VAT on goods for staff, Challenging penalties, Budget forecast

Last week we considered the VAT implications of providing free goods to employees and the circumstances in which HMRC's behaviour creates a reasonable excuse for taxpayers. We also polished our crystal ball to look ahead to the next Budget on 8 July 2015. Certain clients should be advised to take action before that date.

Challenging penalties

The HMRC machine spits out automatic penalties when tax returns or tax payments are delivered late. Unless the taxpayer can prove he has a reasonable excuse, HMRC won't cancel the penalties. But what if HMRC itself is the cause of the reasonable excuse?  

 

HMRC are reluctant to admit that they can be in the wrong or that their “helpline” has misled the taxpayer. The Tax Tribunals tend to take a more sympathetic view of the taxpayer's position, as illustrated in two recent cases: Joanna Porter and John Crangle, which were both heard by the same judge: Peter Sheppard.

 

When trying to file her tax return Ms Porter received the message “access denied” from   the HMRC's online filing system. The online helpdesk told her the problem was an IT error and was not her fault. They eventually sent her with a new ID number which she was able to use to submit her return. However, HMRC still issued a late filing penalty, and refused to accept her appeal against the penalty. The Tribunal agreed Ms Porter did her best to file her tax return and cancelled the late filing penalty.     

 

Mr Crangle ticked the box on his 2012/13 tax return requesting that tax due of £1442 be collected through his PAYE code for 2014/15. This return was submitted online on 20 December 2013, before the cut-off point for altering the 2014/15 code (30 December 2013) but HMRC ignored that request.

 

Mr Crangle believed the tax due would be coded out until he received a letter from HMRC dated 1 April 2014, which was after the tax due date of 31 January 2014. That letter was apparently promoted by the taxpayer ringing HMRC on 11 March 2014, but HMRC still issued a late payment penalty on 24 April and charged interest. The taxpayer had to appoint a tax agent to sort the mess out.

 

Where your client has suffered shoddy treatment by HMRC and as a result has received penalties, it's worth challenging those penalties at internal review and through to Tribunal. Our personal tax experts can advise you how to do this.

This is an extract from our tax tips newsletter dated 21 May 2015. The newsletter itself contained links to related source material for this story and the other two topical, timely and commercial tax tips. It's clearly written and extremely good value for accountants in general practice. Try it for free by registering here>>>

Share scheme reporting, Pension withdrawal forms, VAT refunds for charities

The work of the tax adviser is not all about annual tax returns, you also need to advise clients on the circumstances in which they don't need to submit an annual return, when the official form may be wrong, and how to claim a tax refund. All those situations are covered in the current issue of our tax tips newsletter for accountants in general practice.

Pension withdrawal forms 
There has been huge press coverage of the new pension freedoms which allow those aged 55 or more to withdraw their pension savings as cash lump sums. What has received less attention is the tax effect of doing this. If your clients have already accessed their defined contribution pension pots they may have suffered an unexpected tax charge. 
  
Unless the individual can provide a current form P45 which tells the pension company what PAYE code to use, the pension company will deduct tax using an emergency code. That will generally mean that too much tax is deducted and the individual needs to claim a tax refund either on their self-assessment return after the end of the tax year, or by using one of these new forms within the tax year: 

• P50Z- if the entire pension pot is taken and the individual has no other income;
• P53Z - if the entire pension pot is taken and the individual has some other income;
• P55 - in other circumstances such as where only part of the pension pot is taken.

There are further illustrations of circumstances in which each form should be used in the HMRC Pension Schemes newsletter, number 68. 
  
All three of the new refund forms must be completed online, and then printed off to submit to HMRC. However, there is a problem with form P55 which has incorrect instructions. 
  
Form P55 should allow the taxpayer to reclaim the tax deducted within 30 days, but the online form said this was not possible. Following an article in the FT newspaper at the weekend it appears that form P55 has been temporarily withdrawn from the GOV.UK website to fix the wording.
This is an extract from our tax tips newsletter dated 14 May 2015. The newsletter itself contained links to related source material for this story and the other two topical, timely and commercial tax tips. It's clearly written and extremely good value for accountants in general practice. Try it for free by registering here>>>

Financial reporting standards, Professional conduct, Reclaiming input VAT on commercial vehicles

This is a time of major upheaval to financial reporting standards, and we summarise changes fundamental in quantifying and reporting on business profits on which tax computations are to be based. Last week the tax profession updated its guidance on professional conduct and we look at how this affects everyone working in tax. Finally, we update you on HMRC's latest list of car-derived vans and combi vans for input VAT purposes.

Transition to new accounting standards 
  
Beware of the tax repercussions which follow the changes summarised in this week's newsletter. 

Reported profits of a business are the starting point for computing taxable profits for income tax or corporation tax purposes. On transition from one valid basis of accounting to another, a significant number of accounting adjustments may be required and these could have a crucial impact on your clients' tax liabilities. Positive adjustments (i.e. those that increase profits or reduce losses) are taxed as receipts, and negative adjustments are allowed as expenses.

This is an extract from our tax tips newsletter dated 7 May 2015. The newsletter itself contained more details and links to related source material for this story. And, of course there were the other two topical, timely and commercial tax tips. It's clearly written and extremely good value for accountants in general practice. Try it for free by registering here>>>

CGT for non-residents, RTI error - whose fault is it?, Employment Allowance

What Numpty invented a new form of CGT that requires the gain and tax due to be reported within 30 days? We explain what your clients need to know about this new tax. We also look at the latest position regarding RTI errors and penalties. Finally we have an update on the employment allowance.

CGT for non-residents 
A new capital gains tax charge came into force on 6 April 2015: non-resident CGT (NR CGT). This could impact a range of clients including; property developers, conveyancing solicitors, as well as non-resident owners of UK residential property. 
  
The NR CGT applies to gains made on the disposal of residential property in the UK by owners who are not resident for tax purposes in the UK. The new tax is restricted to gains that relate to the period from 6 April 2015 to disposal date, so it is unlikely to be payable on property sales made early in 2015/16. 
  
However, the NR CGT reporting regime requires a NR CGT return to be made to HMRC within 30 days of the conveyance of the property. This applies whether there is any NR CGT to pay or not, where there is a loss on the disposal, and even where the taxpayer is due to report the disposal on their own personal or corporate self-assessment tax return or under the ATED regime. 
  
A non-resident vendor who completes a residential property sale on say 1 May 2015 must complete the online NR-CGT return (you can do this on their behalf) by 31 May 2015. The non-resident vendor can be an individual, partner in a partnership, trustee, personal representative of non-resident who has died, a closely-held company or a fund. 
  
Where the vendor is not registered for UK income tax, corporation tax or ATED, the NR-CGT charge must be paid with 30 days of the conveyance date. This payment can only be made once the NR-CGT return has been submitted and HMRC have replied with a reference number to use when making the payment. There are penalties for failing to file the NR CGT return on time, and failing to pay the tax on time. 
  
If the taxpayer is registered for UK tax they can opt to pay the NR CGT due at the same time as the tax due for their normal self-assessment, so by 31 January 2017 for gains realised by individuals/ trustees/ PRs in 2015/16. 
  
Conveyancing solicitors need to be aware of these new very tight reporting and payment deadlines. Property developers need to warn their non-resident customers that they will be liable to tax on any gain made when they sell the property and that gain includes any discount in the price achieved by buying “off-plan”. 

This is an extract from our tax tips newsletter dated 29 April 2015. The newsletter itself contained links to related source material for this story and the other two topical, timely and commercial tax tips. It's clearly written and extremely good value for accountants in general practice. Try it for free by registering here>>>