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February 2010 NewsletterFOREWORDWELCOME TO PRIME CHARTERED ACCOUNTANTS FEBRUARY E-NEWS. With the start of the new tax year just over 5 weeks away, now is the time to make sure your house is in order and, if changes are to be made, it would be sensible to make them at this point. For example, if you currently outsource your payroll to an alternative supplier to Prime, now could be a good time to receive a comparative quotation. See our article below for further information. HMRC are also preparing for the new tax year and are in the process of issuing new PAYE codes. However, it has come to our attention that there may be a problem with some new coding notices. We’ve, therefore, included further details for your information and would be happy to assist if you feel you may have the wrong tax code. It’s also worth noting now changes coming into force from April 2010, relating to VAT payments and statutory payments to employees, both of which are covered in greater detail below. We realise questions may arise from the information included in this month’s e-news, so please do not hesitate to contact us. Laurence Moore, Chairman, Prime Group Incorrect Tax codes being issuedHMRC are issuing new PAYE coding for 2010/11. The tax codes should reflect the individual’s personal circumstances and include the tax allowances and reliefs that individuals are entitled to. HMRC are advising that this is the first time the annual coding process will take place using HMRC's new computer system for processing PAYE, known as the National Insurance and PAYE Service (NPS). HMRC are expecting more employees than usual, approximately 25 million, to receive coding notices because of the new system. However, it appears that there may be a problem with the new coding notices. Those affected are thought to include taxpayers who have left a job in the last few years. The HMRC database appears to have ‘lost’ the information it holds about people leaving jobs and as a result is combining taxpayers’ current employment records with old data and concluding that they have two (or more) jobs and much higher earnings than they do. Anyone with two jobs normally has their personal allowance (the portion of your income you do not have to pay tax on) counted against the job with the highest wage. As a result of the error many people will, in effect, have their personal allowance split between two jobs or allocated to a job they no longer have, meaning their current employer will be obliged to deduct too much income tax. The personal allowance will be £6,475 for most people under 65 in 2010/11. 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.’ If you receive a new tax code and are unsure whether or not it is correct, please contact Sarah Nickols in our Coventry office on 024 7622 0208 or Ian Frost in our Solihull office on 0121 711 2468, so we can check it for you. Internet links: HMRC guidance on tax codes Using your own car for workHMRC have updated their guidance on using your own vehicle for work. The guidance needs to be read in conjunction with the mileage rates which for those using their own car for work purposes are unchanged at 40 pence a mile for the first 10,000 miles dropping to 25 pence a mile thereafter. Internet links: HMRC mileage factsheet | HMRC mileage rates ‘False’ Self-employmentWe are already seeing examples of how HMRC’s potential approach to “False Self Employment in the Construction Industry” might turn out in practice. A large contractor in the construction sector is facing a devastating bill for backdated PAYE and NIC following a recent inspection by HMRC. The Inspector has reclassified all self-employed subcontractors who have worked for the company in the last six years resulting in a bill for backdated duty, and interest in excess of £7million. The company intends to fight HMRC. This is an example of the consequences resulting from poorly drafted or non-existent written contracts, but it is also a timely reminder that HMRC remains focused on reclassifying employment status. It would be a mistake to think that “false self employment” is a construction industry issue alone and all businesses engaging freelancers and contractors should ensure that their contracts and related paperwork are in order. If you think you could benefit from a simple review of their contractual terms through to a complete audit of their procedures, please contact us. VAT is moving onlineThis is a reminder that, from April 2010, if you have an annual VAT exclusive turnover of £100,000 or more you will have to do your VAT returns online and pay your VAT electronically. Also, if you register for VAT from 1 April 2010 onwards, you’ll have to file online from the start, whatever your turnover. If you want to discuss this, or need help, please contact Steve Moorcroft on 024 7622 0208. Dispensations - new online application formHMRC have introduced the facility to apply for dispensations online. Where an employer has a dispensation they do not have to report expenses and certain benefits to HMRC on forms P9D or P11D at the end of the tax year. Where employers have a dispensation in place this can be time saving. If you would like to discuss applying for a dispensation please do contact us. Internet link: HMRC guidance on dispensations Who’s handling your payroll?For those of you currently not using our payroll service, as we approach the end of the tax year why not get a quote to see how much time and money we could save you? Prime Paysolve is able to offer a complete payroll solution which can be tailored to your specific needs. We can:-
For a FREE quotation, contact Sarah Hartland on 07943 878752. Statutory Redundancy calculatorThe Business Link website includes a useful calculator of statutory redundancy entitlement. Internet links: Business link calculator Statutory paymentsThe new Statutory Payment Rates for 2010/11 have been announced. The new rates are as follows:-
If you would like any help with any of these statutory payments, please contact Monima Simpson-Smith or call 024 7622 0208. Internet link: Business link statutory payment rates Cloud Computing used by a fifth of SMEsA fifth of UK small firms are using hosted IT services, so-called “cloud computing”, research from Microsoft has found. Microsoft’s global survey of 3,193 small and medium-sized firms found that 20.9% of those in the UK use cloud computing for services like email and accounting. Cloud computing is a way of using the Internet to support work-related tasks people perform on their computers, such as storing and sharing information. Instead of purchasing software and having to install it on their PC, the applications are hosted on secure servers they access over the Internet “in the cloud”. Users can access software and input or extract data via their browser. Because the software and services are delivered over the web, there is no need to install their own server. According to Microsoft, more small firms are turning to cloud technology as a cheaper option than running systems in-house. “One advantage is that services are bought on a pay-per-need basis, so firms only pay a fee for what they need and are not required to keep updating technology,” said a Microsoft spokesman. The survey also highlighted that reduced costs and less IT management were the main reasons cited by small firms for adopting cloud technology. Nearly three quarters (73%) of businesses surveyed said they had considered using cloud computing, compared with just 44% two years ago. The UK is now the third biggest user of hosted IT services in Europe, after France and Spain, according to the survey. Prime is a firm supporter of Cloud computing and will be hosting a seminar on 18 March, looking particularly at the online accounting solution Xero. If you would like to attend, please contact Sarah Hartland on 07943 878752. The Tax Health Plan (THP)HMRC have obtained information from various sources, including NHS trusts, private hospitals and medical insurers and are introducing the THP as an opportunity for medical professionals with tax to pay to get their affairs up to date with the benefit of a fixed penalty. Taxpayers must notify HMRC of the intention to make a disclosure by 31 March 2010 and must make a full disclosure of all undeclared liabilities and full payment of all outstanding taxes and duties, interest and penalties by 30 June 2010. The penalty is fixed at 10% of the taxes/duties underpaid unless the total amount of unpaid liability being disclosed is less than £1,000, in which case there is no penalty. HMRC will pursue those with undeclared tax liabilities who decide not to make a disclosure. The THP is initially open to members of the General Medical Council but is expected to be extended to other health professionals including dentists. If you have any concerns in this area, please contact Ruth Chapman on 024 7622 0208. Internet link: HMRC guidance on THP Disclaimer
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