Access Accounting - Blog

Reverse Charge VAT Go-ahead to Beat Carousel Fraud

Well, last Friday it was reported that HMRC had received the go-ahead from the EU to bring in a significant change to the VAT rules to combat carousel fraud. Carousel fraud is where goods are continually imported and exported from the UK to generate VAT refunds for inter-trading companies who then disappear.

The Government report believes that this is costing the taxpayer £1.9 billion each year. An independent European report estimated that the cost to the UK could be as much as £18 billion! (That equates to around 3p on the basic rate of tax).

For the accounting software industry, there is a significant challenge in changing the software to meet the new VAT rules, which HMRC are bringing into effect from 1st December this year.

Two major software vendors estimated between 7 – 18 months to implement the new changes in their software. I guess that Access is fortunate in that our size means that we can be more responsive to such demands. The new rules bring in a reverse charge for certain small high-value goods. If you are buying these specific high value goods you will be responsible for both claiming back the input tax and paying the output tax on the purchase. If you are selling such goods in a business to business environment then you will not collect the VAT on the sale but will need to detail the tax for the purchaser to pay. The change will mean that the treasury will not be exposed to the carousel fraud – but the complexity of our UK VAT regime will grow considerably.

UPDATE 31/10/06: Since writing this blog we have issued a press release on the forthcoming launch of our reverse charge VAT functionality.

Kevin Misselbrook

Age Discrimination Legislation - Don't Get Caught Out

On 1 October 2006 the Employment Equality (Age) Regulations comes into force. The scope is wide-ranging, effecting recruitment, promotion & training opportunities,  as well as long service payments and redundancy payments. Payroll departments, no matter how large or small need to be aware that these regulations will potentially have an immediate effect on the payroll, and check that they can update their current payroll system in order that it is compliant with the changes effective from that date.  I've outlined below a synopsis of what the regulations entail:

Removal of the lower age limit for the payment of statutory payments

Under 16's will be classed as employees and will then be entitled to Statutory Maternity Pay (SMP), Statutory Paternity Pay (SPP) and Statutory Sick Pay (SSP), even though they are not currently liable to pay National Insurance contributions. For the payment of SMP and SPP, the removal of the lower age limit will apply to all women with a baby due on or after 14 January 2007. This may mean that average earnings need to be calculated from as early as July 2006. The lower age limit is also being removed in respect of Statutory Adoption Pay (SAP), however as UK regulations prevent anyone under the age of 21 from adopting this aspect is not an issue. As SSP is not currently payable for under 16's prior to 1 October, even if they are midway through a Period of Incapacity for Work (PIW), their entitlement will only commence from 1 October and waiting days will need to be served from the first qualifying day after that date, and all other current rules followed.

Removal of the upper age limit for the payment of SSP

Employees aged 65 or over will be entitled to receive SSP (there is no current upper age restriction for SMP, SAP and SPP). Prior to 1 October there is no entitlement to SSP if the employee is aged 65 or over, unless they reach their 65th birthday midway through a PIW, in which case the entitlement continues until the end of the absence, or linked absences. From 1 October if an employee aged 65 or over is absent which does not link to a previous PIW, and if all other qualifying conditions are met (e.g. average earnings exceed the Lower Earnings Limit for NICs),  then they would have an entitlement to receive SSP. If the employee has been off sick previously which would link to the new period of sickness, then the qualifying conditions as at the start of the first linked PIW must be reconsidered (excluding age). Where an employee is off sick straddling 1 October again the qualifying conditions as at the start of the PIW will need to be reconsidered, and if the employee was excluded on the grounds of age only, then waiting days will be served from the first qualifying day after that date and SSP will become payable.

With the 1st October fast approaching, time is of the essence. If you haven't already done so, it would definitely be a good idea to check your systems now!

Pip Trowles

Feel Good by Payroll Giving

What is Payroll Giving?

Payroll giving is an easy way for you to make tax-free donations to your chosen charity. For each £1 gross you wish to donate, only 78p will be deducted from your pay if you are a standard rate tax payer.  This means you can give money to your favourite charity every pay day in the knowledge that they will be better off by an extra 22% - or 40% if you are a higher rate tax payer.

How does it work?

If your employer does not already run a Payroll Giving scheme you will need to persuade them to start one. It is easy and inexpensive to run, and if they are an SME (with less than 500 employees) they will be eligible for a grant of between £300 and £500 if they sign up to a scheme before the end of December 2006. Additionally, a grant matching the employee contributions (up to the first £10 per month) will be paid for the first 6 months, up to the end of March 2007.

It's easy for your company to set up - all they need to do is sign up with a Payroll Giving Agency - a list of these can be found at http://www.payrollgivinggrants.org.uk/. Each pay period they will need to collect the donations from their employees, and each month send the money to the Payroll Giving Agency by BACS or cheque, together with a listing of the employees and the amount of their donations. The employee will have completed a form instructing the agency with the details of the charity they wish to donate to, and if they wish to change the charity, again, this is done direct with the agency and not via the employer.

How much does it cost?

There are little or no costs to the employer - all payroll systems offer the facility to make charitable deductions, and if they are eligible for the grant this will more than offset any start-up costs. The agency does charge a small administration fee per donation which can either be deducted from the donation or be paid by the employer and offset against company profits.

So everyone can feel good - the employee by knowing that they can make tax-efficient regular donations to their favourite good cause, the employer by demonstrating that they are committed to working in partnership with the community and care about their employees, and the charity because they know they will receive regular, committed income which enables them to plan for the future.

Pip Trowles

Preparation for CIS Scheme

In April 2007 the Government introduces a new scheme to manage the tax liability of sub-contractors involved in the construction industry.  The new scheme replaces old manual vouchers,  grubby certificates, and annual returns.  The scheme simplifies the variety of ways in which a sub-contractor might be categorised.  It will allow contractors to verify the identity and tax status of subbies on-line and will require that companies make monthly returns, with on-line submission being the preferred route.  However, as with all new systems the transitionary period might be painful.  Companies will need to ensure that the data that they hold on their sub-contractors matches exactly the data held by HMRC.  A mis-match in a sub-contractors name will result in the whole return being rejected.  HMRC will be providing companies with either listings or CDs containing the data identities of sub-contractors that the company has employed within the last 2 years.  For larger companies it will be a task of some magnitude, to match this HMRC data against their own records.  The Access CIS software will contain tools to assist with this matching process. For those companies that have traded with less than 125 subcontractor records then they will only receive a paper listing from HMRC.  In these cases a manual reconciliation process will be required.  It is obvious that companies need to plan well in advance to ensure that their data will be "cleaned" and prepared for the new scheme.

Kevin Misselbrook         

Return of Expenses & Benefits – It’s not too late!

The last date for submitting forms P11D, P9D and P11D for the 2005/06 tax year is nearly upon us, these forms need to be submitted to HMRC by 6 July 2006, and copies of the P11D and P9D forms given to the employees by the same date. These should cover all expenses and benefits paid to employees which are not covered by a dispensation or PAYE settlement agreement.

P11D’s and P9D’s can be submitted on paper, by magnetic media or electronically (via the Internet or EDI) to HMRC. If your payroll software does not support an electronic method of submitting these forms then you can still submit them online by using the HMRC PAYE for Employers online service, although this method is best suited for employers with fewer than 50 employees.

Any Class1A NICs due must be paid to HMRC by 19 July if the payment is sent by post or cash, or 21 July if paying electronically (as the 22 July falls on a weekend).

Pip Trowles