Exchequer Weblog

This is an easy question –

All PAYE and NIC deductions, including student loan repayments, and CIS deductions for the tax period ending on 5th of the month must be paid to HMRC by 19th of that same month. This means your cheque must reach the Taxman’s accounts office by the last working day before the 19th. If you pay electronically the payment must reach the Taxman’s account by 22nd of each month. In most cases you will need to set-up the payment to leave your bank account on or before 19th as the Taxman’s bank does not accept ‘faster payments’, which arrive the same day as they leave.

If all your average monthly PAYE deductions for the tax year are less than £1,500 you can pay those deductions to the Taxman each quarter instead of monthly. In this case the deductions must reach the Taxman’s accounts office by 19th July, 19th October, 19th January and 19th April. If you pay electronically the payment must arrive by 22nd of the relevant months.

In our 5th January newslog we told you about the Taxman’s crackdown on undeclared commissions. On 11 January 2010 [he] launched a scheme to encourage medical professionals to disclose all their undeclared income, including commissions and any other income that hasn’t been shown on their tax returns. This scheme is called the Tax Health Plan, but at present it is only open to medical doctors who are registered with the General Medical Council (GMC), and to qualified dentists.

If you are a doctor or dentist, and you want to “come clean” to the Taxman you need to register your intention to make a disclosure under the Tax Health Plan by 31 March 2010. You will then have to present the full disclosure report and pay all the tax, interest and penalties due by 30 June 2010. Your accountant or tax adviser can help you calculate what is due and to complete the disclosure forms necessary.

The Taxman has started to issue the 2010/11 PAYE codes, for the tax year that starts on 6 April 2010. This code arrives in the form of a P2 notice, and a copy should go to your employer (on a form P9). If you have received your 2010/11 PAYE code already please study it carefully, as any corrections need to be made in the next few weeks.

Since the Taxman fired up a new PAYE computer last summer there have been a number of faults appearing in PAYE codes. In some cases the age allowance or married couples allowance disappeared, in other cases the state pension amount was understated. Now many of the 2010/11 codes have excluded some of the basic personal allowance, which should be £6,475 for those aged under 65.

This fault occurs if you have changed jobs in the last few years, or started to receive a pension.

Insurance companies often pay commissions to professionals who recommend certain insurance policies to their clients. For example; hospital consultants may recommend health insurance, vehicle dealers may propose car insurance, and lawyers may put forward accident and legal cover. The professionals in these situations should report any commissions they receive on their tax returns, but sometimes they forget to do this.

The Taxman now has wide powers to ask for information about a person’s tax affairs from third parties. He can issue a notice to an insurance company asking for a list of all persons who receive commissions in a certain period, and the amounts paid to each individual.

At last a solution has been found to the problems businesses face when trying to reclaim overseas VAT. From 1 January 2010, to claim a refund of VAT you have paid in another EU country you must complete an online claim in the UK. You don’t have to battle with lots of incomprehensible forms in other languages, as the claim will be done entirely in English. The UK tax office will forward your claim to the relevant country, which will process the refund within four months of receipt. You should then receive the payment due within a further 10 days.

To make VAT refund claims in respect of VAT paid in other EU countries you need to first register to use the Tax Office VAT EU refunds system, which is part of the VAT online service.

The Government needs to raise more revenue to pay off the massive national debt, but it seems reluctant to announce higher tax rates. One tax that looks ripe for an increase is Capital Gains Tax (CGT). The current rate of CGT is just 18%, compared to a top rate of 40% for income tax.

An additional income tax rate of 50% will be imposed on income over £150,000 from 6 April 2010, and there are strong rumours that the rate of Capital Gains Tax (CGT) will also be increased from that date.

Nothing has been announced on this issue yet. Some say this silence is deliberate to avoid people rushing to make gains that will be taxed in the current tax year at 18% (or 10% with tax reliefs), rather than pay CGT at a much higher rate in 2010/11.

January is the month when those big bills become due for payment, and that includes your tax bills…

• - The balancing payment of income tax for 2008/09 is due by 31 January 2010 together with any Capital Gains Tax due for that year.
• The first instalment of income tax for 2009/10 is also due on that date.
• - VAT for the quarter to 31 December 2009 must also be paid by 31 January, unless you file and pay your VAT return online, in which case you have another seven days to pay (ten if paying by direct debit).
• - PAYE and NIC deductions for the month or quarter to 5 January 2010 must also be paid by 19th January, or by 22nd if you pay electronically.

If you do not have the funds to pay all the tax you owe in January, you should contact the HMRC Business Payment Support Service as soon as possible to arrange a payment plan. Their number is 0845 302 1435, they are open every day apart from bank holidays – Mon to Fri 8am to 8pm, Sat and Sun 8am to 4pm.