Abbey

Chartered Tax Advisers
Old Bishops' College
Churchgate
Cheshunt
Hertfordshire
EN8 9XP

T: 01992 642024

E: abbey@abbeyaccountants.com

Smiling businessmen and women

  TAX E-NEWS - Monthly Updates February 2015


Welcome to our first monthly tax newsletter of 2015. Our newsletters are designed to keep you informed of the latest tax issues. We hope you find it interesting and enjoyable to read.

Remember, we are here to help you so please contact us if you need further information on any of the topics
covered.

Peter McDaid CTA ATT TEP
Director

END OF YEAR PAYE RETURN

Prior to the introduction of RTI, employers were required to complete an end-of-year checklist and declaration on form P35 and submit it to HM Revenue and Customs. Under RTI this was replaced by the final full payment RTI submission which included a similar checklist and declaration.

HM Revenue and Customs have recently announced that from 6 March 2015, the requirement for employers to complete the end-of-year checklist when making their final full payment submission under the real time information regime will be removed, for the current tax year 2014/15 and subsequent years.

CGT ENTREPRENEURS’ RELIEF - OFFICER OR EMPLOYEE?

CGT entrepreneurs’ relief (i.e. in effect a 10% tax rate on capital gains) is available when owners of trading companies sell their shares, provided certain conditions are satisfied for the 12 months prior to sale. One condition is that the individual has 5% voting control, but a further condition is that they are an officer or employee of the company.

There have been a number of recent cases testing the Court’s interpretation of the meaning of being an officer or employee, with some fortunate results where directors had recently resigned.

The safest way to avoid the risk of losing this valuable relief would be to continue to be an officer of the company or remain on the payroll up to the date of the sale.

STATE PENSION CHANGES

Recent editions of this newsletter have featured the important changes to personal pensions for those over 55 that take effect from 6 April 2015.

From 6 April 2016 the new flat rate State Pension will be introduced, which is expected to be around £150 a week. A person’s actual entitlement will depend on their National
Insurance contribution record.

Those who have built up an entitlement greater than the flat rate amount due to paying SERPs or other additional contributions will receive that higher amount.

Individuals will need a minimum of 10 qualifying years and the full flat rate State Pension will only be given if they have 35 qualifying years (previously 30 years).

Those aged over 55 are encouraged to contact the Department of Work and Pensions (DWP) to receive a projection of their expected State Pension and check their contribution record. It is possible to make good any shortfall by making voluntary Class 3 contributions (£13.90 a week).

Those who are self-employed will find it cheaper to make Class 2 contributions (currently £2.75 per week). If you are an employee or director, provided your salary exceeds the Lower Earnings Limit (currently £5,772 p.a.) then although no NIC is actually due you are deemed to have contributed for that year.

£150 a week may not seem a lot to live on but note that at a 5% annuity rate you would need a fund of over £155,000 to generate such an income.


IN THE CONSTRUCTION GAME?


The number of self employed people is soaring and the construction industry is the fastest growing sector.



If you work in this sector you have to deal with the HMRC Construction Industry Scheme (CIS). This is a special set of rules imposed by HMRC for handling payments made by contractors to subcontractors for construction work.

CIS applies to all contractors and subcontractors whether sole traders, partnerships or companies.

If your business works in the construction industry or does construction related work you need to ensure that the CIS rules have been complied with.

For these purposes construction includes site preparation, general construction such as bricklaying, plumbing, electrical work, plastering, carpentry etc., alterations, extensions, repairs, decorating and dismantling work.

All contractors and sub contractors must register with the scheme using the HMRC online tax registration service.

A contractor must do two things before he can pay a sub-contractor:

1) Confirm the subcontractor's status as self employed.

2) Check whether the subcontractor has to be verified with HMRC and verify him, if necessary.

Depending on the status of the subcontractor on verification HMRC will instruct the contractor to deduct at either:

30% tax on the payment (excluding VAT and
materials)

20% tax on the payment (excluding VAT and
materials)

0% tax on the payment i.e. gross payment status.

The major point to make on CIS is that it is the contractor making the payment who has full responsibility to operate the scheme correctly. Failure to do this will result in the contractor being charged for any tax that he has failed to deduct correctly plus having to pay interest and punitive penalties.

Finally if that contractor itself has gross payment status i.e. is allowed to received payments for work carried without a deduction for tax, HMRC can and do remove that status for failure to operate the CIS scheme correctly and, in addition, for failure to fulfil fully its other tax legal obligations.

This is a very big stick for businesses in the construction industry as removal of gross payment status has a seriously adverse effect on cash flow. Be warned HMRC are being very aggressive in policing the CIS scheme and carry out annual reviews

PHISHING EMAILS

There has been a huge increase in fraudulent phishing emails received by taxpayers offering a tax rebate.

In the last six months alone there have been almost 75,000 fake emails reported to HMRC.  HMRC along with other law enforcement agencies have during this six month period closed down over 4000 websites responsible for the issue of these emails.

HMRC always advise taxpayers, where there is a refund due by, by letter.  So if you receive an email of this nature please do not provide any information and report it to
phishing@hmrc.gsi.gov.uk
TAX DIARY OF MAIN EVENTS

Date What's Due
  01 February Corporation tax for year to 30/04/14
  19 February PAYE & NIC deductions, and CIS return and tax, for month to 05/02/15 (due 22 February if you pay electronically)
  28 February   Surcharge of 5% on 2013/2014 self assessment tax still unpaid
  01 March  Corporation tax for year to 31/05/2014
  19 March   PAYE & NIC deductions, and CIS return and tax, for month to 05/03/15 (due 22 March if you pay electronically)