| Enews - April 2007 | ||||||||||
Introduction As normal in the world of tax and business, April has been a busy month. In this month we report on HMRC's 'amnesty' for penalties on the non declaration of offshore bank accounts. We also include our usual round up of news. We also report that workplaces in England must be smoke free from 1 July 2007 and provide links to guidance which will enable you to prepare for the change in the law. Please browse through this month's articles using the links below and contact us if any issues or questions arise.
| ||||||||||
| HMRC ask if you have anything to declare It is a common misconception that interest from offshore bank accounts is not subject to UK tax. HMRC have now received information from many banks about offshore accounts and to encourage taxpayers to declare their offshore income HMRC have announced what the newspapers are calling a ‘Tax Amnesty’. The term amnesty is misleading as it only applies to the penalty that will be charged on undeclared tax relating to the offshore accounts, which HMRC have promised to cap at 10% if a voluntary disclosure is made before 22 June 2007. HMRC could in theory impose a 100% penalty. The tax and penalties due will need to be paid by 26 November 2007. HMRC have advised that the penalty cap will also apply to tax relating to other undeclared UK income if a declaration and full payment of the tax due is made by the same dates. The timescale for making use of this disclosure facility is short, so please do contact us as soon as possible if you have any concerns.
Smoke Free Zone From 1 July 2007, as a result of provisions in the Health Act 2006, enclosed public places and workplaces have to be smoke free. This date applies to England only. Wales and Scotland are already smoke free. Wales went smoke free from 2 April this year, whilst Scotland has already past its first anniversary of the introduction of the law which became effective from 26 March 2006. The date for the introduction of the law in Northern Ireland is 30 April 2007. The introduction of the ban in Scotland has been heralded a success by Health Minister Andy Kerr who said: “Although it is too early to know exactly what the health and economic impact of the ban has been, we are already beginning to reap the health benefits. The ban is working extremely well. More people have come forward to smoking cessation services. We are continuing to be creative in how we support smokers. We are not out to get them, we are out to help them.” As noted by the Health Minister, the economic impact on businesses will take some time to be established. The Act obliges employers to prohibit and take steps to prevent smoking on their premises. Clearly visible ‘No Smoking’ signs must be displayed at the entrance to premises that are ‘enclosed’ or ‘substantially enclosed’ (these terms are defined in the regulations). Smoking rooms will no longer be allowed as complete smoking bans must be imposed. However, you can decide to provide a smoking area outside but still on your premises, providing such an area is not ‘substantially enclosed’. All company vehicles used by more than one person are covered by the legislation and must display an appropriate ‘No Smoking’ sign. The Smokefree England website contains lots of useful information to enable businesses to get ready for the change. For those parts of the UK which are already smoke free it enables businesses to ensure that they are complying with the law.
Minimum holiday entitlement to rise A few months ago we reported on the proposal by the Department for Trade and Industry (DTI) to increase the minimum statutory holiday entitlement from the current 20 days (including bank holidays) to 28 days (bank holidays inclusive). The DTI have been consulting with interested parties and should shortly publish the findings of their consultation. The proposal is to increase the statutory annual leave entitlement in two stages:
To give an example an employee currently entitled to the statutory minimum entitlement of 20 days (including bank holidays) with a holiday year to December 2007 would be entitled to one additional day for the three months covered by the increased minimum entitlement from 1 October 2007 to 31 December 2007. (four day annual increase from 1 October 2007 pro rated for three months).
New VAT rules for mobile phones and computer chips Following negotiations with other European Community member states the UK Government has decided to implement the reverse charge accounting mechanism on mobile phones and computer chips with effect from 1 June 2007. HMRC are restricting the new rules to mobile phones and integrated circuit devices. Blackberry’s fall within the definition of a mobile phone and will come within the scope of the reverse charge rules. The implementation of the reverse charge accounting is designed to counteract 'Missing Trader' fraud, which we have previously reported on in enews. ‘Missing Trader’ fraud is a sophisticated and organised criminal attack on the VAT system. The fraud arises through contrived transaction chains involving supplies of high value goods with the tax loss occurring when the VAT charged by the supplier is not paid to HMRC but can be reclaimed by the recipient. The legislation for the reverse charge procedure was introduced in Finance Act 2006 whereby the VAT registered customer, rather than the seller, will have to account for and pay the VAT on the supply of these goods. Although the legislation was introduced in Finance Act 2006 it has taken some time to implement due to difficulties in the negotiations with other member states on the change in law in other countries to introduce the charge. If you would like any advice on the implementation of the new rules please get in touch.
Penalty notices for employers HMRC have recently issued a considerable number of penalty notices to employers for not submitting their 2005/06 employer annual and contractor returns, which were due for submission by 19 May 2006. HMRC have stated that the reason for the long delay in issuing the penalty notices was that: “We wanted to ensure that we had taken account of any returns we are still working. We took the decision not to issue 2005/06 reminders for the same reason. That work required extensive analysis of our various systems. The delay and this analysis has enabled us to avoid issuing a penalty notice for any unprocessed returns.” A large number of employers are maintaining that a penalty is not due because returns have already been submitted. It appears that some of the penalty notices have been issued because employers e-filed test returns thinking they had made a final submission (test returns can be submitted in advance of a final return and help employers to identify errors in the returns). HMRC have confirmed that penalties will not apply to those who filed test returns thinking that they had made a valid final submission. However it is important to appeal against any penalty notices which have issued where the employer believes that the notice was issued in error. HMRC have issued penalty notices for £100 for every 50 employees and/or subcontractors for each month they believe that the return has been outstanding. The penalty is based on the employers/contractors profile information received for previous years. Penalties are not final because they cannot be settled until a final return is filed. Penalties will not apply if a return has already been validly submitted and will also not apply if there were no employees. As a reminder the deadline for submission of this year’s employer and contractor end of year returns is 19 May 2007. If you would like any help with your employer and contractor end of year returns or have received a penalty notice, which you believe has been issued incorrectly, please get in touch.
Project management Research by Vanson Bourne for Microsoft has concluded that a significant number of businesses apparently have no formal approach to project management, with a fifth of small business employees managing projects ‘in their head’. The survey, which asked how businesses currently track their projects, revealed that only 57% of small businesses use a spreadsheet tool and that a quarter of employees rely on a simple piece of paper to manage projects like marketing campaigns, events and product development. Projects quite often involve employees carrying out various tasks and proper controls are essential to ensure information can be shared, and that no aspects are overlooked such as budgeted costs and time scale. Tim Kimber, Office Live product manager, Microsoft UK said: “The results highlight how formal approaches to project management can fall by the wayside as small businesses often have a million other things to worry about. However, there are benefits to be had and it’s not just things like building construction or developing a product that require careful project management; even a simple direct mail marketing campaign will have milestones, dependencies and multiple actions to keep track of.” If you would like any advice on this issue please get in touch.
All change for capital allowances The system of tax reliefs on expenditure on equipment in your business is a complex one. Broadly when you buy a piece of equipment to use in your business you normally cannot set the full cost against that year’s profits, unless the value of the item is quite small, or a special tax relief applies. The cost of more expensive items is written off against profits over a number of years, using the capital allowances system. From April 2008 it is proposed that up to £50,000 spent on equipment in one year by any business will be set-off in full against the profits for that year. This allowance should cover most items of plant and machinery purchased by smaller businesses, although cars will not be included in this total. Where the expenditure on equipment exceeds £50,000 in one year the excess will be written off at a rate of 20% per year. The principle of giving relief over a number of years has also applied for expenditure on certain industrial or agricultural buildings. The capital allowances that are currently available for the cost of buildings will be phased out by 2011, and the changes apply for any alteration in ownership of those buildings from now on. Where equipment is fixed in a building used for your business, you can currently claim 25% of the remaining cost each year against profits. This will be reduced to 10% per year from 2008. Up until April 2008 the old system of capital allowances largely remains in place, except small businesses can claim a 50% first year allowance for the cost of new equipment purchased before 1 April 2008 by companies, or before 6 April 2008 by unincorporated businesses. The tax savings are potentially high. Please get in touch if you are planning additional expenditure on equipment or premises.
Charity Commision guidance on campaigning The Charity Commission has published some supplementary guidance on campaigning and political activities by charities. The guidance takes the form of questions and answers and has been issued to supplement the 2004 guidance. This sought to set out the framework of law and regulation for charities that wished to engage in campaigning and political activities. The Charity Commission’s website states: “In response to feedback received on the guidance, and as a supplement to it, we have set out below some answers to questions charities have asked us about their campaigning and political activities. We are aware from our work with charities that trustees sometimes exercise a considerable degree of self-censorship in undertaking campaigns, and may not be aware of the extent to which they can campaign and engage in political activities to achieve their objectives. We want charities to be in no doubt about this point. Campaigning, advocacy and political activities are all legitimate and valuable activities for charities to undertake.” The questions and answers and guidance can be seen using the link below.
| ||||||||||