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January
2015 eNews Contents
· VAT Moss new guidance
· Incorporation of a business
· Shared parental leave and pay
· Solicitors disclosure
· January Questions and Answers
· January Key Tax Dates
VAT
Moss new guidance
On 1 January 2015 the VAT law changed
for electronic services that are supplied digitally to non-business customers.
Those customers must now pay VAT on the e-service at the rate that applies in
the country where they receive the service. It's up to the supplier to work out
the VAT due, and pay that VAT to the local tax authority. There is no minimum
threshold of sales below which VAT is not due.
The UK has set up the VAT-MOSS system
to collect and pay over the overseas VAT payable by UK based suppliers. However,
in order to use the VAT-MOSS system a UK business must first be registered for
UK VAT.
HMRC say a business which is not
currently VAT registered in the UK, can register for UK VAT and the VAT-MOSS
system in one online application. After that the small business will not have
to apply VAT to its sales to customers in the UK, as long as the total value of
those UK sales are below the VAT registration threshold of £81,000. This is a
change in the VAT law, as previously a business which was VAT registered was
required to charge VAT on all its sales from the date it became VAT registered.
HMRC make it clear that the small
business does not have to formally split into two entities to use this special
VAT-MOSS status, in order to protect its UK customers from VAT. Only one
business entity will exist, but it will need to file nil VAT returns in the UK
every quarter, and VAT-MOSS returns for the overseas VAT collected in each
calendar quarter.
We can help you with those VAT returns
and answer any questions you have about you overseas VAT obligations.
Incorporation
of a business
When a business incorporates and
transfers its trade and assets to a company controlled by the seller, the
assets must be transferred at open market value for tax purposes. The assets
may include "goodwill" which is defined as the business reputation or
customer relationships, including the value of continuing contracts.
The transfer of the assets may
generate a taxable capital gain in the hands of the seller, as the assets will
have appreciated in value during the time they were used or created by the
first business.
Capital gains tax will arise on those
gains, but there are various tax reliefs that can be used to postpone or reduce
any tax payable. One of those reliefs is entrepreneurs' relief, which can
reduce the tax payable to only 10%.
The use of entrepreneur' relief has
been blocked for gains arising on the transfer of goodwill as part of an
incorporation on or after 3 December 2014. Entrepreneurs' relief is still
available to reduce tax from gains arising on other transferred assets, but not
from the goodwill.
If you are thinking of incorporating
your business, we should talk about which assets you want to transfer to the
company, and which you want to leave in your own name. Transferring land and
buildings will often carry an additional cost of stamp duty land tax. Planning
the transaction well in advance is the best way to reduce any tax payable.
Shared
parental leave and pay
Where a child is due to be born (or adopted)
on or after 5 April 2015, its parents will be entitled to share the 52 weeks of
maternity leave and 39 weeks of maternity pay or maternity allowance which is
currently available only to the mother. This ability to share parental leave
and pay will not apply in Northern Ireland until the Northern Ireland Assembly
passes the relevant regulations.
As an employer you need to be ready to
deal with claims from employees to share leave and pay, and to report details
of shared statutory parental pay in your RTI reports.
The parents generally have to give
8-weeks' notice of a period of shared parental leave, which can be taken at any
time within the child's first year (or first year after adoption). The leave
and pay must be taken in blocks of full weeks, but can start on any day of the
week.
The parents need to self-certify that
they both meet the following conditions for shared parental leave:
- they must be employed or
self-employed in Great Britain for 26 weeks in the 66 week period that ends
with the week before the birth (adoption) week; and
- they must have average earnings of
£30 or more each in at least 13 of those 26 weeks.
To qualify for shared parental pay the
parent must also have earned an average salary of at least the lower earnings
limit (£112 for 2015/16), for the 8 weeks prior to the 15th week before the
expected birth date. That pay threshold must be met by both parents if the
statutory pay is to be shared.
You don't have to check the facts
supplied on self-certified claim by the parents, but you must record the name
and NI number of the other parent (who is not your employee), who is sharing
the leave/pay to report to HMRC. We can help you with the reporting
requirements.
Solicitors
disclosure
As a qualified solicitor you need to
be very careful not to make mistakes on your tax returns, as a tax
investigation could do serious harm to your professional reputation. Taxpayers
who make deliberate errors that lead to tax underpayments of £25,000 or more,
may have the details of their name, address, amount of tax avoided and
penalties paid, published on the internet by HMRC.
HMRC are currently targeting
solicitors who have omitted income from their tax returns, and at the same time
are offering a chance for solicitors to disclose any errors before they receive
the call from HMRC.
This disclosure opportunity is open to
solicitors who work within the legal profession as a partner or employee in a
legal firm, or within a company. HMRC has promised that it will not publish the
details of solicitors using this disclosure campaign. However, to secure this
confidentially guarantee the taxpayer must make an accurate disclosure, and
co-operate fully with HMRC if asked to supply any further information following
the disclosure.
You can make a disclosure in respect
of your own tax return, or in respect of a tax return for a company or deceased
person's estate for which you act as director or executor. If you want to make
a disclosure you must first notify HMRC by 9 March 2015, then make a full
disclosure and pay all tax, interest and penalties due by 9 June 2015. We can
help you with those disclosures and the calculations of tax due.
January
Questions and Answers
Q. My company has some surplus cash
which I would like to use to support a local charity. Can the company make the
donation directly or do I have to make a personal donation so it qualifies for
Gift Aid, and the charity can claim the tax back?
A. Companies can make charitable
donations under Gift Aid, but those gifts are made without deduction of tax, so
the charity does not reclaim tax on the gift.
The company's gift is treated as an
expense and deductible from its profits as long as the company has profits for
the accounting year in which the gift was made. The value of the gift cannot
change a profit into a loss, increase a loss, or be carried forward as an
expense for a future period. The gift must also not be subject to conditions
which would make it repayable by the charity, and you or the company must not
receive significant benefits from the charity.
Q. I recently turned 60 and I have an
idea for a new business venture. I want to take £20,000 from my personal
pension scheme to invest in my new business. Can I do that without paying tax
and may I continue to make pension contributions after I extract that lump sum?
A. You will be able to make any
withdrawals you wish from your pension fund after 5 April 2015. Before that
date there are restrictions over how much you can withdraw, but you can still
take 25% of your fund as a tax-free lump sum. Any amount taken in excess of the
25% tax-free lump sum (before or after 5 April 2015) will be taxed at your
marginal tax rate, and that will depend on the level of your other income for
the tax year. However, you don't pay national insurance on your pension scheme
withdrawals.
You can continue to make pension
contributions after you withdraw the lump sum of £20,000, but your
contributions may be capped at £10,000 per year. The conditions surrounding
this cap are complex and will depend on the specific attributes of your pension
scheme.
Q. I love knitting, and I sell the
occasional knitting pattern I have designed through my website. Do I have to
charge VAT when I sell to overseas customers? This is a tiny part of my income
and I am not registered for VAT in the UK.
A. The requirement to charge VAT to
the overseas non-business customers depends on exactly how you supply those
knitting patterns, and where those customers are based.
If you receive an order through your
website, and send out a paper version of the pattern, that is not an electronic
service, so no VAT applies.
If you send out the patterns as PDF
files or similar electronic images attached to an email, which is an electronic
service, so you may have to charge VAT at the rate that applies in the EU
County where your customer is located. However, that VAT is only chargeable if
the knitting pattern is automatically delivered over the internet. This means
there is little or no human intervention in the delivery process. As you sell
only a few patterns to overseas customers you will probably personalise your
email to each customer containing the requested pattern. That human
intervention removes requirement to charge VAT to the overseas customer.
January
Key Tax Dates
1 - Due date for payment of
Corporation Tax for the year ended 31 March 2014
14 - Return and payment of CT61 tax
due for quarter to 31 December 2014
19/22 - PAYE/NIC, student loan and CIS
deductions due for month to 5/1/2015 or quarter 3 of 2014/15 for small
employers
31 - Deadline for filing 2014 Self
Assessment personal, partnership and trust Tax Returns - £100 first penalty for
late filing even if no tax is due or tax due is paid on time
- Balancing self assessment payment
due for 2013/14
- Capital gains tax payment due for
2013/14
- First self assessment payment on
account due for 2014/15
- Interest accrues on all late
payments
- Half yearly Class 2 NIC payment due
- Further penalty of 5% of tax due or
£300, whichever is greater for personal tax returns still not filed for 2012/13
- 5% penalty for late payment of tax
unpaid for 2012/13 self assessment
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