With effect from 1 October 2010, all apprentices must be paid a minimum of £2.50 per hour. Currently, apprentices in England should be paid at least £95 per week, however apprentices under 19 or in the first year of their apprenticeship are exempt from the National Minimum Wage (NMW). The new proposals coming into force from October will, for the first time, set a minimum these apprentices must be paid.

All other NMW rates are set to increase from 1 October 2010. To summarise all NMW rates increases:  

 - Apprentices aged under 19 but in their first year of apprenticeship – (All other apprentices – No special rules, normal NMW rates apply) – £2.50 /hour

 - 16 and 17 year olds – £3.64 / hour

 - 18 to 20 year olds – £4.92 / hour

 - 21 and over  - £5.93 / hour

George Osborne presented his first Budget on Tuesday 22 June 2010.

We have added a full analysis of the Budget to our website and it is available here:

http://www.humph-net.co.uk/general/budget2010/index.htm

A summary of the tax rates which will apply as a result of the Emergency Budget, please also take a look at:

http://www.humph-net.co.uk/general/taxrates2010/index.htm

The following announcement was posted on the HMRC website today:

Annual Coding: multiple or incorrect Coding Notices – update

We advised you that HMRC recently introduced a new National Insurance and PAYE system and that we are using it to issue tax coding notices for the first time.

The transition to the new system has brought to light some discrepancies in our existing records and this is resulting in a number of incorrect coding notices being issued.

We have been working hard to identify situations where customers could receive an incorrect coding notice and have identified three key situations where this may occur. These are:

• Where a previous employment stopped sometime ago but our system has not picked this up and a coding notice has been sent for that employment
• Where 2 notices have been sent for the same employment and
• Where the code BR (basic tax) or DO (higher rate tax) has been given for an employment or pension for the first time.

We are looking to correct as many of these discrepancies as possible well in advance of the new tax year and we are doing all we can to ensure no one pays too much tax from April.

If you are concerned about your tax code and you think it is wrong, particularly if it falls into one of these three categories, then check it using the guidance included with the coding notice and the income tax area of our website. If you cannot resolve your query using this please contact us on 0845 3000 627 so we can make sure you have the right tax code applied in time for the start of the new tax year on 6 April 2010.

If you think you are affected by the HMRC’s systems failure and require any help confirming that you are on the correct tax code, please get in touch with Humphrey & Co and we will be able to assist you.

Updating QuickBooks

There is an update available for QuickBooks users to refresh the software so as to be prepared for the VAT rate change.

Intuit Software have compiled a list of FAQs on their site . There are instructions on how to make the rate change in QuickBooks, and once it’s set to the new rate, it will calculate VAT correctly.

If you use QuickBooks and need any further help making the change, please note that Intuit Software have made special arrangements for the support centre to be open on January 1st and 2nd 2010, between 9am and 5.30pm. You can get in touch on 0845 606 2160.

There are a number of changes which will affect many businesses from 1 January 2010. Here is a quick summary of the key changes.

All Businesses

Change of VAT Rate

 The standard rate of VAT goes back to 17.5% on 1 January 2010. The new VAT fraction to use when a price is stated as being inclusive of VAT is 7/47. This change will affect all VAT registered business that make standard rated supplies of goods or services. Accounting systems will need to be amended, so that all invoices issued on or after 1 January 2010 use the new rate of VAT unless the supply was made more than 14 days beforehand, or payment was made before 1 January 2010. 

 Compulsory On-Line Filing of VAT Returns and Electronic Payment of VAT

 With effect from VAT periods commencing on or after 1 April 2010 existing businesses with an annual turnover of £100,000 or more will have to file their VAT Returns on-line and pay their VAT by electronic payment. The same rules also apply to all new businesses (regardless of turnover) that register for VAT on or after 1 April 2010. Other businesses will need to follow the compulsory on-line filing at a later date which has yet to be confirmed.

 Businesses Trading Outside The UK

 An increasing number of clients make supplies outside of the UK. The following changes will apply to them:

European Community (EC) Services

 There have been a number of changes affecting how EC services are taxed. There is also the requirement for businesses that supply services to EC businesses to submit an EC Sales list and there is a new system for recovering any VAT that is incurred in other EC countries.

Business to business services (B2B) – where one business is invoicing another business

 From 1 January 2010, the basic rule for determining the place of supply of B2B services will change from being the place where the supplier is located to being the place where the customer is located. There will, however, be a number of exceptions, mainly in transport services, to this basic rule. The main changes will be implemented on 1 January 2010. For cultural, sporting, scientific and educational services, the change will be introduced on 1 January 2011. 

 The effect of this is to make most intra–EU services received by business customers subject to the reverse charge, whereby the customer accounts for VAT on the service in his country.

 Business to Consumer Services (B2C) – where a business is invoicing a customer who is not a business

 For supplies of services B2C the basic rule for the place of supply will continue to be the place where the supplier is established. Changes are expected to be introduced in 2015 to make the place of supply where the customer belongs.

 Other services

 The existing exceptions to the basic rule, such as for land-related supplies, will remain, with the exception of valuations of, and work on, moveable property, which will be taxed where the customer is located, rather than the place of performance. This will be a welcome change for businesses involved in cross-border maintenance contracts.

 Time of supply

 The rules on the time the VAT is due under the reverse charge are also changing on 1 January 2010, Instead of the date of payment triggering the requirement to account for VAT, the date VAT is due will be the earlier of:

 - the date the service is completed; or

 - when payment is made.

 For continuous supplies the time of supply will be linked to payment periods, but where no payment is made or invoice issued in a 12-month period, a deemed tax point will occur at the end of the calendar year. 

 E.C. Sales Lists (ESL’s)

 From 1 January 2010 businesses supplying services to businesses which are liable to the new reverse charge procedures will have to submit ESLs for the first time.

They will therefore need to ensure they have the customer’s VAT number. If the customer is a business which is not VAT registered there is no requirement to record the transaction on the ESL, but it will still need to be recorded on VAT returns.

 Businesses which supply goods to the EU are already required to submit ESLs. If they supply both goods and services the same form can be used.

 The new filing dates require submission within 14 days, or 21 days if filing electronically.

 Penalties will be imposed for failure to submit ESLs, or for late filing.

 Overseas VAT Reclaims

 The paper system for claims for the refund of VAT incurred in other EC countries is to be replaced by an electronic system via the customer’s member state. The claim will then be passed to the member state where the VAT was incurred for refund. The time limit for making claims will be extended by 3 months to 9 months from the end of the calendar year in which the VAT was incurred, so claims must be made by 30 September. Member states must refund within 4 months of receipt and interest is due if payment is late.

 ——————————————–

 Impact on Businesses

 The main impact of the changes will be the need to ensure that accounting systems and procedures are in place to deal with the new requirements.

 Businesses making supplies of services to other EU states will need to: 

 - review contracts to determine where such services will be deemed to be received;

 - ensure they have details of customer VAT registration numbers,

 - ensure they are clear in which jurisdiction a client is receiving a service where customers have one or more business establishments; and

 - ensure they are ready to submit ESLs by 1 January 2010.

 Traders receiving supplies of services from EC businesses will need to consider how to account for UK VAT on such services and what the likely impact (if any) will be.

If you have any questions on the new VAT rules then please contact Humphrey & Co for further advice.

On 1 December 2008 the standard rate of VAT was temporarily reduced to 15 per cent. It reverts to 17.5 per cent on 1 January 2010. HMRC recognises that the date of the change may cause problems for certain businesses at a particularly busy time of year so we have introduced two measures to help business to implement the change. These are:

 * special accounting arrangements for businesses operating beyond midnight on 31 December 2009;

 * the ‘light touch’ to be operated by HMRC audit staff in dealing with errors arising out of the rate change.

Further details on each of these are provided below.

1. Special accounting arrangements for businesses operating beyond midnight on 31 December 2009

Retailers

The temporary reduction of the standard rate of VAT to 15 per cent ends on 31 December 2009. As is normal with changes to the VAT rate, the return to 17.5 per cent will be effective from midnight on 31 December. However, HMRC recognises that making the necessary changes to account for VAT at 17.5 per cent may cause particular problems for certain businesses operating after midnight at what can be a particularly busy time of year. For example, it would not be practical for a pub, club, restaurant or hotel hosting a New Year’s Eve celebration to stop serving customers at midnight in order to adjust their tills to account for VAT at 17.5 per cent and to amend their prices accordingly.

In order to assist businesses in this position HMRC will allow them to account for VAT at 15 per cent on takings received up to the earlier of the end of trading of the 31 December session or 6am on the morning of 1 January 2010.

This treatment is subject to the following conditions:

 - It is restricted to those businesses open at midnight on 31 December 2009 that account for VAT at the point of sale such as businesses on a retail scheme – pubs, shops, restaurants etc. It will not apply to mail order or on-line retailers, businesses that account for VAT on the basis of VAT invoices issued; pre-payments for supplies of goods or services to be provided after 6am on 1 January 2010.

 - It will not apply to sales made through coin operated or similar machines (vending, amusement or gaming machines etc). In these cases businesses must follow the normal rate change rules as set out in section 10.1 of the detailed rate change guidance (PDF 248K) and account for VAT based on the date that the machine is used or by apportionment if the machine does not record the date of usage.

 - It will not apply to transactions made after midnight on 31 December that would have been caught by the rate change anti-forestalling legislation (Finance Act 2009, Schedule 3) had they been made before midnight. Any such supplies will be liable to VAT at 17.5 per cent. Further guidance on the anti-forestalling legislation (PDF 79K) is available.

 - HMRC may withdraw or restrict the application of this treatment in individual cases.

2. The Light Touch

The following guidance has been given to HMRC VAT audit staff about the approach to adopt in relation to errors discovered in relation to the rate change:-

What if businesses make mistakes implementing the change of rate (light touch)?

HMRC wants to encourage and assist businesses as they make the changes necessary to deal with the change in the standard rate.

If a business discovers that it has made material mistakes, it should correct them through the normal error correction process.

HMRC will however be operating a ‘light touch’ in terms of errors made in the first VAT return after the change (where the error relates to a change of rate issue). This means that in our audit plans we will not target change of rate errors that are unlikely to lead to any material net revenue loss. And if we find errors which relate to a change of rate issue we will not seek an adjustment unless we have reason to suppose that there is an overall revenue loss.

For example, consider a fully taxable business which supplies standard-rated goods to a fully taxable customer and incorrectly charges 15 per cent rather than 17.5 per cent. As the detailed guidance makes clear, the customer should treat only 15 per cent of the tax exclusive (net) price as input tax. If the customer does this there will be no overall loss of tax. When auditing the supplier, HMRC will assume that the purchaser has followed the accounting documents unless there is good reason to suppose otherwise.

However, if the supply is or may be to a customer who is not able to recover VAT in full, then there is likely to be an overall loss of tax and HMRC will seek to adjust (issue an assessment) in the normal way.

In situations where HMRC do need to adjust (and issue an assessment) we will take into account the difficulties the business has faced in adjusting to the change in considering whether penalties apply.

3. BIS Consultation on proposal to amend the Price Marking Order 2004

Traders are required to display clearly their prices inclusive of VAT. For a period up to 14 days, they are permitted under the Price Marking Order 2004 (SI 2004/102) to let consumers know, by way of a general notice, that an adjustment in price, to take account of the VAT change, will be made at the till.