Monthly Archives: July 2015

HMRC have now issued the first in-year PAYE penalties

HMRC have now issued the first in-year penalties notices to employers with fewer than 50 employees who missed the deadline for sending PAYE information to HMRC.

Rather than issue late filing penalties automatically when a deadline is missed, HMRC have announced that they will ‘take a more proportionate approach and concentrate on the more serious defaults on a risk-assessed basis.’

This approach is in line with the likely direction of HMRC’s general approach to penalties, outlined in the HMRC penalties: a discussion document which they issued earlier this year. HMRC have confirmed that this ‘risk-based’ approach will apply to submissions that were late from:

  • 6 March 2015 for employers with fewer than 50 employees; and
  • 6 January 2015 for employers with 50 or more employees.

Penalties for 2015/16 will also continue to be risk-based.

HMRC had previously announced that they will not be penalising minor delays of up to three days.

HMRC are reminding employers:

‘Even if employers do not get a penalty, they are required by law to file on time and if they do not may be charged a penalty on a future occasion. The deadlines for sending PAYE information stay the same, including the requirement to send PAYE information on or before the time that employees are actually paid or due to be paid.’

HMRC have confirmed the process employers should use to appeal a penalty using the using the Penalties and Appeals System (PAS) on HMRC Online. Employers who receive a late filing penalty notice for tax year 2014/15 quarter 4 but who filed within three days of the reporting deadline may appeal and should use reason code A as set out in the What happens if you don’t report payroll information on time guidance.

Please contact Stephen Charles if you would like help with your payroll or, for more information, please visit our payroll page.

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Chancellor gives Annual Investment Allowance certainty

The Chancellor announced in the Summer 2015 Budget that the Annual Investment Allowance will be set permanently at £200,000 from 1 January 2016. He has previously said that this would be included in the Autumn Statement, but this earlier announcement provides welcome certainty for businesses.

What is Annual Investment Allowance?

The AIA provides a 100% deduction for the cost of most plant and machinery (not cars) purchased by a business, up to an annual limit and is available to most businesses. This recent article explains the importance of this tax relief for the capital expenditure plans of a company or business.

The details

The AIA was increased to £500,000 from 1 April 2014 for companies or 6 April 2014 for unincorporated businesses until 31 December 2015. However it was due to reduce to £25,000 after this date. The level of the maximum AIA will now be set permanently at £200,000 for all qualifying investment in plant and machinery made on or after 1 January 2016.

Where a business has a chargeable period which spans 1 January 2016 there are transitional rules for calculating the maximum AIA for that period which operate as on previous occasions when the AIA has dropped. There will be two important elements to the calculations:

  • a calculation which sets the maximum AIA available to a business in an accounting period which straddles 1 January 2016
  • a further calculation which limits the maximum AIA relief that will be available for expenditure incurred from 1 January 2016 to the end of that accounting period.

It is the second figure that can catch a business out as demonstrated by the following example:

If a company has a 31 March year end then the maximum AIA in the accounting periods to 31 March 2016 will be:

9 months to December 2015 three quarters of £500,000 £375,000
3 months from January 2016 one quarter of £200,000 £50,000
Total annual AIA using first calculation £425,000

This is still a generous figure. However if expenditure is incurred between 1 January and 31 March 2016 the maximum amount of relief for will only be £50,000. This is because of the restrictive nature of the second calculation. Alternatively, the business could defer its expenditure until after 31 March 2016. In the accounting period to 31 March 2017, AIA will be £200,000. However, tax relief will have been deferred for a full year.

For more details and advice, please contact Brian Gooch on bjg@hawsons.co.uk or 0114 266 7141 or contact your local tax specialist in Sheffield, Doncaster and Northampton.

Changes for ‘Buy to Let’ landlords in Summer Budget

t was announced in the Summer 2015 Budget that the government will restrict the amount of income tax relief landlords can claim on residential property mortgage interest costs to the basic rate of income tax.

This means that residential landlords will no longer be able to deduct all of their finance costs from their property income. Tax relief will instead be restricted to the basic rate. To ease the impact the government will introduce this change gradually from April 2017, over four years.

This restriction will not apply to landlords of furnished holiday lettings. The mechanics of the restricted relief will mean that some taxpayers who are currently only liable at the basic rate will be subject to higher rate tax, and could result in some losing the benefit of their personal allowance.

Additionally, from April 2016 the government will replace the Wear and Tear Allowance with a new relief that allows all residential landlords to deduct the actual costs of replacing furnishings. This will bring relief back onto similar footing to that permitted prior to April 2013, with tax relief following actual expenditure.

For more information contact Peter Kennan at pjk@hawsons.co.uk.