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.

Pubs, clubs, restaurants and other retail businesses remaining open past midnight on New Year’s Eve will be allowed to continue charging VAT at 15% on their sales until they close or until 6am on 1 January 2010, whichever is the earlier.

Similar arrangements will apply to telecommunications companies in respect of calls and texts made up to 6am on 1 January.

Making this announcement, Financial Secretary to the Treasury, the Rt Hon Stephen Timms MP, said:

“New Year’s Eve celebrations are a vital source of income for many in the service sector. The Government recognises that it would be very difficult for them to make the necessary changes to account for VAT at 17.5% immediately after midnight. To make the transition as easy as possible retail and telecommunication businesses will be able to charge VAT at the old rate into the early hours of New Years Day.

“I announced in May 2009 that HMRC would be allowing a ‘period of grace’ to help businesses trading across midnight on 31 December in implementing the VAT rate change, and that they would work with business on the details. I am very pleased that HMRC is now able to confirm these arrangements and I hope that those businesses affected will find them helpful.”

The ‘period of grace’ is restricted to those businesses that account for VAT at the point of sale such as businesses on a retail scheme – pubs, shops, restaurants etc and to the cost of calls or texts made and billed in the early hours of January 1.  It will not apply to businesses that account for VAT on the basis of VAT invoices issued or to mail order or on-line retail sales.

HM Revenue & Customs (HMRC) will publish a Revenue & Customs Brief on the HMRC website (www.hmrc.gov.uk) shortly, explaining the extent of the concession in more detail.

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.

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 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.