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Tax update – week ended 10 September 2010

13th September 2010

NI Holiday

This “holiday” scheme started last Monday (6 September 2010), so HMRC clarified matters. The scheme only applies to:

  • The first 10 employees employed in a business during the first trading year. If an employee leaves in this time, his “place” can’t be taken by another.
  • Earnings paid to employees on or after 6 September 2010, where his/her first year expires before the scheme ends on 5 September 2013.
  • Employers’ Class 1 NI (usually at 12.8%) payable on the above earnings, (not employees’ NI @ 11% ), up to a maximum of £5,000 per employee.

Conditions::

  • Show that the primary place of business is outside the excluded areas (Greater London, the Eastern and the South East regions of England).
  • The application was approved by HMRC.
  • The business must be “new” i.e. formed on or after 22 June 2010. The incorporation of existing businesses specifically does NOT qualify.

The following employers specifically do NOT qualify:

  • Businesses without a trade, e.g. public sector employers.
  • Employers of personal/domestic employees e.g. cooks, gardeners and nannies.
  • MSC’s (Managed Service Companies)

Businesses subject to IR35 (but the deemed salary does not count).

Businesses undergo a change in ownership are no longer eligible from the date of sale or takeover.

Draft notes on NI holiday

Comments on NI holiday

VAT on internet marketing

Increasingly, businesses use Google or Facebook to advertise. Google (including ‘adwords’) is an international service for VAT purposes because Google Ireland Ltd (Dublin) is the “seller”

Facebook (USA) is clearly an international service provider.

A UK VAT registered business should not be charged VAT in either example i.e. whether in the EU (but outside the UK) or outside the EU. Instead, on the VAT return – the VAT registered business essentially pretends to sell this service + VAT and reclaims the service + VAT. Net effect is usually zero (unless the business provides exempt services).

If charged, say, Irish VAT at 21% by Google advertising, this could be because Google Ireland Ltd has assumed that thee business is a private person and not a VAT registered business. The recourse is to go back to the supplier and ask them to issue an invoice without VAT. Going to HMRC will not be productive in this case

Notice 741A: Place of supply re. services

Emails from “ChRIS”
Don’t automatically delete emails from ChRIS@HMRC.gov.uk becasue they may contain useful information.

You probably saw an email saying that your authorisation code for VAT is about to expire. If you are sure you have activated, you may ignore but it is worth double checking!

However, aside from “ChRis” – if you receive a suspicious email supposedly from HMRC which you are suspicious about first check that the tax references are correct. If unsatisfied, telephone the online services desk on 0845 60-55-999, or forward it to phishing@hmrc.gsi.gov.uk.

Examples of scam emails

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“This information is taken from Mark Lee’s weekly practical tax newsletter, published by the Tax Advice Network”