Leighton Reed, Director, Broomfield & Alexander

From 6 April 2012 HMRC can exercise new powers that will allow them to require a cash deposit or a bond, which can be cashed on demand, from certain employers where it is considered there is a real risk that they will not pay their PAYE and NIC liabilities.

HMRC have said that this will not affect the vast majority of employers who pay their tax on time, nor will it affect employers who are in genuine financial difficulties. Employers who may be affected include:

• Employers that deliberately choose not to pay.
• ‘Phoenix’ businesses that cease trading and then re-emerge in a different guise.
• Employers who build up large PAYE or NIC debts, and
• Employers who ignore HMRC attempts to contact

Readers may find the following comments from HMRC’s website useful:

HMRC will calculate the amount of the security on a case by case basis – depending on the amount of tax at risk, the previous behaviour of the employer and other risks. Those being required to pay a security can appeal against this decision.

As with VAT, if an employer fails to provide the security for PAYE or NICs, HMRC can prosecute them. The sanction is a fine, not a custodial sentence.

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Leighton Reed, Director, Broomfield & Alexander

Most VAT registered traders will be aware that you cannot reclaim the VAT when you buy a car. The only exceptions are businesses that use cars directly to generate income: for example a taxi firm.

The VAT position of motor expenses for cars owned by the business is slightly more complex.

Fuel
As most business cars are used for private as well as business purposes you are only entitled to effectively claim back the VAT on the business use. Registered traders therefore have four choices:

1. Reclaim all the input tax on fuel purchases and pay a car scale charge as output tax to HMRC to cover private use. The amount of the scale charge depends on the CO2 emissions of the vehicle.
2. Keep mileage records that show business and private use and apportion your claim for input tax on fuel.
3. Rather than the apportionment method (2 above) it is possible to use HMRC’s published fuel rates per mile to calculate the VAT input tax included in fuel costs. To do this multiply business mileage by the appropriate fuel mileage rate and apply the VAT fraction (1/6).
4. Elect to make no claim to recover input tax on all fuel for mixed use vehicles. You would do this if the output tax scale charge at 1 above is more than the input tax recoverable or if you don’t keep the mileage records as set out in 2 above. Please note that if you choose this option you must apply it to all vehicles (including commercial vehicles).

Car repairs and servicing
As long as the car is owned by the business and the costs are paid for by the business all the input tax can be recovered. The only exception if is a car is never used for business purposes in which case no VAT can be reclaimed.

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1 May 2012 – Due date for corporation tax due for the year ended 31 July 2011.
19 May 2012 – PAYE and NIC deductions due for month ended 5 May 2012. (If you pay your tax electronically the due date is 22 May 2012).
19 May 2012 – Filing deadline for the CIS300 monthly return for the month ended 5 May 2012.
19 May 2012 – CIS tax deducted for the month ended 5 May 2012 is payable by today.
19 May 2012 – The payroll forms P35 and P14s must be filed by this date – employers late in filing these forms may receive a penalty.
31 May 2012 – Ensure all employees have been given their P60s.
1 June 2012 – Due date for corporation tax due for the year ended 31 August 2011.
19 June 2012 – PAYE and NIC deductions due for month ended 5 June 2012. (If you pay your tax electronically the due date is 22 June 2012).
19 June 2012 – Filing deadline for the CIS300 monthly return for the month ended 5 June 2012.
19 June 2012 – CIS tax deducted for the month ended 5 June 2012 is payable by today.

Leighton Reed, Director, Broomfield & Alexander

The next HMRC filing deadline is on 19^th May for the submission of the Employers Annual Return form P35.

Changes were introduced for 2011-12 to remind employers about the deadline for filing their Employer Annual Return. A letter will be issued by HMRC at the beginning of May in time for the return to be submitted by 19 May.

A further reminder letter will then be issued after the filing deadline if HMRC still haven’t received a return or a ‘no annual return’ notification.

This letter will explain that a penalty may already have been incurred and say that the return should be submitted immediately in order to avoid the penalty increasing. (More information on penalties can be found at www.hmrc.gov.uk/paye/problems-inspections/annual-return-late.htm)

From 31 May 2012, HMRC will introduce a “P35 Interim Penalty Letter” which will be issued over a 5 day period, so that it reaches employers within a month of the filing deadline. The letter will state that the employer has incurred a late return penalty and explain what to do to avoid it increasing. This will be calculated at £100 per 50 employees for each month or part month there is a delay in filing the return.

If the return remains outstanding for more than four months, the employer will receive another penalty notice shortly after 19 September and again the following January and May, if necessary. These penalty notices will show the amount of penalty that’s building up because the employer hasn’t filed the return on time. This will again be calculated at £100 per 50 employees for each month or part month there is a delay in filing the return.

If you have had PAYE schemes in the past but no employees in 2011/12 it is worth checking whether a notice to file a P35 has been issued. If yes, then you will be required to file a nil P35 by 19^th May 2012. The link to HMRC for a nil P35 is below.

https://online.hmrc.gov.uk/shortforms/form/P35NilEmployer

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Leighton Reed, Director, Broomfield & Alexander

For some time HMRC have not been happy with capital allowances claims made by buyers of existing properties (often going back over many years) and have been seeking to tighten up the rules.  Changes are being incorporated into the Finance Bill 2012.

The proposed changes are detailed and are intended to apply from April 2012.  In broad terms, if a buyer wishes to claim capital allowances on fixtures in a property, he and the seller must enter into an election (known as a section 198 election) to agree the allocation of the purchase price to plant and machinery.  The election must be entered into within 2 years of the buyer’s acquisition.  Such elections have existed for some time, but have not been mandatory.

In addition from April 2014 the past owner must have allocated its expenditure on the fixtures to a capital allowances pool prior to its sale of the property or must have claimed a first year allowance in respect of the expenditure.  This is likely to mean that if the seller was entitled to claim capital allowances, but hasn’t and has therefore not pooled its capital expenditure, the buyer may have to negotiate with the seller to pool the expenditure before the sale.

Practically speaking this means that when a property sale takes place there is an even greater need than in the past to carefully consider the capital allowances position before the deal is finalised.  Purchasers will need to undertake additional due diligence when making a purchase and the sale and purchase agreement formulated appropriately.  It will no longer be possible to rely on sorting the capital allowances position out after the event.

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1 March 2012 – Due date for corporation tax due for the year ended 31 May 2011.
19 March 2012 – PAYE and NIC deductions due for month ended 5 March 2012. (If you pay your tax electronically the due date is 22 March 2012)
19 March 2012 – Filing deadline for the CIS300 monthly return for the month ended 5 March 2012.
19 March 2012 – CIS tax deducted for the month ended 5 March 2012 is payable by today.
1 April 2012 – Due date for corporation tax due for the year ended 30 June 2011.
19 April 2012 – PAYE and NIC deductions due for month ended 5 April 2012. (If you pay your tax electronically the due date is 22 April 2012).
19 April 2012 – Filing deadline for the CIS300 monthly return for the month ended 5 April 2012.
19 April 2012 – CIS tax deducted for the month ended 5 April 2012 is payable by today.