Following on from last month’s article on an insight into invoicing and VAT, another area that can cause concern for small businesses is electronic invoicing.

More and more frequently now, you will find the larger companies informing you that they will no longer issue paper invoices, but electronic ones, which allow you to either access your account on the internet with them and download your invoice, or they send you the invoice in an attachment.

This is extremely cost effective for the large companies, passing on their costs to the smaller companies..  Your electronic invoices must include the same information as paper invoices. As with paper invoices, it is not enough just to produce an electronic invoice - you must actually send it to your customer.

Ways to send electronic invoices

There are several ways of sending invoices electronically. You could use:

·       email messages

·       document attachments to emails, such as PDF or XML files

·       secure networks

·       secure websites

·       electronic data interchange (EDI)

As long as you make sure that what you send to the customer is what they receive, any of these methods is acceptable.

Storing electronic invoices

As with paper, you need to keep proper records of all electronic invoices you send and receive for six years. If you upgrade to a new computer system which is not compatible with your old system, you must make sure that the records held on your old system remain accessible for up to six years. If this is not possible, then you must make paper copies.

You can also keep your records on microfilm or microfiche, as long as you have received approval from HMRC and it is easy for VAT officers to view those records when they need to.

You need to store your invoice data securely in a way that allows you to:

·       keep all original invoice data

·       prevent data from being corrupted

·       reproduce original invoices at any time in a readable format

·       find details of any invoice quickly and easily

At the very least, you should consider password-controlled access to your invoice data, and taking regular backups - and checking that you can recover from backup reliably.

them for HMRC within a reasonable time and in a readable format.

Producing invoice records for HMRC

When they check your VAT records, HMRC will need to see your electronic invoices in a readable format. For more complex systems this might mean holding data in a way that allows for it to be converted to a readable format, or it might simply be that you are able to print out an email or invoice attached to an email when requested to do so by HMRC.

There is much to HMRC’s legislation and it is advisable you seek the advice of a qualified appropriate accountant. 

Please contact :   Dawn Johnson FMAAT (see advert below)

It has often been a bone of contention with smaller businesses not to issue sales invoices, or some form of receipt for work performed by the business for the customer.  When the trade is relatively small it could be argued that a duplicate receipt book would do just as well as an invoice.

This is not unusual practice, but what should be put on the receipt or invoice.

Firstly is the business VAT registered?

A VAT invoice must show:

·       an invoice number which is unique and follows on from the number of the previous invoice - if you spoil or cancel a serially numbered invoice, you must keep it to show to a VAT officer at your next VAT inspection

·       the seller's name or trading name, and address

·       the seller's VAT registration number

·       the invoice date

·       the time of supply (also known as tax point)

The tax point, or time of supply, is the date when a sale is considered to take place for VAT purposes. There are rules that tell you if this is the date of the actual supply, the date of the invoice or some other date, depending on the circumstances.
It's important to put the right date for the time of supply on your invoice, because both you and your customer will need this information to make sure the VAT on the invoice is accounted for on the right VAT Return.

·       the customer's name or trading name, and address

·       a description sufficient to identify the goods or services supplied to the customer

For each different type of item listed on the invoice, you must show:

·       the unit price or rate, excluding VAT

·       the quantity of goods or the extent of the services

·       the rate of VAT that applies to what's being sold

·       the total amount payable, excluding VAT

·       the rate of any cash discount

·       the total amount of VAT charged

If you make retail sales and you make a sale of goods or services for £250 or less including VAT you can issue a simplified VAT invoice:-

Simplified VAT invoices

A simplified VAT invoice only needs to show:

·       the seller's name and address

·       the seller's VAT registration number

·       the time of supply (tax point)

·       a description of the goods or services

Also, if the supply includes items at different VAT rates then for each different VAT rate, your simplified VAT invoice must also show:

·       the total price including VAT

·       the VAT rate applicable to the item

If you accept credit cards, then you can create a less detailed invoice by adapting the sales voucher you give the cardholder when you make the sale. It must show the information described in the six bullets above.

You do need to keep copies of any less detailed invoices you issue and copies of any invoices or receipts whether you are VAT registered or not.

There is much to HMRC’s legislation and it is advisable you seek the advice of a qualified appropriate accountant. 

Please contact :   Dawn Johnson FMAAT (see advert below)

The NMW is due to be changed on the 1 October 2011.

Most workers in the UK over school leaving age are entitled to be paid the NMW.  The NMW does vary, and depends upon the age brackets you apply to.

Some people are not entitled to the NMW as follows:-

Self-employed

If you are self-employed you are not entitled to receive the National Minimum Wage. If you believe you are a worker but your ‘employer’ says you are self-employed, they are responsible for proving you are self-employed if a National Minimum Wage dispute goes to an Employment Tribunal or civil court.

Work experience

If you are a student doing work experience as part of a higher or further education course you are not entitled to the National Minimum Wage if the work experience doesn’t last longer than a year.

Company directors

If you are a company director you are an ‘office holder’ in law. You are not entitled to receive the National Minimum Wage for the work you do as an office holder. If you also have an employment contract or worker’s contract you will be entitled to the National Minimum Wage for the work you do under that contract. 

The NMW rates from the 1 October 2011 are: -

·         Adult rate  - £6.08 per hour

·         Rate for 18-20 year olds - £4.98 per hour

·         Rate for 16-17 year olds - £3.68 per hour

·         Rate for apprentices - £2.60 per hour

Apprentices aged 19 or over who have completed one year of their apprenticeship are entitled to receive the full NMW applicable to their age.

There is much to HMRC’s legislation and it is advisable you seek the advice of a qualified appropriate accountant. 

Please contact :   Dawn Johnson FMAAT (see advert below)

An LLP is an abbreviation for Limited Liability Partnership.  It is known in legislation as a ‘body corporate’.

It is a cross between a conventional partnership and a limited company.

Each partner in the partnership is taxed under income tax legislation, on their share of the profits.  The LLP will need to file at the Revenue a Partnership self assessment return each tax year, as well as each partner filing their own self assessment.

Accounts are due to be filed at Companies House according to the statutory deadline, i.e 9 months from date of incorporation in first accounting period, or 9 months from year end date.

An LLP must also deliver to Companies House an annual return each year detailing any changes to its statutory records during the year.  There is a filing fee for this.

The purpose of an LLP is to give protection to the partners in the LLP from creditors and easier taxation wise for succession purposes for exiting or incoming partners.

All LLP’s conform under the Limited Liability Partnerships Act 2000 and this gives detailed guidance to partners within an LLP.

Some LLP’s will need to have audited accounts prepared and submit full accounts to Companies House for filing, this will depend on the size of the LLP in question.

Loss relief for members of LLPs are the same as for normal partnerships, however there is a restriction, and partners entering into new LLPs or converting from a sole-trader to an LLP must be aware of the restrictions in place at the appropriate time.

It is possible to have a Limited company as a partner within an LLP, but it must have commercial justification.

A Limited Liability Partnership is another trading option for partners to consider, when establishing or converting another business.

There is much to HMRC’s legislation and it is advisable you seek the advice of a qualified appropriate accountant. 

Please contact :   Dawn Johnson FMAAT (see advert below)

HMRC have made many changes of late, the latest being changes to the way they charge penalties for late submission of self-assessment, trust and partnership tax returns.  This came into effect from 6 April 2011 and relates to 2010-11 tax returns and beyond.

The new penalties for late filing of self-assessment and trust tax returns are, as follows:

• Immediate £100 penalty, for filing a tax return after the due date, regardless of whether the tax has been paid or no tax is due.
• For tax returns that are over 3 months late, the additional penalties are £10 per day, up to 90 days.
• For tax returns over 6 months late and again at 12 months late, there is an additional penalty of £300 or 5% of any tax due, if greater.
• In severe cases HMRC reserve the right to charge up to 100% of the tax due.

In the case of late submission of partnership tax returns, these deadlines and penalties apply to each partner, within the partnership.

In addition to these penalties for late submission, HMRC will also estimate the tax due and therefore charge interest accordingly. The current rate of interest is 3%, which may be subject to change.  The interest will be adjusted once the tax return has been submitted.

There have also been changes to the penalties and surcharges for late payment of any tax due. These are as follows:

·         30 days late - 5% penalty of unpaid tax due at that date

·         6 months     - an additional 5% of unpaid tax due at that date

·         12 months   -  an additional 5% of unpaid tax due at that date

These changes apply to all tax returns due for 2010-11 onwards. Any tax return still not submitted for any year up to 2009-10 will apply to the old penalty rules, where there was £100 automatic penalty if there was tax due, and interest and surcharges.

You have a right to appeal against the penalties if you have a reasonable excuse that will stand up to scrutiny, for missing the deadlines.

The current deadline dates for submission of Tax returns are;

• Paper returns are due at HMRC by 31 October 2011
• On-line filing due by 31 January 2012

For further information go to www.hmrc.gov.uk/sa/deadlines-penalties.htm

There is much to HMRC’s legislation and it is advisable you seek the advice of an appropriate qualified accountant. 

Please contact:   Dawn Johnson FMAAT (see advert below)

The plumbers tax safe plan has been introduced by HMRC on 1 March 2011. This plan gives the opportunity for all plumbers who have not in the past told HMRC about all of their income or they have not paid enough tax, due to estimated tax returns. This plan is also in place if you have not registered with HMRC as working for yourself. If this applies to you then this plan will help you get back on track with your taxes.

HMRC’s want to help people in this situation get things right going forward. If this plan is not taken advantage of, then HMRC will follow up those who choose not to comply with serious consequences.

How are HMRC going to help people in this situation?

HMRC have proposed that people who take advantage of this plan will pay a reduced penalty. If you cannot afford to pay what is due to HMRC then you may be able to set up a payment plan.     

How to notify HMRC that you want to take advantage of the PTSP

·         First you must tell HMRC that you wish to take part in the PTSP. The deadline for this is 31 May 2011.

·         You will then have to disclose why you are taking part by sending in a notification form.

The notification form can be completed online, by hand and posted to HMRC or you can telephone HMRC. You will then receive a DRN number (Disclosure Reference Number) you must quote this number on all correspondence. 

The deadline for your disclosure to reach HMRC is 31 August 2011. 

If you are not a plumber you can still take advantage of the PTSP plan

HMRC have stated anyone can take advantage of this plan. You will need to go through the same process stating on the forms that you are not a plumber.

People who voluntarily notify HMRC and put their taxes right can expect reduced penalties. If you do not come forward and HMRC find out later that you owe tax you can expect the penalties to be much higher.

There is much to HMRC’s legislation and it is advisable you seek the advice of a qualified appropriate accountant. 

If you need help with your disclosure or you are unsure if you can apply please contact:   Dawn Johnson FMAAT (see advert below)

P11D Deadline

Another year has passed and the time has come again to prepare and submit P11D’s and P11Db. These forms can be submitted using the paper forms or online.

The deadline for submitting the forms to HMRC is 6 July 2011. If there is any class 1A National insurance due this must reach HMRC, by 22 July 2011 if you are paying online, or by 19 July 2011 if paying by cheque.

HMRC will impose penalties for late submissions and late payments.

A P11d is a form to record all expenses and benefits you have given to an employee who earns over £8,500 during the year. One form must be completed for each employee. If the reimbursed expenses are wholly, exclusively and necessarily incurred for the purposes of the business, you can prevent these expenses becoming taxable by filling in form P87 or writing to the tax office with reference to S.366. If the employee completes a self assessment tax return the P11D expenses can be entered on to the return, this will then correct your taxable income.

A few examples of expenses and benefits

·        Company cars

·        Medical insurance

·        Gym membership

·        Overdrawn directors loan account

·        Reimbursed expenses

If you are an employee and receive a P11d from your employer you need to check this carefully as you will be taxed on these expenses and benefits. HMRC will collect any tax due through your PAYE coding. It is down to you the individual to ensure your PAYE coding is correct and you are paying the correct tax. Over the last year we have seen that the PAYE codes have not been correct, if you circumstances change then you may be hit with an underpayment of tax as HMRC have not been able to collect it through your coding.

It is therefore advisable you seek a professional who can look over your PAYE coding notice to ensure you are being taxed correctly.

PAYROLL YEAR END & CIS

5^th April 2011 – End of tax year 2010/11.

All employers are required to file a year end report online – P35, P38A (if applicable) together with P11/P14 for every person in their employment during the tax year 2010/11.  This also applies to the Construction Industry Scheme. 

• The payroll year end forms must be filed by 19 May 2011. 

• Submit any underpayment of PAYE/NIC due to the Revenue for 2010/11 by 19^th April 2011.   If you pay electronically this deadline is extended to 22 April 2011.

• As from 6 April 2010 a new penalty regime was introduced by HMRC for non payment of PAYE/NIC by the due dates.  This regime should be taken seriously as the penalties are quite severe.

• All employees are entitled to receive a copy of the P14, which is known as a P60 by the 31 May 2011.  Please ensure you keep this safe as you will require it if you or your agent file a self assessment tax return.

• New emergency tax code from 6/4/11 is 747L, followed by either week 1 or month 1.

• Standard rate National Insurance is increasing by 1%

• Paper returns may receive a penalty unless you are one of the following:-

employers entitled to operate PAYE using the Simplified Deduction Scheme for personal and domestic employees – provided they haven’t previously received a tax-free payment for online filing

practising members of religious societies or orders whose beliefs are incompatible with the use of electronic methods of communication

employers who employ someone to provide care or support services at or from their home – subject to a number of conditions

limited companies filing a return solely to submit an entry in box 28 of form P35 (‘CIS deductions suffered’) – these returns cannot be filed online

You may be in receipt of benefits from your employer.  If this is the case, you should receive from your employer a form P11D detailing your expenses for the tax year ended 5 April 2011 by 6 July 2011.  Please retain this, as you will need it if you file a self assessment return.