Thursday 31st March 2011
It will be no surprise that this month's newswire includes Budget news but there were a few non-tax related announcements in the Budget that were unexpected, one in particular! We've summarised the highlights under Audit and Accountancy Issues below. There was a surprise tax announcement too and this is also covered below.
As we approach the start of the new tax year many of you will be issuing '6 April' letters to your clients requesting information to enable you to complete their 2010/11 tax returns. We thought that it would be useful to remind you that the self assessment penalties regime for sending in late tax returns and late payment of tax will be changing. We have drafted some suggested text that you may wish to include in your '6 April' letter. See Tax Issues below.
Turning back to audit related matters, our series of complimentary practical guides on clarified ISAs is proving very popular. In next month's newswire we will be publishing a 'Frequently Asked Questions' on the audit of groups. If there are other topics you would like us to take a look at, we'd love to hear from you.
Nicola Hurley
Director
nicola.hurley@mercia-group.co.uk
Tax cards
Tax cards are an excellent way to keep your name in front of your clients whilst providing them with a useful summary of the key rates for 2011/12. If you didn't place an order before the Budget, we will continue to print cards on a monthly basis until August. If you have already purchased cards from us but didn't order enough, the good news is you can purchase more cards at the run on price.
To request a printed sample click here or view samples of our digital options click here. A circular will be posted out shortly and you can also download a copy here.
Solicitors Conference 2011
This year's conference covers a wide range of practical issues including:
- The New Regulatory Regime - The Legal 'Big Bang'
- ABSs - The Way Forward For Accountants
- Topical Tax Issues
- Accountants Working with Solicitors
- Revisions to Solicitors' Account Rules
- From Monitoring to Self-Reporting
The full day conference will be held at the Hilton Hotel, Castle Donington on 4 May 2011 and costs £265 (£50 for MembershipPLUS and 25% discount for Members).
To view the full programme, please click here.
Audit and Accountancy Issues
It's been such a busy month for audit and accountancy technical news that we've had to produce a separate summary of new guidance issued since our February newswire! Click here if you would like to read this.
Budget 2011 - audit and accountancy news
Earlier this month the Business Secretary, Vince Cable, made public statements about the government's intention to simplify the accounting and auditing environment. Budget day also saw the publication of the "Plan for Growth", which set out more, but certainly not all, of the detail of the government's proposals in this area, which include:
- the prospect of more small companies being eligible for audit exemption in 2012, as they will only have to satisfy two out of three criteria for turnover, balance sheet size, and number of employees in order to qualify
- the possibility that most medium-sized companies should not have to undergo a mandatory audit. The government has said that it will press the European Commission (EC) to remove this audit requirement. (Note, the EC is developing a revised audit directive, which is expected to be published in November 2011.)
- the bringing forward of legislation next year to exempt many subsidiaries from producing audited accounts, provided that their debts are guaranteed by their parent company
- encouragement of the EC to exempt the smallest companies from reporting requirements.
There was also news for mutuals. Amongst other proposed changes, the government will commence the Co-operative and Community Benefit Societies and Credit Unions Act 2010 and will enable the greater use of electronic communications by mutuals.
Finally, there was an unexpected announcement in that the government wants to abolish more than two dozen regulatory offences under Money Laundering Regulations and to exempt businesses with very low turnover in order to reduce compliance burdens. There will shortly be a consultation on detailed proposals for changes to Money Laundering regulations, "to further strengthen and develop the risk-based approach".
You can find a copy of the Plan for Growth here and a response from the FRC here. We'll of course be covering the issues raised on our audit and accountancy update courses.
Charitable Incorporated Organisations (CIOs)
On 28 March, and in advance of final regulations being released by the government, the Charity Commission published the first part of its guidance and two model constitutions for anyone considering the setting up of a CIO. Once final regulations have been debated in Parliament and agreed, the Office for Civil Society will set out a timetable for implementation.
Again, we'll keep you up to date with developments on our update courses.
News for Mercia technical manual subscribers
Earlier this month we issued an update to our RSL, now RSHP (Registered Social Housing Providers) Specialist Assignment Manual (SAM) and we will shortly be issuing updates to our Audit Manual and Charities, Clubs and LLP SAMs to take account of the February 2011 edition of APB Bulletin 2010/2 (revised). If you have any administrative questions about these updates please contact karina@mercia-group.co.uk or call her on 0116 258 1200.
An update to our Pension Schemes SAM is scheduled for later in April 2011 which will also take account of the revised Bulletin, along with the updated version of Practice Note 15.
Tax Issues
Budget 2011 - Tax news
So, another Budget has come and gone. A lot of announcements, many of which we already knew about, but the big surprise was the further reduction in corporation tax to 26% from 1 April 2011.
And, of course, tax and NI are going to be merged - or are they? The statement talks about reviewing the operation of the tax and NI systems. I'll let you read the Chancellor's statement and decide for yourself...
'The Government has announced that it will consult on the options, stages and timing of reforms to integrate the operation of income tax and National Insurance contributions (NICs). In exploring potential reforms the Government aims to remove distortions created by the tax system, reduce burdens on business and improve fairness for individuals.
However, it recognises that any change will be complex and involve a wide range of policy and implementation issues. A consultation document will be published later this year setting out the differences in the current income tax and National Insurance systems, and options to address these.'
New tax return late filing and late payment penalties
We thought that it would be useful to remind you that the self assessment penalties regime for sending in late tax returns and late payment of tax will be changing. We have drafted some suggested text that you may wish to include when communicating with clients.
Of course, by letting your clients know about these changes in advance not only will this help to protect your position with them but it might even encourage some to send their information in earlier and make your life a little bit easier when peak filing season starts! To download the text click here.
Corporation Tax mandatory online filing: transitional arrangements
HMRC have published guidance about how they plan to deal with any difficulties customers experience with the move to the online filing of Company Tax Returns from 1 April 2011. To read more, please click here. If you would like to keep you clients up to date we have also prepared a client letter. You can find out here.
Toolkits to help minimise common errors
HMRC have issued three more toolkits covering National Insurance Contributions and statutory payments, VAT output tax and VAT partial exemption. To read more, please click here.
Managing Deliberate Defaulters Programme
HMRC has introduced the Managing Deliberate Defaulters Programme (MDD) to deter known defaulters from returning to non-compliance; create a permanent change to compliant behaviour; deter potential deliberate defaulters; and reassure the compliant taxpayers that HMRC does take action against deliberate defaulters. To read more, please click here.
The Plumbers Tax Safe Plan
HMRC have introduced the Plumbers Tax Safe Plan. This is the latest of HMRC's disclosure opportunities and follows on from the doctors and dentists disclosure facility. To read more, please click here. If you would like to keep you clients up to date we have also prepared a client letter. You can find out here.
Partial refund of 2003/04 - 2005/06 Class 1A
Employers who have provided benefits in kind that have been used for both private and business use may be entitled to a refund of Class 1A NIC for 2003/04 to 2005/06.
Changes to the advisory fuel rates from 1 March 2011
The advisory fuel rates have been changed with effect for all journeys undertaken on or after 1 March 2011.
Reference: http://www.hmrc.gov.uk/cars/advisory_fuel_current.htm
Office Gossip and Idle Chat!
Julie Bowles is running the London Marathon for Asthma UK
Julie, from our Audit and Accounts team will be running this year's marathon to help raise awareness as well as funds for Asthma UK. As an asthma sufferer, along with some close family members, this charity is very close to Julie's heart.
Julie has a fundraising target of £1500 and has already held a breakfast morning, cupcake challenge and guess the number sweets, and she still has a cake sale, sponsored walk, 70s disco and raffle planned! All at Mercia are supporting Julie and fingers crossed she achieves her target time of around 4 hours, good luck Julie!
'Improving the Operation of Pay As You Earn (PAYE)'
Norman Allison from our tax team attended a HMRC seminar last month entitled 'Improving the Operation of Pay As You Earn (PAYE)'. This concerned the proposals to introduce Real Time Information (RTI) and the consultation document published on 3 December 2010. Some attendees feelings were running a little high and Norman thought he would share some of the more interesting comments.
The plan is to have RTI operational across the board by Autumn 2013. The aggressive timetable is because of the plan to introduce DWP Universal Credits in 2013. Many attendees doubted that HMRC will have this operational within this timescale.
In the first few years the data will be fed into a separate HMRC system. This means that in the worst case scenario HMRC can revert to asking employers to submit end of year returns P35/P14 etc. This is not envisaged but it is the back up plan!
HMRC will be picking up the costs of submitting information via the BACS channel. However, they will not be picking up the cost of the payment instruction or any increased software costs that might be charged by software houses. Let the RTI team know if your software supplier tries to take advantage as they have made Ministers aware that this might be an issue!
There are 102 items of information set out in the consultation document that might need to be submitted. The biggest issue appears to be trying to define 'hours worked'. This appears to be a need for DWP rather than HMRC.
The abolition of form P45 caused quite a stir amongst some attendees, some commenting that this is an 'iconic form'. HMRC advised that 70% of employees lose their P45 and end up down the P46 procedure. However, they do accept that this is a cultural change!
As regards penalties HMRC are planning for a soft landing approach for the first couple of years. They do accept that in payroll adjustments have to be made from time to time.
The majority of attendees thought that employer help lines and customer support were very poor. How will they cope in the future?
Centralised deductions? Feedback so far is that it is a step too far. Watch this space!
