court of Appeal which has upheld the Tribunal’s original decision.
Implications of this judgment
The judgment confirms HMRC’s view that ‘Pringles’ are standard-rated for VAT and always have been.
Therefore, any business that chose to stop charging VAT on ‘Pringles’ as a result of the High Court decision must now resume charging VAT on all such sales. Tax must also be accounted for, for the period from when zero-rating was applied to the current date.
An adjustment may be made to your current VAT return, but the value of the errors must not exceed the greater of either £10,000 or 1 per cent of the box 6 figure on the VAT return for the VAT return period of discovery, subject to an upper limit of £50,000.
Where the errors exceed the limits set out above, a written notification detailing the error should be submitted to HMRC (in these cases the errors must not be corrected through the use of VAT returns).
Details of where to send your notification can be obtained from update 2 to VAT Notice 700/45 - How to correct VAT errors and make adjustments or claims from the HM Revenue & Customs National Advice Service on Tel 0845 010 9000.
Any claims for overpaid VAT lodged as a result of the High Court decision will now be rejected.
If you have any queries about this please contact the National Advice Service.
Self-Employment Crackdown for Construction Industry
May 29, 2009 by Scott
Filed under Accountancy News
The taxman is to consult this summer on bringing forward rules to tackle what it calls “false self-employment”, in a move that could land the industry with a bill for hundreds of millions of pounds.
Last month’s Budget contained the surprise announcement of a consultation on the issue, which has long been an irritation for the tax authorities.
HM Revenue & Customs believes many site workers are registered as self-employed when they should be employees, saving both the contractor and the worker thousands of pounds in national insurance contributions.
HMRC said it was looking to find a “long-term solution”, a spokesman telling Construction News that it intended to consult “before the Autumn”. The consultation will be on principles rather than on draft legislation.
HMRC wrote to 45,000 “sub-contractors” when it looked at the issue in 2004, who it believed should have been employees. If all were still affected, it is thought the bill for both contractors and workers could run into the hundreds of millions.
A note in the Treasury Budget documents said: “The Government remains committed to addressing false self-employment in the construction industry.
“The Government will consult with a view to future legislation to ensure that construction workers and those they work for are taxed appropriately.”
Anne Redston, a tax expert who was involved in the last consultation on the issue, said: “It seems that in view of the fact we are severely short of money, the Government is looking to see what’s on the back burner [that they can bring forward].”
Alistair Gibson, the leader of Ernst & Young’s Construction Industry Scheme team, said: “I would rather we saw the revenue enable the industry to get over its current problems than look to impose yet more rules.”
He added that, since one of the CIS’s main aims was to sort out employment issues, perhaps “this is an indication the scheme has failed.”
The Government insisted it would work with the construction industry to ensure any legislation was effectively targeted and allowed the industry to retain a flexible labour supply.
HMRC Contact by Automated Voicemail or SMS Text Message
May 26, 2009 by Davenports
Filed under Accountancy News
HM Revenue & Customs (HMRC) are trialing new ways to contact taxpayers. As part of these trials you may be contacted by SMS text message. You will be asked to ring them on telephone number 0845 300 3900. If you receive an SMS text message claiming to be from HMRC asking you to contact any number other than 0845 300 3900, you should not respond to the number but instead report the matter to your HMRC Contact Centre for them to consider looking into further. This warning only applies to any SMS text messages from HMRC. It does not apply to any messages left in person by HMRC officers asking you to ring them back at your local office.
National Statistics: Tax Credits 2007-08
May 19, 2009 by Scott
Filed under Accountancy News
HMRC has today published National Statistics on finalised tax credit awards for 2007-08.
The statistics show that the level of overpayments in 2007-08 was £1 billion compared to £2.2 billion in 2003-04. The number of families entitled to end of year top ups has increased as anticipated last May to 1.29 million (£798 million). This is as a result of one of the components of the package of measures announced in the Pre Budget Report 2005 to reduce overpayments.
The statistics also show that in 2007-08:
- 5.98 million families benefited from tax credits
- families received more support from tax credits with the average tax credit award increasing by £200 to £3,611 per year compared with 2006-07. This does not take into account further increases in the child element of £390 and in the basic element of the working tax credit of £160 from 2007-08 to 2009-10;
- more working people on low incomes without children received tax credits, with 336,000 receiving support through the working tax credit, up by 10 per cent. on 2006-07;
- 414,000 families benefited from the childcare element of the working tax credit, an 8 per cent. increase compared with 2006-07; and
- 108,000 families benefited from extra help for workers with a disability a 9% increase compared to 2006-07.
The Tax Credit data is published under National Statistics and available from HM Revenue & Customs website at http://www.hmrc.gov.uk/stats/personal-tax-credits/menu.htm Select “main tables”.
PBR 2005 announced a package of measures which HMRC have made implemented and have led to the reduction in overpayments. These included:
- increasing the income disregard to £25,000 to ensure almost all families with increasing incomes do not have their tax credits reduced in the first year of the increase;
- reducing the period in which people have to renew their claims and so reducing the time during which people are paid an award based on last year’s information;
- introducing new reporting arrangements to increase the number of changes in circumstances that are reported to HMRC and reduce the time taken to report these changes;
- restricting the amount by which ongoing tax credit payments can be reduced to recover an in-year overpayment to ensure low to middle income families don’t face an unexpected reduction in their payments; and
- when an estimate of a reduced current year income is reported, future payments are adjusted but a one-off payment is no longer made for the earlier part of the year. Instead, when the award is finalised at the end of the year any necessary adjustment is made then, tackling the problem of families overestimating falls in their income.
Latest figures already published show that in 2006-07 take up of Child Tax Credit was at 81 per cent with 88 per cent of the money available being claimed. Take up for those on incomes of less than £10,000 is over 90 per cent and 95 per cent amongst lone parents.
For further tax advice, contact Davenports to see how we can help, by simply completing the quick response form below and a member of our team will contact you shortly.
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Government Approves New £5.80 Minimum Wage Rate
May 12, 2009 by Scott
Filed under Accountancy News
The government has announced new National Minimum Wage rates to take effect in October.
- Low paid workers aged 22 and over can look forward to an increase from £5.73 to £5.80 an hour.
- The rate for 18 to 21-year-olds will also rise from £4.77 to £4.83.
- For 16 and 17-year-olds, the rate will go up to £3.57 an hour from £3.53.
Nearly one million people will benefit from October’s increase after the government approved recommendations from the independent Low Pay Commission.
Business Secretary Lord Mandelson said:
“The National Minimum Wage has been in place for 10 years and remains one of the most important rights for workers introduced in that time.
“I am very proud of the difference it has made to the lives of the UK’s lowest-paid workers. It protects them from exploitation and also creates a level playing field for business, making a huge contribution to the UK’s economic success.
“The Low Pay Commission has carefully examined the latest economic data before making their recommendations on the minimum wage rate, balancing the needs of workers and businesses in the current economic climate.
“The government agrees with this assessment and has accepted the recommendations for these new rates to take effect in October.”
The deadline for submission of the Low Pay Commission’s (LPC) recommendations to government was extended from February to Friday 1 May to allow Commissioners to take into account the latest possible economic evidence.
As well as the rate changes to take effect this year, the government has accepted an LPC recommendation that the adult rate of the minimum wage should be extended to 21-year-olds. This will be implemented from October 2010.
The LPC also recommended that information should be available on employers who have shown wilful disregard for minimum wage laws. The government has today committed to develop proposals and consider the practical issues involved.
Chairman of the LPC George Bain said: “These are very challenging times for the UK and unprecedented economic circumstances for the minimum wage. We believe that the Low Pay Commission’s recommendations are appropriate for this economic climate. They reflect the need to protect low-paid workers’ jobs as well as their earnings.
“This was a difficult year for the Commission but our evidence-based approach led to another unanimous Report. I am delighted that the Government has again accepted our recommendations on the rates this year.”
For help and advice on the National Minimum Wage and how it effects Employers, why not contact Davenports to see how we can assist you. Simply complete the quick form below and one of our team will contact you shortly
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Bank of England Maintains Interest Rates
May 7, 2009 by Scott
Filed under Accountancy News
The Bank of England’s Monetary Policy Committee today voted to maintain the official Bank Rate paid on commercial bank reserves at 0.5%. The Committee also voted to continue with its programme of asset purchases financed by the issuance of central bank reserves and to increase its size by £50 billion to a total of £125 billion.
McFadden: October Go-Ahead for Fair Tips
May 6, 2009 by Scott
Filed under Accountancy News
Using tips to make up staff pay to minimum wage levels will be outlawed from October this year, the government announced today.
This will give thousands of workers fair wages and will ensure a fair and level playing field for employers and boost consumer confidence in the use of tips.
The government will also be working towards greater transparency and clarity for consumers through a new industry code of best practice.
Employment Relations Minister Pat McFadden said:
“When people leave a tip for staff, in a restaurant or anywhere else, they have a right to know that it will not be used to make up the minimum wage. It is also important for employers to have a level playing field on wages.
“This is a basic issue of fairness. We do not believe employers should be able to use tips meant as a bonus for staff to boost pay levels to the legal minimum.
“Our consultation showed wide support for these changes, including from business groups, and we are working with them to ensure that consumers get the information they need.”
Today’s announcement is the government’s response to a consultation on the use of tips, gratuities, service charges and cover charges in payment of the national minimum wage.
The consultation received wide support for the government’s plans to ensure tips are not used to make up the minimum wage - a majority of businesses responding to the consultation backed the proposed changes.
The government is working with consumer and business groups over ways of boosting clarity and information, which could include a new scheme for participating businesses to promote clear tipping practices.
Steve Brooker, markets expert for Consumer Focus, said:
“We are glad the Government has listened to calls from Consumer Focus and other groups to close the outrageous loophole allowing employers to use tips to make up the minimum wage.
“This is a real victory for common sense, for both employees and consumers.
“From October customers can be confident their tips will always go to waiting staff, which will allow employees to fully reap these rewards. In the meantime we would urge consumers to pay their tips in cash to ensure staff receive the full amount.”
A spokesperson for Pizza Hut said:
“We are pleased that the Government has finally closed the loophole that allows employers to top up staff wages with tips. We have always ensured our employees receive 100% of their tips on top of wages and have been calling for an industry commitment to fair tips for some time.
“We would be delighted to work with the Department for Business Enterprise and Regulatory Reform to help develop a best code of practice for the industry.”
