Employment Taxes update

Electronic Filing Update
 
The ‘default’ position for employers that have registered to send their P35s online is for PAYE notices and reminders to be sent to them electronically by Revenue & Customs. It is possible to opt out of this (using an online facility to do so) and continue to receive paper by selecting the ‘change your statutory notice option’ from the PAYR online service page.
 
In addition to the electronic message on the employer’s PAYE online service page, confirmation emails will be sent, but only if the employer has supplied an email address. Employers should also note that with the phasing out of the secure mailbox system, notices and reminders that were sent to that location before 6 April 2006 can no longer be accessed, with effect from 27 June.
 
Notices are now being sent online that the £150 tax-free electronic filing incentive payments are being paid. Paper notices will only be sent where the Revenue has not other way of contacting the employer or its agents. As in previous years, employers are encouraged to self-serve by deducting the £150 from their next PAYE payment rather than emailing to request a cheque.
 
VAT & Company Cars
 
VAT registered employers with company vehicles may find the new VAT notice 700/64 (May 2007) of assistance. It cancels the August 2006 version and sets out, among other things, Revenue & Customs’ VAT definition of a car, how to deal with VAT on motoring costs and how to account for VAT on the purchase and sale of vehicles.
 
Contracted-Out Guidance
 
May 2007 saw the issue of a bumper bundle of contracted-out guidance for employers from Revenue & Customs. Whether those employers are dealing with salary-related or money-purchase schemes, mixed benefit schemes or appropriate personal pensions. The booklets are labelled CA14C, CA14D, CA16E and CA16A respectively and may be found at http://www.hmrc.gov.uk'pensionschemes/contracted%20-out-guidance.htm.
 
Share Schemes
 
The Sch 22 Finance Act 2003 rules on employment-related securities have reached the special commissioners (case no SpC 602) for the first time. A director of ‘company A’ acquired shares in the parent company at market value. The company had only one class of shares, so there were at that point no differences between his shares and others. Shortly thereafter the members entered into an agreement to the effect that, on a sale of the group for more than a target value, the director would receive a greater share of the proceeds than warranted by the shares he held, which is what eventually happened.
 
Revenue & Customs argued that the transactions fell within Chapter 3D of Part 7, Income Tax (Earnings and Pensions) Act, as they were sold for more than their pro rata market value. The taxpayer lost but is planning to appeal. If the company had issued the director with a separate class of shares with different rights, rather than changing the capital rights of part of the only class for his benefit, the argument might never have arisen.
 
Meanwhile, the Revenue’s fifth Share Focus has been issued (see www.hmrc.gov.uk/shareschemes/news/share-focus5.pdf). It includes an announcement of a change in practice and certain clarifications in respect of agreeing the market value of employment-related securities used in approved share schemes.
 
Managed Service Companies
 
Revenue & Customs was planning to issue all regulations and guidance on managed services companies by the end of June. Meanwhile, the FAQs section of the MSCs area of the Revenue’s website has continued to grow. See www.hmrc.goc.uk/employment-status/faqs.htm.
 
Oddly, the answer to the question ‘Is a payment received by a worker after the 6 April relating to their services provided through a service company prior to 6 April subject to the new legislation?’ is given as ‘Yes’. This is doubtful, at best. Since the legislation does not define the term ‘MSC’ until 6 April 2007, no ‘MSC’ as defined could have provided services before the date, and only payments made in respect of the services of an MSC are within the new regime. Watch this space…..

more from PAYE

Employment Taxes update
Employment Taxes
Holiday Entitlement to Rise
Holiday Entitlement to increase from the current 20 days
National Minimum Wage Increases
New National Minimum Wage rate of £5.52 (£5.35) an hour from October 2007
Employers End of Year Returns
Employers annual returns P35 and P14 (P60) are due for submission to HMRC by 19 May 2007
Penalty Notices for Employers
HMRC have recently issued a considerable number of penalty notices to employers
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