It's Christmas Time Mr Taxman!

It's that time of year when staff parties abound, and you may be thinking of handing out small seasonal gifts to employees, customers or suppliers. Before you get too generous, make sure you know the tax implications.



Entertaining your staff is tax allowable as long as the entertaining is not part of an event aimed primarily at your customers. The cost of entertaining customers or potential customers or suppliers is not tax allowable for income tax or corporation tax. Your accounting records need to distinguish between the cost of hospitality such as the provision of food or drink, and significant gifts to customers, from your other marketing expenditure. The amount classified as non-allowable entertaining is added back to your profits to calculate the total tax due.


You can reclaim the VAT on the cost of entertaining your staff, but a proportion of the costs must be disallowed for VAT purposes where non-staff, such as family members, customers or suppliers also attend the event. However, where customers from overseas are present the VAT can be reclaimed on their portion of the costs. This is because the Tax Office recently removed the block on reclaiming VAT on entertaining overseas customers. Note the VAT block is only lifted for overseas customers, not suppliers, or UK customers, or other third-parties.


An event laid on free or below cost for employees would normally be a taxable benefit for those staff who attend, but it is tax free if it is designated as an 'annual event'. The other requirements are that the event is open to all staff and the cost does not exceed £150 per head, including VAT. If the cost exceeds this threshold, your employees will be taxed on the total cost of the event as a benefit in kind. You can pay this tax and NI on behalf of your employees using a payroll settlement agreement (PSA), which you need to agree with the Tax Office. So to avoid this hassle, keep the cost of the event, including all free transport and accommodation, below £150.01 per head.


Small seasonal gifts to staff, such as a bottle of plonk or a turkey, can be treated as 'trivial benefits'. These trivial benefits can be excluded from the report of benefits and expenses (form P11D) provided to staff, if you agree a dispensation for these gifts with the Tax Office. Don't push it with the Tax Inspector by trying to pass off expensive hampers or cases of champagne as trivial benefits.

More seasonal news here!

Tell the Taxman Now!

Did you know you could be landed with a penalty if you fail to tell the Taxman when you become liable to pay tax? For example, when you become self-employed, or make a large capital gain. The deadline for declaring that you have income tax or capital gains tax (CGT) chargeable relating to the year to 5 April 2010, is 5 October 2010.

If you miss that deadline, the Taxman may send you a failure to notify penalty, which can be up to 100% of the tax due. However, if you pay all the tax due on time, which for income tax and CGT relating to the 2009/10 tax year, is by 31 January 2011, the penalty can be reduced to nil.

Where you have already received a self-assessment tax return form to complete for 2009/10 or a notice to file a self-assessment tax return online, your obligation to tell the Taxman is satisfied when you submit your tax return on time. But if you haven't got a tax return form, you need to ask the Taxman to set you up in the self-assessment system before 5 October 2010. We can help you with registration.

Once you are registered with the Tax Office, you should receive either a Tax Return form or a letter from the Taxman asking you file a Tax Return online. The form or letter will include your Unique Taxpayer Reference number (UTR). If you submit a Tax Return that does not include your personal UTR number it may be rejected, and any tax payments you make will not be promptly matched to your records.

Mazuma win HSBC Start-up Stars Award!

We are delighted to announce that Mazuma have won the HSBC Start-up Stars 2010 award!

More than 250 leaders from the worlds of business, politics and the media gathered at the Dorchester Hotel on Monday 18th October 2010 for a glittering Gala Dinner to celebrate the 2010 HSBC Start-Up Stars Awards. The 2010 Start-Up Stars winners were announced on the night for the overall winner, the green award and the international award.

Head of business banking for HSBC, Huw Morgan, said: "Lucy and Sophie's story is a perfect demonstration of two entrepreneurs with a great idea, who then carried it through to create an impressive brand



From left to right: Dodo Juice (HSBC Green Award winner 2010), Mazuma (HSBC Start-Up Star 2010), Veritas (HSBC International Award winner 2010)

Business Secretary Vince Cable praised the 16 finalists competing for the top honours, saying: "The very best of British enterprise is represented at the HSBC Start-Up Stars Awards."

He added: "With the economy still facing significant problems and the state no longer able to spend its way to recovery we are more reliant than ever on enterprise and business to provide real growth and jobs for our economy. The dynamism, innovation and hard work of these SMEs will help drive Britain's economic recovery now and for the future and will demonstrate yet again that the UK is open for business."

We'd like to say a big thank you to all of our staff and clients across the UK who have helped make Mazuma what it is today, we wouldn't be where we are without you!

PAYE 'Errors'

You have no doubt heard on the news about the PAYE 'errors' affecting millions of people this autumn. The underlying problem is not new - the PAYE system does not cope well with taxpayers who have income from more than one employment or pension during the year. Under or overpayments of tax arise, and when the Taxman gets round to reconciling the tax and allowances due on the two or more employments, he issues a tax computation (form P800) to the taxpayer.

Unfortunately the Taxman did not do his reconciliations for 2008/09 (and in many circumstances for earlier years), so there are now two years worth of forms P800 (2008/09 and 2009/10) on their way to up to 4.7 million taxpayers.

It is going to take some weeks to issue all those forms, so you may not receive a letter immediately, if at all. If you normally complete a self-assessment tax return form you should not receive a form P800 as all your tax liabilities are reconciled on the self-assessment form.

If you do receive a form P800, don't panic. In most cases it will show a repayment of tax, which will be sent to you within a few weeks. You do not have to supply any further details to the Taxman to get this repayment. To avoid fraudulent scams, PLEASE DO NOT respond to emails or telephone calls asking for your bank details in connection with a tax repayment.

If the form P800 shows that you owe some tax, you won't have to pay anything immediately. Indeed, if you owe less than £300 in total for 2008/09 and 2009/10 that tax will be written off and you won't have anything to pay. If the tax due is less than £2,000 it will be collected through your 2011/12 PAYE, so the amount will be deducted from your monthly salary in the year to 6 April 2012. If the tax due is more than £2,000 the Tax Office will issue a separate payment request, and ask for payments to be made in 2011. However, if you will have difficulty in paying the amount due, whether this is more or less than £2000, you can ask to pay over an extended period of up to three years.

There is a possibility that you could avoid paying the tax due, where you can prove that the Taxman ignored information relating to your tax affairs for more than 12 months after the end of the tax year. This procedure is called Extra Statutory Concession A19, and you need to make a claim for this to apply.

National Minimum Wage Changes

In the current recession you may have been forced to freeze or even reduce wages. If your workers are low paid you must be careful that you continue to pay at least the national minimum wage rate (NMW).

The hourly NMW rates increased on 1 October 2010 and now apply to workers in the following age bands:

21 and over: £5.93
18-20: £4.92
16 and 17: £3.64
Apprentice rate: £2.50

The apprentice rate applies to apprentices aged under 19, or those aged 19 or more in the first year of their apprenticeship.

The Taxman can impose penalties of up to £5,000 if you do not pay the statutory NMW rate, and you may even be tried in the Crown Court for non-compliance with the NMW rate regulations, leading to an unlimited fine. You must also pay any arrears of wages owed (for the previous 6 years), based on the current NMW rate, not the rate in force when your employee was underpaid.

VAT Rates and Refunds

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.

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.