Entries Tagged 'Tax news' ↓

New Minimum Wage rules came into effect on 1 January 2011, making schemes where some travel expenses counted towards the National Minimum Wage (NMW) ineffective.

The practice popular with employment agencies and umbrella companies, often involves a worker sacrificing part of their contractual pay, in place of the payment of amounts for travel and subsistence to a temporary place of work. This arrangement would have meant the worker paying less tax and NIC.

The Cordant Group, a manpower agency which employs around 30,000 staff went to the High Court to challenge the new changes late last year, but was unsuccessful. 

HM Revenue & Customs (HMRC) says that it is aware that a number of travel schemes and umbrella business models are being marketed which claim to continue to provide savings for the employer and be compliant with the NMW from 1 January 2011. These include:

• Paying subsistence expenses rather than travelling expenses;
• Classifying workers as directors;
• “Holiday Pay adjustments”; and
• Under recording hours worked

HMRC says that none of these models, including those listed above, would comply with the requirements of NMW legislation for workers paid at, or close to, the NMW.

Maybe the Queen’s speech was particularly boring or the in-laws became out-laws.  Whatever the reason, the number of self assessment tax returns filed on 25 December 2010 rose from 620 in 2009 to 845 in 2010.  This increases to 2,408 returns filed on Boxing Day.  There must some dedicated (or sad) accountants out there!

HMRC now have increased their powers which allow them to knock on your door and enter business premises for tax inspections.

Click on the link above to read about what rights you have regarding unannounced visits and pre-arranged visits.

The Government today announced the new qualifying rules for FHLs which will take effect from April 2012.  These new rules affect both UK properties and those located in the European Economic Area (EEA).

• a property must be available for letting to the public for at least 210 days per year (increased from 140 days);
• a property must actually be let to the public for at least 105 days in a year (increased from 70 days);
• losses made in a qualifying UK or EEA furnished holiday lettings business may only be set against income from the same UK or EEA furnished holiday lettings business; and
• a “period of grace” will be introduced to allow businesses that don’t continue to meet the “actually let” requirement for one or two years to elect to continue to qualify throughout that period.

The average UK household will pay £283 of tax per family on their festive spending this year according to the Taxpayers’ Alliance.

“While Santa Claus is coming down the chimney, George Osborne is sneaking through the back door, like the Grinch stealing the presents,” said Mike Denham, a research fellow at the Taxpayers’ Alliance.

The Christmas tax principally comprises VAT which is charged at 17.5% on virtually all Christmas goods resulting in an average VAT bill of £224.   The remainder of the £283 of tax per household is made up of excise duties (on alcohol) and fuel tax (at £3.46 per gallon).

According to Deloitte’s long-running Christmas Retail Survey the total cost of Christmas this year will be £37bn. That works out at £1,460 per UK household (including £283 of tax as above), of which £365 will go on food and drink, £803 on gifts, and £292 on socialising.

Merry Christmas everyone (well, everyone except Mr Osborne)!

Click here to see the fuel rates to use from 1 December 2010 for both:

• employers wanting to reimburse employees for business journeys done in company cars, and
• employees needing to reimburse employers for private jorneys done in company cars. 

If these rates are used there is no extra tax to pay on such payments.

HM Treasury has just announced the new tax and NI rates for 2011/12 which take effect from 6 April 2011.  In brief the changes are as follows:

• Personal allowance increased to £7,475
• Basic rate threshold reduced £35,000
• NI is payable on earnings exceeding £7,070 pa or £136 pw
• Basic NI rates increase to 12% for employees, 13.8% for employers and 9% for the self employed
• The higher NI rate is increased to 2% for employees and the self employed
• ISA limits increased to £5,340 for cash or £10,680 for shares

Full details can be found by clicking on this Tax rates for 2011/12 link.

The Prime Minister, David Cameron, has issued a message of support and thanks to the UK’s 1.4m feelance workers.

Mr Cameron sent a letter yesterday to the Professional Contractors Group (PCG) in recognition of 23 November being National Freelancers Day.  In his letter the PM said: “I can’t tell you how much admiration I have for people who leave the comfort of a regular wage to strike out on their own.  It takes a lot of courage – and without that courage this country would be a much poorer place.

“The 1.4million freelancers in our country make a massive contribution to our economy.  More and more people are choosing freelancing, recognising that it strikes the right balance between work and life in the 21st century, and as we go for economic growth this Government is getting right beghind them.”

Encouraing words, I’m sure you’ll agree.  However, let’s wait until the new version of IR35 is published before getting too carried away…

The Scottish government has failed to pay for the upkeep of an HMRC computer system that was used to support the country’s variable rate tax.

In 1997, the Scottish Parliament was granted tax powers to increase or decrease income taxes by 3% from the UK standard rate. The SNP government failed to meet a demand for £7 million by 20 August towards the cost of upgrading its software to match the latest software used by HMRC.  Non-payment of this bill means that Edinburgh has now lost its ability to raise or lower taxes for Scotland.

Pensions minister, Steve Webb, confirmed last week that every company, regardless of size, colour or creed will have to sign up to the government’s new pension provision rules.

Although the scheme starts in 2012, it won’t impact smaller companies (those with less than 50 employees) until 2014/15.  Even then, we think that exemptions will be available for personal service companies (contractors, freelancers and the like).

Employer contributions will ratchet up from 1% to 3% of the employee’s salary over a transitional period but only where that salary exceeds £7,475.   As many contractors take a minimal salary below this level (and the rest of their earnings as dividends) you can see that the impact will be small. 

In reality, a more suitable pension provision can be made via a SIPP or stakeholder pension which is more flexible both in what it can invest in and at retirement.