Time to Make Sure your PAYE Payments are Made on Time

It has been long-threatened, but the introduction of in-year interest being charged by HMRC on late payments of PAYE and National Insurance Contributions is now a reality. The change came into effect from the start of the 2014/15 tax year and means that from 20th May 2014 any payments that are late (i.e. after the 19th of the following month or 22nd if paid electronically) will be subject to an interest charge at a rate of 3% per annum from the date payment is due to the date that it is paid in full. This interest will similarly be charged on late payments of Construction Industry Scheme charges. Previously, HMRC had not charged interest on late-payments provided that the payments were brought up to date by 19th April following the end of the tax year but unfortunately that grace period no-longer applies so it is more important than ever that you make your payments on time. Annual payments such as the payment of Class 1A and Class 1B National Insurance Contributions will continue to to be charged interest on any amounts which remain unpaid after the annual due date.

On a brighter note, HMRC has indicated that in-year interest will also be paid to employers in the event of over-payments being made where an employer makes a payment and the charge is subsequently reduced. This will happen regardless of whether the over-payment is repaid or simply reallocated against a later charge. Unlike other changes that have been made regarding PAYE and CIS recently where there has been one set of rules for the taxpayer and one for HMRC, it at least appears that there will be an even-handed approach in this respect.

Motor Expenses under Attack by HMRC

HMRC have won a significant case relating to motor expenses which, if not subject to a successful appeal by the appellant, Dr Samadian, is likely to be extremely bad news for business owners in general and professionals who have a home office base.

The doctor in question lost his claim to deduct travel expenses from his home office to the hospitals where he undertook private work.  One of the most significant factors in the decision against Dr Samadian was the fact that there was a mixed motive involved in the traveling, as this involved returning to the place where he lived.

There was no doubt in this case that the doctor performed a significant amount of his professional services at his home office, as indeed many professionals do.  HMRC attacked both journeys between his home and the locations for the private clinics, and also journeys from NHS hospitals, where he was employed, and the private clinics.

HMRC successfully argued that the motive, objective, and purpose of Dr Samadian’s journeys between his home and the private hospitals were to take him from the location where he lived and to get him back to it.  Despite the business activity that was undertaken at his home office, it is evident that part of the expenditure was simply to get him to and from his home.  For expenditure to be deductible for a business it has to be “wholly and exclusively” for the purpose of the business.  Where there is mixed use, then it cannot fulfil this test and there have been a number of court cases that have upheld this decision.

Whilst this seems in essence to be extremely unfair, the law is the law, and if the decision is not overturned on appeal it will stand.  Armed with this new weapon in their armoury you can expect an attack on travel expenses where such travel includes journeys between home and a regular workplace.

If you feel that you are affected, then you need to discuss this with your accountant to determine a plan of action.  Alternatively please contact us at DEB Chartered Accountants where we would be delighted to discuss this or any other business matter with you.

HMRC Gives With One Hand….. Then Takes Away With The Other

Great publicity has been given to the new Employer’s Allowance whereby employers can reduce their Class 1 National Insurance liability with effect from 6th April 2014 by up to £2000.  This is aimed at encouraging businesses to take on new employees where the cost of National Insurance can be a significant disincentive.  Surely this is good news for all business owners?  But apparently not!  Not  all businesses can claim the  allowance – there are many exceptions.   You thus need to ensure that your business is not excluded.  If you wish to know if you are eligible for this allowance you should consult your accountant, or indeed speak to us at DEB.

It is not all good news however. As is so often the case, HMRC bestows benefits upon us but then takes away at the same time.  The Percentage Threshold Scheme enables employers to recover some of the Statutory Sick Pay paid to their employees if the total falls below certain limits.  This enabled small employers to recover the larger part of any Statutory Sick Pay that they incur when their employers are absent due to illness.  However,  from now on the cost of SSP falls fully upon the employer.  The associated reduction of the related record keeping requirements will provide little compensation for the cost that now falls squarely on employers, no matter how small.

There will be winners and losers from these changes.  Employers who are not excluded and who have little or no employee absence will win.  Those who are excluded and who have high absenteeism due to illness will feel the full impact of the new changes.  Many will fall between the two extremes.  Indeed the Government suggest that employers should be able to compensate for the loss of SSP by being able to manage sickness absence.  Of course they will, won’t they?

Those of us old enough to remember will recall a time when sickness benefit was something that was paid via the post office and was nothing to do with employers.   This was replaced by employers being given the task and cost of administering and paying SSP with the ability to recover the cost from their PAYE/NI contributions along with compensation for their efforts.  First the right to recovery for larger businesses was removed, and now it applies to all businesses.  Thus the cost of SSP has been successfully transferred from the Government to business owners.   Strangely, this news hasn’t received as much publicity.