VAT can be very complicated at times! Most goods and services carry VAT at the standard rate, which is currently 17.5% and is due to increase to 20% on 4 January 2011. However, some transactions, such as financial services, are exempt from VAT, and some goods, such as children's clothes, carry VAT at 0%.
To confuse matters even more, certain services can carry VAT at 5%, or 17.5% or 0%, depending on the circumstances. For example, renovating a house that has been empty for at least two years can carry VAT at 5%, but repairing a roof on another building will generally require VAT to be charged at 17.5%, unless the building has 'listed' status when the work may be zero rated if it is an approved alteration.
If you find you have charged VAT at too high a rate to your customer you should refund the excess VAT charged, if this is practical and possible. You also need to correct your VAT returns for the excess VAT paid over to the VAT office. You can only make a claim for overpaid VAT for VAT periods ending in the last four years, so don't delay if you find an error that covers several periods.
Friday 24 September 2010
Tuesday 21 September 2010
Maximum NI Contributions
Before the General Election NI was referred to as a 'tax on jobs', and essentially it is a tax, as once you have sufficient NI contributions to qualify for state benefits any extra payments will not entitle you to further benefits.
If you have paid in excess of the maximum NI contributions required for the tax year you can reclaim the excess amount. The PAYE system will normally ensure that you will not pay more than the annual maximum on your regular employment. However, if you have two or more concurrent employments in the tax year, or you are employed and self-employed at the same time, you may pay more NI in the year than the annual maximum.
Each taxpayer has their own annual maximum figure based on their individual earnings. The annual maximum NI for employees will be at least £4,279 and for taxpayers who are both employed and self employed the annual maximum is at least £3,180. However, you need to add to those figures the amount of NI payable at the additional rate (currently 1%), which cannot be reclaimed.
If you believe you have paid more NI than your personal annual maximum you can reclaim the excess by writing to the NI Office in Newcastle upon Tyne. You don't have to calculate the amount of NI repayment due, as the NI Office will do this for you. But you must provide evidence of your earnings during the tax year, such as P60 forms or accounts.
There is no time limit for reclaiming overpaid NI contributions, so you can submit claims for all past years where a repayment is due.
If you are likely to overpay NI for the current tax year you can apply to defer the NI charges on one of your jobs. Do this by completing form CA 72A for employees, or form CA 72B if you are also self-employed. It is not too late to submit either application.
If you have paid in excess of the maximum NI contributions required for the tax year you can reclaim the excess amount. The PAYE system will normally ensure that you will not pay more than the annual maximum on your regular employment. However, if you have two or more concurrent employments in the tax year, or you are employed and self-employed at the same time, you may pay more NI in the year than the annual maximum.
Each taxpayer has their own annual maximum figure based on their individual earnings. The annual maximum NI for employees will be at least £4,279 and for taxpayers who are both employed and self employed the annual maximum is at least £3,180. However, you need to add to those figures the amount of NI payable at the additional rate (currently 1%), which cannot be reclaimed.
If you believe you have paid more NI than your personal annual maximum you can reclaim the excess by writing to the NI Office in Newcastle upon Tyne. You don't have to calculate the amount of NI repayment due, as the NI Office will do this for you. But you must provide evidence of your earnings during the tax year, such as P60 forms or accounts.
There is no time limit for reclaiming overpaid NI contributions, so you can submit claims for all past years where a repayment is due.
If you are likely to overpay NI for the current tax year you can apply to defer the NI charges on one of your jobs. Do this by completing form CA 72A for employees, or form CA 72B if you are also self-employed. It is not too late to submit either application.
Monday 20 September 2010
Cycle to Work Scheme Update
The cycle to work scheme allows employers to lend cycles to their employees tax-free, and in some cases the employees can purchase the cycle at the end of the loan period. However, the Taxman is looking carefully at abuses of this scheme...
- Some employers treat the loan of the cycle to employee as part of the employee's salary and reduce their cash wages proportionately. This is known as a salary sacrifice, and the arrangement must be agreed with the relevant employee in advance. If cycles are only provided to employees under salary sacrifice arrangements the whole cycle to work scheme may lose its tax exemption, as some employees cannot have their cash pay reduced due the National Minimum Wage rate rules.
- It is quite common for the employee to purchase the cycle from the employer at the end of the loan period. However, the Taxman says that where there is an automatic transfer of the cycle to the employee at the end of the loan period, the tax exemption for the cycle to work scheme is also lost.
- The second problem with the transfer of the cycle to the employee is how to establish the market value of the cycle at that time. If the employee pays the employer less than the market value for the cycle the difference is treated as employment income subject to tax and NI. As a top of the range sporting cycle can cost several thousand, the second hand value can be quite significant!
The Tax Office have produced a table to help employers value second hand cycles here
Finally, remember to qualify as a tax free cycle, it should be used mainly by the employee for travelling to work and on work related business, although other personal use is permitted. An expensive touring cycle that is never used for work related journeys will not qualify for the tax exemption!
Like this tax tip? Then check out Mazuma's bookkeeping services and low cost, hassle-free accountancy services!
- Some employers treat the loan of the cycle to employee as part of the employee's salary and reduce their cash wages proportionately. This is known as a salary sacrifice, and the arrangement must be agreed with the relevant employee in advance. If cycles are only provided to employees under salary sacrifice arrangements the whole cycle to work scheme may lose its tax exemption, as some employees cannot have their cash pay reduced due the National Minimum Wage rate rules.
- It is quite common for the employee to purchase the cycle from the employer at the end of the loan period. However, the Taxman says that where there is an automatic transfer of the cycle to the employee at the end of the loan period, the tax exemption for the cycle to work scheme is also lost.
- The second problem with the transfer of the cycle to the employee is how to establish the market value of the cycle at that time. If the employee pays the employer less than the market value for the cycle the difference is treated as employment income subject to tax and NI. As a top of the range sporting cycle can cost several thousand, the second hand value can be quite significant!
The Tax Office have produced a table to help employers value second hand cycles here
Finally, remember to qualify as a tax free cycle, it should be used mainly by the employee for travelling to work and on work related business, although other personal use is permitted. An expensive touring cycle that is never used for work related journeys will not qualify for the tax exemption!
Like this tax tip? Then check out Mazuma's bookkeeping services and low cost, hassle-free accountancy services!
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