Dean Statham |
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Dean Statham Tax Alert. |
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VAT understanding default surcharge |
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A default surcharge is a penalty levied on businesses that submit VAT returns after the nominated filing date, or make payments late. VAT registered traders should take the following factors into account:
- There is no penalty for a first offence, however a business that submits a VAT return late or makes a late payment is issued with a surcharge liability notice that begins on the date of the notice and ends twelve months from the end of the latest period in default.
- If further VAT returns are submitted late during this period a penalty based on a 'specified percentage' ranging from 2% to 15% will apply. The penalty increases up to a maximum of 15% with each default.
- There is also no scope for mitigation of the penalty and only a limited possibility of arguing that a reasonable excuse for the delay in filing or payment existed.
HMRC accept that taxpayers may have a reasonable excuse in cases involving computer breakdown, illness or loss of key personnel, unexpected cash crisis or loss of records. However, a claim of reasonable excuse will not necessarily be accepted just because it seems to fit into one of these categories. HMRC do not accept that a lack of funds is a reasonable excuse unless this is caused by some unforeseen event.
No surcharge will be levied under the following circumstances:
- A nil return is submitted late.
- A VAT repayment return is submitted late.
- If a time to pay agreement has been arranged in advance of the VAT due date. This is applicable only where the terms of the agreement are adhered to.
- The VAT due has been paid on time but the VAT return was late. This will be recorded as a default and will extend the 12 month surcharge period but will not increase the percentage rate.
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Seed Enterprise Investment Scheme |
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Since we released an update to the existing Enterprise Investment Scheme last month the Government has published details of a similar scheme targeted at smaller companies. The new Seed EIS will be introduced in the Finance Bill 2012.
The scheme is designed to increase the level of investing in the early development of high growth potential businesses. The scheme is similar to the EIS but focuses on smaller, early stage companies carrying on, or preparing to carry on, a new business in a qualifying trade.
The main points of the draft legislation are as follows:
- There will be an annual investment limit of £100,000 and cumulative investment limit for companies of £150,000.
- The investee company must have been incorporated no more than two years before the SEIS shares are issued.
- The scheme will only apply to smaller companies with 25 or fewer employees and assets up to £200,000 at the point of investment which are carrying on or preparing to carry on a new business.
- The scheme will provide income tax relief worth 50% of the amount invested to individual investors with a stake of less than 30% in such companies, including directors who invest in their companies.
- The SEIS will apply to subscriptions for shares, using the same definition of eligible shares as EIS (which is expected to be widened in Finance Bill 2012).
- There will be an annual investment limit of £100,000 per investor, with unused annual amounts able to be carried back to the previous year, as under EIS.
- An investment limit of £150,000 for companies to give the greatest degree of flexibility, this is a cumulative limit, not an annual limit.
- An exemption from CGT on gains on shares within the scope of the SEIS.
- A CGT holiday for investments on gains realised from disposals of assets in 2012-13, where the gains are reinvested through the new SEIS in the same year.
- Provisions for the withdrawal of SEIS relief in certain circumstances.
- Strict rules for the investee company to follow to ensure that the majority of money raised is spent on qualifying business activities within a specified time frame.
The use of the SEIS in 2012-13 could therefore result in tax relief of up to 78%. (50% income tax and 28% CGT).
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PAYE and Real Time Information (RTI) |
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The current problem:
Employers are required to file an annual PAYE return, form P35, with HMRC containing details about their employees' earnings during the tax year, along with information about the amount of income tax and National Insurance contributions (NICs) deducted from the employees' salaries. This return is due on 19 May following the end of the tax year to which it relates. As the return is not filed until after the end of the tax year, but salary payments and deductions are made on a monthly basis during the tax year, errors in the PAYE code, leading to incorrect amounts of income tax being paid, are not discovered until well after the end of the tax year.
The solution - RTI
Under RTI, it is proposed that employers and pension providers would be required to file monthly PAYE returns containing similar information to the current form P35. These returns will be filed on-line at the point employers pay their employees, rather than after the end of the tax year, as under the current system.
What are the benefits?
The Government believes that RTI will make the PAYE system more accurate for individuals, resulting in fewer bills and repayments being sent after the end of the tax year, as reconciliations can be performed, and PAYE codes corrected, in real-time.
What are the disadvantages?
The major disadvantage will fall on employers. In particular smaller employers will suffer a disproportionate share of the software and other administrative costs to convert to electronic processing of payroll data.
A pilot programme will run from April 2012. All employers will be expected to apply RTI from October 2013.
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DISCLAIMER - PLEASE NOTE: The ideas shared with you in this email are intended to inform rather than advise. Taxpayers' circumstances do vary and if you feel that tax strategies we have outlined may be beneficial it is important that you contact us before implementation. If you do or do not take action as a result of reading this newsletter, before receiving our written endorsement, we will accept no responsibility for any financial loss incurred. |
Dean Statham,
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Tel: 01782 614618 Fax: 01782 717287.
Web: www.dsonline.co.uk.
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