HMRC Sponsors New TV Series

A new TV series – “The Business Inspector” - has been sponsored by HM Revenue & Customs (HMRC). The programme will raise awareness among small businesses that they need to keep good records.
The Business Inspector is a four-part series that will be broadcast weekly on Five at 8pm from 10 March 2010.

Stephen Banyard, Business Customer Unit Director at HMRC said:

“We know that most small businesses want to get their tax right. But we also know too that failure to take reasonable care costs the Exchequer over £6bn a year, with a major cause being poor record keeping. We hope this series will raise awareness of the need for good record keeping.

“We also want small businesses to realise the benefits to them – such as improved cash flow – of taking better care of their records and paperwork.”

Presenter Hilary Devey said:

“Britain’s brimming with creativity but a terrifying number of businesses go bust each year and this shouldn’t be happening. I am going to teach businesses how to improve their all round business knowledge and direction, cash flow, marketing strategy and in some cases even their enthusiasm. Invaluable lessons they will never forget.”

Warning on UK Tax Codes

Incorrect tax codes may have been sent by HM Revenue & Customs (HMRC) because of an error in a new computer system.

The codes tell taxpayers how much their employers and pension firms will deduct in income tax in the coming financial year 2010-11.

The Chartered Institute of Taxation (CIOT) says taxpayers could be asked to pay up to £108 a month too much.

The Revenue said it had no evidence of a widespread problem but advised taxpayers to check carefully.

“There will be some incorrect tax codes as there always are at this time of year,” said an HMRC spokesman.

“But the coding notice tells people what the code relates to and tells them to contact us if it is wrong,” he added.

‘Nasty shock’

The CIOT has called on the Revenue to launch a publicity campaign to alert taxpayers to the potential problem.

“Most people on PAYE are used to assuming that what the taxman sends them is correct,” said Andrew Hubbard of the Chartered Institute of Taxation (CIOT).

“But this year, many of them are being given wrong information, and unless they spot it and tell HMRC, their employer will receive the wrong information too.

“They could get a nasty shock when they open their April pay packet and see it is as much as a hundred pounds lighter than they are expecting,” he added.

It is not clear how many incorrect tax codes have been sent out, or may be distributed in the coming weeks.

The CIOT said the scale of the problem might be indicated by the fact that this year about 25 million coding notices are being distributed, which is about twice last year’s number.

The Revenue explained that the increase was a natural feature of the new system.

“It creates a single record for customers for the first time, and this, together with increased automation compared to previous years, is resulting in many more people having more accurate codes than before,” the spokesman said.

Computer problem

The codes have been sent out in batches in a process that started in the first week of January and which ends in the first week of March.
  If the whole of that personal allowance is wrongly applied that would cut a basic rate taxpayer’s pay packet by about £108 a month or £1,295 a year

CIOT
They go first to individual taxpayers in a P2 notice for them to check, before the code is sent to their employer.

However some people are receiving two or more more coding notices which are different.

The problem appears to lie with a new computer system designed to process the collection of income tax via the PAYE system, along with national insurance contributions.

The CIOT said the system’s database was failing to distinguish between current jobs and old ones, leading to tax codes being calculated on the assumption that someone has more than one job.

It said this was resulting in some people having their personal allowance split between two jobs, or allocated entirely to a job they no longer had, which would force their current employer to deduct too much tax.

“The personal allowance will be £6,475 for most people under 65 in 2010-11,” said the CIOT.

“If the whole of that personal allowance is wrongly applied that would cut a basic rate taxpayer’s pay packet by about £108 a month or £1,295 a year,” it said.

In a few cases the Revenue computer system has removed the personal allowance on the assumption that the person’s income will be higher than £100,000.

Earners above this level will lose their personal allowance this coming tax year, in a measure first announced by the Chancellor in the 2008 pre-budget report.

Accountancy Age

Government Delays Crackdown on Tax in Construction

Plans for a clampdown on tax in the construction industry have been postponed until the New Year.

According to the industry magazine Construction News the focus on what the taxman regards as “false self-employment” will continue after the holidays when responses to current consultation are also expected to be published.

HMRC believes many people working in construction are in effect “employees” but adopt self employed status to avoid tax and national insurance contributions.

Accountancy Age

Taxman Should Improve Bereavement Behaviour

The Low Incomes Tax Reform Group has called on the taxman to improve its treatment of the bereaved.

A paper from the charity recommends HM Revenue & Revenue takes part in a Tell US once pilot which allows the bereaved to report a death to s single government agency which would then notify all the other relevant bodies.

In addition the group wants HMRC to begin house calls and take steps to eradicate the overpayment of tax among the elderly.

John Andrews, Chairman of LITRG, said: “LITRG tries to join up the activity of HMRC with other departments, such as the DWP and we are continually frustrated at the silo mentality of ostensibly customer-facing organisations.

“People need the maximum support from all government departments at the time of bereavement.”

Accountancy Age

Pre-Budget Report 2009

Alistair Darling will make his Pre-Budget statement to the House of Commons on Wednesday 9 December 2009 at 12:30.

Students Getting Educated About Tax

Full time students pay income tax just like everybody else but research from HM Revenue & Customs (HMRC) reveals that more than half of the UK’s 2.3 million university students don’t realise this.

The good news is many of those who have paid tax will be entitled to get it back if they have earned less than £6,475 during this year.

Students who think they may have paid too much tax can use the student tax calculator on HMRC’s website (http://www.hmrc.gov.uk/calcs/stc.htm) to find out if they are due a cash refund and HMRC plans to launch a tax fact Facebook application complete with a refund calculator.

Three out of every four students take paid work, and if they have worked over the summer vacation or intend to get part-time work during term-time HMRC wants to help them to get the facts about tax right so that they don’t pay more tax than absolutely necessary on their hard-earned cash.

HMRC’s research also shows that there is no such thing as a typical student job – summer posts range from retail and hospitality to counting the number of passengers on trains or setting up bouncy castles for a city council.

Jane Frost, Director of HMRC Individuals Customer Directorate said:

“The start of the academic year is a good time to get educated about tax.

Making sure your tax code is right from the start of your paid employment can save you money and is good training for life after graduation. We want to help students understand how the tax system works ideally so they pay the right amount of tax from the outset and can claim what is due.”

Key questions for Students

As well as being aware of their Personal Allowance, students should also find out:

What do I do with forms such as the P45, P60 and P38(S)?

Students who plan to work only during the holiday periods, and expect to earn no more than the Personal Allowance (currently £6,475) in the tax year can ask their employer for a P38(S) which they should complete and return to their employer at the start of their job. A P45 is given out at the end of a job and shows the pay received and tax deducted between the start of the tax year (6 April) and the date the employment ceased (if before 5 April the following year). The P60 summarises the yearly earnings and tax paid for a particular job. Students with more than one job at the 5 April each year will receive a P60 from each employer. The P45 and P60 forms should be kept in a safe place for future reference.

What does my tax code mean?

Your tax code shows how much you are allowed to earn before paying any tax. This helps employers to work out how much tax to deduct from your pay.

What if I have more than one job?

Like everyone else, students only have one Personal Allowance for each tax year and if they start a new job without finishing their first job, their second employer will ask them to fill out and sign a form P46. The employer uses the information on the P46 to notify HMRC that a new employee has started and to ensure the correct code is operated on earnings from the second job.

What are National Insurance contributions (NICs)?

NICs pay for social security benefits that you may receive later in your life and to help pay for the National Health Service. National Insurance contributions are recorded against a person’s name using a National Insurance Number. NICs are deducted at source from pay by employers and cannot be claimed back. They are only paid once your income exceeds £110 a week. You’ll need to keep a record of your National Insurance Number for any dealings with your tax office and your employer(s).

Who do I need to tell when I change address?

HMRC needs to be kept informed of your address. This is the individual’s responsibility – don’t assume your college or university will do it - and ensures you won’t miss any important letters or forms – or rebates!

Students can find all the information they need at: www.direct.gov.uk/studenttaxadvice.

HM Revenue & Customs re-organisation of Corporation Tax work

HM Revenue & Customs (HMRC) is currently reorganising the way it handles Corporation Tax work in local offices.

During July the Corporation Tax records of companies and organisations currently dealt with by the office in Liverpool (That is those records prefixed by 423) will transfer to:

HMRC Local Compliance
CT Operations
Blackburn House
Hanley
Stoke-on-Trent
Staffordshire
ST1 3BS

Telephone: 01782 683318 – Please do not use this number for any other queries.

You will shortly receive a note on form CT 210 confirming these details.

You may receive notification of this change even if your company or organisation is currently dormant. This is because HMRC want you to know which office to contact should your circumstances change.

HM Revenue & Customs re-organisation of Corporation Tax work

HM Revenue & Customs (HMRC) is currently reorganising the way it handles Corporation Tax work in local offices.

During July the Corporation Tax records of companies and organisations currently dealt with by offices in Wrexham and Swansea (that is those reference numbers prefixed by 793 and 700) will transfer to:

HM Revenue and Customs
Local Compliance
CT Operations South Wales
Ty Glas
Llanishen
Cardiff
CF14 5FP

Telephone: 02920 325003 – please do not use this number for any other queries.

You will shortly receive a note on form CT 210 confirming these details.

You may receive notification of this change even if your company or organisation is currently dormant. This is because HMRC want you to know which office to contact should your circumstances change.

HM Revenue & Customs vs ‘Pringles’

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

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.

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