Reduced Red Tape on Tax on the Way

The government has announced the introduction of a new digital system whereby you will be able to manage your own tax accounts online. Exchequer Secretary, David Gauke, said that the idea is that people should be able to manage their tax affairs just as they manage their bank accounts online.

The £200m investment in the new system will allow HMRC to provide a service “fit for the twenty-first century.” It will also reduce HMRC costs and save around £51m of taxpayers’ money in the first year of its operation, with the savings continuing from then, of course.

What it Means for SMEs

It should reduce the time and effort you and your bookkeepers have to expend on tax compliance and increase the time you have to focus on developing your business, because there will be much less paperwork and bureaucracy.

By 2015/16, as a small business, you should be able to view your organisation’s tax calendar and receive digital alerts, and have access to all your online transactions; get answers to questions online, and supply information needed by HMRC without using snail mail or phone calls; access cross-border information where needed, and interact digitally with HMRC. According to David Gauke, all this should give you more control over your tax affairs and more flexibility in how you manage them.

What it Means for Individuals

As a personal self-assessment tax payer, you will be able to receive correspondence from HMRC online at your account, and carry out many more transactions. The government announcement reports that the services will include updating your personal details and reporting changes in circumstances and extra sources of income; accessing your tax codes and how they were arrived at; dealing with the important issue of repayments yourself at your convenience. When retirement is looming, you will also be given access to targeted online support.

The HMRC View

The online services currently available have proved increasingly popular. Over 82% of self–assessment taxes were filed and paid online in January 2013, with much of the filing performed by outsourced bookkeepers.

The new service should do much to alleviate criticism about the time it currently takes to receive a response to telephone queries with HMRC. The Chief Executive of HMRC, Lin Homer, is delighted to have secured the investment to transform the current digital services, saying that her department is, “committed to doing business with our customers in the way they want to do it.”

Tax Aspects of Company Cars

The tax aspects of company cars have become more and more onerous over recent years. The laudable fact that government wants to encourage businesses to buy and use more eco-friendly vehicles is just one of the contributing factors.

Get Some Advice First

If you are not sure whether it’s worth the commitment, you probably need some guidance before offering company cars to your staff or having one yourself. Your outsourced bookkeepers could be your first port of call. They have probably dealt with this thorny issue for some of their other customers, or they will know someone to call on.

The Complications for Employers

You have to pay Class 1A National Insurance contributions on the taxable value of company cars. This value is based on the list price of the car and accessories at the time of purchase. You also have to collect income tax payable by employees on the benefit in kind of having a company car. To be able to do this, you must notify HMRC quarterly of any changes in company car use so that PAYE codes can be amended. No income tax is payable on electric vehicles.

For employees who use their own cars for work, no tax or NICs are due provided you pay them a mileage allowance that is not more than the HMRC approved rates. Check with your outsourced bookkeepers for the current rates that apply and make sure you are always compliant. Pool cars are not taxed either, but should not be available for employees’ to take home at the end of their working day.

Special VAT rules apply. This tax is only recoverable on fuel used for business purposes. VAT on fuel you provide for private use can be recovered, but then has to be paid at a rate dependent on the car’s CO2 emissions.

The Tax Implications for Employees and Directors

Only employees earning more than £8,500 a year have to pay tax on their company car. This does not apply to directors though; their earnings are not usually taken into consideration by HMRC.

For them and everyone else, a company car is a benefit in kind which is taxed at their top tax rate. The benefit is calculated as a percentage of the car’s list price, depending on its CO2 emissions. The higher the emissions, the higher the percentage used in the calculation. If a company car is shared, or only used for part of a year, the tax liability is reduced proportionately.

For bookkeepers and payroll operators, there are many pitfalls related to company cars, and they need to take particular care to get the tax aspects correct.

Photo courtesy of FAEP, Wikimedia Commons

Opportunities of Apprenticeships

Do you, or could you, employ an apprentice or two? Taking on an apprentice could benefit your business as well as the individual concerned.

The Business Benefits

Your outsourced bookkeepers will know that, each time you take on one aged between 16 and 24, you will receive a grant of £1500 from the government, up to ten times. 

This applies to any business with under 1000 employees. Many employers believe that apprentices help to increase productivity and bump up the levels of motivation and job satisfaction among staff. Apprenticeships are available for older people but do not attract the government grant for employers.

In addition to receiving the grant to help with the wage bill for your young apprentices, this will not be as high as for other employees, as their minimum wage for the first year is currently only £2.65. In October it will rise, but only by a few pence. After year one, this minimum rate can change for those over 19. You are, of course free to pay them more if you wish.

An apprentice package includes an element of formal training for qualifications as well as learning on the job while working for you. This training is paid for by the government – in full for those up to age 18 and partially for those 19 or over. You, of course, just have to allow your apprentices the time for it, as they become more competent in the work they do for you, and require less on the job training and supervision as time goes by. In the current economic climate, apprenticeships are proving popular with small and micro businesses.

Benefits for Apprentices and the Community

For young people who currently have few options and job opportunities, an apprenticeship offers a way into a career. Anyone who is not qualified beyond Level 3 (A Levels) is eligible. The qualifications they gain will be nationally recognised, and they will have experience of the working environment and put their learning into practice in the work they do for you.

Everyone will benefit in the long run as workforce skills develop and more people become employed and eventually able to contribute. As an employer of one or more apprentices, you will be making your own extra contribution and giving something back for your own education and opportunities.

How it Works

There are three levels of apprenticeship offered and your commitment of between one and three years depends on this. If you would like to recruit an apprentice, you just need to contact the National Apprenticeship Scheme. If you are based in England their freephone number is 08000 150 600. Other numbers apply for Scotland, Wales and Northern Ireland. Or you can complete a form on their website.

You’ll then receive a pre-arranged visit from a consultant who will discuss what you need and guide you through the steps of finding the right apprenticeship training provider, recruiting the apprentice, and obtaining the funding. If it all seems too time consuming, you can even have an agency do this work for you.

Why not ask your outsourced bookkeepers for their opinion. They may know of other local businesses which have apprentices, and how it has worked for them.