HM Revenue and Customs (HMRC) gave an important insight into their customer service expectations recently.
As anyone who’s had to call HMRC will know, they don’t answer the phone very quickly. A recent review of their Facebook page showed that, rather than being that helpful, it is actually a place for individuals to vent their anger at the length of time they are kept waiting on the phone. In many instances, the calls end with the system simply cutting them off, which must be extremely dispiriting and frustrating.
Therefore, the recent announcement by HMRC must be quite welcome. They have announced in this press release that they are going to improve customer service by allocating £45 million. This will pay for an extra 3,000 employees to join customer service teams.
This is obviously good news.
However, the same press release gave more information about their approach to customer service.
HMRC receives more than 60 million calls a year, peaking around key deadlines such as 31 January for Self Assessment, and 31 July for tax credits renewals.
The statistics show that while 73 per cent of calls were answered last year, service standards were inconsistent across the year, with some months falling well short of HMRC’s 80 per cent target. The figures also show that in some months as many as one in five customers heard a busy tone and could not join a phone queue.
I am unsure which is the more alarming statistic:
If you have a business, surely your target for answering phone calls would be 100%? Particularly if you make customers wait for a long time.
A change to vat on digital sales within the EU came into effect from the beginning of 2015.
Previously, any VAT on digital sales was accounted for in the country of the seller. However, from 1 January 2015, the place of supply will change to the country where the consumer is established. What this potentially means is that a business with digital sales to EU countries must register for VAT in the country where the sale has taken place, which could mean multiple VAT registrations, an administration nightmare.
To clarify what digital sales are, digital sales means the supply of telecommunications, broadcasting and electronically supplied services. HMRC list out some examples of e-services, which include things like:
If the above are electronically supplied – i.e. delivered over the internet with minimal or no human intervention – then they are categorised as “digital services” and are covered by the rule change. If you sell through another market place e.g. Amazon, the Apple Store, etc., then the VAT issue will be handled by them.
Suppliers will either need to register for VAT in every Member State where their digital supplies are made or make use of an EU-wide accounting system known as the 'mini one stop shop' (MOSS). NB this affects any business making digital sales, even if they are not registered for VAT. However, if you are not registered for VAT, you can register for VAT in the UK and while your UK sales are under the VAT registration threshold (currently £81,000) you do not need to account for VAT on your UK sales.
More details about registering for MOSS can be found here.
The Chancellor delivered his 2015 Budget on Wednesday 18 March 2015. We have reviewed the announcements and highlighted the following which will have a direct impact on small business.
Income Tax
The personal allowance threshold is due to increase to £10,600 from 6 April 2015 and then to £10,800 from April 2016 and to £11,000 from April 2017.
The 40% tax rate is reached in the 2014-15 tax year when income is £41,865 and will be £42,285 for 2015-16, £42,700 for 2016-17 and £43,300 for 2017-18.
From April 2016, a tax free allowance of £1,000 (or £500 for higher rate taxpayers) will be introduced for the interest that people earn on savings.
Farmers will be able to average their profits over five years, up from the current two years.
Capital Gains Tax
The annual exemption from capital gains tax is currently £11,000, and it will increase to £11,100 for the 2015-16 tax year.
National Insurance
Given the headline grabbing increases in the personal allowance thresholds, the Government are less keen on increasing National Insurance (NI). Class 1 NI and Class 4 NI for the self-employed will start at £8,060 for the 2015-16 tax year.
However, the Government will abolish Class 2 NI in the next Parliament and will reform Class 4 NI to introduce a new contributory benefit test.
VAT
The VAT registration threshold will increase from £81,000 to £82,000.
And Finally….
The Death of the Tax Return!
HM Revenue and Customs (HMRC) has set out plans to modernize the administration of the UK tax system with the introduction of digital tax accounts. It is anticipated that, in time, they will remove the need for individuals and small businesses to submit annual tax returns.
The digital tax account will be available by early 2016 to five million small businesses and ten million individuals, and will be available to all such taxpayers by the end of the next Parliament. HMRC believe that the main benefits will be as follows:
Comment
We think that the intent behind this announcement is great, as it will give taxpayers more control over their affairs. It should consolidate a lot of information and (in theory) make things simpler. However, HMRC don’t have a tremendous track record at introducing big initiatives, so we think it will be interesting.
NB all of these announcements have got to go through Parliament, which may prove difficult given that there is a general election in May 2015.
With the start of the 2015/16 tax year almost here, there are a couple of changes we wanted to make you aware of.
Collection of Tax Debts
If your tax return is filed early enough, it is possible to collect any tax debts through your tax code (provided you are subject to PAYE) – known as ‘coding out’. There used to be a limit of £3,000 which could be collected. However, from the start of the 2015/16 tax year, this increases as follows:
| Annual PAYE earnings | Coding out limits |
| Up to £29,999.99 | £3,000.00 |
| £30,000.00 – £39,999.99 | £5,000.00 |
| £40,000.00 – £49,999.99 | £7,000.00 |
| £50,000.00 – £59,999.99 | £9,000.00 |
| £60,000.00 – £69,999.99 | £11,000.00 |
| £70,000.00 – £79,999.99 | £13,000.00 |
| £80,000.00 – £89,999.99 | £15,000.00 |
| £90,000.00 and above | £17,000.00 |
Transfer of Personal Allowance between Married Couples
As previously mentioned, from 6 April 2015, 10% of the personal allowance is transferrable between married couples or civil partners, which is £10,600 x 10% = £1,060. To qualify, neither of the couples can be a higher rate taxpayer, and they need to be married or civil partners.
The claim can be made after the tax year has started. The partner receiving the allowance will gain £1,060 of tax free pay and have a code letter of ‘M’, rather than the usual ‘L’, whilst the partner giving the allowance will lose £1,060 of tax free pay and have a tax code letter of ‘N’ rather than the usual ‘L’.
In order to benefit from this, a claim will need to be made online, but the system to deal with this is not available yet.
The Marriage Allowance was announced in the 2013 Autumn Statement and is an allowance transferrable between married couples and civil partners. It is available from 6 April 2015 and the amount which can be transferred is 10% of the personal allowance, which is 10% x £10,600 (for 2015/16) = £1,060. The tax saving is likely to be £1,060 @ 20% = £212.
The application needs to be made by the spouse or partner who will be transferring their personal allowance. In order to qualify, the following conditions must be met:
So essentially, this means that you WON’T be able to claim the Marriage Allowance if:
At the moment you can register your interest here. HMRC will then let you know when you can claim the relief. NB you don’t have to register, you can claim the relief later in the year, or up to 4 years after the end of the tax year.
The couple’s PAYE codes will be altered to reflect the change in allowances, with new suffix letters added as follows:
Full details are available here.
HM Revenue and Customs (HMRC) recently released figures in respect of the 2014 tax returns, highlighting such statistics as:
The final figure is quite eye catching. Each will be issued with a late filing penalty of £100 (which will rise further if the return continues to be unfiled, see here).
Most of the time, a tax return is issued for a specific reason, such as the taxpayer being self employed. It used to be the case that, if HMRC issued a tax return, it had to be completed, even if it was nil. However, HMRC have become a bit more accommodating over the last couple of years. If you’ve been issued with a tax return and one is not required, you can ask for it to be cancelled.
To give an example; if you have a buy to let property, then you must complete a tax return. If that property is then sold, then you will no longer have property income and should not have to complete a tax return. However, HMRC may still issue returns. If that is the case, then you can tell HMRC that there's no reason for you to complete a tax return.
However, our advice as always is: if you’ve received a tax return, deal with it sooner rather than later. It’s a lot less hassle and causes less anxiety getting the return cancelled before the deadline date rather than waiting for a late filing penalty to land on your doormat.
