Christmas Pay Dates

Last Christmas, HMRC gave employers a temporary easement on reporting payroll information in real time, this year to save us from tears, they’ve given it to us again!

With December fast approaching, HMRC have presented us with an early Christmas gift in the form of a bulletin. This bulletin provides advice on what dates should be included on your Full Payment Submission (FPS) during the festive period. Regardless of whether you intend to pay your employees early at Christmas, you must still report your payroll with the normal payment date, even if the usual pay date falls on a weekend or bank holiday.

For example: if you pay on Friday 20 December 2019 but the normal/contractual payment date is Tuesday 31 December 2019, you should still report the payment date on the FPS as 31 December and ensure the submission is sent on or before 31 December.

The rationale behind this is to protect your employee’s eligibility for Universal Credit, as the assessment period for Universal credit is determined upon the dates submitted on the FPS.

Universal Credits are a social security payment, provided to those on low earnings or out of work to support them with daily living costs. If it looks as though someone has received two payments in one assessment period, it may affect their eligibility for Universal Credits and therefore leave them struggling financially.

Although the easement is only applicable for the Christmas pay period, ensuring you submit your FPS on the regular pay date should be applied throughout the remainder of the year.

For example, where an employee who is normally paid on the 30th of each month but is paid on the 29th in November 2019 (as the 30 November is a Saturday, which is a non-banking day) the employee must have 30 November reported as the payment date.

So remember, submitting your FPS with your regular payment date should be applied for life, not just for Christmas!

UK Income Tax Liabilities regarding Offshore Matters

New legislation has introduced a legal requirement for UK taxpayers who have undisclosed UK tax liabilities to income tax, capital gains tax and inheritance tax in respect of offshore matters to disclose the relevant information to HMRC by 30 September 2018.  This is known as the Requirement to Correct (RTC).

The penalties for failure to correct (FTC) start at 200% mitigated to a minimum of 100% of the tax.  There can also be asset-based penalties in more serious cases.

With effect from 1 October 2018, the Common Reporting Standard will be introduced under which 100 jurisdictions will exchange financial account information on residents’ investments offshore hence the need to report any undisclosed liabilities by the 30 September 2018.

When the legislation was first drafted it was thought it was intended to target deliberate tax evasion, such as routing undeclared UK income through off shore structures. However over the course of the last few months it has become clear that HMRC will be taking a more aggressive approach even in cases where an innocent error has occured.

In brief, a person must correct any offshore tax non-compliance, including failure to notify chargeability to tax or failure to submit a Return that should have been submitted.

The RTC covers tax years as far back as 2013/14 if a failure has occurred but the taxpayer has taken reasonable care, back to 2011/12 if behaviour was careless and back to 1997/98 if the behaviour is deliberate.

If you have any assets overseas, for example holiday homes, letting income, bank interest, then Pierce can help you prepare for the new legislation.

For further information, please contact Anne Wilson on a.wilson@pierce.co.uk or call 01254 688 100.

R&D Tax Credits – Are you like many others missing out?

The Research and Development (‘’R&D’’) tax credits legislation has been around for a number of years, but it is still estimated that a vast majority of eligible businesses are not making a claim.

Many businesses are unaware that their activities are R&D qualifying for tax purposes which can lead to significant corporation tax savings or cash repayable credits from H M Revenue and Customs. Such activities can include making bespoke products, product development and changes to manufacturing techniques and processes.

Tom Wilkinson, Associate Director of Blackburn-based accountancy firm Pierce, talked to the Chamber about the legislation. ‘’It is staggering how many eligible businesses there are out there who are not making a claim for R&D tax credits. Part of this is due to poor or non-existent professional advice, but a key factor is that of the awareness of the legislation with is much broader than many realise. I was speaking to a senior tax barrister just before the Christmas break who says HMRC believe some 87% of eligible businesses for R&D are not making a claim!’’

The R&D tax credits system means that companies can claim 230% tax relief on qualifying expenditure which can be attributed to directly to R&D activities, rather than a standard 100% relief. Such expenditure includes materials consumed in R&D and staffing time expended on R&D as well as software, consultancy and utilities costs incurred on qualifying activities. In numbers terms, an R&D spend of £50,000 would result in a company being able to reduce its profits chargeable to corporation tax by an additional £65,000 (£50,000 x 130% extra relief) saving corporation tax of £13,000 at the current UK company corporation tax rate of 20%. There is also relief available for loss-making businesses by way of a repayable tax credit from H M Revenue and Customs.

Tom added ‘Some people have suggested this is a sort of tax-avoidance scheme, which is not the case at all, in fact HMRC are encouraging the legislation and there are some 60 equivalent schemes worldwide. The legislation is there to encourage growth and innovation in the UK. Some of the types of companies I have done claims for include all sorts of manufacturing companies, engineering, food and drink, technological and even construction. Whilst many businesses qualifying activities can be clearly evident, it is surprising how many businesses are undertaking tax-qualifying R&D work without realising it. I recall last year going to see a client about a completely separate matter, a business restructure project, when we started discussing activities on the shop floor and it was evident some of the work being undertaken was R&D qualifying and a subsequent claim was successfully made’’

‘’My advice to businesses who believe they potentially qualify for R&D would be to have a think about what their key business technical challenges have been in the past two or three years. You can potentially go back two previous financial years to make an R&D claim. Once you have considered such potential activities, please do feel free to engage with me on a no-obligation basis and we can discuss whether a potential claim could be made with HMRC. So far we have a 100% success rate and an excellent working relationship with the specialist units at HMRC and have saved local companies over £2.5m in the process’’.

Contact

Anyone interested in finding out more can call Tom Wilkinson on 01254 688100 or email at t.wilkinson@pierce.co.uk