1110 by stariya


									NOVEMBER 2010 – ENEWS

In this month’s enews we report on the increase in the standard rate of VAT.

Please browse through this month’s articles using the links below and contact
us if any issues or questions arise.

NEST Pensions reform 2012
Parties for employees
New tax-free children's savings account
Increase in the standard rate of VAT
VAT rate increase – Shoppers may see price rises
Government announcements expected on tax issues
Employer CDrom update
Shopping on the internet
Royal wedding Bank Holiday

The introduction of the National Employment Savings Trust (NEST) has been in the
press recently following a government review of the scheme. The headlines that
employers will have to start making pension contributions for all of their employees
from 2012 are somewhat misleading as the majority of employers will not need to
comply with the rules from that date. The start date for the roll out of the scheme is
October 2012 but this will impact on employers with 120,000 employees or more. For
those with a more modest workforce the start date varies, for example those with less
than 500 employees the date is 1 January 2014 and for those with less than 50
employees the earliest start date is 1 August 2014.

According to the website

‘The requirement to be NEST compliant starts from October 2012 and will vary
dependent on size of business and PAYE reference number. The Regulator will write
to all employers around 12 months before their staging date so that they know when
to automatically enrol their eligible jobholders. Three months before the employer’s
staging date the Regulator will write again to remind them of the new duties and the
need to register.’

Employees eligible for automatic enrolment will be:

      those who aren’t already active members of a qualifying scheme
      are aged between 22 years and the State Pension age and
      earn over £7,475 gross a year.
The qualifying scheme may be the existing employer pension scheme if it meets
certain conditions, or if an employer does not have a qualifying scheme they will have
to set one up or use a NEST pension scheme.

Minimum contributions levels for qualifying schemes

Minimum Contribution          Employee Pays           Tax Relief   Employer Pays
 8%                            4%                      1%           3%

Employees will be able to opt out of the scheme if they so wish. However for those
employees within the scheme it is expected that the employer will have to contribute
at least 3% of their ‘qualifying’ earnings. These earnings are their basic salary plus
commissions, bonuses and overtime between £7,475 and £33,540 a year (2006/07

Contribution levels will be phased in over a period of time

                                        Employee Pays **           Employer Pays
Before October 2016                       1%                        1%
October 2016 - October 2017               3%                        3%
From October 2017                         5%                        3%
** Less tax relief.

If you would like more details of the scheme please do get in touch.
Internet links: NEST pensions website NEST pensions dates for employers

With the season for office parties fast approaching we thought it would be a good
idea to remind you of the tax rules. The good news is that, unlike entertaining
customers, the costs of entertaining employees are generally allowable against the
profits of the business.

But what is the tax treatment for the employees themselves? Is it a perk of their jobs
and will they have to pay tax on a benefit?

Generally, as long as the total costs of employee annual functions in a tax year are
less than £150 per attendee (VAT inclusive) there will be no tax implications for the
employees themselves. In considering this limit make sure you have included all the
costs, which may include not only the meal itself but also any drinks, transport and
accommodation that you provide.

If the costs are above the £150 limit then do get in touch so we can advise you how
best to deal with them.

Internet link: HMRC guidance

The Government has announced that they will create a new tax-free children’s
savings account following the end of Child Trust Fund (CTF) eligibility.

The Government intends the new accounts to be available by autumn 2011.

The new account will have the following key features:

    all returns will be tax-free

    funds placed in the account will be owned by the child and are locked in until
     the child reaches adulthood

    investments will be available in cash or stocks and shares

    annual contributions will be capped and

    there will be no Government contributions into the account.

The new account, described as a 'Junior ISA', will offer parents a simple and tax free
way to save for their child's future.

Eligibility for the new account will be backdated, to ensure that no child born after the
end of CTF eligibility will miss out on the chance to have one of the accounts. There
will be no CTF eligibility for children born from January 2011.

Internet link: Treasury press release

The standard rate of VAT will increase from 17.5% to 20% from 4 January 2011. The
reduced rate of 5% and the zero rate will remain unchanged. Businesses need to
ensure that they are ready for this change.

For any sales of standard rated goods or services that take place on or after 4
January 2011 businesses should charge VAT at the new rate of 20%.

This means that businesses currently calculating their VAT using the VAT inclusive
fraction of 7/47 should, from 4 January 2011, use the new VAT fraction of 1/6.

There are many rules which determine the correct rate of VAT to apply.

Goods/services provided before the change

The new rate generally applies to all VAT invoices issued by a business on or after 4
January 2011. However, where a business issues an invoice on or after 4 January
2011 and the goods or services were provided prior to 4 January 2011, the business
may apply VAT at 17.5%.

Goods provided after the change

If a business has received a payment or issued an invoice before 4 January 2011 but
the goods will be provided (or services delivered) after 4 January 2011 then the
supplier has a choice, either:

    to leave the VAT charged at 17.5%; or

    to account for VAT at the new 20% rate.

Electronic tills and accounting software

Electronic tills and accounting software will also need to be adjusted to reflect the
new rate. This will be a particular issue for those tills which are set up to provide VAT

Most accounting software packages do have a facility to change the rate of VAT or
create an additional rate of VAT. It may be preferable to create a new 20% rate,
rather than delete the 17.5% rate, as some businesses (especially those who use
cash accounting) will need the old standard rate for certain transactions for some
time to come.

HMRC have issued lots of guidance which can be found at the link below. If you
would like help dealing with the change please do get in touch.

Internet link: HMRC guidance

With the standard rate of VAT set to increase to 20% from the current 17.5% it is a
good idea to be aware of the rules on the correct rate of VAT you should be charged
on purchases around the busy New Year period.

When buying goods or services on or after 4 January from a retail business such as
a shop, restaurant or hairdressing salon, all purchases should be subject to 20%

Businesses that are passing the VAT increase on to customers will increase their
current prices by just over 2%. The exact calculation is 120/117.5. It is up to each
individual business to decide whether it wants to pass the VAT increase onto its
customers in this way.

If however you pay for something you have taken away (or the supplier has
delivered) before 4 January 2011 then the sale took place before 4 January 2011 and
you should be charged VAT at 17.5%.

It is common for retailers to give refunds, particularly in the period after Christmas. If
you are given a refund on or after 4 January 2011 for a sale made before 4 January
2011 this will be made at the old VAT rate. If you want to exchange goods, for
example a jumper for another size or colour, you may find the gross cost has
increased and you have to pay more. The replacement item will have been sold at
the new VAT rate.

Internet link: HMRC website

On Monday 29 November the Office for Budget Responsibility (OBR) will publish its
updated forecast for the economy. The Chancellor of the Exchequer will respond to
that forecast in a statement to the House of Commons.

We are unsure whether or not the Chancellor will announce significant tax measures
which are usually announced around this time of year in a Pre-Budget Report. A
number of important announcements are expected around the end of November and
early December. We will update you next months on significant changes.

Internet link: http://www.hmrc.gov.uk/budget-updates/index.htm

HMRC are advising employers that make use of the Employer CDrom that they have
made some important updates to the software. Users should install this update even
if they have installed the previous September 2010 update.

Internet link: Employer CDrom

As we fast approach what is for many the seasonal time for giving, some of us will be
shopping online. HMRC have some useful guidance on the rules for VAT and/or duty
on purchases from overseas.

Internet link: HMRC guidance

Following the announcement of the engagement of Prince William to Catherine
Middleton the date of the wedding has been announced as Friday 29 April 2011. The
day has been declared a Bank Holiday.

Internet links: Royal wedding date Direct Gov website

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