HMRC is running a ‘campaign’ targeting businesses which haven’t made VAT returns by the due dates; to receive the best possible terms, taxpayers must complete and submit returns by 28 February 2013. Employers will have to deal with two big changes in the coming months – real time information (RTI) and auto-enrolment. The increase in the annual investment allowance from 1 January 2013 should incentivise businesses to increase their expenditure on qualifying plant and machinery, but care must be taken when advising on the transition.
With all personal tax returns (hopefully) now safely filed, there are, nevertheless some other significant tax return issues to be addressed. Furthermore, the draft Finance Bill has been followed by a number of further consultations on specific proposals. In particular, further anti-avoidance legislation has been issued as has the draft legislation on the restating of the 120% limit for income drawdown and the promised relief for inadvertent remittances by non-domiciliaries. The HMRC website pages on the Finance Bill – available via www.lexisurl.com/FB – is well worth keeping an eye on.
VAT returns
HMRC recently announced yet another ‘campaign’ with this one particularly aimed at targeting an estimated 50,000 businesses identified as not having made VAT returns by the due dates. It is being publicised as ‘an opportunity for businesses to bring their VAT returns and payments up to date’, running from 9 January, and advises that, ‘to receive the best possible terms’ taxpayers must complete and submit returns by 28 February 2013’. It does not however indicate what these ‘best possible terms’ are. HMRC has stated that, if businesses have not submitted their outstanding VAT returns and paid what they owe by this date, it will use its legal powers to pursue outstanding returns and any VAT unpaid; penalties, or even criminal investigation, could follow.
Typical penalties would normally include default surcharges ranging from 2% to 15% on top of the VAT that is due and payable. However, where HMRC determines that a business has purposely failed to submit a return, it could potentially invoke a maximum 100% penalty of the tax due as ‘a deliberate understatement aggravated by concealment’.
Don’t forget that, if you are aware of a client deliberately withholding tax payments, or failing to submit a return, you may need to consider whether you have an obligation to make a specific activity report under the Proceeds of Crime Act 2002.
Employers: RTI and auto-enrolment
Employers will have to deal with two big changes in the coming months – real time information (RTI) and auto-enrolment. As most readers will be aware, RTI is the most radical shake-up to the PAYE system since its creation in 1944. Employers, with very few exceptions, will have to file a return online (a Full Payment Submission) every time payments are made to employees. The key is that RTI will start for most employers in April 2013 and there is a lot of work to do before then. Specifically, employers must ensure that their payroll software will be RTI-compliant (or else make alternative arrangements), a comprehensive data cleansing exercise must be undertaken to ensure that key data items (full name, date of birth, NI number and so on) on every employee are correct and, of course, staff must be trained in the operation of RTI.
Compared with the ‘big bang’ of RTI, auto-enrolment may creep up on employers as, at the start of each month between now and November, a new ‘staging date’ will be reached, triggering the commencement date of auto-enrolment for another group of employers. By 1 November all employers with more than 500 employees must be offering an appropriate pension scheme, automatically enrolling most of their employees in it (there are some limited exceptions) and making contributions, set initially at a minimum of 1% (smaller employers will be phased into the scheme over the following four years or so). As with RTI, preparation is essential and any employer without a pension scheme, or unsure whether an existing scheme will comply with the new rules, should be taking action well in advance of their staging date.
As the old adage goes, fail to prepare and prepare to fail. For employers, failure is not an option.
Capital expenditure: transition with care
The increase in the annual investment allowance (AIA) from £25,000 to £250,000 from 1 January 2013 will, it is hoped, incentivise businesses to increase their expenditure on qualifying plant and machinery. However a business with an accounting period that spans the date of the increase must take care in calculating the maximum AIA for that transitional period. For example, a business with a year ended 31 March 2013 will have a maximum AIA for that period of £81,250 (£25,000 x 9/12 + £250,000 x 3/12), but the AIA will be limited to £25,000 for expenditure in the period incurred before 1 January 2013. Therefore, despite a maximum for the period of £81,250, a business that spends £80,000 on qualifying plant and machinery in (say) September 2012 will qualify for an AIA of £25,000 for that expenditure. In this example £56,220 of the maximum AIA remains available for qualifying expenditure in the three months after 1 January 2013.
Lakshmi Narain is a technical director with Baker Tilly.
