Archive for the 'Tax and Financial News' Category

VAT Invoices – The Essentials

All VAT registered businesses have to issue VAT invoices to go with the sale of their goods and services. Sounds fairly straightforward but if you look into the rules regarding VAT invoices then you will see that they are quite significant and care has to be taken to ensure that they are fully complied with.

1. Introduction

A VAT invoice shows certain VAT details of a sale or other supply of goods and services. It can be either in paper or electronic form.

A VAT-registered customer must have a valid VAT invoice from the supplier in order to claim back the VAT they have paid on the purchase for their business.

The following are not VAT invoices:

  • pro-forma invoices;
  • invoices that state ‘this is not a tax invoice';
  • statements;
  • delivery notes;
  • orders; and
  • letters, emails or other correspondence.

A business cannot reclaim the VAT paid on a purchase by using these documents as

proof of payment.

2. What a VAT invoice must show

A VAT invoice must show:

  • an invoice number which is unique and sequential;
  • the seller’s name or trading name, and address;
  • the seller’s VAT registration number;
  • the invoice date;
  • the time of supply (also known as tax point) if this is different from the invoice
  • date – see below;
  • the customer’s name or trading name, and address;
  • a description sufficient to identify the goods or services supplied to the
  • customer;
  • the rate of any cash discount; and
  • the total amount of VAT charged expressed in sterling.

For each different type of item listed on the invoice:

  • the unit price or rate, excluding VAT;
  • the quantity of goods or the extent of the services;
  • the rate of VAT that applies to what’s being sold; and
  • the total amount payable, excluding VAT.

If a VAT invoice is issued that includes zero-rated or exempt goods or services, it

must:

  • show clearly that there is no VAT payable on those goods or services; and

show the total of those values separately.

So, the humble VAT invoice is actually more complicated than you might think and it is important to ensure that HMRC rules and regulations are complied with. If in doubt about the content of your VAT invoices then you should contact us, Balance Accountants, Huddersfield, for guidance. Better to get it right than end up with HMRC on your back.

ANNUAL INVESTMENT ALLOWANCE INCREASED TO £500,000

The Annual Investment Allowance (AIA) provides a 100% tax write off for the cost of most plant and machinery acquired by businesses, a notable exception being motor cars. This allowance was  temporarily increased to £250,000 on 1 January 2013 and was due to reduce back down to just £25,000 on 1 January 2015.

The Chancellor has announced that the allowance will be increased to £500,000 per annum for expenditure incurred between 1 April 2014 and 31 December 2015 (the change takes effect from 6 April 2014 for unincorporated businesses).  Remember that the AIA is available for assets bought on hire purchase as well as those bought for cash. It can also be claimed in respect of fixtures and fittings within buildings. Contact us to help you maximise tax relief for capital expenditure, as the timing of expenditure can be critical.

Employment Allowance – £2,000 deduction from Employers Class 1 NIC’s

As you may now be aware, the Government has announced that from 6 April 2014 there will be an allowance for businesses who operate PAYE schemes that will reduce their employers Class 1 National Insurance Contributions liability by £2,000.

The allowance will be used against the first £2,000 of employers National Insurance that would otherwise be due to be paid to HMRC.

For a business which has a number of PAYE schemes, the allowance can only be used against one of these schemes.

As is usually the case with these sorts of allowances, there are various rules in place; and in this instance the main rules that we think that you need to know about are the rules that are in place relating to the claiming of the allowance where there are connected businesses. Many of these rules are based upon the connected persons rules which are used for corporation tax purposes.

Below is an explanation of some of the various rules and scenarios regarding the claiming of the £2,000 allowance:

Simple rules/scenarios

Where a company is part of a group of companies, only one company can claim the allowance. It is a personal choice which company should have the allowance, although we would suggest that you claim the allowance in the company which has the highest National Insurance liability.

If two or more companies are under the control of the same person(s), then they are only entitled to one allowance between the companies; and once again you have to specify which of the companies will claim the allowance (you can’t share it out between the companies, nor can unused allowances be transferred to other companies). Once again we would suggest that you claim the allowance in the company which has the highest National Insurance liability.

More complex rules/scenarios

The outcomes in these situations depend on the result of a test to determine what HMRC call ‘substantial commercial interdependence’. The connected persons/connected businesses rules only apply where the companies in question are deemed to be substantially commercially interdependent.

In simple terms, companies are connected where there is a reliance/link between the companies.

For companies to be substantially commercially interdependent (and therefore only entitled to one employment allowance between these companies), there needs to be a link between the companies which is either financial, economic, or organisational (you only need one of these links to be treated as being connected):

  • Financial interdependence – this is where one company gives financial support to another, or companies have a financial interest in the affairs of the same business.
  • Economic interdependence – this is achieved where the companies either seek to realise the same economic benefit, have activities which benefits one of the other companies, or where the companies have common customers.
  • Organisational interdependence – this occurs where the companies have common management/premises/equipment/employees.

Remember, if one of the above links is present then only one employment allowance can be claimed in one of the companies; the rest of the companies will not have an allowance for the year.

Differences for unincorporated businesses

The rules for unincorporated businesses (sole trades and partnerships) are the same as for companies, with one noteworthy exception.

If an unincorporated business which claims the employment allowance does not have a liability of £2,000 for employers National Insurance in the year, any remaining allowance not used can be transferred and used against the PAYE scheme of another unincorporated business controlled by the same person(s). This transfer of the remaining allowance will take place after the end of the tax year.

For example, if you claimed the employment allowance against a sole trade business which only had a liability for employers National Insurance throughout the year of £1,600, the remaining £400 not utilised could be transferred to reduce the employers National Insurance due in another sole trade business.

If you have any questions regarding the entitlement of your business/businesses to the allowance then please contact your client manager or our payroll team who will be happy to help you.

This article was compiled by Phil Auckland.

Recovery of Unpaid Class 2 Contributions

HMRC have published information about the collection of unpaid Class 2 National Insurance contributions (NICs). HMRC have been sending payment requests since April 2013 to those who owe Class 2 NICs. The payment requests said that if not paid, HMRC may collect the debt through their PAYE code from April 2014 or pass it to a private debt collection agency for recovery on HMRC’s behalf.

Taxpayers are advised to act on the payment requests either by making the requisite payment or, if their payment request is wrong, they should contact HMRC to explain why (e.g. if they have stopped being self-employed), failing which they are likely to receive an Annual Coding Notice (P2) between January and March 2014. This will show the Class 2 NICs debt to be collected from April 2014 through their PAYE code. To prevent the outstanding debt to be included in their tax code, the full amount will have to be paid.

More details are available from HMRC at http://tinyurl.com/pnshj4g

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Free Agent – Is This The Way Forward For Accountancy?

For someone who finds bookkeeping a drag, and fails to create time to keep their records properly.  Or for someone who is interested in a change of their bookkeeping system to help make their life easier, then Free Agent could be for you.

Free Agent is a relatively new bookkeeping system that is all web based.  That means, no installations, no downloads and no space taken up on your PC or laptop.  As long as you have an internet connection you can access your information from anywhere, being from your PC or through an APP on your phone or tablet device.  This gives bookkeeping a more flexible and ‘on the go’ feel so that the previous ‘drag’ of having to go through and write or type each individual transaction at the end of the day/week/month/quarter to keep your books in order is reduced and hopefully gone completely!

When you initially log into your unique Free Agent account you are taken to the ‘dashboard’, this is effectively an overview of how your company is performing over the year.  There is a cash flow graph at the top showing money coming to and from the company on a month by month basis and the bank is shown in a line graph format so that you can visually see what has been happening with your company’s finances.  Separate lists of amounts due from or to you are also shown, and the dashboard has the flexibility for you to choose what you would like to be shown.  So if you would like to keep an eye on motor expenditure for example, this can be shown on a box on the dashboard.

One of the best features of this system is the fact that it is able to link up with your company bank accounts.  Once you have inputted your bank details, depending on the settings you choose Free Agent will download your bank transactions at the end of every day, saving you a lot of time, and also making sure your bank balances immediately as it is taken directly from your bank statements.  Your job is then to allocate those transactions to the correct expense account.  Free Agent also has the ability to pick up regular transactions and allocate them for you, saving even more time in future months.

Instead of having to write or type individual invoices and trying to remember what number invoice you are at Free Agent produces invoices for you.  There are also a number of formats to choose from if the standard invoice doesn’t suit you.  These invoices can then be e-mailed to customers through Free Agent so work does not need to be duplicated in order to send them out.  These e-mailed invoices also have the ability to be paid online, straight to your bank account through a link at the bottom of the invoice, giving customers an extra option to pay you quickly and efficiently.

If you are VAT registered, VAT returns can be filed online through Free Agent making VAT filing a lot easier.

Payroll can also be run through Free Agent, with the ability to print pay slips as required.  PAYE can also be submitted online through Free Agent and meets all the Real Time Information (RTI) requirements

Trying to explain all the features that Free Agent has to offer is extremely difficult as there are so many! So this is just a brief overview of the package.  So if this small piece of information sparks an interest into what we are currently offering then please contact us here at Balance and we can speak to see how Free Agent or something similar could help you and your business today.

This article was compiled by Jacob Lee, trainee accountant at Balance Accountants.

HMR&C clarify “week 53” payments

There are 52 weeks in a year—OR ARE THERE?????? Employers who pay their employees weekly, fortnightly or 4 weekly, instead of monthly, may end up making an extra payment to their employees at the end of the tax year (5th April). HM Revenue & Customs call these additional payments week 53 payments and there are special PAYE rules relating to them.

The trouble is that HMR&C considers week 53 payment as non-cumulative payments to be treated in isolation and PAYE tax is therefore deducted without taking any account of previous pay and tax details. This may well result in an underpayment of tax as the non-cumulative tax code (week 1) gives the employee extra personal allowances.

It is also important to ensure that the week 1 tax code is only applied to the week 53 payment and not used to adjust the final tax code for the tax year as a whole.

If you have any queries about week 53 payments then please do not hesitate to contact the payroll department here at Balance.

This article was compiled by Ashley Barrowclough, partner at Balance Accountants.

Taxing International Athletes

A few weeks ago we saw some amazing tennis being played at Wimbledon, later on in the year we will see the rugby league world cup being held in England for the first time since the year 2000. These tournaments bring the best athletes in the world to our country to entertain the many fans that watch them. But are ad hoc tax exemptions for sports athletes coming to the U.K. to compete giving out the wrong message and turning them away?

Usain Bolt’s agent Ricky Simms labelled U.K. tax rules as “completely crazy”! This is because U.K. tax bills hugely outweigh athletes British earnings. He goes on to saying “It’s like me asking you to come to work today and pay me three times what you’re getting,” said Simms.

Usain Bolt keeping quiet on his next trip to Britain

Like most countries, the UK charges tax on appearance fees and prize money when non-resident athletes compete in Britain but, unlike many other countries, it also seeks to tax the athlete’s global endorsement income.

Based on the number of days spent competing in the UK, Her Majesty’s Revenue and Customs charges tax on a percentage of the athlete’s income earned elsewhere.

Bolt is not the only athlete complaining about the tax laws, Rafael Nadal feels it is becoming harder and harder to play in the U.K. as he actually loses money while playing here.

Are these rules going to drive top athletes away to competing in our country?

This article was compiled by Austen Barrowclough, marketing assistant at Balance Accountants.

Problems With HMRC Basic PAYE Tools

THE FREE SOFTWARE provided to small businesses by HM Revenue & Customs is failing to file real-time PAYE submissions.

The Basic PAYE Tools (BPT) software package is available to employers with nine or fewer employees, and is designed to work out tax and national insurance contributions for each payroll cycle, and report it to the taxman in real time.

However, a software issue has seen an error message appear when employers attempt to make PAYE submissions, while taxpayers calling the RTI helpline were met with a recorded message acknowledging the fault and assuring them the issue was being investigated.

An element of Windows, known as a registry key, has been removed in a Windows update. The key is needed to enable full functionality of the software. Without its presence, the software is unable to successfully submit the information.

HMRC has published guidance advising users that although information about restoring the key is available from various sources online, HMRC itself cannot provide instruction on how to, as it is unsure why the key was removed.

The taxman will, however, release a software update at the end of May negating the need for the key. In the meantime, taxpayers are advised to continue running the payroll system as normal and submit the information once the update has been installed.

A spokesman for HMRC said: “The roll out of RTI is progressing well. Since 6 April over one million PAYE schemes have successfully started to report PAYE in real time. This includes over 140,000 BPT users successfully submitting returns.

This article has been provided by Ashley Barrowclough, Partner at Balance Accountants.

Disclosure Agreements With Isle Of Man, Jersey And Guernsey

These new agreements involve a planned automatic exchange of information from 2015 on all accounts held in these offshore areas. So for any UK residents with savings accounts in these offshore areas, be aware that HMRC will know all about them from 2015.The new arrangements include a disclosure facility to allow UK resident investors with accounts to come forward and settle their past UK tax affairs before information on their accounts is automatically shared between the governments. Similar arrangements are expected to be announced for Luxembourg.

The disclosure facility operates from 6 April 2013 until September 2016. It will not be open to individuals already under investigation but will cover liabilities dating back to April 1999 at the earliest.

These types of arrangements are proving a real money spinner for HMRC. They were originally expected to bring in over £5billion over the next six years but they have upped that to £9billion based on what they have collected so far!

This article was compiled by Ashley Barrowclough, Partner at Balance Accountants.




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