Monthly chores for CIS contractors

Posted on 11th May 2023 by Solutions Accountancy

The Construction Industry Scheme (CIS) is a set of special rules covering tax and national insurance for those working in the construction industry. Businesses in the construction industry are known as 'contractors' and 'subcontractors' and should be aware of the tax implications of the scheme.

Under the scheme, contractors are required to deduct money from payments to subcontractors and pass it to HMRC. The deductions count as advance payments towards the subcontractor’s tax and National Insurance.

Monthly returns must be submitted online. The monthly return relates to each tax month (i.e., running from the 6th of one month to the 5th of the next). The deadline for submission is 14 days after the end of the tax month. Even if no subcontractors have been paid during a month, contractors still have to make a nil return. All contractors are obliged to file monthly returns even if they are entitled to pay their PAYE quarterly. The returns can be filed  using the HMRC CIS online service or commercial CIS software. There are penalties for late returns.

Contractors who have not paid subcontractors in a particular month are required to submit a 'CIS nil return' or notify HMRC that no return is due. If this is likely to be a longer term ‘nil return’, then the contractor can contact HMRC to make an inactivity request stating they have temporarily stopped using subcontractors. This request lasts for 6 months. You must notify HMRC if you start using subcontractors again during this period. 

Contractors are defined as those who pay subcontractors for construction work or who spent more than £3m on construction a year in the 12 months since they made their first payment.

Cost of living payments 2023-24

Posted on 11th May 2023 by Solutions Accountancy

The Cost of Living support package has been designed to help over 8 million households in receipt of mean tested benefits. The details for Cost of Living Payments due in the 2023-24 tax year have been published. 

Eligible recipients will receive up to 3 Cost of Living Payments of £301, £300 and £299. This includes those receiving pension credit. These payments will be made separately from other benefit payments.

The payments are expected to be made as follows:

  • £301 paid between 25 April 2023 and 17 May 2023 for most people on DWP benefits
  • £301 paid between 2 and 9 May 2023 for most people on tax credits and no other low income benefits
  • £300 paid during autumn 2023 for most people
  • £299 paid during spring 2024 for most people

There are also additional payments that may be made such as a Disability Cost of Living Payment of £150 that is expected to be paid to qualifying individuals during the summer.

An additional one-off payment of £150 or £300 will be paid to pensioners during winter 2023-24. The Winter Fuel Payment is provided by the government to help older people keep warm during winter. The amount a pensioner will receive depends on a number of factors including their age and the age of other people living with them.

HMRC’s guidance on the payments has been updated to clarify that claimants will not get a Cost of Living Payment for a low income benefit if their benefit is reduced to £0 because they received a ‘sanction’. They may still receive a Cost of Living Payment if they had a 'hardship payment' because they received a 'sanction'.

Withholding tips from staff now unlawful

Posted on 11th May 2023 by Solutions Accountancy

A new law that stops employers from withholding tips from people working in the hospitality, leisure and services sectors has come into force. The Employment (Allocation of Tips) Act 2023 received Royal Assent on 2 May 2023. 

The Bill makes it unlawful for businesses to hold back service charges from their employees, ensuring staff receive the tips they have earned. The measures are expected to come into force in about a year, following a consultation and secondary legislation.

This means that more than 2 million workers will have their tips protected. HMRC has estimated that this new law will mean an estimated £200 million a year will go back into the pockets of hard-working staff by retaining tips that would otherwise have been deducted.

A new statutory Code of Practice will also be developed in order to provide businesses with advice on how tips should be distributed among staff. This Code is being developed and will be subject to formal consultation later this year.

Workers will also be given a new right to request more information relating to their employer’s tipping record, which will help them to bring forward a credible claim to an employment tribunal.

The Business and Trade Minister said:

'As people face rising living costs, it is not right for employers to withhold tips from their hard-working employees. Whether you are pulling pints or delivering a pizza, this new law will ensure that staff receive a fair day’s pay for a fair day’s work – and it means customers can be confident their money is going to those who deserve it.'

National Insurance for company directors

Posted on 11th May 2023 by Solutions Accountancy

Directors are classed as employees and pay National Insurance on annual income from salary and bonuses that exceeds the Primary Threshold. The annual threshold is £12,570 in the current 2023-24 tax year.

Many director shareholders take a minimum salary and any balance of remuneration as dividends. This tends to reduce National Insurance Contributions (NICs), and in some case income tax. The planning strategy is to pay a salary at a level that qualifies the director for state benefits, including the State Pension, but does not involve payment of any NICs.
 
A director’s liability to NI is worked out based on their annual (or pro-rata annual) earnings. This differs from regular employees whose liability is calculated based on their actual pay period, usually weekly or monthly. Payments on account of a director’s NICs can be made in a similar way as for employees. However, an annual adjustment must be made at the end of the tax year.

Directors, who are first appointed during a tax year, are only entitled to a pro rata annual earnings band which depends on the actual date appointed and on the amount of time remaining in the tax year. Care needs to be taken in these circumstances to avoid an unexpected liability to pay NIC.

There are a number of considerations to take into account when setting the most tax/NIC efficient salary/dividend package. Please call if you need advice in this area.

Business Relief for IHT

Posted on 11th May 2023 by Solutions Accountancy

There are a number of reliefs available that can reduce liability to Inheritance Tax (IHT).

One of these reliefs is known as IHT Business Relief and is a valuable tax relief for taxpayers with business interests, offering either 50% or 100% relief from IHT on the value of the business assets if certain conditions are met. For example:

  • 100% Business Relief can be claimed on a business or interest in a business or on shares held in an unlisted company.
  • 50% Business Relief can be claimed on:
    • shares controlling more than 50% of the voting rights in a listed company;
    • land, buildings or machinery owned by the deceased and used in a business they were a partner in or controlled; and
    • land, buildings or machinery used in the business and held in a trust that it has the right to benefit from.

Relief is only available if the deceased owned the business or asset for at least 2 years before they died. There are a number of restrictions to the relief, for example if the company in question mainly deals with securities, stocks or shares, land or buildings, or in making or holding investments. In some cases, partial Business Relief may be available.

What is a P11D?

Posted on 11th May 2023 by Solutions Accountancy

A P11D form is a form used by employers to list certain ‘benefits in kind’ provided to directors or employees. P11D forms are used to provide information to HMRC on all Benefits in Kind (BiKs), including those under the Optional Remuneration Arrangements (OpRAs) unless the employer has registered to payroll benefits. This is known as payrolling and removes the requirement to complete a P11D for the selected benefits. The P11D form is submitted annually to HMRC.

The deadline for submitting the 2022-23 form is 6 July 2023. The form can be submitted using commercial software or via HMRC’s PAYE online service. Paper P11D and P11D(b) forms are no longer accepted by HMRC. Employees must also be provided with a copy of the information relating to them on these forms by the same date.

A P11D(b) is still required for Class 1A National Insurance payments regardless of whether the benefits are being reported via P11D or payrolled. The deadline for paying Class 1A NICs is 22 July 2023 (or 19 July if paying by cheque).

Where no benefits were provided from 6 April 2022 to 5 April 2023 and a form P11D(b) or P11D(b) reminder is received, employers can either submit a 'nil' return or notify HMRC online that no return is required. Employers should ensure that they complete their P11D accurately, including all the details of cars and loans provided. There are penalties of £100 per 50 employees for each month or part month a P11D(b) is late. There are also penalties and interest for late payments.

Any tax or National Insurance due for 2022-23 under a PAYE Settlement Agreement (PSA) needs to be paid electronically to clear into HMRC’s bank account by 22 October 2023 (19 October 2023 for payments by cheque). This does not need to be reported on a P11D.

The winds of change

Posted on 9th May 2023 by Solutions Accountancy

A new King, the possibility of a change of government next year, and signs that we may, at last, be emerging from the disruptions created by Brexit and COVID.

Meanwhile, back at helms of our small business sector firms, entrepreneurs are obliged to deal with the challenges that have arisen in recent years. Including:

  • Inflation
  • Crippling energy cost rises
  • Supply chain difficulties, and
  • The lack of qualified staff – affecting service industries, farming and manufacturing.

It’s as if the UK economy is becalmed, in the doldrums, waiting for the winds of change.

What do we need?

  • Price stability, inflation reduced to 2% not 10%.
  • A reduction in the cost of energy.
  • Less red tape when trading (importing and exporting) in the EU post Brexit.
  • Access to European and other global labour markets.

Readers who are suffering from these and other issues would do well to keep revisiting their business plans for the coming year to head-off cash-flow and solvency concerns. Please call if you would like to discuss your options.

Simplified tax system for savers

Posted on 4th May 2023 by Solutions Accountancy

The government has announced a number of new measures to help millions of people boost their future savings. One of these measures is a simplification of the Help to Save scheme.

The Help to Save scheme was launched by the government in September 2018 to help those on low incomes to boost their savings. Under the scheme, those eligible could save between £1 and £50 every calendar month and receive a 50% government bonus. The 50% bonus is payable at the end of the second and fourth years and is based on how much account holders have saved. The bonus is paid directly into the account holder’s chosen bank account.

It was announced as part of the Spring Budget measures that the government will extend the Help to Save scheme by 18 months, on its current terms, until April 2025. The government will examine how the scheme can be made simpler by reforms to how its bonus is calculated, the length of time an account can be open for and eligibility requirements, all with the aim of enhancing long-term savings habits.

The government also wants to address the fact that parents who have not claimed Child Benefit could miss out on building their state pension. Those affected will in future be able to claim National Insurance credit retrospectively. Further details will be published in due course.

New Bill to crack down on online fraud

Posted on 4th May 2023 by Solutions Accountancy

New legislation aimed at cracking down on rip-offs, protecting consumer cash online and boosting competition in digital markets has been published. 

The new far-reaching Bill will have the following headline benefits:

  • New powers aimed at boosting competition in digital markets currently dominated by a small number of firms.
  • Clamping down on subscription traps that cost consumers £1.6bn a year, making it easier for consumers to opt out when a free trial or introductory offer is ending.
  • Tackling fake reviews so customers aren’t cheated by bogus ratings.

As part of these measures, the Competition and Markets Authority (CMA) will be given new powers to tackle businesses that breach consumer rights law. The Bill will provide the CMA with stronger tools to investigate competition problems and take faster, more effective action, including where companies collude to bump-up prices at the expense of UK consumers.

The CMA will be able to directly enforce consumer law rather than go through lengthy court processes. Both the CMA and the courts will have the power to impose penalties on businesses of up to 10% of global turnover for breaching consumer law or up to £300,000 in the case of an individual.

The new measures will come into effect as soon as possible following parliamentary approval, subject to secondary legislation and the publication of guidance.

Reminder to look out for tax credit renewal packs

Posted on 4th May 2023 by Solutions Accountancy

HMRC is currently sending the annual tax credit renewal packs to some 1.5 million tax credit claimants and is encouraging recipients to renew their tax credits claim online. HMRC started writing to taxpayers on 2 May and expects all packs to be with recipients by the 15 June 2023. 

A renewal is required if the pack has a red line across the first page and it says, 'reply now'. Families and individuals that receive tax credits should ensure that they renew their tax credit claims by 31 July 2023. Claimants who do not renew on-time may have their payments stopped. Around 500,000 taxpayers are expected to receive these packs and can renew their tax credits via GOV.UK or on HMRC’s app.

If the renewal pack has a black line across the front page and says ‘check now’, then you will need to check your details are correct. Taxpayers need to notify HMRC where there have been changes to the family size, childcare costs, number of hours worked and salary. Details of previous year's income also need to be completed on the form to allow HMRC to check if the correct tax credits have been paid. Claimants must also inform HMRC of any changes in circumstances not already reported during the year such as new working hours, different childcare costs or changes in pay.

Universal Credit is expected to fully replace tax credits, and other legacy benefits (including Income-Related Employment and Support Allowance, Income-Based Jobseeker’s Allowance) by the end of 2024. This means that claimants who receive tax credits will receive a letter from the Department for Work and Pensions (DWP) telling them when to claim Universal Credit.