Wednesday, 19 September 2012

Warning to expats from HMRC over EBT schemes

HM Revenue & Customs is warning expats and other workers utilising Employee Benefit Schemes (EBT) for tax benefits should declare them and pay up taxes due or face significant fines and court action.

The current disclosure program initiated by HMRC can avoid penalties and legal action in some cases and provide a framework for settlement of taxes.

The program covers various EBT structures and taxes such as:

Assuming a settlement is agree with HMRC the disclosure program :

  • Allows payment to be made to HMRC of taxes due
  • Avoids complex and lengthy tax enquiries and legal costs
  • Provides certainty and finality to tax liabilities

EBT's were outlawed in January 2011 when HMRC successfully challenged the structure in the case against PA Holdings Ltd. It was determined by the Court and by a subsequent supported by the Court of Appeal that the arrangements avoid PAYE and NIC's through the EBT structures does not work.

Employer-Finance Retirement Benefit Schemes (EFRBS) are also considered not to work.

Tuesday, 18 September 2012

Are Christmas Parties Tax-Deductible ?

It's coming up to that time again when companies are considering a good night out with colleagues. So, are Christmas parties tax-deductible ? Here are a few guidelines:

For the cost to be tax-deductible it must be:
  •           Open to all employees
  •           An annual event
  •           Cost less than £150 per head

If your event meets the above criteria then there is no benefit in kind on the Christmas Party/meal and it is allowable for tax.
However beware...
  • The £150.00 includes VAT
  • If the cost is £151.00 then all of it is taxed as a benefit in kind
  • This is not a licence to put a flat rate of £150.00 through your accounts
  • You can have more than one event but the £150.00 is reduced proportionately
  • Like all business costs you must have a receipt
  • The event must be for all employees and not just directors - except where the director is the only employee
The £150.00 limit is for each employee so no family or friends allowed. However if you are a Director and therefore an employee of your own company then you can have a Christmas meal courtesy of the company.

Thursday, 6 September 2012

Tax Return Initiative for 2009/10 and earlier

HMRC is about to send our reminders to thousands of higher rate taxpayers with overdue self-assessment tax returns for 2009/10 and earlier. Individuals will have until 2 October 2012 to inform HMRC that they wish to participate in the 'Tax Return Initiative', to submit the tax returns and to pay any outstanding tax.

HMRC say that by coming forward individuals will receive better payment terms and penalties will be lower than if HMRC catch up with them first. The spreading of payments may also be available under certain conditions and circumstances.

Wednesday, 5 September 2012

Hairdresser chair rental - VAT rules from October

HMRC has confirmed that chair rentals within hairdresser/barber businesses will be subject to VAT at the standard rate of 20% from October 2012.

The new ruling will include a chair with certain right of access, in a defined area of a room or premises, and/or including related hairdressing services.

This ruling also includes services provided by any assistants, the booking of appointments and laundry services.

Currently most hairdressers are sole traders and are not VAT registered and therefore this could increased their costs by 20% as they cannot recover the VAT.

Advice should be sought by traders to understand the implications of these new rulings.

Overseas business options - The Republic of Ireland

The Republic of Ireland could be a good option to set up a new business as the Corporation Tax rate is only 12.5%. Transferring an existing company to Ireland is possible however setting up a new LTD company has added tax advantages. New start-ups can apply for the three-year corporate and capital gains tax exemption which started in 2010 but has now been extended for another 3 years for companies starting up in 2012, 2013 and 2014.

The scheme was last year modified so that the value of the relief is linked to the amount of employers’ PRSI (Social Insurance) paid by a company in an accounting period subject to a maximum of €5,000 per employee. If the amount of qualifying employers’ PRSI is lower than the reduction in corporation tax liability otherwise applicable, relief will be based on the lower amount.

3 Year Exemption – Eligible Companies

This is a new relief which you can claim if:

• You are a new company (incorporated in Ireland or another EEA State) since 14th October 2008
• Which commences a qualifying trade in 2009-2014
• Whose corporation tax liabilities do not exceed certain levels

You must commence a qualifying trade. A qualifying trade does not include:

a) A trade previously carried on by another person. The trade must be a new business and not the transfer of an existing business or part of a business from a sole trader or previous company

b) An excepted trade (subject to 25% tax). Profits from non trading activities such as rental and investment income are taxed at 25% and do not qualify for the relief

c) A trade carried on entirely outside Ireland and whose profits are subsequently taxed at 25%. An Irish incorporated company must be managed and controlled in Ireland and have “substance” in Ireland in order to qualify for the 12.5% corporation tax rate and in turn the exemption as outlined in this article

d) A trade dealing in or developing land or exploration and extraction of natural resources

e) A trade of a “service company” that would be subject to a professional companies profits surcharge as per S441 TCA. Effectively, the “service companies” that do not qualify for this tax relief include close companies (5 or fewer shareholders/ directors) whose businesses consist of the carrying on of a profession or the provision of professional services, or of exercising an office or employment. These “service companies” also include businesses that provide services to professionals

f) A trade in the fishery or aquaculture sectors

g) A trade active in the primary production of agricultural products

h) A trade active in the coal sector