BANK AND BUILDING SOCIETY INTEREST

If you are a non-taxpayer, make sure you register for interest to be paid gross and if you have not done that, make sure that you claim back any tax paid on interest earned on bank and building society deposits.

To receive interest gross you should complete the HMRC form R85.

You can download the form via the following link:

http://www .hmrc.gov .uk/forms/r85. pdf.

To receive interest gross you should complete the HMRC form R85.

You can download the form via the following link:

http://www .hmrc.gov .uk/forms/r85. pdf.

TIPS WHEN MAKING PAYE PAYMENTS

PAYE should be paid on time each month to avoid late payment penalties.

However, to avoid getting caught out by bank holidays and weekends, ensure that payment is made early when the normal payment day falls on a bank holiday or a weekend. When this happens, the payment (or in the case of electronic payments, cleared funds) must reach HMRC by the last working day before the bank holiday or weekend on which the normal payment day falls.

In 2014/15, where payment is not made electronically (so must reach HMRC by the 19th of the month), payment should be made early in July 2014, October 2014 and April 2015 to allow for the fact that the 19th falls on a weekend.

Where payment is made electronically, payment should be sent in early in June 2014, November 2014, February 2015 and March 2015 to allow for the fact that the 22nd  falls on a weekend (unless the Faster Payment service issued).

AUTO-ENROLMENT

Auto-enrolment is the term for the law that requires all employers to register their employees into a qualifying workplace pension scheme. This requirement is being rolled-out to the largest employers first and will eventually apply to the smallest employers from June 2015 onwards.

For example if you have 62 to 89 employees you have to apply auto-enrolment from 1 July 2014. Those with larger payrolls should already have auto-enrolment in place.

There are let-outs; auto-enrolment only applies to employees working in the UK who are aged 22 to state pension age, and who earn more than the personal allowance (£10,000 for 2014/15). After being enrolled in to a pension scheme, each employee has an opt-out period of one month whereby they can receive a full refund of any contributions already made. Another opt-out opportunity must be offered every three years. 

Once the workplace pension scheme is running both the employee and the employer must make contributions, which will start at 1% of qualifying earnings rising to a total of 8%. Qualifying earnings consist of pensionable pay in the range £5,772 to £41,865 (for 2014/15). The employee's employment contract will define what "pensionable pay" is.

We can help you work out what auto-enrolment may cost you, and which employees will be covered. There is a lot to think about, and if you haven't already got a suitable pension scheme in place you will need to set one up. There are significant penalties for employers who fail to enrol employees on time, so don't let the auto-enrolment timetable overtake you. 

VAT AND DISCOUNTS

Do you offer prompt payment discounts to your customers - known as PPDs?

Under UK law VAT is payable on the net amount after deducting the discount, whether or not the customer takes advantage of the discount.

Say you sell a carpet for £1,000 + VAT, and offer 3% discount if the customer pays with 10 days. VAT is charged at 20% on £970 i.e. £194, rather than as 20% of £1,000 which is £200. Even if the customer takes two weeks to pay and thus doesn't qualify for the PPD, the amount due will be £1194.

This is a ripe loophole ready for blocking, and that is exactly what the Government is going to do from 1 April 2015. From that date it is proposed that VAT will be due to the amount the customer actually pays. So in the example above where the customer doesn't take up the PPD he pays the full £1000 plus VAT of £200.

The PPD VAT-dodge has been widely exploited by suppliers of telecommunications and broadcasting services, so the use of PPDs to reduce VAT due has already been blocked in those sectors from 1 May 2014, where the customer can't recover the VAT charged. Those will be non-business customers.

If you offer PPDs you may need to change your sales software. We will keep you informed of the details of the changes, when they are announced nearer the time.

REAL TIME INFORMATION (RTI) INTEREST

In the past some employers would play the PAYE system, holding on to the PAYE deductions until the last payment date of the year, and then paying the balance due before interest was charged. That is no longer possible under real time information (RTI), as interest is now charged on late paid PAYE and CIS deductions on a monthly basis throughout the tax year.

The interest is applied to payments which fall due on and after 19 May 2014, which are paid late. If you check your business tax dashboard on the HMRC website, you may see interest accrued from 19th of the month. Where you pay the PAYE due electronically the payment is due by 22nd of the month. In the case of an electronic payment the interest charged from 19th to 22nd should be cancelled.

However, there is a known problem which HMRC are working to fix. If your business made no full payment submissions (FPS) for a tax month (perhaps because no wages were paid), HMRC may have estimated the PAYE due and added that estimated amount to your PAYE account. The estimated PAYE debt is called a "specified charge". Interest accrues on the specified charge as if it was real PAYE due.

The way to get rid of a specified charge is to submit a nil Employer Payment Summary (EPS) for each of the tax months for which the specified charge has been raised for. This should also remove the interest accrued on the specified charge, but currently it doesn't. HMRC say this interest will not be pursued, and it will be removed from the PAYE account when the software is fixed.

MARGINAL TAX RATES

What rate of tax would you pay on an additional £1 of earnings? If your annual income is between £41,865 and £150,000 you may think the tax rate would be 40%, but the peculiarities of the UK tax system mean you could pay much more.

To start with earned income above the 40% threshold carries a national insurance charge (NICs) of 2% so for every £1 you earn above £41,865 (for 2014/15) you will pay 42% in tax and NICs.

Child benefit is withdrawn from the highest earner in the family at the rate of 1% of the benefit for each £100 of income exceeding £50,000 per year. This translates into an effective marginal tax rate of 60% on income between £50,000 and £60,000.

When your income exceeds £100,000 your personal allowance is withdrawn at the rate of £1 for every £2 of income above £100,000. This is an effective tax rate of 62% including NICs.

From 6 April 2015 married couples will be able to transfer up to 10% of their personal allowance between them. This will allow up to £1,050 of the allowance to be transferred from the person who earns less than £10,500, to their spouse who earns up to the 40% threshold. Thus £1 of additional income that takes you over the 40% threshold will mean you lose the whole of that transferable allowance - an infinite marginal tax rate.

If you are able to control the level of your taxable income, perhaps because you run your own business, it makes sense to adjust your income to avoid those high marginal tax rates. Perhaps you could employ other members of your family, or take them into business with you as partners, to spread the business income.

Payments of pension contributions and Gift Aid donations can stretch your 40% threshold, so the higher earner in the family should making those charitable donations and pay pension contributions. We can help you plan to avoid the highest tax rates and make the best use of all allowances available.

THE VAT CASH ACCOUNTING SCHEME

If your VAT-exclusive turnover is £1.3Sm or less, then you may account for and pay VAT on the basis of cash paid and received.

You can join this scheme at any time.

Once you are in the scheme you can continue to use it until your taxable turnover exceeds £1.6m per annum.

What this means is that you don't have to pay VAT to HMRC on invoices that have not been paid yet and conversely are not allowed to claim VAT back on expenses you have incurred but not yet paid.

ROLL-OVER RELIEF FOR BUSINESS ASSETS

Roll-over relief for business assets

It is always worth bearing in mind that when you sell certain types of business asset, it is possible to postpone the gain by reinvesting in a qualifying asset for roll-over relief purposes.

This is quite a restricted relief these days and care should be taken before relying on the availability of the relief.

The best feature about this relief is that you can claim it on more than one new purchase, and can include assets purchased one year before to three years after the date of sale of the original asset.

SEARCH FOR LANDLORDS

In our March newsletter we told you about HMRC's let property campaign (LPC) which aims to nudge landlords into confessing undeclared rental income. We also warned that HMRC is actively looking for errant landlords. We now know how those landlords will be found.

HMRC is writing to letting agents in the UK, asking them to provide details of the properties they have let in 2012/13, including the amount collected per property and the addresses of the let property and the landlord. The letting agent is given just 60 days to provide the information, or face a penalty of £300, and further penalties of £60 per day for additional delays.

The agent also can't refuse to provide its customers' details on the grounds that such personal information is protected by Data Protection Act 1998, as the tax law overrules the Data Protection Act in these circumstances.

If you have received such a request from HMRC we can help you compile the information in the form demanded - which must be on a pre-defined spreadsheet.

If you think your overseas property will never be found by the Taxman, think again. HMRC is using its "connect" programme to search holiday rental websites for UK residents who are letting overseas properties. If you live in the UK your overseas rents should be declared in the UK, as well as to the local tax authorities. Even if you make no profit from the property, you still need to show all the income and expenses on your tax return.

CROSS-BORDER SERVICES

You may have heard that the price of electronic books and music will rise on 1 January 2015. This because electronic services (including e-books and music), will be subject to VAT in the country where the customer lives from 2015. Currently large suppliers of electronic services tend base themselves in the EU country with the lowest rate of VAT, so they can sell their services with that low rate attached.

This change in the law could affect your business if you sell electronic services to non-business customers in other EU countries. "Electronic services" includes a wide range of things including the provision of software online, writing or supporting websites.

Say you design a website for someone in France (who is not a business). From 2015 that sale will be subject to French VAT rates and you will probably have to register for VAT in France, as the French VAT registration threshold is very low. Similarly you may have to register for VAT in other EU countries where you sell electronic services to non-business customers.

Fortunately there will be a "mini one stop shop" (MOSS) on the HMRC website that will allow you to register for VAT in all the EU countries in which you sell electronic services, and make a single VAT return for all those countries. The MOSS will be open to start the registration process from October 2014.

In the meantime you need to check which of your products will come within the definition of "electronic services" for these new rules. We can help you with that.

If you are selling across EU borders you also need to think about the following:

- How to identify the location of your customers, and store that information.
- How to determine if your customer is a business or not, and what evidence will you need to support this decision.
- If you sell through an agency, check what the contract says about who takes responsibility for VAT registration.

SALARIED MEMBERS OF LLPS

Do you operate your business as an LLP? If you do, you need to be aware of the change in tax treatment of certain LLP members from 6 April 2014. Members who meet all of these conditions will be taxed as employees:

A. works for the LLP as an LLP member and at least 80% of the amounts paid to him for that work are disguised salary;
B. does not have significant influence over the affairs of the whole of the LLP; and
C. is not required to contribute funds to the LLP (a capital contribution), or if he does contribute funds that contribution is less than 25% of his disguised salary for the current tax year.

From the member's perspective the easiest of the conditions to break is C - provide capital to the LLP (aka: partner's loan). Current members of the LLP will have until 6 July 2014 to contribute the required level of capital, but they must make a firm commitment to do this by 6 April 2014. Members who join the LLP on or after 6 April 2014 will have two months in which to raise the required level of capital to break condition C.

If you are caught by these new rules and become a deemed employee of the LLP on 6 April 2014, you will cease being self-employed on 5 April 2014. Depending on the accounts year-end of the LLP, you could be taxed on up to 23 months of profit in 2013/14, subject to any overlap relief. The on-account tax payment you made on 31 January 2014 will almost certainly be incorrect. Talk to us about recalculating your tax payments for 2013/14 and 2014/15.

The LLP business that has members caught by these new rules will have to set up PAYE scheme if it doesn't already have one. We can help you with that.

SALARY AND DIVIDEND STRATEGY 2014/15

As a director and shareholder of your own company you can decide how much salary to pay yourself each month in order to use your tax-free personal allowance in the most tax efficient way. Any further funds you need can be extracted as a dividend if the company is making a profit.

If you are a director of your company and you don't have a contract that sets out terms of employment with the company, you don't have to pay yourself the national minimum wage. So how much should you pay yourself?

For 2014/15 if you were born after 5 April 1948 you have a tax free personal allowance of £833 per month (£10,000 per year). You could take a salary at that level and pay no income tax, assuming you have no other taxable benefits from the company such as a car.

However, you will pay national insurance (NICs) on that salary as the NICs threshold is only £663 per month. From a gross salary of £833 the company must deduct NI of £20.40 and set-aside employer's NI of £23.46 on top. The company will have an employment allowance of £2,000 for the year to set against its employer's NI due on all its employees, so it won't have to pay over employer's NI until that £2000 is used up.

If you take a salary of just above the NI lower earnings threshold of £481 per month, you will get an NI credit towards your state pension, but you don't pay any tax or NI. However, at that annual salary level (£5,772) you will be "wasting" £4,228 of your tax free personal allowance, unless you have other income to cover it.

Talk to us about the best salary level for you, which takes into account all your other sources of income.

VAT ON BOOKS AND LEAFLETS

There is no VAT on printed books, booklets, newspapers, and leaflets. Well there is, - its zero-rate VAT, so the customer pays no VAT, but the supplier can reclaim the VAT it pays on purchases.

Printing businesses have to be very clear about which of their products they treat as zero-rated for VAT and which are standard-rated so 20% VAT applies. The VATman likes to come round and check. If you have classified your printed products
incorrectly, VAT on the earlier sales (up to four years ago) will have to be paid. It's unlikely that you will be able to recover this extra VAT from your customers.

In a recent case printed card document folders, which were designed to hold other leaflets, were judged to be standard rated for VAT, as was a laminated business card. However, personalised souvenir photo-books were determined to be zero-rated. We can help you decide which of your products should be zero or standard rated for VAT.

Beware; if the book, leaflet or newsletter is provided in an electronic form, standard rate VAT will apply. There is a special exemption for audio-books for the blind which are zero-rated.

LET PROPERTY CAMPAIGN

The taxman has launched another 'confess your tax sins' campaign aimed at individuals who have failed to declare rental income they have received from residential properties.

This let property campaign (LPC) can't be used by companies that let property or by landlords who let commercial rather than residential properties.

Like other tax disclosure campaigns the taxman promises that you will pay a lower amount of penalties if you disclose under the LPC, but the tax due and interest on late paid tax will have to be paid in full.

If you want to use the LPC to declare income and gains from your let properties, you need to complete a notification form on the HMRC website, or phone the property campaign helpline on 03000 514 479. We can help you with this.

There is no set deadline for asking to use the LPC, but the Taxman is running a taskforce in parallel to the LPC which is targeting tax evasion by residential landlords. So it's a case of "confess before we catch you."

Once you have notified HMRC that you want to use the LPC, you will be given a reference number and be told to make a full disclosure of the previously un-declared income and gains with three months. You will also need to pay all the tax due within the same three month period. If you can't pay all the tax in                   that time period you must ask HMRC for a "time to pay" arrangement before the deadline arrives. We can help you with this as well.

REAL TIME INFORMATION (RTI) PENALTIES

HMRC has experienced significant problems in reconciling amounts of PAYE due from employers, to the amounts reported under real time information (RTI). As a result some of the automatic RTI penalties which were to apply from 6 April 2014, will now apply from:

- October 2014 for late filing of in-year RTI reports; and

- April 2015 for late payment of in-year PAYE due.

However, interest for late paid PAYE will still apply from 6 April 2014. To keep on top of what PAYE you have paid, what HMRC thinks is due; you should view the business tax dashboard facility on the HMRC website at regular intervals. Unfortunately we cannot access the business tax dashboard on your behalf.

If you are late with filing your last RTI report (known as the final submission for the year) for 2013/14, a £100 penalty will apply. This penalty continues to mount-up at £100 per month, or part month, for each batch of 50 employees on the payroll, until the final submission is received by HMRC.

The full payment summary (FPS) for the last tax month will normally be your final submission for the tax year. This FPS should be submitted on or before the last pay day in the tax year, or by 5 April 2014 where you take advantage of the concession for small businesses.

You should not submit forms P35 or P14 for 2013/14 as the information on those forms is included on the final FPS or EPS submitted for the tax year.

If no employees are paid in the final tax month of the year you should submit an employer payment summary (EPS) as the final submission for the year. This EPS should reach HMRC by 19 April 2014. The EPS can also be used as the final submission if the last FPS for the year was not marked as the final submission for the year.

We can help you with the end of year payroll procedures if you are uncertain about what you need to do.

BUSINESS JOURNEY

A number of self-employed businesses have been waiting for a tax case to be decided which turned on the question of "what is a business journey?" The test case concerned a doctor who was both employed by the NHS and self-employed as a private consultant.

The Upper Tax Tribunal decided that the doctor's self-employed work started when he arrived at his private clinic, so the travel between his home and the clinic was not a business journey. This was in spite of the fact the doctor had an office at his home where he prepared his treatment plans.

So what does this mean for you as self-employed person who travels to various sites to work? The taxman will argue that your work only starts when you reach your customer's site and any business activity performed at your home-office is irrelevant. This would restrict your allowable travel costs to journeys between customers and deny a deduction for travelling from your home to the first customer of the day.

The key is determining where your "place of business" is located, and whether the activity undertaken at the home-office is wholly and exclusively undertaken for the purpose of your business. As ever it will come down to the evidence you can produce.

Can you show that the activities you perform at your home must be performed at that location? For example: contacting suppliers, drawing up quotes, or scrutinising plans. Also can you provide evidence of the time you spend working exclusively on your business at your home, perhaps by records in your business diary?

We can help you record the details the taxman will want to see in order to prove you do start work at home, and not when you reach you first customer of the day.

INHERITANCE TAX

Inheritance tax (IHT) is payable at 40% on the net value of the assets you own when you die, plus (to a certain extent) on the value of the gifts you made in the seven years before you die. The first £325,000 of assets is currently exempt from IHT in all cases.

There are also exemptions from IHT for business assets, such as shares held in unquoted companies. However, you cannot escape IHT by holding all your investments and spare cash inside your personal company. The business of the company must be more than passive holding of investments, and the Taxman normally regards letting property as an investment, but this is a grey area.

Even where your company has an active trade, it doesn't follow that the full value of its shares will qualify for the IHT exemption. The Taxman wants to look inside the company and check that each asset it holds, including cash, is used for the purpose of the trading business.

This can cause difficulties for companies which hold more cash than is needed for everyday working capital. If your company is in this position, to get the IHT exemption you need to form some plans for use of the funds within the business and document those plans.

The IHT exemption applies where the shares of the trading company are held by individuals, or where a holding company holds the shares, and shares in that holding company are held by individuals. However, where the holding vehicle is a general partnership or an LLP, instead of a company, the IHT exemption does not apply.

VAT PENALTIES

If you pay your VAT late to HMRC, even one day late, your card will be marked for a VAT penalty called a 'default surcharge'. The first late payment doesn't attract a monetary penalty, but the second occasion on which you are late within 12 months triggers a penalty of 2% of the VAT due. The third, fourth, and fifth occasions of lateness increase the percentage of the penalty to 5%, 10% then 15% of the VAT due (ouch!).

You may not notice the first two penalties set at 2% and 5% of the VAT due as HMRC will only demand payment from a small business if the total penalty amounts to over £400. However, you will receive a warning letter, and you should appeal against the penalty if you had a reasonable excuse for paying late.

Not having the money available to pay your VAT bill is not a reasonable excuse. If your business has a cash flow problem you need to ask the HMRC business support service for time to pay before the VAT becomes payable, or we can do this on your behalf. The number to ring is: 0300 200 3835, and it's open every day. Don't ring the VAT helpline as they can't deal with VAT debt issues.

If your VAT payment was delayed by circumstances outside your control, for example a computer failure at your bank, that would be a reasonable excuse. However, you do need to present evidence of this reason when asking HMRC to review the penalty. Around 60% of VAT penalties are overturned on review, so it's worth a try!

NON-RESIDENT LANDLORDS

If you leave the UK and let your property here, your letting agent (or the tenant where there is no agent) should deduct basic rate (20%) tax from the rents paid after deduction of certain expenses, under the non-resident landlord scheme (NRL). This ensures that at least some tax is paid on the income in the UK.

You can avoid having 20% tax deducted if you successfully apply for approval under the NRL scheme from HMRC. Approval will be granted where your UK tax affairs are up to date, or you don't expect to be liable to pay UK tax in the year you apply.

The NRL scheme applies if the landlord's usual place of abode is not in the UK. This is not the same as being not resident in the UK for tax purposes. An absence from the UK for as little as six months can be enough to establish your usual place of abode as being outside the UK.

The NRL scheme applies to members of the armed forces and diplomats, just as it does to any other non-resident landlord. It also applies to overseas trusts and companies, which must have income tax (not corporation tax) deducted from their rental income.

If your UK property is let as holiday accommodation, you may need to register for VAT in the UK as holiday lets are subject to standard rate VAT. As an overseas person you have a zero turnover threshold for VAT registration, so you may have to register for VAT immediately on letting holiday accommodation. However, where a UK letting agent manages the property on your behalf, the VAT registration threshold of £79,000 applies for that landlord.

CGT ON HOME DEVELOPMENTS

Your main home is exempt from capital gains tax when you sell it, but only if you bought the property with the intention of living in it on a permanent basis, not as a project to renovate and sell. People who are required to live in job related accommodation, such as prison warders and church ministers, can have a separate tax-exempt home without having to live in it.

Some taxpayers who have taken on renovation projects have found the gain on their property doesn't qualify for the tax exemption, because they can't prove they occupied the property on a permanent basis while it was being renovated before the sale.

For example, Jason Moore bought a property with his girlfriend in December 1999. He claimed to have lived there while he renovated it in the period to late February 2000, when he returned to live with his girlfriend. The property was then let to tenants until it was sold for a profit in June 2004. Jason had no documentary evidence of his time at the property in the three months to February 2000, so his claim for the tax exemption failed.

Paul Gibson went much further in knocking down his whole home and constructing a new one on the same site, which he sold shortly after it was completed. Although Paul intended to live in the new property, he was forced to sell it to repay the loans he had taken out. He claimed to have occupied the finished house for about five months before the sale, but he couldn't prove this with any documents.

If you are planning a "grand design" conversion for your own home talk to us first about the tax implications.

JUNIOR ISA

Use your children's Junior ISA limit.

Junior ISAs are long-term savings accounts for children. A child can have a Junior ISA if he or she is under 18, lives in the UK and does not have a child trust fund account.

The money belongs to the child, although anyone can put money in. There are two types of Junior ISA - cash Junior ISA and a stocks and shares Junior ISA. A child can have one or both.

The maximum amount that can be paid into a Junior ISA is £3,720 for 2013/14. Income and gains are tax-free. Except in very limited circumstances the money cannot be withdrawn until the child is 18.

An ISA can be used to build up a nice savings pot for the child or maybe to fund university or college.

Once a child reaches 16, they can open an adult cash ISA and take advantage of the higher investment limits.

INHERITANCE TAX

Inheritance tax (IHT) is payable at 40% on the net value of the assets you own when you die, plus (to a certain extent) on the value of the gifts you made in the seven years before you die. The first £325,000 of assets is currently exempt from IHT in all cases.

There are also exemptions from IHT for business assets, such as shares held in unquoted companies. However, you cannot escape IHT by holding all your investments and spare cash inside your personal company. The business of the company must be more than passive holding of investments, and the Taxman normally regards letting property as an investment, but this is a grey area.

Even where your company has an active trade, it doesn't follow that the full value of its shares will qualify for the IHT exemption. The Taxman wants to look inside the company and check that each asset it holds, including cash, is used for the purpose of the trading business.

This can cause difficulties for companies which hold more cash than is needed for everyday working capital. If your company is in this position, to get the IHT exemption you need to form some plans for use of the funds within the business and document those plans.

The IHT exemption applies where the shares of the trading company are held by individuals, or where a holding company holds the shares, and shares in that holding company are held by individuals. However, where the holding vehicle is a general partnership or an LLP, instead of a company, the IHT exemption does not apply.

PAY PAYE ON TIME TO AVOID PENALTIES

Penalties are charged if PAVE is paid late on more than one occasion in the tax year.

The penalty charged for late payment is a percentage of the PAYE paid late.

The penalty rate is linked to the number of occasions on which payment was made late in the tax year, ranging from 1% if payment is made late on two, three or four occasions in the year to 4% if payment is made late on 11 or 12 occasions.

A further penalty of 5% is charged if payment is outstanding after six months. If payment remains due after 12 months, a subsequent 5% penalty is levied.

A PAYE month runs to the 5th of each month. Where payment is made electronically, cleared funds must reach HMRC's bank account by the 22nd of the month. Payments of PAYE and NIC must reach HMRC by the 19th of the month if paid by cheque.

CAPITAL ALLOWANCES: ANNUAL INVESTMENT ALLOWANCES

Ensuring that the annual investment allowance (AlA) is claimed on all new items of plant and machinery can save considerable amounts of tax.

The AlA gives a 100% deduction against profits up to the amount of the allowance. The allowance is £250,000 for a temporary period of two years from 1 January 2013, after which it will revert to £25,000 from 1 January 2015.

Where the chargeable accounting period spans 1 January 2013, the allowance is determined pro rata for the period before and after 1 January 2013. The pro rata limits set the maximum AlA expenditure in each period.

VAT PENALTIES

If you pay your VAT late to HMRC, even one day late, your card will be marked for a VAT penalty called a 'default surcharge'. The first late payment doesn't attract a monetary penalty, but the second occasion on which you are late within 12 months triggers a penalty of 2% of the VAT due. The third, fourth, and fifth occasions of lateness increase the percentage of the penalty to 5%, 10% then 15% of the VAT due (ouch!).

You may not notice the first two penalties set at 2% and 5% of the VAT due as HMRC will only demand payment from a small business if the total penalty amounts to over £400. However, you will receive a warning letter, and you should appeal against the penalty if you had a reasonable excuse for paying late.

Not having the money available to pay your VAT bill is not a reasonable excuse. If your business has a cash flow problem you need to ask the HMRC business support service for time to pay before the VAT becomes payable, or we can do this on your behalf. The number to ring is: 0300 200 3835, and it's open every day. Don't ring the VAT helpline as they can't deal with VAT debt issues.

If your VAT payment was delayed by circumstances outside your control, for example a computer failure at your bank, that would be a reasonable excuse. However, you do need to present evidence of this reason when asking HMRC to review the penalty. Around 60% of VAT penalties are overturned on review, so it's worth a try!

NON-RESIDENT LANDLORDS

If you leave the UK and let your property here, your letting agent (or the tenant where there is no agent) should deduct basic rate (20%) tax from the rents paid after deduction of certain expenses, under the non-resident landlord scheme (NRL). This ensures that at least some tax is paid on the income in the UK.

You can avoid having 20% tax deducted if you successfully apply for approval under the NRL scheme from HMRC. Approval will be granted where your UK tax affairs are up to date, or you don't expect to be liable to pay UK tax in the year you apply.

The NRL scheme applies if the landlord's usual place of abode is not in the UK. This is not the same as being not resident in the UK for tax purposes. An absence from the UK for as little as six months can be enough to establish your usual place of abode as being outside the UK.

The NRL scheme applies to members of the armed forces and diplomats, just as it does to any other non-resident landlord. It also applies to overseas trusts and companies, which must have income tax (not corporation tax) deducted from their rental income.

If your UK property is let as holiday accommodation, you may need to register for VAT in the UK as holiday lets are subject to standard rate VAT. As an overseas person you have a zero turnover threshold for VAT registration, so you may have to register for VAT immediately on letting holiday accommodation. However, where a UK letting agent manages the property on your behalf, the VAT registration threshold of £79,000 applies for that landlord.

CGT ON HOME DEVELOPMENTS

Your main home is exempt from capital gains tax when you sell it, but only if you bought the property with the intention of living in it on a permanent basis, not as a project to renovate and sell. People who are required to live in job related accommodation, such as prison warders and church ministers, can have a separate tax-exempt home without having to live in it.

Some taxpayers who have taken on renovation projects have found the gain on their property doesn't qualify for the tax exemption, because they can't prove they occupied the property on a permanent basis while it was being renovated before the sale.

For example, Jason Moore bought a property with his girlfriend in December 1999. He claimed to have lived there while he renovated it in the period to late February 2000, when he returned to live with his girlfriend. The property was then let to tenants until it was sold for a profit in June 2004. Jason had no documentary evidence of his time at the property in the three months to February 2000, so his claim for the tax exemption failed.

Paul Gibson went much further in knocking down his whole home and constructing a new one on the same site, which he sold shortly after it was completed. Although Paul intended to live in the new property, he was forced to sell it to repay the loans he had taken out. He claimed to have occupied the finished house for about five months before the sale, but he couldn't prove this with any documents.

If you are planning a "grand design" conversion for your own home talk to us first about the tax implications.

EMPLOYMENT AGENCIES

From 6 April 2014 if a worker supplied by an employment agency personally carries out the work, or is involved in the provision of the services, the payment from the engager to the worker will have to be taxed under PAYE with class 1 NICs deducted. Any apparent  right of substitution in the worker's contract will not prevent PAYE and NICs being due at the employed rates.

If you have any doubts about the contracts you are using either as a worker or an employer, our tax experts can help check the tax implications for you.

DISGUISED EMPLOYMENT

The Government is cracking down on situations in which workers are treated as self-employed for tax purposes, and hence pay low amounts of NICs, but from the outside they appear to act as employees. The following changes in the tax law are proposed to block the use of 'self-employed' workers working through LLPs or who are hired-out through employment agencies.

LLPs

All individual members of LLPs are currently taxed as self-employed persons, even if they receive a regular 'salary'. This is the default position of the law and nothing is being 'fiddled' to put workers in this position. However, HMRC believe this rule is being abused, and the workers involved may not realise that they are technically self-employed.

From 6 April 2014 salaried members of LLPs will be treated as employees of the LLP if  all of the following conditions are met:

- the member works for LLP and at least 80% of the pay he receives from
the LLP is disguised salary;
- where the member has contributed any capital to the LLP, that capital
amounts to less than 25% of the member's 'disguised salary' for the
year; and
- the member is not involved significantly in the management of the LLP.

The Government has not yet defined term 'disguised salary'. If you have salaried members in your LLP we need to talk about these tax changes.

CAPITAL ALLOWANCES ON FIXTURES

There are a number of capital allowance claims firms targeting businesses which have recently bought or sold commercial property. These 'experts' suggest the business needs to pay for a special survey to claim all the capital allowances they are entitled to, and this must be done quickly in order to claim all the allowances due.

In most cases a special survey is not needed. However, it is true that for commercial building sales made since 1 April 2012 the vendor and purchaser must take formal steps (usually an election) to agree the value of fixtures including in that building. This value must be agreed within two years of the transfer of ownership, if agreement cannot be reached the two parties can go to the tax tribunal where the judge will make a decision.

The agreed value for fixtures is brought into the capital allowance pool as the disposal value for the vendor and is added to the capital allowance pool for the purchaser.

There is another change on its way for transfers of commercial buildings from April 2014. The value of fixtures and fittings must be claimed as part of a capital allowances pool by the vendor, in an accounting period prior to the sale of the building. If the vendor does not make this claim, the purchaser is barred from claiming any capital allowances for the fixtures it acquires.

We can help you make the necessary elections and claims for capital allowances.

TIMING YOUR DISPOSALS FOR CGT

A timing advantage of one year on the payment of tax can be achieved simply by delaying sales beyond 5 April in the tax year, so that you have use of the funds for another year and can earn interest on this money for a year longer before having to pay the tax to HMRC.

However, this needs to be balanced against a possible loss of the annual exemption if it has not been fully utilised for the earlier year.