Welcome to the December 2014 Newsletter from Connolly Accountants Ltd

With all eyes on the Chancellor in anticipation of the Autumn Statement, many businesses are also in the midst of the Christmas rush. It is an excellent time to reflect, to plan ahead, and catch up on any important financial news you might have missed...


New holiday pay ruling on overtime

In a ground-breaking case the Employment Appeal Tribunal (EAT) has ruled that employers must take overtime into account when calculating holiday pay, a decision expected to benefit up to 5 million employees.

Those who regularly work overtime are likely to see an increase in their holiday pay, as non-guaranteed overtime they would otherwise have worked must now be included up to the first four weeks of holiday taken.

The Government is mitigating the effect this could have on employers, with workers allowed to retroactively claim for only three months holiday pay.

Business Secretary Vince Cable said: 'The Government will review the judgement in detail as a matter of urgency. To properly understand the financial exposure employers face, we have to set up a taskforce of representatives from Government and business to discuss how we can limit the impact on business. The group will convene shortly to discuss the judgement'.

The taskforce reportedly includes business groups such as the Institute of Directors (IoD), the Federation of Small Business (FSB), the Consortium of British Industry (CBI), and the British Retail Consortium.

CBI Director General, John Cridland, said: 'This is a real blow to UK businesses now facing the prospect of punitive costs potentially running into billions of pounds - and not all will survive, which could mean significant job losses'.

Businesses are likely to take steps to minimise the financial impact for themselves, with many facing the possibility of using part-time agency staff to cover overtime, or changing contracts to include 'voluntary' overtime as opposed to 'non-guaranteed' overtime. With such measures in place, the impact to workers in the long run may be negative despite their increased holiday pay.


Saving tax on seasonal gifts

With the season of gift-giving fast approaching, it's important to be sure that you're up to date on the rules around gifts for clients and staff - and making the most of any tax-free opportunities!

In general, HMRC advises that businesses treat gifts in the same way that they treat entertainment. This means that, with a few key exceptions, gifts are not tax deductible. But what are those exceptions and how can you make the most of them?

The office Christmas party is of course a tradition, but did you know it is also tax deductible? Staff annual functions can be tax-free where the total cost per person attending is not more than £150 per year (including VAT).

This will apply to everyone attending the party, including employees and their guests. It can also be used for other expenditure which is part of the event, such as taxis or accommodation for the attendees.

A big caveat is that if you overspend the amount per head then the whole cost of the party is subject to tax, not just the proportion that exceeds the limit. This will need to be paid by reporting the benefit on the employee's P11D form, or the grossed up tax can be settled through a PAYE Settlement Agreement (PSA). A further national insurance bill will also be payable - so be sure to get the sums right!

Seasonal treats for clients and staff may also be deductible, but in order to qualify they must be seen as promotional gifts. This means displaying a 'conspicuous advertisement' in the form of your company logo. But with many options available for personalisation, it's incredibly easy to give meaningful gifts while staying tax free. These could be anything from calendars and diaries to stress balls and festive snow globes.

Promotional gifts can be given to staff tax-free providing the overall cost does not exceed £50 per person per year. It's important to note that gifts of food, drink, tobacco and vouchers are specifically excluded from this scheme.

Tax efficient charitable donations can be made through Gift Aid, or in cash, stock or investments. There are various tax efficient schemes and incentives for individuals, sole traders and companies so it pays to make sure that your gifts are deductible depending on your business size. Detailed HMRC rules on the subject can be found here.

Third party gifts, which employers may receive from third parties such as business associates or clients, are exempt from tax providing their total value is less than £250. It is very important to be aware of anti-bribery rules when dealing with such gifts. In many cases simple 'common sense' can be applied to tell when a gift should be accepted. Anti-bribery rules now mean that even those aware but not directly involved may be found culpable should such an illegal transaction take place.


ESSENTIAL TAX DATES FOR DECEMBER

30 December
Last day for online submission of 2014 Tax Return for HMRC to collect tax through clients' 2015/16 PAYE code, where they owe less than £3,000.

31 December
Last day for non-EU traders to reclaim recoverable UK VAT suffered in the year to 30 June 2014.
End of relevant year for taxable distance supplies to UK for VAT registration purposes.
End of relevant year for cross-border acquisitions of taxable goods in the UK for VAT registration purposes.
End of CT61 quarterly period.
Filing date for Company Tax Return Form CT600 for period ended 31 December 2013.


QUOTE OF THE MONTH

'I'm not in the whingeing business. This job is a tough job and it should be a tough job - it's an audition to be the prime minister of the country.'

Labour Party Leader Ed Miliband


WEBSITE OF THE MONTH

www.getarealitycheck.co.uk

A handy and easy to use financial retirement planner powered by Standard Life.


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MPs criticise speed of tax crackdown
HM Revenue & Customs' (HMRC) action in recovering tax from avoidance schemes is 'unacceptably slow', according to the public accounts committee of MPs.
Click here for the full story

Business rates growing faster than council and fuel taxes
The Office for Budget Responsibility (OBR) has released figures showing that business rates are rising faster than both council tax and fuel duty combined.
Click here for the full story

New cap on payday loan rates
A new cap on payday loan rates will be introduced with effect from January 2015, the Financial Conduct Authority (FCA) has confirmed.
Click here for the full story

Carney unveils new deal for banks
Mark Carney, Governor of the Bank of England (BoE), has revealed that new standards are to be published for banks deemed 'too big to fail'.
Click here for the full story

Competition inquiry launched into 'big four' banks
The Competition Markets Authority (CMA) will examine the working practices of the UK’s largest banks, an investigation expected to last 18 months.
Click here for the full story