The Fizz! Blog

Special PAYE arrangements for students to be ditched from next April

At the moment, if you give a student a holiday job, you don't have to operate PAYE as long as they fill in form P38(S) to confirm their status and pay level.

From April 2013, HMRC say they're ditching the form and students will be treated like everyone else.

This will have no effect on most employers, but could mean a bit of extra admin for some.  If you fall into the latter camp, be aware of the change!

Reflections on the "Cash in Hand" debate

As I'm writing this, the day's tax avoidance/evasion/whatever story is the question of whether paying someone in cash when you know it's being done to avoid tax is immoral or not.  There's been plenty of views on either side.  In particular, there's been lots of obfuscation on the grounds that sometimes cash is being used for very good reasons (reducing credit risk, making it easier to pay for costs later in the day, reducing banking fees etc etc) - and that somehow because sometimes cash is fine, it's impossible to identify cases where it's not above board.

All of this is pretty feeble, really.  Obviously there are loads of occasions when cash is used for perfectly good reasons.  Equally, there are some when it's used to evade taxes.  Most of the time both parties know which of those situations they're in (and it may even have been prompted by the purchaser, not the seller).  Whether to accept an offer to pay in cash is a moral issue for the buyer of services, and morals are personal.  Personally, I wouldn't do it, and if someone I know does it I like them a little less.  That's just what I think and I wouldn't particularly try to impose my views on anyone else.  But all the distraction around "Well, sometimes it's OK because of..." or "How am I supposed to know if the seller's paying his taxes?" is really pathetic.  You'll almost always know the score.  Make your own moral decision and go with it - but don't pretend you're in the dark.

Charities - tin-rattling to become more attractive

If you're involved with the finances of a charity that receives donations, you might want to be aware of a change coming in April 2013.

At present, if a donor signs a Gift Aid declaration when making a donation (or signs one covering a range of donations) then the charity can claim some extra tax back from the goverment - 25% of the donation.  If there's no signed declaration, the charity can claim nothing.

From the next tax year, a charity with a good record of claims will be able to claim the extra 25% on up to £5,000 of donations as well, as long as all those donations unaccompanied by a declaration are under £20.  So, in effect, if you manage to collect £2,000 in collecting tins during the year, HMRC will give you another £500.  Every little helps etc.

If you're a company director, you can't plead ignorance of your company's tax affairs

Another interesting tax case of recent months.  A director of a company, a leading and highly paid car designer, left the administration of his company to his wife.  His wife left him, and pretty much simultaneously HMRC pointed out that the amount of income declared in his company's tax returns didn't appear to match up to what their sources suggested had really happened.

It seems to have been undisputed that his now estranged wife had been spiriting money out of the company.  HMRC wanted to tax the amounts based upon the idea that it was a loan or a dividend to the director, and the fact that his wife had disappeared with the cash was something to be resolved between him and his wife.  The car designer argued that he'd made appropriate arrangements to have this company's affairs adequately looked after, and the missing money wasn't his fault.

The car designer lost.

The tribunal was clear that, as the sole director, the buck stopped with him.  Although he may have been unfortunate, he should have had sufficient knowledge of his company's affairs to be reasonably sure that the public purse wasn't being defrauded on what was a fairly massive scale - the "missing" profits were around £123,000.  The moral of the story is clear.  If you've a business, it's your responsibility to have a basic knowledge of what's going in it - and if you don't have that, you need to be aware you're running a risk.

If I ran the ICAEW Ethics Helpline, this is how it would work

"Hello, and thank you for calling the Ethics Helpline of the Institute of Chartered Accountants in England and Wales.  If you felt the need to call us, then whatever it is you're worried about or are thinking of doing is inappropriate.  If you need guidance on what is and what isn't an ethical way to behave towards your customers, suppliers or associates then you probably shouldn't be a member of the ICAEW to begin with.  We hope this helps - thanks again for your call!".

Click.  Buzz.

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A minor victory for the taxpayer

An interesting tax tribunal case from a couple of months ago.

A pensioner (Mr Bentley) didn't know how to complete the tax return he'd been sent by the 31 January deadline.  He asked HMRC if they'd help him if he came in to see them.  They said yes - but they were a bit busy in January, what with the important tax return deadline, so could he perhaps come in early February?  He said yes, they helped him to complete his return at the start of February, and after taking it off him promptly fined him for being late.

He appealed, on the grounds that if they were going to fine him for being late then they shouldn't have made his appointment after the deadline.  Unsurprisingly, the tribunal agreed and cancelled the fine, as any halfway reasonable onlooker would agree is fair.

The real mystery is quite why HMRC were so keen to impose the fine and take it through the appeals process to begin with.  It wasn't even the full £100 penalty - it was capped at the tax due, which was £93!  At least Mr Bentley got a fair result in the end.

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Watch out for changes to Child Benefit

At present, Child Benefit is not means tested.  From January, that's going to change.  Where one partner or the other has income over £50,000, parents will gradually start to lose their entitlement, and one of them earns £60,000 it will be withdrawn entirely.

That sounds quite simple in principle but in practical terms it could be difficult.  For a start, the higher earner may well not be receiving the child benefit to begin with, so one person could be receiving the benefit and another having to repay it (repayment will be via the higher earner's tax return, although you will be able to choose not to receive the payments to begin with if you know they'll just have to be repaid.  And, in any case, it's not always the case that one partner knows how much the other earns - independent taxation is a fundamental part of the UK tax system.  But apparently you'll be able to get just a "Yes" or "No" answer on that subject from HMRC (which to me is a massive invasion of privacy but there you go).  Perhaps most absurdly, because self-employed tax bills are largely based on your accounting year, not necessarily the tax year, it's possible for someone to have a good year and consequently have to repay the child benefit of a partner they hadn't actually met until after that good year.

It remains to be seen how exactly things will work in practice but, in the meantime, just be aware of the effect it could have on your household budget.  And if you don't have a household budget, consider drawing one up!

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Where have all the CVs gone?

I used to quite regularly signpost interesting (to me, at least) and positive personal finance and business stories on Twitter.  It’s become virtually impossible of late because there aren’t any.  We’re on the ground with businesses every day and things are, by and large, pretty much the same as ever.  But the flavour of the month (year, decade?) is evidently remorseless negativity.

I’ve now noticed we’ve been getting very few job applications of late.  The main reasons I can think of for that are a) everyone’s got jobs now, b) people assume that there are no jobs going so they don’t bother applying or c) chance.  At the moment it’s still at the level where I can live with the last one as being plausible.  But it won’t be long before I start to wonder whether b) doesn’t have at least something to do with it.

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Idiot-proof your charity's Gift Aid declarations

HMRC have updated their guidance about the wording of Gift Aid declarations – if you’re involved with the finances of a charity you should make sure your standard documents are up to date.

You’d think that confirming one’s a UK taxpayer would be a fairly simple matter, but evidently not – when ticking the box, some people supposedly don’t realise that a) you have to pay enough tax to coverall your donations, not just the one at hand at that instant, and b) that “tax” in this context means “income tax”.

So, the new recommended wording is:

“I confirm I have paid or will pay an amount of Income Tax and/or Capital Gains Tax for the current tax year (6 April to 5 April) that is at least equal to the amount of tax that all the charities and Community Amateur Sports Clubs (CASCs) that I donate to will reclaim on my gifts for the current tax year. I understand that other taxes such as VAT and Council Tax do not qualify. I understand the charity will reclaim 25p of tax on every £1 that I have given.”

To be honest, it would take a cold-hearted tax inspector having a really bad day to make a charity cough up tax repayments based on outdated wording.  But, for the sake of a minute or two’s work, you might as well make sure your charity’s getting it right!

More detail here:

http://www.hmrc.gov.uk/charities/gift_aid/declarations.htm

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