FEBRUARY’S TAX TIPS FROM CLARKE NICKLIN

This month’s tips from Clarke Nicklin look at VAT benchmarking; Supporting Sickness – more about Statutory Sick Pay; Real Time Information – more filing and penalties for missed deadlines; 

VAT Benchmarking

HMRC are currently writing to around 7,500 furniture retailers and car repair businesses asking the owners to check the figures reported on their VAT returns. If you receive one of those letters, don’t panic. HMRC do not believe your VAT return is wrong, they are just asking you to double check your sales and purchase figures.

The HMRC letter asks you to work out your VAT mark-up ratio by comparing the difference between your sales and purchases (i.e. gross profit), as a percentage of the total of the purchase costs as reported on your VAT return.

Supporting Sickness

It is such a pain when a key employee is off sick. You are required to pay that person statutory sick pay (SSP) once he or she has been absent from work for four days. To add insult to injury you can’t reclaim any of the SSP paid since 6 April 2014. Payments of SSP made for periods before 6 April 2014 can be reclaimed from HMRC where the SSP exceeds 13% of the class 1 NI paid to HMRC for the month.

Real Time Information

Real time information (RTI) was supposed to make the reporting of PAYE easier for employers, but it has introduced more filing deadlines, and new penalties for missing those deadlines.

Every employer must now send a full payment submission (FPS) report every time they pay employees, on or before the payment date. There is some relaxation for certain employers who have fewer than ten employees.

Holiday Pay

There has been some panic whipped up in the media about employers having to pay vast amounts of back-dated holiday pay to employees who regularly get paid for overtime.

In general holiday pay is calculated according to an employee’s “normal pay”, which for years has been judged not to include overtime payments. However, in a recent Employment Tribunal (Fulton v Bear Scotland [2014] UKEATS/0047/13), the judge decided that both guaranteed and non-guaranteed overtime should be included in the sum of “normal pay” on which holiday pay is based. The tribunal also determined that employees could make back-dated claims for unpaid holiday pay.

In response to this ruling the Government has changed the 1998 Working Time Regulations, such that paid holiday is not a contractual right and any underpayments of holiday pay cannot be pursued as a breach of contract in the civil courts.

Find out more at www.clarkenicklin.co.uk