Contractors Now Receiving Accelerated Payment Notices (APNs)

Tax_TaxAgility Accountants LondonBack in July 2014 HMRC published a list of over 1,000 schemes that they deemed to be tax avoidance vehicles, claiming that they will soon start sending out Accelerated Payment Notices (APNs) to taxpayers, including contractors and freelancers, who have invested in these schemes.

Under the new rules associated with APNs it’s mandatory for contractors who receive one of these letters to pay any tax bills upfront before appealing their case; including the full payment of all and any bills you dispute. If you don’t pay your tax bill in full you will automatically incur fees and penalties, even if you intend to appeal the decision.

Though these new rules were due to come into effect in July, HMRC have since revealed that APNs will start being sent out from August. It’s worth noting that if you are due to receive an APN you will first be sent a notice letting you know that HMRC have placed your tax payments under consideration. You should use this time to gather your payment options, as once you receive your APN you’ll have exactly ninety days to pay your bill in full.
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How to Make Redundancy Payments

Calculator_TaxAgility Accountants LondonIf you’re the owner of a small to medium-sized business (SME) you may be lucky enough to not have had to make a single employee (or group of employees) redundant as of yet.

This luck, however, may well change over the coming months and years, and though you’ll by no means want to place your focus on this negative train of thought, when you know the implications of such a situation ahead of it occurring, you’re better placed to deal with the consequences once you’re put in a situation that requires you to go down this path.

Selecting Employees for Redundancy

If you’re required to make an actual position (or entire operation) within your business redundant, then every employee in this position will have fairly and objectively been selected for redundancy.

If, however, only a certain number of employees within a particular position need to be made redundant (often as a response to budget cuts or a reduction in company income), the most common, objective, and fair way of selecting employees for redundancy are:

  • Self-Selection: When you ask for volunteer redundancies you can save your employees a lot of heart-ache if there are others who are happy and willing to accept redundancy at this time.
  • Last In: The last in, first out selection process is deemed fair in most industries.
  • Looking over Disciplinary Records: Another selection process that’s hard to argue against.
  • Overlooking Skills, Qualifications, and Experience: Ensuring you keep on your most skilled and experienced workers.

When selecting employees for redundancy it’s imperative that any choices you make can’t be classed as unfair dismissal.

Redundancy Payment Breakdowns

Your employee(s) will be entitled to statutory redundancy pay if they’ve been working for your company for upwards of two years. Any redundancy pay your employee receives from you won’t be taxable so long as it totals under £30,000.

Depending on how long your employee(s) has been with you, you’ll have to pay out the following:

  • Half a week’s pay for each year (full year) in which they were under the age of twenty-two.
  • One week’s pay for each year in which they were between the ages of twenty-two and forty.
  • One and a half week’s pay for each year in which they were forty-one and above.

You can calculate your employee(s) redundancy pay using this government-provided tool.

Finding Suitable Employment Alternatives

If you’re required to make an employee, or number of employees within your SME redundant, you should put some serious thought as to whether or not you can provide them with ‘suitable alternative employment’ in another area of your business, or an associated organisation.

The suitability of any employment alternatives you make to your employee(s) will be based upon the similarity of the new job compared to their previous role, the acceptability of the job’s terms, the similarity of the required skills for said job, and the rate of pay, benefits, working hours, and work location.

If your suitable employment alternative(s) are turned down by your employee(s), they may lose their right to statutory redundancy pay.

Notice Periods

You are legally contracted to give your employees the following notice periods before ending their employment through redundancy, though you may provide your employees with more than the below-stated minimums if you so wish:

  • One week’s notice for employees employed between one month and two years.
  • One week’s notice a year for employees employed between two and twelve years.
  • Twelve week’s notice for employees employed twelve years and above.

Making Redundancy Payments

To speak with a professional to discuss how to make redundancy payments and what you owe your employees, as well as the tax implications regarding any payment made over £30,000, contact us today on 020 8780 2349 or get in touch with us via our contact page to arrange a complimentary, no-obligation meeting.


This blog is a general summary. It should not replace professional advice tailored to your specific circumstance.


Green Taxes and Reliefs for Businesses

Green_TaxAgility-Accountants-LondonThe general idea behind the government offering green taxes and reliefs to businesses up and down the land is to encourage you to act in a more environmentally friendly manner; whether you’re a large organisation using a significant amount of energy annually, or you’re a SME that hardly uses any energy at all.

It should be remembered that, at a more general level, you can claim capital allowances when you purchase energy-efficient or low/zero-carbon technologies for your company, reducing your overall tax payments.
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Overview of SMP for Employers

Family_Tax Agility Accountants LondonDealing with and understanding Statutory Maternity Leave and Statutory Maternity Pay (SMP) as a new employer or SME can be difficult, especially if you’ve never had to deal with this issue yourself as an employee at a previous company.

Though we’ll be focusing on SMP in this post, it should be noted that all new mothers have a legal entitlement to take up to twenty-six weeks off around the time of the birth of their baby, regardless of whether or not they are entitled to SMP.
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The Most Tax Efficient Ways to Save for Your Children

Child Benefit_TaxAgility Accountants LondonIf you’re a parent you’ll know how important it is to put some money aside for your children; whether with the intention of using it to help fund them going to university one day, or to start building a safety net for their future.

Problems arise when you start putting money aside and realise that certain tax laws mean a large portion of anything you save will be taken from your savings each year. For this reason, below we have detailed three of the most efficient ways to save for your children, both in the short term, and for their futures.
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Tax Tips and News for August 2014

This issue … Accelerated Payments, Maximising Statutory Maternity Pay, Commission Refunds, EC Sales Lists, August Questions and Answers, August Key Tax Dates

Accelerated Payments

The Taxman now has the power to demand tax from you if you have used a registered tax avoidance scheme, or if he thinks the tax scheme you have used is similar to one that has been judged to fail by a Court or Tribunal.

For some years most tax avoidance schemes have been registered under the Disclosure Of Tax Avoidance Scheme (DOTAS) rules. Each scheme was issued with a DOTAS reference number, known as a "DOTAS number" or SRN, which had to be shown on tax returns of taxpayers who used the scheme.

If you were advised to include a DOTAS number on your tax return, and HMRC has already opened an enquiry into that tax return you should watch the post for a tax demand headed "Accelerated Payment Notice". This could arrive at anytime from now until April 2016.

If you receive an accelerated payment notice you can't appeal against it, but you can ask HMRC to reconsider the amount demanded within 90 days. We can help you with this.

You may also want to consider some other options such as:

  • negotiating a settlement with HMRC to resolve the dispute over the tax scheme you used - there may well be interest and penalties to pay.
  • asking the Tax Tribunal to close the enquiry into your tax return - this is an option if you really believe the tax you avoided is not due, i.e., the scheme works; or
  • asking for a payment arrangement in which you agree to pay the tax demanded by instalments.

We should discuss the consequences of paying the accelerated tax demand on the rest of your tax affairs; will you be able to meet your other tax liabilities when they are due?

Maximising Statutory Maternity Pay

Paying statutory maternity pay (SMP) is not optional. It must be paid if your employee qualifies, but the good news is that a small business can recover 103% of the SMP paid from HMRC. A business that pays less than £45,000 of class 1 NICs in one tax year is defined as "small" for this purpose.

In a family business there may be scope for maximising the SMP payable for the first six weeks of maternity leave, and hence getting the Government to refund that SMP with a bit extra to cover the employer's NICs due. Let's see how this could work.

Where the employee earns at least £111 per week the employer must pay SMP at these rates for the following periods:

  • for the first 6 weeks - 90% of the employee's average weekly earnings (AWE);
  • the remaining 33 weeks - the lower of £138.18 or 90% of their AWE.

If a bonus is paid in the crucial "relevant period" - which is used to calculate the employee's "average weekly earnings" - the SMP payable for the first six weeks automatically increases. The remaining 33 weeks of SMP are not affected as that period is paid at a flat rate where earnings exceed £153.53 per week.

The relevant period is a period of at least 8 weeks ending on the pay day before the "qualifying week". The qualifying week falls 15 weeks before the expected birth date, so you need to know the expected date of birth before timing the bonus payment.

Say the expectant mother normally earns £520 per week, she will receive £468 per week in gross SMP for the first six weeks. Her employer will pay class 1 NICS of £260.82 on top of this SMP and will be able to recover: £468 x 1.03% = £2,892.24. If the class 1 NICs on the SMP are covered by the employment allowance of £2,000 for the business, the employer effectively recovers £2892.24 against an SMP cost of £2808.

However, paying a large bonus won't necessarily be tax effective; it depends on how much NICs can be covered by the employment allowance.

Say the employee receives a bonus payment of £2,000 in the relevant period, this bonus generates an employer's NICs bill of £276, and increases her AWE and hence her SMP for the first six weeks to £675 per week. Her employer can recover £675 x 1.03% for six weeks = £4171.50.

But this is a marginal increase from £2892.24 which was recovered without the bonus; an increase of £1279.26 for paying out £2447.40 (bonus + NICs on the bonus and SMP).

There is a calculator on the GOV.UK website that can help you work out the SMP that will be due, and you can change the answers to each question to see how difference in pay will change the SMP. We can also help you crunch the numbers.

Commission Refunds

If you invest through a firm of financial advisers, you may well receive a repayment of commission from that firm each year. In previous years any refunded commission was rolled into the earnings from your investments or set against charges, so you may not have been aware of it. However, from 6 April 2013 the financial adviser must deduct interest from any refunded commission and show the amounts paid and deducted separately on your annual statement.

You should look out for these refunded amounts on your investment statement for 2013/14, as it must be declared on your 2013/14 tax return. However, don't add it into your interest, or dividend income. The correct place to declare the refunded commission is in box 16 on your self-assessment tax return under "other taxable income", with an explanation of the income in box 20.

We will do this for you when we complete your tax return, but please remember to provide us a copy of your investment statement that shows the refunded commission.

EC Sales Lists

If your business is VAT registered and you sell goods or services into other European countries you must generally also submit an additional form to the Government called an EC Sales List (ESL also known as form VAT101). There are no payments to be made or reclaimed with the ESL, as you do on your quarterly VAT return form, but you must submit the ESL on time or HMRC will charge a penalty for late submission.

If you export goods worth more than £35,000 per year you will need to complete a monthly ESL, otherwise it's a quarterly task. However, where your total turnover is less than £106,500 and you export less than £11,000 you can ask HMRC for permission to submit just one ESL per year.

HMRC should send you an ESL form to complete if you have filled in box 8 on your VAT return. Don't ignore it, as the deadline for returning the form is just 14 days from the end of the quarter. If you chose to complete an online version of the ESL you have 21 days from the end of the quarter. These deadlines are much shorter than that for your quarterly VAT return.

We can complete and submit the ESL online on your behalf.

August Questions and Answers

Q. In July 2011 I sold a property which had been used for my business. I planned to reinvest the proceeds in another property, but that acquisition never happened. I know I should now pay Capital Gains Tax on the gain made in July 2011. How do I go about doing that?

A. The period in which you should have reinvested the proceeds ran out in July 2014, so you do need to pay the CGT due for 2011/12 unless you get the tax inspector to agree to extend the period for reinvestment. He will only agree to an extension if you were prevented from reinvesting by circumstances beyond your control.

The disposal made in July 2011 should have been reported on your 2011/12 tax return as part of your provisional claim for roll-over relief. You should now write to the tax office to withdraw that provisional claim and declare the full taxable gain. The tax will be payable immediately and interest will run from 31 January 2013.

Q. I work as a self-employed courier for a large courier company who operates self-billing for VAT purposes and pays me monthly. I have just registered for VAT which has been back-dated to 1 May 2014. What should I do to collect the VAT due for May, June and July?

A. You should ask your customer if it is acceptable for you to issue a VAT only invoice to them. Calculate the VAT due as if the total amounts you have received in May to July under self-billing are the net amount of your fees for the period. You should also supply your customer with a copy of your VAT registration certificate, so the company knows to add VAT to your self-billing invoices in the future.

Q. My personal service company is about take on an IT servicing contract in Belgium. The customer will pay me a rate for every day I attend their premises, on top of my fee for the whole contract. This 'per diem' rate is less than HMRC's benchmark rate for expenses when working in Belgium. Can it be paid directly to me personally or should it be paid to my personal service company?

A. The 'per diem' rate should be paid to your company and be included in its turnover for VAT purposes, so treat it as a gross receipt including VAT. Your company can pay you expenses for working abroad, at or below the HMRC agreed benchmark rates. Do not short circuit this by accepting the per diem rate straight into your personal bank account as this will create a VAT mess.

August Key Tax Dates

2 - Last day for car change notifications in the quarter to 5 July - Use P46 Car

19/22 - PAYE/NIC, student loan and CIS deductions due for month to 5/8/2014

We are committed to ensuring none of our clients pay a penny more in tax than is necessary and they receive useful tax and business advice and support throughout the year.

If you need further assistance just let us know – we're here to help!

Contact us today on 020 8780 2349 to discuss how any of the above affects your personal or business finances or get in touch with us via our contact page to arrange a complimentary, no-obligation meeting.


This blog is a general summary. It should not replace professional advice tailored to your specific circumstance.