HMRC have published further clarification regarding who can, or cannot, claim the new £2,000 a year NIC Employment Allowance. Extracts from the update are set out below:

Public authorities

Public authorities (such as local authorities, town councils and parish councils) are not eligible for the Employment Allowance unless they have charitable status.

Pharmacies

Independent pharmacies conducting a business, including over the counter sales as well as dispensing NHS prescriptions, are entitled to claim the Employment Allowance.

Educational Institutions

Schools, academies, further education colleges and universities are entitled to claim the Employment Allowance if they are private businesses or charities. This includes local authority or central government funded institutions provided they have charitable status.

If your charity is connected to another charity, then there will be entitlement to just one allowance for all of the connected charities. So, an education trust which controls several academies with charitable status will be entitled to just one allowance and it will be up to them to decide which academy makes the claim.

Domestic staff

Employers of domestic staff will be unable to claim the Employment Allowance as the employees are all being employed in a personal capacity to support the running of a household.

Franchises

Where a person operates a franchise, the employer (franchise holder) will be entitled to the Employment Allowance. However, if the franchise holder controls more than one franchise of a business, there will only be entitlement to one Employment Allowance for all of the franchises of the business controlled by that franchise holder.

Self employed

Can the self-employed claim the Employment Allowance? Yes, but only if you have employees and your business pays employer Class 1 NICs on your employees’ earnings.

If you are a registered VAT trader and your present turnover is below £150,000 you may be advised to take a look at the VAT Flat Rate Scheme (FRS).

FRS users pay VAT as a fixed percentage of their total sales including VAT. You still add 20% VAT to your invoices but you cannot reclaim VAT on purchases or expenses paid.

The flat rate that you apply depends on the business sector in which you trade. Rates vary from 5% to 14.5%.

Benefits of using the Flat Rate Scheme

Using the Flat Rate Scheme can save you time and smooth your cash flow. It offers these benefits:

• You don't have to record the VAT that you charge on every sale and purchase, as you do with standard VAT accounting. This can mean you spending less time on the books, and more time on your business. You do need to show VAT separately on your invoices, just as you do for normal VAT accounting
• If you are in your first year of VAT registration you get a one per cent reduction in your flat rate percentage until the day before the first anniversary you became VAT registered
• You no longer have to work out what VAT on purchases you can and can't reclaim
• With less chance of mistakes, you have fewer worries about getting your VAT right
• You always know what percentage of your takings you will have to pay to HMRC

Potential disadvantages of using the Flat Rate Scheme

The flat rate percentages are calculated in a way that takes into account zero-rated and exempt sales. They also contain an allowance for the VAT you spend on your purchases. So the VAT Flat Rate Scheme might not be right for your business if:

• You buy mostly standard-rated items, as you cannot generally reclaim any VAT on your purchases
• You regularly receive a VAT repayment under standard VAT accounting
• You make a lot of zero-rated or exempt sales

It is well worth crunching the numbers to see if a switch to FRS would be advantageous. It is possible that using the FRS would save you money as well as time.

David Gauke, the Exchequer Secretary to the Treasury, recently gave a speech to the Lord Mayor’s Taxation Forum. His presentation focussed on international tax competitiveness, and how the UK’s system fares compared to our overseas competitors.

Here’s an extract of his comments:

Competitiveness

“Since 2010 we’ve cut corporation tax from 28% to 21%. And this time next year it will fall again, to just 20%. To spur innovation, we’ve introduced the Patent Box and the ‘above the line’ tax credit for Research and Development.

• we’ve modernised our Controlled Foreign Company (CFC) regime
• we’ve cultivated a generous environment for oil and gas exploration
• we’re supporting the creative sector through a number of targeted tax reliefs

And at the Budget last month, we announced further tax incentives to support business, by:

• doubling the Annual Investment Allowance
• increasing the R&D credit for innovative companies
• overhauling the UK Export Finance direct lending programme

It is not just about the competitive tax rates, reliefs and allowances. How we make tax law is important. In 2010, we published a Corporate Tax Roadmap, setting out what we were going to do and also, perhaps more importantly, explaining what we were not going to do.

We have also established a new tax policy-making process, ensuring proper consultation and the early publication of draft legislation – enabling us to refine and improve our legislation. And the importance of tax administration can be under-estimated. We recognise that our tax administrators need to understand major taxpayers. We’ve made sure that the largest two thousand corporations in the UK have their own dedicated relationship managers at Her Majesty’s Revenue and Customs, who can support those organisations and help to ensure that they are paying the correct amount of tax.

And that system exists, because it’s in everyone’s interests to have a strong working relationship that will ensure revenues are paid fully, and that any disputes or queries can be played out quickly without expensive litigation.

This is not about being a soft touch. Tough action is taken wherever necessary. But a constructive relationship built on trust between the taxpayer and the tax collector continues to bring in the revenue for the UK exchequer and add to the attractiveness of the UK system.”

Be interesting to see how this “carrot and stick” approach works in the real world as the UK promotes itself as a low-tax jurisdiction, but beware if you don’t pay your dues…

Skills and Enterprise Minister Matthew Hancock unveiled £25 million of additional support for businesses to take the lead in improving training for new and current employees. Businesses can submit their proposals from 6 May 2014 and the offer will be open for 12 weeks.

Speaking at a UK Commission for Employment and Skills Investment Showcase, the Minister pledged to support businesses in the automotive sector supply chain with £20 million to fund training. This marks the next development in support of employer ownership, making sure skills support meets the needs of business. He also announced the successful bidders in the next phase of Employer Ownership Pilot (EOP) funding as well as unveiling the way in which previous winners have chosen to invest their funding.

The £20 million fund for the automotive sector supply chain will support the skills essential for the continued growth of the automotive sector. From next week, businesses in the sector will be able to submit proposals in order to access funding and address skills shortages.

Skills and Enterprise Minister Matthew Hancock said:

“Our goal is to bring employment and education closer together, to deliver the skills employers need. This straight forward, flexible employer ownership fund will allow employers in the supply chain to develop their skills so they can take advantage of significant growth opportunities in the sector. By having a highly skilled workforce, companies will be able to grow and meet the imminent and longer-term needs of automotive manufacturing companies.”

In the first week of April 2014 HMRC issued guidance on its latest tax gathering campaign. The target group this time is UK taxpayers who have second incomes and are not presently declaring these income streams on their tax return.

The information published by HMRC about the scope of the campaign is reproduced below:

About the Second Incomes Campaign

Introduction

The Second Incomes Campaign is an opportunity for individuals to bring their tax affairs up to date if they have additional income that is not taxed through their main job or another Pay As You Earn (PAYE) scheme. People with undeclared income can get up to date with their tax affairs in a simple, straightforward way and take advantage of the best possible terms. If you owe tax on your income you must tell HMRC about any unpaid tax now. You will then have 4 months to calculate and pay what you owe.

The scope of the Second Incomes Campaign

The Second Incomes Campaign is an opportunity open to individuals in employment who have an additional untaxed source of income.

Examples could include:

• fees from consultancy or other services such as public speaking or providing training
• payment for organising parties and events or providing entertainment
• income from activities such as taxi driving, hairdressing, providing fitness training or landscape gardening
• profits from spare time activities such as making and selling craft items
• profits from buying and selling goods, for example regular market stalls, boot sales etc

Taxpayers who take advantage of this scheme should benefit from lower penalty charges in order to bring their tax affairs up-to-date.