Welcome to the September 2010 Newsletter from Connolly Accountants Ltd

The Government's new National Insurance Contributions (NICs) 'holiday' scheme came into effect earlier this month, giving up to 400,000 new businesses a break from paying staff NICs. It is hoped the initiative will boost enterprise in those areas most dependent on public sector employment.

Meanwhile, HM Revenue and Customs (HMRC) has announced that it will only pursue tax underpayments of more than £300, after it emerged that coding errors had resulted in millions of people paying the incorrect amount of tax. This was shortly followed by the news that the Revenue will not charge interest on outstanding balances of £2,000 or more.  


Regional employer NICs 'holiday' scheme comes into effect

The National Insurance Contributions 'holiday' scheme unveiled in the June Emergency Budget has come into effect.

Up to 400,000 new businesses may be eligible for a 'holiday' in paying staff National Insurance Contributions (NICs). However, to qualify they must be established outside of London, the South East and East of England.

Firms can save up to £5,000 for up to the first ten employees hired in their first year of operation - potentially cutting their national insurance payments by up to £50,000 each.

The scheme was launched on 6 September 2010 and runs for three years, ending on 5 September 2013.

The scheme is only open to businesses that meet certain conditions. To be eligible:

  • a sole trader, partnership or company must start a new business in the period 22 June 2010 to 5 September 2013 inclusive;
  • the principal place at which the new business is carried on when it is started is not in an excluded region (Greater London, the East and South East); and
  • qualifying employees are engaged for the purposes of the new business.

The included countries and regions are: Northern Ireland; Scotland; Wales; East Midlands; North East; North West; South West; West Midlands; and Yorkshire and Humber.

The Government said it hopes the move will boost enterprise in those areas most dependent on public sector employment and support the 'transition to a new, sustainable model of economic growth'.

'We need to rebalance our economy which has become over-reliant on public spending and jobs provided by the public sector,' said Exchequer Secretary to the Treasury David Gauke.

'The NICs holiday for new businesses, in addition to cuts in corporation tax, will provide a valuable boost to start-up businesses and help foster the private sector-led recovery that will drive growth in the UK over the coming years.'

However, the Forum of Private Business (FPB) has warned that the scheme does not go far enough and has called on the Government to extend the initiative.

'Given the significant threats to cash flow and business growth from issues such as a lack of bank finance and increasing late payments, recruitment is likely to be slow during the first 12 months for many new firms,' said the FPB's Chief Executive, Phil Orford. 'The scheme should be available for a longer period than just the first year they are in business.'

More details of the scheme, including an application form and postcode checker, can be found here.


HMRC writes off tax underpayments of under £300

Around 900,000 people have had their tax underpayments written off after HM Revenue and Customs (HMRC) announced that it will only pursue cases where individuals owe £300 or more.

It is believed that some 2.3 million people have underpaid income tax in the last two years due to errors in their Pay As You Earn (PAYE) tax code, with individuals owing an average of £1,428 each.

However, HMRC has now raised the threshold for recouping tax from £50 to £300, meaning that only 1.4 million taxpayers will be chased for the money. The move is expected to cost the Treasury some £160 million.

Meanwhile, those who owe between £300 and £2,000 could have up to three years in which to pay rather than the usual one year. The money will be reclaimed through amendments to taxpayers' PAYE codes.

A new concession will also mean that those given time to pay more than £2,000 in underpaid tax will now have their interest waived - in line with those with smaller demands.

Only those who do not engage with HMRC over their outstanding tax bills will face an interest charge.

An HMRC spokesman told the BBC: 'The overwhelming majority of PAYE cases - over 40 million - are right, so most people have paid the right amount of tax. But for a variety of reasons in some cases there will be a discrepancy.

'The Government accepts that the way we go about deducting tax at source needs to be much more accurate and the introduction of the NPS [computer system] paves the way for a real time system which in turn boosts accuracy.'

In addition, it is thought that 4.3 million individuals paid too much tax between 2008 and April this year, with those affected expected to receive an average rebate of £418 each.

We can help you check your PAYE code to ensure that you are paying the correct amount of tax. Please contact us for assistance.


ESSENTIAL TAX DATES AND DEADLINES

30 September: End of CT61 quarterly period.

Last day for UK businesses to reclaim EC VAT chargeable in 2009.

1 October: Due date for payment of Corporation Tax for period ended 31 December 2009.

5 October: Individuals/trustees must notify HMRC of new sources of income/chargeability in 2009/10 if a Tax Return has not been received.

14 October: Due date for income tax for the CT61 quarter to 30 September 2010.

19/22 October: Quarter 2 2010/11 PAYE remittance due.

31 October: Last day to file 2010 paper Tax Return.

For more information on key tax dates and deadlines, visit our 2010/11 Tax Calendar.


QUOTE OF THE MONTH

'The fragile nature of the recovery is why, in the forthcoming spending review, the Government must focus its scarce resources on those areas which most galvanise growth, namely infrastructure and capital investment.'

Richard Lambert, Director General of the Confederation of British Industry, looks ahead to the Coalition's spending review.


WEBSITE OF THE MONTH

www.legislation.gov.uk

New website launched by The National Archives which gives clearer, faster and simpler access to legislation.


ON OUR WEBSITE

Essential information for business owners

For advice on all aspects of owning and running a business, visit our Business Guides.

The latest tax information

View the 2010/11 tax rates and allowances, plus a host of other tax information here.

Small firms urged to claim backdated rate relief
A leading business group is calling on small firms to claim their share of £200 million in backdated rate relief.
Click here for the full story

HMRC reveals 'tax gap has widened to £42bn'
The shortfall between the amount of tax owed to HM Revenue and Customs (HMRC) and that actually paid, increased to an estimated £42 billion in 2008/09.
Click here for the full story

EU maternity proposals 'could cost business £2.5bn'
EU plans to extend maternity leave to 20 weeks on full pay could cost UK firms £2.5 billion a year, according to the British Chambers of Commerce.
Click here for the full story

Workplace pension reforms 'need to be simplified', warns CBI
The Confederation of British Industry (CBI) has welcomed the Government's plans to reform workplace pensions, but called for the measures to be simpler and more flexible.
Click here for the full story

Longer turnaround times for paper tax returns
As the deadline for self assessment paper tax returns approaches, some experts are warning that individuals could experience delays in their forms being processed.
Click here for the full story