Archives for 2013

If you intend to make amusement machines available for play, you must register under the Machine Games Duty (MGD) regulations. MGD was introduced for existing operators from 1 February 2013. The published list of person’s who may be affected is anyone who:

• holds, or is required to hold, a licence or permit which allows them to provide gaming machines for play on premises
• owns, leases or rents premises on which machine games may be played
• controls the operation of machines on which machine games may be played
• controls admission to premises on which machine games may be played
• has an interest in premises on which machine games may be located
• is responsible for the management of premises on which machine games may be played
• shares in the profits from machine game-play.

Penalties may be applied if you don’t register for MGD, don’t make your MGD returns on time, don’t pay the MGD that you owe, and if you make a mistake on your return.

If you had dutiable machines available for play at 1 February 2013, or since that date, and you have still not registered to make MGD returns, you should apply as soon as possible in order to minimise any penalties payable.

The rates of MGD depend on the type of machine. There are two for MGD purposes:

• Type 1: all machines that do not qualify as Type 2 machines.
• Type 2: to qualify as a Type 2 machine it must be demonstrated that:
  (a) the cost to play each dutiable machine game on the machine once does not exceed 10p, and
  (b) the maximum cash prize for each dutiable machine game on the machine does not exceed £8.

The standard rate of MGD (20%) applies to Type 1 machines, and the reduced rate of 5% to Type 2 machines.

HMRC are advising certain charities to sign up to its new online Gift Aid system. The last “old style” forms will not be accepted after 30 September 2013.

According to HMRC, more than 19,000 charities have already signed up to Charities Online. Since the online process was launched 22 April 2013 almost 50% of Gift Aid payments are now being processed online.

Charities with no access to the internet can still claim using a paper based system, but must use a new form, ChR1, that can be ordered from the Charities Helpline on 0845 302 0203.

Charities should allow 15 working days from the day they sign up, before making their first Gift Aid submission online.

The HICBC was introduced on 7 January 2013 and applies to couples where:

• One partner has received Child Benefit payments after 7 January 2013, and
• Either partner has income in excess of £50,000 a year. The person with the highest income, if both are over £50,000, will be liable to pay the charge.

It will not apply if the person entitled to receive Child Benefit stops their claim for a complete tax year (or for the period 7 January 2013 to 5 April 2013, for the tax year 2012-13).

In effect, the charge recovers the actual Child Benefit received using a graduated scale. 1% of benefit received will be recovered for every £100 the highest earner’s income exceeds £50,000. Accordingly, if the highest earner’s income exceeds £60,000, all of the Child Benefit received will be clawed back.

The partner with the highest income in excess of £50,000, and where either partner received any Child Benefit payments from 7 January 2013 to 5 April 2013, will need to declare the benefit received on their Self Assessment tax return for 2013.

If you are not registered for Self Assessment you must do so by 5 October 2013.

If you are concerned that you may be caught by the HICBC, and would like assistance with the registration or reporting process, please call.

There has been much press commentary recently regarding HMRC’s pursuit of football clubs who stand accused of paying certain “employees” below the NMW. This action is being taken due to complaints HMRC has received from ballboys and club mascots who receive no payment for their time.

All employers are required to pay their employees at least the NMW rates. However, there are a number of persons not entitled to the minimum wage. They are:

• self-employed people
• company directors
• volunteers or voluntary workers
• workers on a government employment programme, e.g. the Work Programme
• family members of the employer living in the employer’s home
• non-family members living in the employer’s home who share in the work and leisure activities, are treated as one of the family and aren’t charged for meals or accommodation (e.g. au pairs)
• workers younger than school leaving age (usually 16)
• higher and further education students on a work placement up to 1 year
• workers on government pre-apprenticeships schemes
• people on the following European Union programmes: Leonardo da Vinci, Youth in Action, Erasmus, Comenius
• people working in a Jobcentre Plus Work trial for 6 weeks
• members of the armed forces
• share fishermen
• prisoners
• people living and working in a religious community

HMRC took enforcement action against more than 700 employers last year who were each fined up to £5,000 for non-compliance with the NMW rules. HMRC also secured back pay for over 26,000 employees, to top up their wages to the appropriate NMW rate.

The NMW rates are changing from 1 October 2013:

• the main adult rate (for workers 21 and over) will increase by 12p to £6.31 an hour
• the rate for 18-20 year olds will increase by 5p to £5.03 an hour
• the rate for 16-17 year olds will increase by 4p to £3.72 an hour
• the rate for apprentices will increase by 3p to £2.68 an hour

Holiday businesses in Devon, Cornwall, North Wales, the Lake District and Blackpool area beware: the taxman has set up a further task force to seek out and bring to account business owners who are not declaring the correct information on their tax returns.

The taskforces are trained to focus on particular business sectors and may have some flexibility regarding the level of penalties they levy – this is likely to depend on how co-operative the defaulting tax payer is during their investigation.

It would be sensible for holiday businesses to get their house in order.

HMRC will be interested in a range of compliance activity and taxes. For example:

1. Payroll and PAYE compliance – particularly adherence to the new Real Time Reporting system. For businesses affected they will no doubt be asking questions about tips and gratuities and how these are treated for tax purposes.
2. VAT
3. Record keeping – this will include evidence of income and how this reconciles with booking diaries and systems. Do the numbers add up?

If your business operates in one of the targeted areas you would be well advised to review your systems, be prepared. Don’t wait until the brown envelope drops through your letter box.

Generally speaking, debts of a person’s estate are deductible for IHT purposes – though there are some circumstances where specific debts cannot be deducted such as where the deceased had previously made a gift to the person who made the loan. Following this year’s Finance Act, which became law on 17 July, there are several changes affecting deaths on or after that date.

The changes will affect deductions for debt in the following ways:

1. Generally, a deduction will be denied unless the debt is repaid on or after death out of the estate. However, a deduction may still be permitted where the debt has been retained for sound commercial reasons, and gaining a tax advantage was not one of the main purposes for keeping it.
2. Debts will not be taken into account as deductions for IHT purposes if they were taken out to purchase, maintain or enhance property excluded from IHT. If, however, the amount of the debt exceeds the value of the excluded property, and is not perceived to have a tax avoidance motive, then the balance may be allowed as a deduction. This will affect relatively few people.
3. Debts taken out to acquire property which benefits from business property relief or agricultural property relief must first be deducted from the value of that property with only the balance being deductible from the chargeable estate. Previously, debts were deductible from the value of the property on which they were secured (which was usually chargeable) rather than from the property they were used to acquire, so this change means that such debts may no longer obtain the IHT savings they previously did. However, following a change to the original Finance Bill, this particular rule only applies to debts incurred on or after 6 April 2013 – so arrangements existing at that date remain effective. Even so, this change will affect many who are farmers or run their own businesses (whether as sole traders, partnerships or companies) and take out new finance or possibly reorganise existing finance.

These changes could have a significant impact on estate planning. We recommend that any individual who is relying on a debt reduction to minimise future IHT payments should seek advice.

If you have been sent a tax return for any tax year up to 5 April 2012, and it has not been submitted, you may want to consider taking part in this campaign.

In a nut-shell HMRC are offering to look kindly on any penalties chargeable, as a result of late filing or late payment of any taxes due, as long as you submit all outstanding returns and pay any taxes shown to be payable.

To take part in this offer is fairly straight forward:

1. Firstly, you need to advise HMRC that you want to take part in the campaign – we can do this for you.
2. Secondly, you will need to complete and submit all the outstanding returns – again we can help.
3. And last, but not least, you will need to pay any taxes due.

There is a deadline you need to consider; you must complete all of the three stages set out above by 15 October 2013.

HMRC have offered to consider extended payment plans if your individual circumstances warrant this requirement.

Of course it may be that you are due tax refunds for certain years, and this will be determined when your returns are completed, in which case HMRC will make appropriate refunds to you. However, any refunds of tax for 2008-09 and earlier are time barred and cannot be repaid unless you have received an estimated determination of taxes due within the last twelve months, and this is greater than the tax found to be due.

The Budget 2013 included a stated intention that HMRC would be enabled to take a fresh look at the possible manipulation of profit and loss allocations from partnerships to secure a tax advantage. HMRC has since published a formal consultation on anti-avoidance legislation for LLPs. The effective date for proposed legislative changes is April 2014.

HMRC are particularly concerned that partners in LLPs may be receiving fixed profit share arrangements that are, in all other respects, salaries. This so-called “disguised remuneration” allows the recipients and the partnership to avoid certain Class 1 National Insurance contributions as well as producing some income tax advantages.

HMRC will also be taking a closer look at partnerships that have corporate members which will be paying Corporation Tax at the lower company rates.

The proposals in the consultation document are widely drawn and we will not know the final rules for some while yet. However, there are some core principles which are likely to make it to the final legislation. We would encourage all our readers who may be affected to make an appointment to discuss any potential implications for their tax position.

Employers please note that the National Minimum Wage rates are increasing from 1 October 2013. They will be:

• Apprentice rates: £2.68 per hour. * But see note below.
• Under 18s: £3.72 per hour.
• 18 to 20 years: £5.03 per hour.
• Age 21 years and over: £6.31 per hour.

*This is the rate for apprentices under 19 years old or in their first year. Those 19 years or over and past the first year of apprenticeship should be paid at the rate applicable to their age.

There are a number of circumstances where care needs to be taken in the way in which claims are made for the business use of a vehicle, usually a car, which has duality of use – business and personal. We have listed below a few issues that businesses and private car owners should be aware of.

1. If you are self-employed and your business assets include a car you should be reducing your claim for capital allowances, loan and HP interest and running costs based on your private use of the vehicle. The percentage added back should be based on a record of your private and total mileage.
2. Alternatively, if your business turnover does not exceed the VAT registration threshold (currently £79,000) you can use the fixed mileage rates referred to below. These do not cover loan interest and this can also be claimed subject to restriction for private use based on private and total mileage for the period claimed.
3. If you are employed and your employer requires that you use your own vehicle for business trips there are two aspects to consider: the rate per mile you are paid (HMRC allow you to receive up to 45p per mile for the first 10,000 business miles each tax year and 25p per mile thereafter) and the number of miles you claim. The 45p/25p rate HMRC allow is a maximum as regards being non-taxable. Employers are free to pay up to this limit without triggering benefit-in-kind issues. Again journeys should be logged and recorded to evidence the number of miles claimed.
4. If you have the use of a company car and your employer pays for your private petrol you will be liable to a hefty benefit-in-kind charge. You can eliminate this charge if you reimburse your employer for the cost of private petrol provided. Usually, the cost of any such reimbursement will be lower than the tax charge created by the benefit-in-kind assessment. The reimbursement can be calculated using the ‘advisory fuel rates’ on HMRC’s website and you will need to log your private mileage.

You will need to provide evidence should HMRC visit and select mileage claims for audit. Generally speaking you should:

• Record the postcode at the beginning and end of the journey so an accurate check can be made of mileage claimed. London to Birmingham would be too vague.
• The business miles claimed should not be rounded.
• Home to work mileage should be excluded.