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May 2011 - E-NEWS
Please browse through this month’s articles using the links below and contact us if any issues or questions arise.
- Using your own car as an employee or director
- New employment rules are a concern
- Large increase in penalties for late tax returns
- Online VAT filing for all
- Regional Growth Fund Set To Boost Job Creation
- New Minimum Wage Rates Set
- Don’t Forget To PAYE on Time, Says HMRC
Using your own car as an employee or director
A modest but nonetheless welcome increase in the mileage allowance on which you can claim tax relief applies from 6 April 2011. Instead of a maximum claim of 40p per business mile, you can now get 45p. However, as before, this applies only for the first 10,000 business miles in the tax year, with the excess mileage only qualifying for a mileage allowance of 25p per mile. If your employer will not pay as much as 45p, you can claim tax relief on the shortfall. If you receive more than the statutory rate, the excess is taxed.
If you drive your own car on a business trip and take colleagues with you, your employer (which of course includes your own company) can also pay you a tax-free 5p per mile per passenger. But if they won’t do this you cannot claim tax relief on 5p per mile – confusing but typical when it comes to the tax system for employees!
Despite the increase, the system still penalises high business mileage employees driving a car of over 2 litres. This again raises the old question of whether it is better to have a company car, or whether to get a car allowance for your own car. If you have the choice, we will be pleased to advise you of what is the better option.
A self-employed person can also use these new rates as if your annual turnover does not exceed the VAT registration threshold (currently £73,000). You still of course have the option to claim actual business use expenses. The same situation applies to volunteer drivers to calculate the taxable profit on mileage allowances received from hospitals, social service agencies and other voluntary organisations.
New employment rules are a concern
New regulations scrapping the default retirement age and extending paternity leave could harm businesses, a new survey has claimed.
The survey, carried out by the British Chambers of Commerce (BCC), found that the new rules, which came into effect at the beginning of April, are of concern to many of those firms polled. Of the 1,300 businesses questioned as to the impact of the regulations, over half (52 per cent) said they expected the additional paternity leave requirements to be detrimental to their businesses, with over a third (34 per cent) claiming they would be extremely detrimental. When asked about the abolition of the default retirement age, a fifth (21 per cent) considered it would have a negative impact.
Under the paternity leave changes, which also cover adoption, new fathers gain the right to additional paternity leave and pay if their partner gives birth on or after 3 April 2011. Additional paternity leave allows a father to take up to 26 weeks’ leave to care for the child.
The scrapping of the default retirement age means that employees can no longer be obliged to leave their jobs simply because they have reached 65 in the case of men and 60 in the case of women.
The BCC pointed out that these two major reforms to employment legislation will not be subject to the three-year exemption from new UK regulations announced in the Budget for micro-firms (those employing fewer than 10 staff).
David Frost, the BCC’s director general, said: “Our survey results show that employment law changes are causing great concern among employers, who, instead of concentrating on running their business, have to cope with more and more shifts in employment law. Every change, no matter how small, costs employers time and money.”
Large increase in penalties for late tax returns
HMRC has warned taxpayers that the penalty for filing late tax returns is to rise significantly. The old fine of £100 is to be replaced because, the tax authority says, the previous penalty rate was not enough of a deterrent. The new penalty regime for late filing and late payment of self assessment income tax starts in April 2011 and applies to the tax year 2010/11.
The new penalties for filing self assessment tax returns late are:
One day late incurs an automatic fine of £100, thirty days late will involve an initial penalty of 5 per cent of the tax unpaid at that date; six months late will involve a further penalty of 5 per cent of the tax that is still unpaid; twelve months late will involve a further penalty of 5 per cent of the tax that is still unpaid. These penalties are on top of the interest that HMRC will charge on all outstanding amounts, including unpaid penalties, until the payment is received.
Penalties for late payment of tax are:
Thirty days late will involve an initial penalty of 5 per cent of the tax unpaid at that date; six months late will involve a further penalty of 5 per cent of the tax that is still unpaid; twelve months late will involve a further penalty of 5 per cent of the tax that is still unpaid. These penalties are on top of the interest that HMRC will charge on all outstanding amounts, including unpaid penalties, until the payment is received.
If you would like expert guidance on how best to plan your personal tax, so that you meet the rules but don’t pay more than you have to, please call us.
VAT filing is set to become compulsory for every registered business. As from 1 August 2012, online registration for and deregistration from VAT will be compulsory for all.
What’s more, VAT-registered businesses with a VAT exclusive turnover under £100,000 per annum will be required to file returns online as from 1 April 2012. Since April 2010, this rule has only applied to those businesses with an annual, VAT exclusive turnover exceeding £100,000 and newly registered businesses.
Getting things right on VAT can be a major concern for many businesses. Should you need any help on making sure you deal with your VAT returns and payments in the most efficient way, do contact us.
Regional Growth Fund Set To Boost Job Creation
More than 100,000 new jobs are set to be created and safeguarded under government plans to invest £450 million in businesses across England.
Now private companies and public/private partnerships are being invited to bid for almost £1 billion remaining in the Regional Growth Fund (RGF). The minimum bid is for £1 million.
The first round of the RGF, announced on 12 April, will see public investment support 50 bids by companies and partnerships who demonstrated how they would create jobs and high levels of private sector-led sustainable economic growth over the coming years.
The government expects over 27,000 jobs to be directly created and safeguarded, with close to a further 100,000 jobs in associated supply chains and local economies.
Business secretary Vince Cable said: “We wanted to see proposals that created jobs in the private sector, in areas of deprivation and that is at risk of suffering from public sector cuts. I’m confident that the successful bids we have chosen will deliver on this.”
Successful bidders included General Motors, the Liverpool Echo, Jaguar Land Rover and Doncaster Borough Council.
In total, the RGF will allocate £1.4 billion between 2011 and 2014. The objective is to stimulate private sector investment by supporting projects that offer significant potential for long-term economic growth and sustainable private sector jobs.
LINK: Regional Growth Fund
The government has accepted the independent Low Pay Commission’s (LPC) recommendations for this year’s National Minimum Wage (NMW) rates.
The following rates, announced in April, will come into effect on 1 October 2011:
- the adult rate will increase by 15p to £6.08 an hour;
- the rate for 18-20 year olds will increase by 6p to £4.98 an hour;
- the rate for 16-17 year olds will increase by 4p to £3.68 an hour; and
- the rate for apprentices will increase by 10p to £2.60 an hour.
Business Secretary Vince Cable said: "More than 890,000 of Britain’s lowest-paid workers will gain from these changes.
“They are appropriate - reflecting the current economic uncertainty while at the same time protecting the UK’s lowest-paid workers.”
LINK: Low Pay Commission
Don’t Forget To PAYE on Time, Says HMRC
HM Revenue & Customs (HMRC) has issued a reminder on due dates for PAYE payments made electronically.
It says that to avoid paying late, HMRC must receive cleared funds by the due date, which is the 22nd of each month when payments are made electronically.
However, when the 22nd falls on a non banking day – a weekend or bank holiday –
HMRC must have cleared funds by the last bank working day before the 22nd.
HMRC says: “If you do not do so, you will be noted as paying late, and late payments for this tax year may result in a penalty being charged.”
LINK: Payments and Deadlines
HWB
Chartered Accountants, Highland House, Mayflower Close, Chandlers Ford, Eastleigh,
Hampshire, SO53 4AR.
