Exchequer Weblog

The Taxman is currently writing to taxpayers who are suspected of tax fraud, asking them to make a full disclosure of their wrong-doing under the contractual disclosure facility (CDF).
If you receive a letter offering the CDF, it is a very serious matter. The Taxman has taken a view that he could launch a criminal investigation into your tax affairs, but has decided that a criminal case is not cost-effective. Instead he is offering you a binding agreement to come clean, with the promise of low penalties.

If your business is registered for VAT in the UK and you sell to VAT registered customers in other EU countries you are required to submit an EC sales list (known as ECSL or form VAT 101), to HMRC. If you move your own goods to a branch or subsidiary of your business in another EU country, you may also have to complete an ECSL for that period.

The ECSL is generally submitted quarterly, but businesses that export goods totalling more than £35,000 (excluding VAT) per quarter must complete an ECSL every month. If your business only sells services to other EU countries you can continue to submit a quarterly ECSL, but you can opt to submit monthly ECSL forms.

PAYE and other payroll deductions need to clear Taxman’s bank account by 19th of the month, if paid by cheque. Electronic payments can arrive by 22nd of the month, or the last banking day before that date.

If you use the faster payments service (FPS) to make your PAYE payment, the amount transferred will clear the Taxman’s bank account the same or next day. However, there are limits on the amounts that can be transferred per day and per transaction using FPS, which vary from bank to bank. So check what limit your bank applies.

If you are in the process of closing down your company, or are thinking of doing so, you need to know about the change in the tax law from 1 March 2012.

If your company contains significant value, you will want to extract the cash and assets in the most tax efficient manner. Until now you could ask the Taxman to apply concession C16 to the payments made during an informal winding-up up of the company. Concession C16 allows the payments made to shareholders (known as distributions) to be taxed as capital gains. Shareholders who were also officers or employees of the company may be able to claim entrepreneurs’ relief on those gains, which means the gain is taxed at just 10%.

HMRC are encouraging businesses to pay all their taxes electronically. Only large employers with 250 or more employees, are currently required to pay PAYE and other payroll deductions to HMRC by electronic means, but this may become compulsory for all employers from October 2013.

Before then let’s hope HMRC will sort out their banking to make it easier for employers to pay on time. At present they do NOT operate the Faster Payment Service (FPS) on any of their bank accounts, so you need to allow at least three working days for an electronic payment to reach the HMRC account. This means electronic payments of PAYE must leave your bank on 19th to arrive on 22nd of the month, assuming none of those days falls on a weekend or bank holiday

Do you own a property that qualifies as a furnished holiday let (FHL)?

To qualify the property has to be commercially let for short periods for at least 70 days per year, although this minimum will increase to 105 days from April 2012. There are also some other conditions.

If your property does qualify as a FHL, have you claimed tax relief for all of the equipment included in and attached to that property?

FHL properties have advantageous tax rules that permit capital allowances to be claimed for the cost of equipment used in the building, which is not the case for other let residential property.
Since April 2008 it has been easier to claim capital allowances on a range of items attached to buildings that qualify as integral features.

There are quite a few types of car which have CO2 emissions of no more than 110g/km; including certain models of the Mini Cooper, Toyota Prius, Smart, and Fiat 500. If your company buys one of these low emissions cars new (not second hand), it can claim a tax deduction for the full cost in the year of purchase and for all its running costs.

Where the car is provided to a director or employee of the company for their own private use, or for the use of a member of their family (perhaps for son or daughter), the director/ employee will be taxed on 10% of the list price of the car

Your personal self-assessment tax return for the tax year to 5 April 2011 must be submitted to HMRC by 31 January 2012, or by 31 October 2011 if it is submitted in paper form. These deadlines also apply to your separate partnership tax return where you are a member of a partnership.

For tax returns for earlier years you would receive a penalty of £100 if you submitted it later than those dates, but that penalty would be reduced to nil if you were due a tax repayment, or all the tax due was paid by 31 January. There was however no reduction for penalties relating to late partnership returns. For 2010/11 tax returns and later years, the penalties for submitting the return late will not be reduced even if all the tax due has been paid on time.
As well as the initial £100 penalty, there are additional penalties!

If you first received your state pension after 5 April 2010 you may have to pay an unexpected tax bill. This is because of yet another programming error with the Tax Office PAYE computer.
The state retirement pension is taxable but it is paid without tax being deducted. The amount of your state pension should be set against your personal allowance in your PAYE code. However, this adjustment to the PAYE code was not done by the PAYE computer for state retirement pensions that commenced in the tax year 2010/11

The Tax Office has started to issue electronic PAYE code notices (forms P9) to employers for 2011/12. If you have provided an email address for the Tax Office to contact you concerning PAYE matters, you should receive an email to inform you that new PAYE codes have been issued for your employees.

To view the PAYE codes you need to log on to the PAYE online service on the HMRC website (or through your Payroll software), and choose the option required (e.g. tax code notices). Change the option ‘tax year’ from ‘current’ to 2011/12 to see the notices for 2011/12