Three important updates have been announced by the UK government recently: VAT penalty notices, planning for retirement, and payroll settlement agreements (PSAs). All these changes can have a significant impact on businesses and individuals.
VAT Penalty Notices
The HM Revenue & Customs (HMRC) has recently introduced two new VAT penalty regimes effective from 1 January 2023. These are for late filing of VAT returns and for late payment. Late filing of a VAT return will now attract a penalty point rather than a warning or formal default surcharge notice. You will have to pay a fixed financial penalty of £200 once you reach a certain threshold of points. The points threshold, which generates a financial penalty, varies according to the frequency of the VAT returns required. Once the points threshold is reached, all further late returns will attract another £200 penalty until the points slate is wiped clean. You need to achieve full compliance for two years to wipe out points awarded for late quarterly returns. If you receive a notice about late filing penalties, check if the VAT number shown matches your own registration VAT number. Also, check whether you have a reasonable excuse for the late filing. You can appeal against points awarded incorrectly or where you have a good excuse.
Planning for Retirement
As of 6 April 2023, the pensions annual allowance has increased from £40,000 to £60,000, and the pensions lifetime allowance has been abolished. You can now contribute far more to your pension funds each year, and so can your employer. Any unused annual allowance can also be carried forward up to three years. This freedom to contribute also applies to those with large pension savings who have fixed protection on their pension pots, to stop the lifetime allowance charge from applying. Now that
the lifetime allowance has been abolished, those with fixed protection can still benefit from contributing more to their pensions without being penalized.
However, while the increased allowance is good news for those planning for retirement, it is important to keep in mind that contributions above a certain level may affect your annual allowance. This means you could incur a tax charge on the excess contributions, so it is essential to seek professional advice before making any significant pension contributions.
Payroll Settlement Agreements (PSAs)
A payroll settlement agreement (PSA) is a voluntary agreement between an employer and HMRC. It is used to settle tax liabilities on minor or irregular benefits or expenses provided to employees. The agreement can cover one-off payments or ongoing expenses, such as travel expenses or staff entertaining.
The HMRC has recently updated its PSA process, making it more streamlined and easier to use. The changes include removing the need to agree on an annual fixed rate for expenses and benefits and instead, allowing employers to use a bespoke rate for each individual item.
Another important change is that employers will no longer need to provide a sample payslip or P11D form when applying for a PSA. Instead, they can provide a list of benefits and expenses included in the agreement. These changes should help to simplify the PSA process and reduce the administrative burden on businesses.
In conclusion, it is essential to keep up-to-date with any changes to tax and business regulations that may impact you or your business. VAT penalty notices, planning for retirement, and payroll settlement agreements are just a few of the recent changes introduced by the UK government that could affect businesses and individuals. Seeking professional advice from a qualified accountant or tax adviser can help you to navigate these changes and ensure compliance with the latest regulations.