Three things to watch out for in your VAT return
The risks of
incomplete VAT filings have been highlighted by a recent victory for
HMRC over an appeal.
The appeal – made
by Sacutia Healthcare Ltd (TC06844)
–
concerned the father of the company
director, who claimed a defence based on carelessness.
Unsurprisingly, HMRC took the view that this amounted to ‘deliberate
but unconcealed’ behaviour, which is why it applied substantial
penalties of £24,072 on a total assessment of £57,839.
The nature of the
filing errors should provide warning for those with responsibility
for their company’s VAT filing.
Export evidence
HMRC found that the
VAT return was missing paperwork to support declared exports of goods
and documents made to a company that the father was involved with.
HMRC also found no record of Sacutia as an exporter. It is essential
that you keep complete and accurate records of exports for VAT.
Deposits on
customer payments
The output tax was
not correctly reported on customer deposits. A tax point is created
whenever a company receives a deposit, as well as the balancing
payment, so you must ensure your VAT records reflect every stage of a
customer transaction.
Input tax
evidence
As well as the
issues with export invoices, HMRC found that Sacutia had claimed
input tax on supplies of goods using invalid invoices. They also
found uncertainty around pro-forma and VAT invoices, and mistakes in
the accounting records. As with export records, you must keep your
accounting records complete and accurate.
The case
demonstrates the high penalties HMRC will issue where mistakes are
made with VAT filing. With Making Tax Digital for VAT just around the
corner, we can help you ensure your company filings are error-free.
Protecting the state pension for stay-at-home parents
An issue concerning how the high
income child benefit charge (HICBC) can potentially affect
stay-at-home parents has emerged.
The HICBC claws back child benefit
payments where either parent has income over £50,000 a year and
removes the benefit entirely if either parent has income over
£60,000. For couples where one person earns over £60,000 whilst the
other stays at home to look after children, it can appear that it is
not worth claiming a benefit that is completely withdrawn.
However, child benefit payments also
provide national insurance credits for adults caring for children
under the age of 12. These credits can help build up entitlement to
the state pension, with 35 years of contributions required to receive
the full benefit (£168.60 a week from April 2019).
These NI credits are given to the
parent who claims the Child Benefit by default. However, the credits
are still provided even if the parent involved asks for payments to
stop to avoid the HICBC.
The state pension for stay-at-home
parents
The problem arises if one parent does
not work, but the NI credits are paid to their partner because of
that default allocation. This means the stay-at-home parent could
lose state pension entitlement while their partner receives unneeded
NI credits, while also paying full NI contributions through their
payroll.
HMRC only keeps data on the parent
making the claim, so when the House of Commons Treasury Select
Committee asked how many families might be affected by these rules,
no accurate answer was available. However, HMRC estimated 3% of
households (about 230,000) are affected, based on DWP annual survey
data.
If the wrong person is receiving NI
credits in your household you can ask HMRC for the credits to be
transferred, but such a switch can only be backdated for one tax
year. So, along with all the other deadlines on 5 April, that Friday
is the last opportunity to transfer NI credits for 2017/18.
Younger generations picking up the tax bill
The tax burden in
the UK is shifting on to the younger generations, according to new
research published by the accountancy firm, Moore Stephens.
Baby boomers paid
£63 billion in income tax in the 2015/16 tax year, compared to a
bill of £41.4 billion for millennials. However, baby boomers only
paid 38.2% of the total income tax paid in 2015/16, compared to 44.6%
of the total in 2011/12. Millennials, however, paid 25.1% of the
total in 2015/16, compared to 19.2% in 2011/12.
The research shows
that ‘millennials’ (here anyone born between 1977 and 1996) have
been taking the brunt of changes to stamp duty land tax (SDLT),
changes to national insurance contributions (NICs) for high earners
and the pension rules, whilst baby boomers (anyone born between 1946
and 1965) move property less and are increasingly benefiting from
changes to pensions rules.
Millennials are more
likely to be buying property and earning higher salaries, whilst baby
boomers are more likely to be using pension freedoms to draw income
instead of buying annuities – with low interest rates making these
products less attractive – which helps reduce their income tax
bill.
Insolvencies also
rising
In October, Ralph
Moore also reported a stark increase in new insolvencies for the
under-25s – 5,650 in 2017, a 20%
increase from 2016.The figure reduced for those over 65 – 4,580 in
2017, down 10% from 2016.
The
firm suggested that millennials are being squeezed by property price
inflation, and being forced to commit to larger mortgages, which
leaves them with fewer savings to deal with financial stress.
Conversely, the baby boomers typically have lower housing costs, and
can draw on the equity value of their property if needed.
The reports both
suggest the trends will continue, putting greater financial pressure
on the younger generations.
The value of a flexible employee benefits package
Employees are
looking for more tailored benefits packages that will reward their
loyalty to an organisation, as attitudes to careers and workplace
benefits evolve.
The nature of work
has changed considerably over the last few decades and it is now
normal for employees to change job – even career – regularly as
part of their personal and professional development. The increasingly
sophisticated technologies at use have also encouraged decentralised
working and made our lifestyles more flexible.
However, not all
employee benefits packages have kept pace with this change, and new
research published by Get Living suggests nearly three-quarters of
employees want more tailored benefits.
There has been a
shift away from more traditional desirable benefits – such as
health/dental insurance or a company car – with 17% of respondents
wanting access to mental health care and 8% wanting an office pet.
Changing
priorities
One of the more
interesting findings was how employee priorities depend on their age,
where younger employees wanted different benefits from older ones.
For example, 33% of
respondents aged 18-24 saying the best bonus they could have would be
unlimited holiday, suggest a desire for a better work-life balance
and a different working environment. However, just 17% of the over-55
thought unlimited holiday would be best.
Meanwhile, half of
respondents aged 45-54 said flexible working would be the best
benefit, whilst those over 55 wanted enhanced pension contributions.
With a recent report from Carers UK showing 1 in 7 workers juggling
work with caring and up to 600 workers a day giving up work to care
for sick, elderly or disabled relatives, there is a significant
potential for losing valuable members of staff.
The suggestion is
that the perfect employer would offer a suite of benefits, which
would allow employees to choose the thing they value most. With the
preference for more holiday, greater flexibility or enhanced pension
contributions depending on age, a one-size-fits-all benefits package
may not be the most attractive.
If you would like to
discuss how you can offer more options to your employees, please get
in touch.
Government to reassess impact of retrospective
loan charges
The government
will reassess its controversial proposed loans charge rules, which
are intended to address disguised remuneration, typically via non-UK
trusts or umbrella companies.
The loan charge is
due to take effect from April 2019 and is intended to reduce tax
avoidance by stopping people using loan schemes to avoid paying the
appropriate amount of income tax.
The new charge has
been challenged in part because it would give HMRC the power to
pursue anyone who has used a loan scheme at any point over the last
20 years. In particular, criticisms have noted that the rules could
penalise low- and middle-income individuals who used such schemes,
rather than the those who promoted and recommended them.
However, the
Treasury has now confirmed that it will undertake a review to assess
the impact of the loan charge, particularly for those on low- and
middle-incomes.
Loan charge
settlements
Many people will
have used such loans for relatively small amounts of income and may
well have acted in good faith. It is also the case that individuals
may not be able to pay significant charges back to HMRC so long after
the income was received.
While HMRC will
charge interest on any amounts relating to open tax years –
generally the last four tax years – they have also said that
penalties will be the exception instead of the norm.
Complex rules will
apply to anyone caught by the charge, as the amount payable could
depend on the untaxed loan income, their income tax rate and any
leftover personal allowance at the time, fees from the trust or
umbrella company and other factors.
If
you are concerned that your past income may be caught in the loan
charge, please get in touch to discuss your situation.