Insight - April 2011
Tax Disclosure Opportunity for Plumbers and Others
HM Revenue & Customs (HMRC) have introduced the Plumbers Tax Safe Plan (PTSP), which is designed for people working within the plumbing industry who have not told HMRC about all their income in the past and who now want to get back on track. It is intended to cover people who work (or worked) in the plumbing, heating or gas installation trades and this includes anyone who installs and repairs pipes and fixtures for water, drainage or gas systems in a building.
Under the scheme, plumbers, gas-fitters, heating engineers and members of associated trades with undisclosed taxable income from the past five years have until 31 May to register their intention to make a voluntary disclosure. They will be offered a reduced penalty (maximum 20%) in return for coming forward voluntarily as well as a simple means of putting their tax affairs in order.
Once a taxpayer has registered under the scheme, they will have until 31 August to provide their details and make arrangements for payment.
These more generous terms will not be available to people who choose not to sign up for the PTSP if later HMRC find that they are behind with their tax affairs.
Other taxpayers who voluntarily come forward and put right their tax position can expect very similar terms to those on offer through PTSP. If you do not come forward and HMRC later find that you owe additional tax, you may face higher penalties or even criminal investigation.
Once the PTSP window closes in the summer, individuals who have not come forward but are found to have unpaid liabilities could face penalties of up to 100% of the tax evaded.
Henderson Loggie have extensive experience of helping taxpayers make voluntary disclosures to HMRC and negotiating with HMRC concerning penalties.
PAYE – compulsory online filing
All employers need to be aware that their Employer Annual Return for 2010/11 will have to be filed online by 19th May 2011.
Paper returns should not be filed for 2010/11, as even if they are submitted before the deadline, a penalty may still arise.
Smaller employers may use HM Revenue & Customs’ free software, but there are also commercial products available. Alternatively the employer may appoint an agent to submit the return. Henderson Loggie provide an agency service on this to a large number of our clients.
In addition, employers must register with HM Revenue & Customs’ PAYE Online service. This will enable them to file online.
Employers also need to be aware of the penalty regime for late payment of PAYE that was introduced with effect from May 2010. There are now penalties for not making PAYE and NIC payments on time and in full.
Are You A US Citizen? – The US Offshore Voluntary Disclosure Initiative (OVDI)
The Internal Revenue Service (IRS) recently launched a special voluntary disclosure initiative. This gives US citizens and residents the chance to come forward and file the appropriate tax returns and pay any outstanding tax, penalties and interest. This has arisen because the IRS is very concerned that US citizens have not been disclosing and paying tax on offshore foreign financial accounts in particular.
The deadline for gaining access to the program is 31st August 2011. This is the deadline for filing all original and amended tax returns and paying taxes, interest and accuracy-related penalties.
The IRS is describing the initiative as an opportunity for taxpayers to return to the US tax system.
There is a penalty framework set out in the rules of the initiative, which means that the initiative offers clear benefits to taxpayers who come forward now rather than risking IRS detection. Taxpayers hiding assets offshore who do not come forward will face far higher penalties as well as the possibility of criminal prosecution.
It is likely that IRS efforts in the international arena will only increase as time goes on.
New Advisory Fuel Rates Apply From 1 March 2011
New fuel rates apply to all journeys made on or after 1 March 2011 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.
For example, for a petrol car with an engine size of 1400cc or less, employers may reimburse employees using company car for business at the rate of 14p per mile. The old rate for such cars was 13p per mile.
The advisory fuel rates are intended to reflect actual average fuel costs at the time they are set. The aim is to save time for both employers and HMRC by setting out some figures that can be used in the majority of cases. They give employers more certainty about what the mileage rates that they choose to apply mean for tax and National Insurance contributions (NICs).
The rates only apply where employers:
• reimburse employees for business travel in their company cars, or
• require employees to repay the cost of fuel used for private travel.
The rates do not apply in any other circumstances. In particular, employees driving company cars are not entitled to use them to calculate a deduction if employers reimburse them at lower rates. Such calculations should continue to be based on actual costs incurred.
The End of Contracting Out
The tax year 2011/12 is the last year you will be able to contract out of the State Second Pension on a money purchase basis. After the end of this tax year, no further rebates will be paid, other than those still due to be paid from earlier tax years.
Contracting out has been available to individuals since 1989. An individual age 30 who contracted out at that time is now aged 52 and could have accumulated quite a sizeable pot of money from the redirection of part of their national insurance contributions. Many of these pots of money will be held in old contracts with outdated charging structures and the funds they are invested in may bear no relation to the individual’s attitude to risk.
Quite unsurprisingly, because no physical money is deducted from the individual, these plans remain in pension plans and funds that are no longer suitable for purpose and are not reviewed in the same way as other financial products are.
Should you have a question regarding your protected rights pot, Henderson Loggie Financial Services Limited can provide an appraisal of this for you.
If you would like more details regarding any items in this article and the implications for you please get in touch with your usual Henderson Loggie contact or email firstname.lastname@example.org.
Please remember when investing your capital or the income produced is not guaranteed and can fall as well rise. Any references to tax and legislation is based on our understanding of law and HM Revenue & Customs practice at the date of publication. Tax and legislation are liable to change. Tax relief may be altered and the value to the investor depends on their financial circumstances. The purpose of this article is to provide technical and generic guidance and should not be interpreted as a personal recommendation or advice.
Henderson Loggie Financial Services Ltd is authorised and regulated by the Financial Services Authority.