Archive for April, 2011

New penalty regime for late filing and late payment of Income Tax Self Assessment

Friday, April 8th, 2011

For those who Income Tax Self Assessment (ITSA) applies, HM Revenue & Customs (HMRC) will be issuing 2010/11 notices and paper returns which will include information on the new penalty framework and how it will significantly increase penalties for those who file and pay late.
The new penalties will be issued automatically to all those in ITSA who do not file and pay on time.

New penalty regime

The new penalty regime for ITSA 2010/11 returns will be:

Late filing penalties

  • When any return is late, an initial £100 fixed penalty arises the day after the filing date. This applies even if there is no tax to pay or the tax due has been paid on time.
  • Individuals are notified they will be liable for a further daily penalty if the return is not submitted within three months of the filing date. The penalty is calculated at £10 per day, until the return is filed, for a maximum of 90 days (up to £900).
  • After the daily penalties, and if the return is still outstanding six months after the filing date, a further penalty arises, calculated at five per cent of the tax liability on the return or £300 if this is higher.
  • Where the return is still outstanding after 12 months, a further penalty arises, calculated at five percent of the tax liability on the return or £300 if this is higher.
  • If a determination has been made because the return has not been received, the penalties at six and 12 months will be based upon the estimated amount in the determination, and then adjusted retrospectively when the self-assessed amount is returned.

Late payment penalties

  • at thirty days late there will be charged an initial penalty of five per cent of the tax unpaid at that date
  • at six months late and there will be charged a further penalty of five per cent of the tax that is still unpaid
  • at 12 months late there will be charged a further penalty of 5 per cent of the tax that is still unpaid
  • these penalties are additional to the interest that will be charged on all outstanding amounts, including unpaid penalties, until payment is received

New National Minimum Wage Rates

Friday, April 8th, 2011

Current NMW rates

There are different levels of NMW, depending on your age and whether you are an apprentice. The current rates are:

  • £5.93 – the main rate for workers aged 21 and over 
  • £4.92 – the 18-20 rate
  • £3.64 – the 16-17 rate for workers above school leaving age but under 18
  • £2.50 – the apprentice rate, for apprentices under 19 or 19 or over and in the first year of their apprenticeship

The age at which you become entitled to the main rate was reduced from 22 to 21 on 1 October 2010.  The apprentice rate was introduced on the same date.
If you are of compulsory school age you are not entitled to the NMW. Some of your other employment rights are also different.

Rates from 1 October 2011

The NMW rates are reviewed each year by the Low Pay Commission and from 1 October 2011:

  • the main rate for workers aged 21 and over will increase to £6.08
  • the 18-20 rate will increase to £4.98
  • the 16-17 rate for workers above school leaving age but under 18 will increase to £3.68 
  • the apprentice rate, for apprentices under 19 or 19 or over and in the first year of their apprenticeship will increase to £2.60

Past NMW rates can be viewed on the Low Pay Commission website

HMRC to press ahead with real time PAYE system

Friday, April 8th, 2011

5 Apr 11 HM Revenue and Customs (HMRC) has confirmed that it will be going ahead with a major reform of the PAYE system.
The overhaul will involve a switch to a real time information system.
The new system will mean that employers must supply HMRC with details, such as income tax, national insurance contributions and student loan payments, on each payroll day rather than at the end of the year.

HMRC said that the change would bring several benefits. These include making it easier to ensure individuals pay the right tax after a change of job and removing the need for the P45/P46 process over time.There would be a simplification of the PAYE end of year reconciliation process for employers, and much of the uncertainty that leads to errors in the tax credits system would be lifted.

Following a period of consultation, HMRC said that it is to embark on a pilot scheme in April 2012, involving volunteer employers and software developers.Work to ensure data quality will begin in October 2011 and continue until all employers have moved to the new system.

Once the pilot scheme has been successfully completed, the plan is that employers will be expected to start using the real time information system from April 2013. It will become mandatory by October 2013.David Gauke, Exchequer Secretary to the Treasury, said: “Real Time Information will support improvements to the PAYE system making it more accurate for taxpayers and easier for employers and HMRC to administer.

“We need a PAYE system that can meet the demands of the 21st century workplace and ensure that the tax system works better.” Stephen Banyard of HMRC added: “We wanted people who use the system every day to give us their views on the collection of Real Time Information. We have listened to the concerns of payroll providers and employers surrounding the proposed mandation date and amended our plans to take these into account.“We want to work with software developers and employers to help us deliver the new system. I urge anyone interested in being involved in the pilot to contact us.”