November 2009 Newsletter

FOREWORD

WELCOME TO PRIME CHARTERED ACCOUNTANTS NOVEMBER E-NEWS.

With 2010 just around the corner, this e-news looks at VAT and the changes businesses will have to address as we revert to 17.5%; as well as the new VAT cross border rules for those businesses trading across the EU that come into force from January next year.

In addition, we’ve also included two articles relating to payroll and PAYE and reminders of late payment penalties and wrong filing methods by HMRC.

Aside from statutory obligations, Business Link WM is offering support to local businesses on any aspect of running a business. Prime is currently working with them to identify clients which may benefit from their help. See our article below for more information, or alternatively, give us a call if you would like to find out how they may be able to assist your business.

This month, Coventry Telegraph announced its annual awards and is currently asking local businesses to register their interest to be put forward for one of their prestigious awards. Could your business be in with a chance for a top prize? More details can be found in the article below.

As always, if you would like any further information relating to any of the articles included, please contact us.

Laurence Moore, Chairman, Prime Group

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VAT changes at the year end

The start of 2010 is set to be a busy time for VAT registered businesses particularly those involved in cross border supplies of goods and services.

The current temporary VAT rate of 15% will revert back to 17.5% for supplies of goods and services made on or after 1 January 2010. As always, this is not necessarily as simple as it sounds, as there are special rules for supplies which span the date of the change and deposits/prepayments etc.

That said, there is a cash flow opportunity for businesses if they can encourage customers to pay in full before 1 January for goods and services to be provided after the increase. (However, please note that this is subject to anti-forestalling legislation which will affect certain transactions).

Changes will need to be made to computer-based accounting systems such as Sage and QuickBooks. We will put more information with regard to that on our website in due course. However if you need our help with this at the beginning of next year, please contact us now so that we can plan for it.

With effect from 1 January 2010, there will also be a number of important changes for businesses supplying goods to other EU countries and also for those supplying or receiving cross border services. These changes involve three aspects; the place and time of supply of certain services, and changes to the EC Sales Lists rules (currently only required for cross border supplies of goods, but will be extended to include services). If you are involved in cross border transactions, now is the time to consider if and how the changes will affect your business and what needs to be done in order to comply.

Businesses which submit VAT refund claims for VAT incurred in other countries will have to do so using a new EU electronic system being introduced on 1 January 2010. The new system has revised time limits and procedures for submission and repayment of the claims. In order to use the service, UK businesses will need to register online via the UK portal and this service is expected to be available from late November. HMRC will announce further details in due course. Whilst the UK is prepared for the new system, it is possible that certain EU countries may not be fully ready.

Internet link: VAT registered businesses

If you would like any advice about any VAT related matters, please do contact us.

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Online payroll starter and leaver forms

HMRC are reminding employers with 50 or more employees that they should now be filing their starter and leaver information online. The forms which need to be filed electronically, and should have been online since 6 April 2009, include:

P45 (Part 1) – details of employee leaving
P45 (Part 3) – new employee details
P46 – details of employees starting work who do not have a P45
P46 (Pen) – new pension details
P46 (Expat) – details of those seconded to work either wholly or partly in the UK whilst remaining employed by an overseas employer

Penalties

HMRC advise that they will shortly begin issuing warning letters to those employers with 50 or more employees who are still not filing their starter and leaver forms online. These warning letters will refer to paper submissions made up until 5 January 2010 and will only refer to one paper submission.

From the start of the fourth quarter of 2009/10 (6 January 2010) HMRC will begin charging penalties to those employers with 50 or more employees who send HMRC starter and leaver notifications on paper. Penalties will range from £100 to a maximum of £3,000 depending on the number of forms sent in paper format.

The first penalty notices will be sent in April 2010. Although this is some time away, it is important to check that employers are sending starter and leaver notifications online.

Our dedicated payroll team would be happy to assist you. Please email Kerrie Lucas or call 024 7655 4324.

Internet link: Employer Bulletin

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Business Link offers support to local businesses

Business Link West Midlands offers impartial advice and up-to-date information on any aspect of starting or running a business and can help you access a wide range of services and specialist resources ranging from training and skills development, finance, marketing and productivity to new technology, e-commerce and more.

To find out more about how Business Link can help you, call 0845 113 1234, email Business Link here or visit www.businesslinkwm.co.uk.

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Paying PAYE on time

HMRC are warning employers that from May 2010 they may have to pay a penalty if they do not pay their PAYE on time. These are generally due each month, on time and in full.

HMRC will implement late payment penalties for payments due from May 2010. From then on, employers may have to pay penalties if they make more than one PAYE payment late in a tax year. The new penalties will apply to all employers, including large employers (those with more than 250 employees) who currently are subject to a Mandatory Electronic Payment surcharge.

HMRC are advising employers to let them know if they are likely to have difficulty making a payment on time, so that arrangements can be made and penalties can be avoided. Their guidance states that where employers enter into ‘time to pay’ arrangements, before the liability becomes due, no penalty will be charged. Penalties for late payment start at 1% increasing to 4% depending on the number of late payments in the year. Extra penalties will be added where liabilities are outstanding for a further six, and then 12, months.

Our payroll bureau pays PAYE/NI automatically on the due date for our clients minimising the risk of accidental penalties being incurred. Please email Kerrie Lucas or call 024 7655 4324 for more details.

Internet link: Employer Bulletin

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Retail sales rise 3.4%

UK retail sales in October rose at the fastest annual pace since May 2008, according to figures released by the Office for National Statistics (ONS).

ONS data revealed that sales in October were up 3.4% from a year ago and increased 0.4% from September.

The figures also revealed how important the online sector is becoming, with online sales recording a 15.8% year-on-year increase in sales from October last year. If you want help in putting your business online, so that you can sell products through your website, please email Laurence Moore, as we have software tools to do that.

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Pre-Budget Report

The pre-budget announcement will take place on 9 December this year. Following the announcement, we will be preparing and distributing a special e-news providing more information. This will be sent to you by close of play on 10 December.

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Business Property Relief

Hidden away in the inheritance tax (IHT) regulations is a relief that can have a significant impact on the amount of IHT payable by estates which include business property.

What is business property?

It includes:

• A business or interest in an unincorporated business, 100% relief available.
• A holding of shares in an unquoted company, 100% relief available.
• A controlling holding of shares in a quoted company (more than 50% of the voting rights), 50% relief available.
• Land, buildings or plant and machinery used in a business of which the deceased was a partner at the date of death or used by a company controlled by the deceased, 50% relief available.
• Land, buildings or plant and machinery held in a trust where the deceased had the right to benefit from the trust and the asset was used in a business carried on by the deceased, 50% relief available.

Businesses which are mainly "investment" businesses are excluded from the relief, but qualifying business assets can potentially make a significant difference to IHT payable.

Consider the following example:

At the date of his death, Alfred had assets of £1m in cash on deposit and shares in an unquoted trading company valued at £1m. The shares qualified as business assets. In his Will he left the shares to his wife, who wanted to continue running the company and had her own cash assets. Alfred's cash deposits were left to his daughter.

In this case the transfer of the shares from husband to wife was free of inheritance tax charge (between spouses) so business property relief was wasted. However, the £1m in cash left to his daughter would create an IHT bill of £270,000. (£1m less nil rate band £325,000 at 40%).

There is a quite legitimate way to restructure the Will and pay no IHT at all on Alfred's death. As a direct result of the required estate planning, Alfred's wife would obtain ownership of the shares and the daughter would have £1m in cash instead of £730,000 (£1m-£270,000 IHT).

Action point

The facts in this example have been somewhat simplified to demonstrate the importance of IHT planning. If you have business assets in your estate it might be an idea to review your Will to ensure that maximum relief can be claimed. If you would like to discuss your inheritance tax planning, please email Sarah Hartland, or call 0845 872 2099, who will be happy to make an appointment for you with a representative from Prime Financial Advisers.

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Coventry Telegraph Business Awards 2009

Coventry Telegraph is inviting Coventry and Warwickshire businesses to enter their Business Awards competition, which recognizes companies large and small for their effort and innovation.

The award categories are:

International Trade, Innovation, Customer Care, Environment, Best use of IT and Communications, Community Involvement, Business of the Year, Small Business of the Year

Entry is completely free of charge with an awards presentation dinner taking place on 11 May 2010.

If you are interested in entering, simply call 01604 505480 or click here to find out more.

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CIS (Construction Industry Scheme) Gross Payment Status

The CIS Tax Treatment Qualification Test (TTQT) is scheduled to be fully automatic from this month. This means that the initial and annual compliance checks will be carried out entirely by HMRC’s computer, with consequent absence of discretion. At the moment 30% of contractors fail the TTQT, so the further automation of the system may lead to an increase in the failure rate with consequential loss of gross payment status.

Loss of gross payment status is usually disastrous for contractors, so a failure rate of 30% is alarming. The vast majority of the cases involve late payment of tax – usually monthly PAYE – rather than late submission of returns. And the rules are draconian – one payment more than 14 days late, or three payments late by even one day is enough to trigger loss of gross payment status.

Payments made late by agreement with HMRC under a Business Support Plan do not count as failures for the TTQT.

A decision by HMRC to remove Gross Payment Status can be appealed so please contact us if you need any more advice about this subject.

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Tax relief on nursery vouchers to be withdrawn

In his speech to the Labour Party Conference, the Prime Minister, Gordon Brown announced an extension of free nursery places, to be financed by the withdrawal of the tax and National Insurance (NIC) exemptions for childcare vouchers.

The proposal is that the provision of free nursery places will be extended to two year-olds (this would be on top of the existing free childcare available to three and four year olds). It is expected that 250,000 children will benefit from this by 2015/16.

However, the quid pro quo would be the eventual withdrawal of tax and NIC exemptions for employer provided childcare vouchers. Currently employees are exempt from tax and NIC on childcare vouchers provided by employers. The exemption is available on the first £55 a week of vouchers per employee, as long as a range of conditions are met. Any excess over the £55 is liable to tax and to NIC (both employees’ and employers’ contributions).

Under the proposals, it appears that from April 2011, employees who join an employer-supported voucher scheme will not be entitled to the current tax and NIC exemptions. Those already receiving vouchers will be unaffected until April 2015, when the exemptions for vouchers will be withdrawn completely.

More details are expected in the 2009 Pre-Budget Report.

Internet link: Childcare vouchers

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Disclaimer
This newsletter is published for the information of clients and other recipients of our email newsletters. It provides only an overview of the regulations in force at the date of publication, and no action should be taken without consulting the detailed legislation or seeking professional advice. Therefore no responsibility for loss occasioned by any person acting or refraining from action as a result of the material contained in this newsletter can be accepted by the firm.