VAT Toolkits

If you are responsible for preparing and/or submitting VAT returns on behalf of a business, HMRC have recently updated their VAT ‘toolkits’, which are designed to provide guidance on how to avoid making the common errors that they see in filed returns.

They aim to highlight the areas of potential risk, using real errors that have been identified by compliance staff in returns filed by real customers, and therefore include sections on areas such as motor expenses and business entertainment.

There are currently three toolkits available, as follows:

VAT Input Tax Toolkit

VAT Output Tax Toolkit

VAT Partial Exemption Toolkit

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New Tax Lock!

Legislation is planned to introduce a new “Tax Lock”, which will prohibit any increase in the rates of income Tax, National insurance and VAT.

The lock is planned to last for the duration of the current Parliament.

However, capital gains tax falls outside of this ‘triple lock’, so could potentially be subject to increases during the same period.

Stamp Duty Changes

Since 3rd December 2014, the government have changed the rates of stamp duty on purchases of property and the way it is calculated.

Rather than paying an exact percentage on the entire price of your property, buyers will now pay in separate bands:

  • Up to £125,000 : 0%
  • £125,001 to £250,000 : 2%
  • £250,001 to £925,000 : 5%
  • £925,001 to £1.5m : 10%
  • Above £1.5m : 12%

This means that if you bought a home for £200,000, you would pay stamp duty at the following rates:

0% on the first £125,000 and 2% on the remaining £75,000. This equates to £1,500, rather than the £4,000 you would have paid previously.

Maximising Statutory Maternity Pay

In a family business it may be beneficial to pay a bonus to your employee/female director before their maternity leave begins.

As paying Statutory Maternity Pay (SMP) is not optional, if your employee qualifies for it, you must pay it. However, if your business is classed as a small business, (a business that pays less than £45,000 in Class 1 NICs in a year is classed as small for this purpose) you can recover 103% of the SMP paid from HMRC!

If your employee earns at least £111 per week, the employer must pay SMP at 90% of the employee’s average weekly wage, for the first six weeks of the Maternity period, and the lower of either the 90% rate or £138.18 per week for the remaining maternity time.

By paying a bonus before the maternity period begins, you can increase the average weekly wage and increase the amount recovered from HMRC.

The timing of the bonus is crucial to maximise benefits, so please let us know if you need any further advice in this respect.

Personal Allowance Increase

The new standard personal allowance (the amount you can earn each year free of tax) will be increasing from 6th April 2015.

The standard personal allowance for 2014-15 is currently £10,000, which is due to increase to £10,600 for 2015-16.

However, the personal allowance for those born before 6th April 1938 remains frozen at £10,660.

As well as the increase to the personal allowance, from 6th April 2015, married couples and civil partners will be able to transfer up to £1,060 of their unused personal allowance to their partner, provided that their partner’s total income does not exceed the basic rate threshold.

NIC Employer Allowance Changes

Over 850,000 employers have already benefitted from the recently introduced National Insurance Contributions Employment Allowance, and it is expected that over 500,000 employers will pay no NICs in the coming 2015-16 tax year.

Currently, the allowance is not available for individuals who employ people such as nannies, gardeners and cleaners, in their own home.

However, from April 2015, the employment allowance will become available to individuals who employ care and support workers, which could mean big savings on employer’s NIC!

EC Sales Lists

If your business is VAT registered and you make sales of goods and certain services to other EC countries, you will need to submit an EC Sales List (form VAT 101) to HMRC. Unlike your VAT return, this form is not for claiming or reclaiming any VAT and no payments will need to be made, however it is mandatory and HMRC will issue penalties if it is not filed.

You can complete your EC Sales List quarterly, unless you export goods worth more than £35,000 per year. In that case, you will need to complete a monthly ESL. You may also request to only complete one ESL per year if your total turnover does not exceed £106,500 and you export less than £11,000 worth of sales per year.

The deadlines for filing your ESL are much shorter than the deadlines for submitting your VAT return. For submission of your ESL, you only have 14 days after the end of your quarter or 21 says if you choose to complete your ESL online.

Corporation Tax Equality

Since April 2011, the small profits corporation tax rate (for profits up to £300,000 per year) has been 20%, whilst the main corporation tax rate has been gradually dropping from 26% – firstly to 24%, then 23%, then to 21%.

From April 2015, all companies of all sizes (excluding special rates such as oil and gas companies) will be aligned and corporation tax will be charged at 20%, regardless of profits, or size.

Larger companies however, must pay their corporation tax quarterly once their taxable profit exceeds £10,000,000.

Company Cars

From 6th April 2015, for the first time, vehicles with low to zero CO2 emissions will become subject to tax as a benefit in kind.

This tax will be calculated based on the vehicle’s list price – 5% for petrol models, and 8% for diesel. The charge on all other vehicles will increase by 2% of the list price, meaning the maximum benefit in kind will rise to 37%!

Although there will still be no benefit in kind where the employer pays for the electric to charge an electric company car for private journeys, the fuel benefit is still subject to tax, and this is calculated as the relevant percentage of the list price for the car, applied to the fuel charge multiplier (£22,100 for 2015/16).

New Business Rate Discount

Over 30,000 small businesses on the high street will benefit from an increase in the business rate discount for retail, food and drink businesses.

The additional £500 business rate discount takes the total to £1,500 for 2015-16.

The discount will be available for businesses in properties with a rateable value below £50,000. The eligible properties classed as A1, A3, A4 and A5 (for planning purposes) include a variety of businesses including charity shops, drycleaners, hairdressers, pubs, restaurants and cafes.