Enews November 2014

eNews – November 2014

In this month’s enews we report on the Government’s announcement on the availability of free advice on pensions flexibility, the latest HMRC disclosure opportunity and the end of the Business Entity Tests for IR35.

Acas have issued guidance on the administration of Shared Parental Leave and HMRC will be collecting larger debts via ‘coding out’.

Please do contact us if you would like any further information on any of the issues

Pension flexibility

HMRC Credit Card Sales Campaign disclosure opportunity

IR35 Business Entity Tests

HMRC to collect more debt through tax codes

VAT on ‘snowballs’

Acas guidance on new shared parental leave rules

Parties for employees

2012/13 tax gap

Pension flexibility

The Government has announced that people who wish to access their defined contribution pension flexibly will be able to go to a local Citizens Advice Bureau across the UK for expert free and impartial face to face guidance or receive telephone guidance from the Pensions Advisory Service.

In Budget 2014 radical changes to the way individuals can access their pensions were announced. The Government promised that those able to take advantage of these flexibilities would be entitled to free and impartial guidance on their available choices as they approach retirement.

Pension expert Dr Ros Altmann CBE said:

‘This is a big step forwards in ensuring the pension revolution announced in the Budget will have a meaningful impact on pension savers. It is clear that, currently, most people saving for a pension don’t understand all the vital issues, and it’s really important that they receive impartial help to make the best decisions for themselves.’

‘Both the Pensions Advisory Service and Citizens Advice have longstanding experience in helping the public with financial issues; and it is really important that people do trust the scheme, otherwise they remain at risk of stumbling into poor decisions.’

Internet link: News

HMRC Credit Card Sales Campaign disclosure opportunity

HMRC have launched yet another disclosure opportunity this time aimed at undisclosed credit card sales. The Credit Card Sales Campaign is an opportunity for those affected to bring their tax affairs up to date if they are an individual or business that accepts credit or debit card payments for goods or services.

The disclosure opportunity allows those who have not registered with HMRC or who have failed to declare all their income to make a ‘voluntary disclosure’ of the omitted information in order to get the best terms under the campaign.

If you have any concerns in this area please do get in touch.

Internet link: Credit card sales campaign

IR35 Business Entity Tests

The ‘IR35’ rules are designed to prevent the avoidance of tax and national insurance contributions through the use of personal service companies and partnerships.

The rules do not stop individuals selling their services through either their own personal companies or a partnership. However, they do seek to remove any possible tax advantages from doing so.

One of the ways in which businesses, advisers and HMRC determine whether or not the IR35 rules apply is by the use of Business Entity Tests (BETs) which were introduced in 2012. The points based system is used to risk assess whether a particular arrangement is caught by the rules.

The IR35 Forum has recently reviewed the approach to administering IR35 and found that the BETs were not helpful to businesses as they were:

used very little
not fulfilling their intended purpose.

As a result the review recommended withdrawing the BETs.

HMRC have accepted this recommendation and will withdraw the BETs from 6 April 2015. They have also confirmed how this change will affect previous, ongoing or future enquiries which are detailed in the link.

If you are concerned how this change will affect you or your business please do get in touch.

Internet link: News

HMRC to collect more debt through tax codes

HMRC can currently collect debts of up to £3,000 by adjusting an individual’s Pay As You Earn (PAYE) tax code which applies to their employment or pensions income. This collection method is known as ‘coding out’. The effect of this is to recover the debt from an individual’s income, by increasing the amount of tax that is deducted from their income during the tax year.

Currently the limit set on the amount which can be recovered this way is £3,000, however for those with PAYE earnings of £30,000 or more the amount which can be recovered via coding out will be increased from April 2015 to a possible maximum of £17,000. The amount which can be collected increases using a sliding scale of band earnings, for example those with annual PAYE earnings of between £40,000 but less than £50,000 could have debts of £7,000 collected this way. If an individual’s earnings are less than £30,000, there is no change to the £3,000 coding out limit.

These changes will only apply to underpaid Self Assessment and Class 2 National Insurance debts and Tax Credit overpayments. Changes will be reflected in 2015/16 tax codes. If an individual does not want the debt coded they should arrange to pay off the debt or agree a suitable payment plan with HMRC.

The current £3,000 coding out limit will still apply to the collection of Self Assessment balancing payments and PAYE underpayments.

If you don’t want the debts to be included in your tax code, then you will need to pay the full amount you owe or speak to us to agree a suitable payment arrangement.

If you receive a tax code and would like us to review it please do get in touch.

Internet link: News

VAT on ‘snowballs’

HMRC have published a Brief which advises that ‘snowballs’ are zero rated for VAT purposes.

Following the decision of the First Tier Tribunal HMRC have issued guidance on the VAT treatment of ‘snowballs’. The case concerned the VAT liability of this food item and whether or not it was confectionary (standard rated) or a cake (zero-rated). The ‘snowballs’ considered were those manufactured by Lees of Scotland and Thomas Tunnock Ltd which are a dome of marshmallow covered with sugar strands and a chocolate, carob, cocoa or coconut coating with or without a jam filling.

Both manufacturers had challenged a previous ruling that ‘snowballs’ were standard rated confectionery by claiming they were also cakes and submitted voluntary disclosures for VAT they claimed was overcharged. HMRC disagreed with this view and so the matter was decided by the First Tier Tribunal.

The Tribunal considered what factors should be considered when identifying whether a product is a cake and weighed the relevant factors in the balance. The Tribunal did not dispute that snowballs are confectionery however they accepted they do have sufficient characteristics of a cake for them to be characterised as a cake, which means they are zero rated for VAT purposes.

HMRC have accepted that decision and will be updating their guidance in respect of this type of snowball in due course.

In limited circumstances suppliers of these products may be entitled to a refund however this claim would be subject to the ‘unjust enrichment’ rules and the 4 year cap in line with normal HMRC procedures.

This case helps to illustrate how important it is to get the VAT treatment right. Please do get in touch for advice on VAT issues.

Internet link: Brief

Acas guidance on new shared parental leave rules

Acas have issued a new guide to help employers and employees to understand the practicalities of the Shared Parental Leave (SPL) Regulations.

The operation of the new rules, which apply to parents of babies due on or after 5 April 2015, and to parents of children placed for adoption from that date, have raised concerns among employers about administrative difficulties, such as managing employee requests to alternate leave multiple times between parents.

The Acas guidance which can be found using the following link includes step by step instructions on how eligible employees can make SPL requests, as well as advice for employers about how to handle requests fairly together with useful template documents.

Internet link: Acas guidance

Parties for employees

With the season for workplace parties fast approaching we thought it would be a good idea to remind you of the tax implications of these type of events. The good news is that, unlike entertaining customers, the costs of entertaining employees are generally allowable against the profits of the business.

But what about the tax consequences for the employees themselves? Is it a perk of their jobs and will they have to pay tax on a benefit?

Generally, as long as the total costs of all employee annual functions in a tax year are less than £150 per attendee (VAT inclusive) there will be no tax implications for the employees themselves. In considering this limit make sure you have included all the costs, which may include not only the meal itself but also any drinks, entertainment, transport and accommodation that you provide.

If the costs are above the £150 limit then the full cost will be taxable on the employee. In that case do get in touch so we can advise you how best to deal with them.

Internet link: HMRC guidance

2012/13 tax gap

HMRC have announced the latest tax gap figures. The tax gap, which is the difference between the amount of tax due and the amount collected, was 6.8% of tax liabilities, or £34 billion, in 2012 to 2013.

Financial Secretary to the Treasury David Gauke said:

‘Since 2010 to 2011 the percentage tax gap has stayed lower than at any point under the previous government, saving the country £4 billion. Today’s figures show that there’s still more work to do but our continued drive to tackle avoidance means that avoidance is down.’

Internet link: News

Enews October 2014

eNews – October 2014

In this month’s enews we report on mis-sold interest rate hedging products, guidance on Gift Aid and free admission, an update on the broadband voucher scheme and HMRC’s latest phishing scam.

Please do get in touch if you would like any further guidance on any of the areas covered.

Mis-sold interest rate hedging products

Gift Aid and free admission

UK broadband voucher scheme overhauled

Latest fake ‘HMRC’ phishing scam

Deadline for ‘paper’ self assessment tax returns

Latest labour market employment figures

Mis-sold interest rate hedging products

Following a review of the way some banks sold Interest Rate Hedging Products (IRHP), some businesses are entitled to redress payments. These redress payments are now starting to be made to those businesses which were affected.

Mis-sold interest hedging products (IRHP)

The Financial Conduct Authority (FCA) has identified failings in the way some banks sold IRHP to businesses taking out business loans, which were intended to offer protection against rising interest rates.

The banks calculate the amount due which can be made up of three elements:

basic redress – represents the difference between the actual payments made and the payments that would have been made without the productcompensatory interest – at 8% per year and consequential losses – losses suffered due to not having the use of the money.

If you do receive a redress payment please let us have the paperwork so we can review the position. There are certain circumstances where the tax treatment of the payment will be different so please do contact us so we can investigate the position and ensure the correct accounting and tax treatment.

Internet link: HMRC news

Gift Aid and free admission

HMRC have updated their guidance for charities to explain that the terms and conditions attached to a donation that gives a right of admission to property cannot include a right to a full or partial refund of the admission payment.

To read the full HMRC guidance click on the link below.

Internet link: HMRC guidance

UK broadband voucher scheme overhauled

Businesses are being urged to take advantage of a scheme to get faster, cheaper broadband. The government is overhauling its plans for getting ultra-fast broadband to UK businesses after disappointing take-up of its current scheme.

As reported by the BBC only £7.5m out of a possible £100m has so far been spent, with just 3,000 businesses taking up vouchers. As reported by the BBC:

‘Initially the government had expressed hope of reaching 200,000 small businesses.

With a March 2015 deadline for the money to be spent, the government is keen to galvanise interest.

Changes aimed at making it easier to get the money include a redesigned website and a more streamlined process of applying for a grant.

Other changes include:

Qualifying businesses no longer need to fill in an application form but can access the government grant with a call to a pre-approved broadband supplier
Businesses that already have a different supplier in mind need only to fill in a form to get their quote approved
Suppliers can also apply to BDUK (the group overseeing the process) with a set of eligible connection costs, cutting the need for businesses to apply at all
Once a broadband package has been approved, suppliers can market them to eligible businesses with no more need for forms or rubber-stamping.’

As reported by the BBC, Sajid Javid, Secretary of State for Culture, Media and Sport said:

‘This is a golden opportunity for businesses to take advantage of better broadband. The grant takes away the costs of installation, which are normally charged up front or added to monthly charges.’

Internet link: BBC news

Latest fake ‘HMRC’ phishing scam

We are aware that there is a new bogus email which is phishing scam aimed at taxpayers. The email which is supposed to come from HMRC states that the recipient is no longer eligible to receive a tax return and needs to sign up with their current details to get back into the system.

It is possible to check HMRC’s website for security advice and examples of phishing emails. Suspicious emails should be sent to HMRC at phishing@hmrc.gsi.gov.uk

Internet link: ICAEW

Deadline for ‘paper’ self assessment tax returns

For those individuals who have previously submitted ‘paper’ self assessment tax returns the deadline for the 2013/14 return is 31 October 2014. Returns submitted after that date must be submitted electronically or they will incur a minimum penalty of £100. The penalty applies even when there is no tax to pay or the tax is paid on time.

If you would like any help with the completion of your return please do get in touch.

Internet link: HMRC deadlines

Latest labour market employment figures

The Office for National Statistics has announced that the latest statistics, based on the period May to July 2014, show that employment continued to rise and unemployment continued to fall.

According to the ONS:

‘There were 30.61 million people in work. This was 74,000 more than for February to April 2014, the smallest quarterly increase since April to June 2013.

Comparing May to July 2014 with a year earlier, there were 774,000 more people in work.

The proportion of people aged from 16 to 64 in work (the employment rate), was 73.0%, slightly higher than for February to April 2014 (72.9%) and higher than for a year earlier (71.6%).

There were 2.02 million unemployed people, 146,000 fewer than for February to April 2014 and 468,000 fewer than a year earlier.’

Neil Carberry, CBI Director for Employment & Skills, said:

‘The fact that unemployment is lower now than at any time since late 2008 is good news. There is more to do, but it’s clear that our growing economy is feeding through to new jobs.

Jobs growth is coming from the private sector, more than making up for public sector job losses, and more young people are finding their feet in our labour market.

With unemployment dropping, and wage settlements in larger firms starting to pick up, we expect to see average earnings growth begin to rise in time.’

Internet links: ONS CBI press release

Enews September 2014

eNews – September 2014

In this month’s enews we report on a variety of issues including an update for employers on payroll penalties and NMW increases. We are also including guidance on the introduction of the VAT Mini One Stop Shop for digital services.

We are amending the timing of enews following a review of the product. Enews will be published during the first week of the month, rather than at the end of the month. So please watch out for the next issue early in October.

Please do get in touch if you would like more detail on any of the articles.

RTI penalties for small employers delayed

VAT and the digital business

National Minimum Wage rises

Fuel Advisory rates

Autumn Statement date announced and have your say

RTI penalties for small employers delayed

HMRC have confirmed that employers with fewer than 50 employees will face automated in-year penalties for late real-time PAYE returns from 6 March 2015 which is later than had originally been anticipated. Those who employ 50 or more people will face penalties from 6 October 2014. HMRC will send electronic messages to all employers shortly to let them know when the penalties will apply to them, based on the number of employees shown in the department’s records.

Level of penalties

For the purposes above, an employer who, during a tax month, fails to make a return on or before the filing date will be liable to a penalty as follows:

1-9 employees – £100
10-49 employees – £200
50-249 employees – £300 and
250 or more employees – £400.

Employers must make a submission to advise HMRC when no payments are made in pay period. Other limited relaxations apply to some micro employers. Please do contact us if you would like some advice on payroll matters.

Ruth Owen, HMRC Director-General for Personal Tax, said:

‘Real Time Information is working well. Our most recent figures show that over 95% of PAYE schemes making payments to individuals are successfully reporting in real time, and 70% say that it is easy to do.’

‘We know from our experience of rolling out of RTI that to ensure a smooth transition for our customers it’s best to introduce changes in stages. This will allow us to update our systems and enhance our guidance and customer support as needed. We know that those who have had most difficulty adjusting to real-time reporting have been small businesses, so this staged approach means they have a little more time to comply with the new arrangements before facing a penalty. ‘

If you would like any help with payroll matters please do get in touch.

Internet links: Press release HMRC Helpsheet

VAT for digital businesses and the Mini One Stop Shop

The one-stop VAT service starts from 1 January 2015 for businesses supplying what are collectively known as ‘digital services’ in the EU. The effect of the measures are that a business will not have to account and pay VAT separately in each country where they do business which would otherwise be the case following a change in the place of supply rule.

Digital services essentially means broadcasting, telecoms and e-services including those selling apps, e-books, streaming services (e.g. sports/film/tv/music), dating services and journals, newspapers and magazines that are subscribed to electronically and smartphone games.

Change of place of supply

From 1 January 2015 the place of supply for VAT purposes for a EU business selling digital services will change. Currently, intra-EU supplies of digital services to non-business customers are subject to VAT in the member state where the supplier belongs.

From 1 January 2015 this changes, so that the VAT is due where the customer who receives the service lives or is located. This will ensure that UK consumers of these services will pay UK VAT no matter where the supplier of those services belongs.

In order that UK businesses supplying digital services do not have to register for VAT in every EU member state where they have customers, an optional VAT ‘Mini One Stop Shop’ (MOSS) online service has been set up by HMRC. Other EU member states will be building their own systems.

Sally Beggs, Deputy Director Indirect Tax, HMRC, said:

‘The VAT MOSS will save digital services suppliers from having to register for VAT in every Member State where they do business, removing a significant administrative burden. Businesses with their main operation or headquarters in the UK will register with HMRC to use the service.’

Businesses will be able to register for VAT MOSS from 20 October 2014. The service will be available to use from 1 January 2015.

If this affects your business and you would like more detailed information or guidance on the matter please do not hesitate to contact us.

Internet links: HMRC MOSS News story

National Minimum Wage rises

The National Minimum Wage (NMW) is a minimum amount per hour that most workers in the UK are entitled to be paid. NMW rates increases come into effect on 1 October 2014:

the main rate for workers aged 21 and over will increase to £6.50 (currently £6.31)
the 18-20 rate will increase to £5.13 from £5.03
the 16-17 rate for workers above school leaving age but under 18 will increase to £3.79 from £3.72
the apprentice rate will increase from £2.68 to £2.73 per hour.

It is important to note that these rates, which are in force from 1 October 2014, apply to pay reference periods beginning on or after that date.

Penalties

Penalties may be levied on employers where HMRC believe underpayments have occurred and HMRC now have the power to ‘name and shame’ non-compliant employers.

Most workers in the UK over school leaving age are entitled to be paid at least the NMW for details of exceptions see the Acas website.

If you have any queries on the NMW please do get in touch.

Internet link: Acas

Fuel Advisory rates

New company car advisory fuel rates have been published which took effect from 1 September 2014. HMRC’s website states:

‘These rates apply to all journeys on or after 1 September 2014 until further notice. For one month from the date of change, employers may use either the previous or new current rates, as they choose. Employers may therefore make or require supplementary payments if they so wish, but are under no obligation to do either.’

The advisory fuel rates for journeys undertaken on or after 1 September 2014 are:

Engine size	Petrol
1400cc or less	14p
1401cc – 2000cc	16p
Over 2000cc	24p

Engine size	LPG
1400cc or less	9p
1401cc – 2000cc	11p
Over 2000cc	16p

Engine size	Diesel
1600cc or less	11p
1601cc – 2000cc	13p
Over 2000cc	17p

Other points to be aware of about the advisory fuel rates:

Please note that not all of the rates have been amended, so care must be taken to apply the correct rate.

Employers do not need a dispensation to use these rates.
Employees driving employer provided cars are not entitled to use these rates to claim tax relief if employers reimburse them at lower rates. Such claims should be based on the actual costs incurred.
The advisory rates are not binding where an employer can demonstrate that the cost of business travel in employer provided cars is higher than the guideline mileage rates. The higher cost would need to be agreed with HMRC under a dispensation.

If you would like to discuss your car policy, please contact us.

Internet link: HMRC advisory fuel rates

Autumn Statement date announced and have your say

The government has announced that the Autumn Statement 2014 will take place on 3 December.

The government is seeking views of businesses, charities and members of the public, as to what they would like to see included in the Autumn Statement 2014. To have your say email autumnstatementrepresentations@hmtreasury.gsi.gov.uk

We will keep you informed of announcements.

Internet link: News

Enews August 2014

eNews – August 2014

In this month’s enews we report on a number of issues including HMRC’s latest disclosure opportunity, warnings of incorrect PAYE overpayment notifications and the introduction of late submission penalties and guidance on pension scams. We also advise on HMRC guidance on exceptions to the VAT return electronic filing rules and the Pensions Regulator issues first report on auto enrolment penalties.

Please do get in touch if you would like more detail on any of the articles.

eNEWS quicklinks

Guidance on changes to VAT filing rules

Pensions Regulator uses formal powers over Auto Enrolment

Pension scams

HMRC latest disclosure opportunity

HMRC warn of incorrect RTI letters

HMRC to issue penalties for late submission of PAYE returns

Guidance on changes to VAT filing rules

The majority of businesses have to file their VAT returns online. HMRC have issued guidance on changes to VAT rules which introduce additional exemptions to the requirement to file VAT returns online. The changes, which came into effect at the beginning of July 2014, allow business owners that satisfy HMRC that it is ‘not reasonably practicable’ for them to use the online system to submit ‘paper’ VAT returns.

HMRC will also be able to approve telephone filing as an alternative method of electronic filing in certain circumstances.

If you would like any advice on VAT issues please do get in touch.

Internet link: HMRC VAT Brief

Pensions Regulator uses formal powers over Auto Enrolment

The Pensions Regulator (TPR) has issued the first quarterly bulletin which details how many times it has needed to use its formal powers to ensure employers comply with their automatic enrolment duties.

The first of the new quarterly bulletins shows the regulator had used its powers on 23 occasions up until the end of June this year. The powers listed include the ability to carry out inspections and to issue statutory notices including fixed penalty and escalating fines.

Executive director of automatic enrolment Charles Counsell said:

‘Employers and the pensions industry are understandably interested to know how and when we use our powers. To date the vast majority of employers are complying with their new workplace pension duties without the regulator needing to use our enforcement powers.’

‘I believe this is a testament to the success of our proportionate, risk-based approach to compliance and enforcement. We target our resources where they will maximise compliance and work with employers to help them comply with their duties.’

‘We have provided the tools and assistance that large and medium employers need to ensure millions of workers didn’t miss out on the pension contributions they are entitled to. On a small number of occasions, when our intervention has not resulted in the required outcome, we have used our powers to help to ensure employers comply with their duties.’

For general guidance on employers auto enrolment duties see TPR website. If you would like specific guidance, help or advice on how to deal with your auto enrolment obligations please do get in touch.

Internet link: Bulletin

Pension scams

HMRC and the Pensions Regulator (TPR) are publicising the availability of revised leaflets which warn people of the consequences of pension liberation scams.

HMRC are advising that individuals with pension savings continue to be targeted by unscrupulous companies encouraging them to access their pension savings early. Options are given for personal loans, cash incentives and one-off pension investments to encourage people to invest in these pension scams. Pension savers involved in these pension liberation scams face significant tax consequences.

HMRC has worked closely with TPR on publishing a revised set of leaflets highlighting the serious downsides of pension scams. The leaflets provide guidance on what trustees and scheme members can do to reduce the risk of becoming involved in these scams, and the tax impact of releasing pension funds early using these types of arrangements.

Internet links: HMRC news TPR website

HMRC latest disclosure opportunity

HMRC have announced the details of their latest disclosure opportunity which is expected to give approximately 16,000 tax avoidance scheme users the opportunity to pay the tax they owe.

The contractor loan scheme used non-UK employers to pay untaxed income or a loan instead of paying part of an employees salary.

HMRC are inviting those who have used the scheme to bring their affairs up to date using the contractor loans settlement opportunity which will allow taxpayers to settle their liability in the best possible terms. This opportunity is for the tax years up to 5 April 2011 and is open until 9 January 2015.

If they do, they will pay the tax and interest due on the sums they received as loans under the scheme. HMRC are warning that if participants continue to challenge HMRC in the courts, they risk having to pay additional tax charges and penalties – as well as the costs of litigation if they lose.

Jennie Granger, HMRC Director General for Enforcement and Compliance, said:

‘Many people regret ever getting involved with complex aggressive tax avoidance schemes and HMRC is providing an opportunity for contractors to come forward and straighten out their tax affairs.’

‘This is an important opportunity and we are working hard to encourage users to withdraw from such schemes. We also want to ensure they’ve understood our position. They can choose to continue to litigate for a better outcome but they risk a worse result. HMRC has a strong track record of winning tax avoidance cases in court, with around 80% of decisions in our favour. The costs for users are high, potentially resulting in penalties, charges and significant legal costs for scheme users.’

Please get in touch if you have any concerns in this area.

Internet link: Contractor loan disclosure opportunity

HMRC warn of incorrect RTI letters

HMRC have warned that incorrect RTI letters have been issued. The full statement reads:

‘We are aware that a batch of RTI 201 letters has been sent to employers and agents in error, containing incorrect information about overpayments. Any employer or agent receiving one of these letters in August should please ignore it. Those wishing to check their tax position can do so on the Business Tax Dashboard. We are very sorry for any inconvenience caused.’

If you would like any help with payroll issues please do get in touch.

Internet link: HMRC What’s new

HMRC to issue penalties for late submission of PAYE returns

In the latest Employer Bulletin HMRC are warning that employers’ who fail to submit their PAYE submissions, Full Payment Submission (FPS) or where appropriate Employer Payment Summary (EPS) on time will face penalties. The penalties are being introduced from October 2014.

Penalty notifications will be issued on a quarterly basis.

Please do get in touch for advice on PAYE matters.

Internet link: Employer Bulletin

Enews July 2014

eNEWS – July 2014

In this month’s enews we report on VAT and prompt payment discounts, changes to flexible working rights, challenges to the calculation of holiday pay and new PAYE messages for employers. Please do get in touch if you would like more detail on any of the articles.

eNEWS quicklinks

VAT and prompt payment discounts

Holiday pay law

NMW consultation

Extension to flexible working rights

PAYE messages for employers

Zero hours contracts and exclusivity clauses

VAT and prompt payment discounts

Businesses which currently offer prompt payment discounts (PPD) to their customers need to be aware that there are some changes ahead to the rules.

Currently under UK law VAT is payable on the net amount after deducting the discount, whether or not the customer takes advantage of the PPD and pays promptly.

For example if you sell some goods for £1,000 plus VAT and offer 5% discount if the customer pays within 10 days then VAT is charged at 20% on £950 being £190, rather than 20% of £1,000 which is £200. Even if the customer takes 30 days to pay and therefore does not qualify for the PPD, the amount due will be £1,190.

This rule regarding PPD is in the process of being changed and from 1 April 2015 VAT will be due on the amount the customer actually pays. So using the above example if the customer fails to take advantage of the PPD he would need to pay the full £1,000 plus VAT of £200.

The business making the supply will have to issue a credit note to account for the PPD where this is taken up. So using the same example if the customer takes up the discount then the credit note would be for £50 plus £10 VAT.

Apparently PPD have been widely used by suppliers of telecommunications and broadcasting services and so the use of PPD to reduce VAT due has already been blocked in those sectors from 1 May 2014. This applies where the customer cannot recover the VAT charged.

If your business currently offers PPD you may need to change your invoicing procedures from 1 April 2015 and the Government are going to consult on the implementation of the change. We will keep you informed of the details of the changes as and when further detailed guidance is made available.

Internet link: VAT TIIN

Holiday pay law

The CBI are warning that employers are facing the risk of significant additional costs, potentially ‘billions of pounds’, from employment tribunals challenging the normal calculation of holiday pay under the Working Time Regulations (WTR).

In the UK holiday pay is currently calculated on the basis of a ‘week’s pay’ which is based on basic salary and excludes payments such as working allowances, expenses, overtime, commission and bonus payments as these payments relate to specific work done by an employee whilst performing their duties of employment.

A recent European Court of Justice (ECJ) judgment redefined holiday pay to include an allowance for commission, even though commission is paid on sales made and the employee would not have delivered those sales whilst on holiday.

If liabilities on holiday pay are backdated then employers may face huge liabilities for holiday pay arrears.

Katja Hall, CBI Deputy Director-General, said:

‘Backdated claims on holiday pay could lead to bills of millions of pounds for each business, and ultimately threaten their very existence.’

‘Businesses that have done the right thing and fully complied with UK law suddenly face the threat of substantial additional costs. And the companies most at risk are in vital sectors for our economy, such as manufacturing, construction and civil engineering.’

‘Moving the legal goalposts in this way is unacceptable. Although most businesses believe we are better off in a reformed EU, there is a real danger of expansive decisions being made by the European Court of Justice on the UK labour market. As part of an EU reform programme, this has to be addressed and it’s time to put a stop to back-door EU employment law being made.’

‘We need the UK Government to take a strong stand and do all it can to remove this threat. Otherwise we face the very real prospect of successful firms in this country going out of business, with the jobs they provide going too.”

Cases on commission and overtime are currently in progress and we will keep you informed of developments. Meanwhile the CBI is calling for the Government to use its powers under British law to limit the retrospective liability UK employers face.

Internet link: CBI press release

NMW consultation

The Low Pay Commission (LPC) has launched a National Minimum Wage (NMW) consultation which runs until 26 September 2014. The LPC would like to hear from individuals and organisations affected by the NMW, including employers of low-paid workers including those involved in sectors such as retail, hospitality, social care, cleaning and hairdressing and focuses on the particular impact of the NMW on young people.

To find out more on the consultation visit the link below. If you would like any advice on the payment of the NMW please do get in touch.

Internet link: NMW consultation

Extension to flexible working rights

The right to request flexible working has been extended to all employees with at least 26 weeks’ service from 30th June 2014.

Before this change in the law, only employees with children aged 16 or under (17 or under if the child is disabled) or those acting as carers had the right to request flexible working.

Employers are required to consider requests and deal with applications in a ‘reasonable manner’ as the previous statutory procedure for dealing with flexible working requests has been abolished.

Employers do not have to accept an employee’s request as there are a number of legitimate reasons for turning down a flexible working request, including the burden of additional costs to the business and an inability to recruit additional staff.

For information on how to make and deal with requests see the ACAS website guidance

Internet link: News

PAYE messages for employers

HMRC will shortly start alerting employers where their records show that they have failed to make their PAYE or Construction Industry Scheme payments in full by their due date.

HMRC review the payments after each monthly (or quarterly) payment deadline has passed. Shortly after that, HMRC will issue a late payment Generic Notification Service (GNS) message to employers and contractors if they believe they have an underpayment of £100 or more for the month or quarter.

The messages will state:

‘HM Revenue & Customs (HMRC) records show you did not make full payment on time. If you have not already done so, please bring your payments up to date and ensure future payments are made on time and in full. Paying on time and in full is important as otherwise you may be charged in-year interest and late payment penalties.’

‘If you had no PAYE payment to make because you didn’t pay any employees during this tax period, you should let HMRC know by sending an Employer Payment Summary (EPS) for this tax period.’

‘To see why HMRC have issued this notice, please check HMRC Tax Dashboard or PAYE Online which provides details of your payments and PAYE charges.’

Employers should:

submit an EPS as instructed, if appropriate
ensure that they pay their PAYE in full and on time in future.

If you would like any help with PAYE matters please do get in touch.

Internet link: HMRC news

Zero hours contracts and exclusivity clauses

Zero hours contracts are those where the employer does not guarantee to provide the worker with any work and pays the worker only for work actually carried out. The Government estimates that some 125,000 employees are on such contracts.

Some employers argue that they are an important tool to enable a business to maintain flexibility to deal with fluctuations in demand whereas some employee groups claim that businesses use them to avoid giving workers the status of ‘employee’ and eligibility for the full range of employment rights.

The Business Secretary, Vince Cable, has announced that employers hiring workers on zero hours contracts will no longer be able to compel staff to work exclusively for them. These ‘exclusivity clauses’ will not be permitted in contracts and will therefore give workers the freedom to take employment elsewhere. The ban on exclusivity clauses will be contained in the Small Business, Enterprise and Employment Bill.

The Government considers zero hours contracts have a place in the labour market but that the use of these contracts needs tightening up to protect employees from employers who misuse the contracts.

Internet link: Government news