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RTI System

New multimillion pound RTI system fails to reduce number of tax discrepancies

Are you one of the estimated  5.5 million people who have paid the wrong amount of tax this year?

The numbers of PAYE errors have increased this year, despite the new Real Time Information system being fully rolled out. You may be one of 2 million people who have paid too much income tax and are due a rebate. Or, more worryingly, you could be one of the 3.5 million people that HMRC are claiming have paid too little. It’s a good idea check your tax code now to make sure yours is right.

The PAYE system only checks tax paid against tax due at the end of every year. This means that things like changes in pay or job are not taken into consideration and lead to over and underpayments of tax. The idea behind the new Real Time Information system is that employers report their wage payments weekly or monthly, thereby ensuring increased accuracy. The Treasury told MPs that R.T.I. would “bring PAYE into the 21st century” and spent £270 million implementing the system. This year the numbers of errors has actually risen from 5.2 million to 5.5 million.

Some businesses had concerns that the new system would be too unwieldy. As payroll consultant Kate Upcraft said, “Taxpayers have spent hundreds of millions on R.T.I. and employers have had to spend hundreds of millions to use the new system, so we are entitled to expect significantly fewer errors in the reconciliation process.”

Tax inspectors have estimated the average discrepancy to be about £300.00 and claim that there have been an increase in errors because there have been an increase in the number of people in employment due to an upturn in the economy. HMRC stand by RTI and say that the positive effects of the new system will be seen in time. They also added that underpayments and overpayments would remain part of our tax system.

Tony Shanks

 

 

One good thing about paying 40% tax…

You get a larger tax rebate

Over the last few tax years more and more people have moved into the 40% tax bracket – when before they weren’t.

Literally hundreds of thousands of UK tax payers are paying tax at a higher rate because of changes in the tax brackets. It basically means you need to earn less before you start paying tax at the higher threshold.

Having to pay more income tax under PAYE is usually something no one wants to do, however one good thing is that you can claim tax relief on your job expenses at 40%, instead of 20%.

This makes a big difference in the amount of income tax you can claim back, essentially doubling the size of any tax rebate your owed.

Example

We have clients who we help each year claim back expenses like mileage tax relief. Many of them are now paying tax at 40% when they weren’t previously.

If you are claiming for 10,000 business miles your claim will be worth £4500.

Paying tax at 20% you can claim a tax rebate of £900

Paying tax at 40% your looking at a refund of £1800

It doesn’t matter what type of claim you are making the additional tax relief applies. So if you are claiming a uniform tax rebate or relief for using your own home you can look forward to a higher refund than most.

So don’t despair when you see the amount of tax taken in your pay packet, just make sure you only pay the you need to by claiming back what’s rightfully yours.

Tony Shanks

A Uniform Tax Rebate Example

Mr Nwulu has been a retail assistant for 5 years and wears a uniform which has his companies logo on. He found about our service from a colleague he works with and applied for his uniform tax rebate online.

 

What happend next…

After answering a few questions and signing our simple claim forms, Mr Nwulu made a successful uniform tax rebate claim and, within 8 weeks received £295.

As part of the claim Mr Nwulu’s current tax code also changed meaning he received a tax rebate for this current tax year and will now pay less tax in the future too.

After receiving his uniform tax rebate, Mr Nwulu told us how happy he was with us saying:

‘I only recently found out you could claim tax refund for laundering uniform. Tax Rebate Services backdated my claim for me and I received nearly £300. Thanks guys.’

Lot’s of British tax payers pay too much tax for many reasons, claiming back a uniform tax rebate is just one of them. Not claiming means you can miss out on money your owed for the last four tax years, and in the future.

 

How can I make a claim?

We specialise in helping people find out what they’re owed and claiming back all the tax relief they are entitled to. You can claim online or by phone, and we make it really easy making it hassle free for you. Get in touch to find out what your due, can you afford not to?

Tony Shanks

MOD Tax Rebates

The Ministry of Defence and HMRC have recently agreed a new Flat Rate Expense for some MOD staff, giving them tax relief on the cost of washing their uniforms. This is good news and means you could be owed an MOD tax rebate and pay less tax in the future.

The agreed flat expense amounts per tax year are:

  • Royal Navy £80
  • Army £100
  • Royal Marines £100
  • Royal Air Force £100

How do I get the allowance?

This allowance is allocated through an amended tax code for tax year 2013-14; it will be listed as ‘Earlier Years Adjustment’. For most people, this revised code number was allocated to the pay for March 2014 although a few took effect in February 2014’s pay. For most, this meant paying less tax in the month where the revised tax code was applied (for individuals not presently in employment who must complete a Self Assessment tax return, HMRC added the adjustment to the statement of account).

How far back does it go?

The allowance will also be given retrospectively to the tax year that began on 6th April 2008 (this will of course depend on length of service). Service personnel will be entitled to their full expense entitlement for each year of service; the entitlement is not reduced if the service period began or ended part way through a tax year.

HMRC will also include any due RPS repayment supplement (this is compensation paid to customers where there has been a delay in the repayment). This will be paid at an average annual interest rate of 0.5%.

Here are two examples showing what you could be due:

Example 1

A Royal Navy recruit commences service in September 2009 and remains with the Navy until March 2012. The recruit was entitled to FREA for three tax years: 2009-10, 2010-11 and 2011-12) and the rate is not adjusted for the years of commencement (2009-10) and cessation (2011-12). The individual remains a basic rate taxpayer throughout the tem of service.

  • 2009-10 £80 @ 20% = £16 + Repayment supplement = 16.32
  • 2010-11 £80 @ 20% = £16 + Repayment supplement = 16.24
  • 2011-12 £80 @ 20% = £16 + Repayment supplement = 16.16

Total Repayment due £48.72

Example 2

In November 2013, another individual joins the RAF as “Other Ranks” and is entitled to the FREA for one year (2013-14) which is not apportioned for that year. Because there has been no delay in making the payment, no repayment supplement is due. This individual too is a basic rate taxpayer.

  • 2013-14 £100 @ 20% = £20 Total Repayment due £20

The allowance, from 6 April 2014, will be allocated by your respective payroll department before the tax is deducted.

Service personnel retain an option of requesting a deduction from actual expenses instead of receiving FREA. Expense claims must be made in writing to HMRC supported by evidence for the claim.

HMRC and MOD continue to negotiation laundry expenses for Officers and other groups employed by the MOD who have different terms and conditions of employment.

What else can I claim for?

Tax relief for MOD staff can be claimed for other types of job expenses. Our service helps many to claim back tax relief on travel from home to base. It’s only possible when your posting is intended to be for less than 24 months. Even if you you receive home to duty pay a claim is still likely.

Claims for mileage aren’t simple, but we make it easy. The rewards are worth making the effort for, with our average mileage tax rebate of over £2500.

Get in touch today to claim your MOD tax rebate.

Tony Shanks

5 Million Not Paid The Right Tax

More than 5 million caught by tax miscalculations

It ‘s been estimated that 5.5 million or more people may have paid the wrong amount of tax; some have paid too much meaning their due a tax rebate, but a significant number may have to make further payments to HMRC to correct the error, according to details released by the government organisation.

Around 3.5 million, it appears, paid too little income tax in the tax year 2013/14 through PAYE; the underpayment will be taken through the system over the next few years. These problems persist despite the introduction of the new RTI system (real-time PAYE). Approximately 2 million people were charged too much and can claim it back from HMRC.

The 5.5 million errors for the tax year 2013/14 are higher than the errors for 2012/13 which numbered 5.2 million.

The RTI system aims to reduce the number of reconciliations but the staggered nature of introducing the system means that it has had only a limited impact so far. The HMRC has also stated that the money value of underpayments and overpayments fell by £50 in comparison to the previous year.

An HMRC spokesperson commented: “There will always be end-of-year reconciliation due to the way PAYE works. Most people pay the right tax throughout the year, but there will always be a small percentage of the 41 million people in PAYE who have underpayments or overpayments at year end. This could be because they have moved jobs, received a number of different sources of income or received benefits-in-kind that were only reported at the end of the year.

“The effect of RTI is not reflected yet as it has not bedded in but, over time, RTI will help to reduce the number of cases that have to be reconciled. The estimates quoted for reconciliations in 2013/14 are based upon actual reconciliation numbers in 2012/13. We do not yet know what effect RTI will have had on reconciliations for 2013/14. As we adopted a staged process for employers using RTI, some will not have used RTI for the full tax year. We will not be able to measure any effect on reconciliations for 2013/14 until the end of this tax year (2014/15).That said, early indications show that processing is in line with our expectations.”

Tony Shanks

Tax Credit Debt Soars

More families fall into debt with HMRC after tax credit overpayment soars

According to recently released details, more families are in debt to HMRC due to a large increase in tax credit overpayments in 2013. The Independent newspaper discovered that debt collectors working on behalf of HMRC have targeted over 200,000 of Britain’s lowest earners after the mistake by the government department. Tax Credit overpayments should not affect a claim for a tax rebate through PAYE.

Though the number of families claiming tax credits fell between 2012 and 2013 from 5.6m to 4.6m thanks to altering the criteria for eligibility, the total amount owed back to the government due to overpayments dropped only marginally from £1.6bn to £1.5bn. In the financial year 2012-2013, it appears that around 27% of all tax credits paid out by HMRC were overpayments, increasing from 24% for tax year 2011-2012.

Chaminda Jayanetti of the False Economy organisation said: “The growing zeal with which HMRC is pursuing overpayments, often on spurious grounds, reflects a Government bent on hounding people whose crime is raising children or working in the low-paid jobs that our economy is based on.”

“The proportion of claims that have been hit with an overpayment has risen by a third in two years, taking this broken system back towards the chaos that greeted its birth. The Government’s plan to let HMRC raid people’s bank accounts should be viewed in this light.”

Citizens Advice Bureau has reported that people seeking help for debt acquired as purely because of overpaid tax credit has increased over the last year:

  • 29,366 cases regarding debt from overpaid tax credits  -an increase of 14% from the previous year
  • 14,157 of these cases sought help in budgeting to repay money that they owed to HMRC. This was an increase of 19% from the previous tax year

Gillian Guy, the Chief Executive of CAB said: “For thousands of families, Whitehall calculations are leading to household debt. Tax credits are there to make sure people get a decent standard of income, but the sharp rise in debts from overpaid tax credits suggests this policy is having the opposite effect.

“Seeking to improve the accuracy of tax credit payments is sensible, but HMRC needs to tread carefully with its new powers to reclaim money directly from people’s bank accounts. HMRC has a poor track record in managing people’s data and dealing with overpayments.

“The safeguards put in place look sensible on paper but with such huge pressure on household budgets, it does not take much to push families into financial trouble and mistakes by HMRC will be harmful. As the economy recovers and welfare reforms are phased in, ministers and Government agencies must ensure people trying to make ends meet are supported through the upheaval.”

A spokeswoman for HMRC clarified: “As a result of policy changes which came into effect in April 2012, tax credits overpayments have reduced as a proportion of money paid out. Overpayments fell from £1.6bn (5.4 per cent) in 2011/12 to £1.5 billion (five per cent) in 2012/13, out of around £30bn a year paid to 4.5m families. The figures published today also reveal that the number of awards that are overpaid fell by 70,000, from 1.62 million in 2011/12 to 1.55m in 2012-13.

“If an overpayment occurs as a result of HMRC’s error, claimants do not need to repay the overpaid money. An overpayment only needs to be repaid if a claimant has failed to meet their responsibilities in telling HMRC of any changes of circumstance.”

“Where claimants have genuine difficulty in repaying an overpayment, we agree for them to pay in instalments through Time to Pay arrangements, and around two thirds of tax credits overpayments debt is currently being repaid in this way.”

Tony Shanks

Tax Rebate Services Tax Glossary

Tax Terms Explained

If your looking to find out a bit more about tax you can use our online tax glossary to help you out.

Over many years helping UK tax payers deal with their affairs, we’ve been asked hundred’s of questions, and thought we’d put together a glossary to get tax terms explained in a simple and easy to understand way.

Because tax is such a big subject it’s likely many terms are unfamiliar and sometimes complicated. Giving yourself the knowledge about all the different taxes and reliefs, can help you only pay the income tax you need to and stop you overpaying. In  some cases you could find out that you are entitled to a tax rebate.

Tony Shanks

www.TaxRebateServices.co.uk New Site Launch

www.TaxRebateServices.co.uk Launches a New Look

Today has seen the launch of our redesigned website www.taxrebateservices.co.uk – and it’s all thanks to you. We’ve listened to our past and current clients, who told us what they’d like us to do to make the process of dealing with their tax affairs as easy, and pain free as possible.

So what’s new? A quick summary…

Tax Rebate Calculator

We’ve introduced a handy new tax rebate calculator. The calculator  lets you enter your PAYE job expenses to give you an estimation of how much tax you can claim back.

Accountancy Services

Our new accountancy services section lets you choose which type of assistance you need with ease. Although we’ve been helping the likes of CIS Sub Contractors, landlords, and UK non residents for a long time, it’s now even easier to find what you want.

Tax Glossary

It’s good to find out more about things, so we’ve created an online tax glossary to explain in a simple way popular tax terms. You’ll find everything from income tax to what is a tax year to help you get to grips with the UK tax system.

Responsive for all devices

With so many people using devices like mobiles and tablets we’ve made the site friendlier to use for everyone.  

We hope you enjoy using our brand new site and it helps make tax a little less taxing.

Best wishes,

P Donohoe and the Tax Rebate Services team

Tax Avoiders to pay up front

Queen’s Speech: Tax avoiders told to pay up front in new guilty-before-trial law

HMRC have been criticised for treating taxpayers as “guilty until proven innocent” for proposed new powers that will force suspected tax avoiders to pay up front. The plans, which were announced in the Queen’s Speech, means that individuals and businesses who use tax avoidance schemes will have to make “accelerated payments”. This is expected to raise around £2 billion from the 65,000 people that the Treasury feel will be affected by these new powers. Most controversially are the new rules that apply to the pre-existing cases of money invested in contentious schemes from the past.

Earlier in the year, Chancellor of the Exchequer George Osborne announced plans for a major crackdown on tax avoidance after several high-profile cases. Take That singer Gary Barlow along with two band mates and the group manager now face having to repay tens of millions of pounds. They had previously invested in schemes that a judge later ruled were designed for tax avoidance.

If the plans go through, in future those accused of using such tax avoidance schemes must pay the tax while the review on whether they are legal or not takes place. Many are warning that tens of thousands of potentially innocent British citizens will be forced to pay tax bills before they are due.

In May, an all-party Treasury Select Committee expressed their concern about up-front payments. Berwin Leighton Paisner spokesman Neal Todd warned that HMRC was setting itself up as judge and jury: “We continue to have serious reservations about this. It’s causing a great deal of concern amongst clients, to be quite frank. The reason is that it gives the Revenue the power to come along to a taxpayer and ask for the money straight away.”

“That worries people. In a sense the Revenue can think of a number – obviously they have to act reasonably – but they can decide what they think the right number is. That’s very different from going to a court and them saying, ‘On balance we have decided that you owe a certain amount of money’.”

“For many people, the prospect that the Revenue can be judge and jury without going to tribunal…is very worrying and contrary to the normal rules of law and procedure.”

Tina Riches who is a national tax partner at Smith & Williamson, an accountancy and investment management group, added: “In some ways it flies in the face of the British justice system in that normally if there’s an issue you can take it court and an independent judge can decide.

“But if you’ve got to pay the tax up front before you can get anywhere near the court you could image that people could end up just deciding to pay the tax and not pursue what is actually a legitimate case.”

Earlier this year, Chancellor Osbourne said: “If people feel they have been wronged, they can of course go to court. If they win, they get their money back with interest.”

Tony Shanks

Pensioners Savings Tax Rebate

Attention Pensioners – You May Be Due a Tax Rebate

Confusion over the 10% rate could means that many of the country’s pensioners have paid too much tax – either because they were overcharged or did not have to pay anything in the first place. It is estimated that HMRC owes in the region of £200 million.

Rebates could be from a few pounds up to several hundred for those who took out five-year fixed bonds, and those affected are now being encouraged to take advantage as the 10% tax rate was scrapped in the 2014 budget. The treasury said that this was because most people entitled to it were not claiming it back.

With banks offering little advice and none of the largest having information on their websites, few were even aware that it existed.

10P Savings Tax and You

Typically, 20% tax will be deducted off of any interest paid on your savings, and only those on very low incomes can receive their interest before the deduction is made – your bank or building society will deduct it at source. In order to qualify for tax-free personal savings, your annual taxable earnings must be under the tax-free personal allowance.

The limit is £10,000 for the under-65s for the 2013-14 tax year, £10,500 for the over-65s and £10,660 for the over 75s. If you feel you qualify for tax free savings, ask your bank or building society for an R85 form. A large number of people who earn more than £10,500, who are receiving interest on their savings, will qualify for a 10% tax rate on those saving

To work out whether you qualify, first, add up all your taxable income except savings interest. If it is below £10,815 (for the under-65s), £13,210 (over-65s) or £13,370 (over-75s), you can claim back some of the tax you paid on your savings.

Entitlement

If you use self-assessment for tax purposes, HMRC will automatically send you a rebate – similarly for PAYE.

Any individual may earn up to £2,710 of interest at the 10% rate of tax which means you may claim a maximum of £271. This amount will be reduced in proportion to how much greater your income is compared to the personal allowance.

A 66-year-old with an income of £12,000 from a pension and an additional £4,000 in interest earned from his or her savings will have had an £800 tax deduction. The maximum income that individual may have in order to qualify for the 10% tax band is £13,210. This means that the £13,210, minus the stated £12,000 income, will leave £1,210 to pay interest at the 10% band.

This leaves £2,790 of savings interest which will be subject to the 20% tax rate. The individual can reclaim 10% tax on £1,210 interest, which will be £121. Those with non-savings income below the personal allowance will be able to claim back much more.

You will need to reclaim any tax you have overpaid directly from HMRC, and you are able to claim back up to four years of overpaid tax. You will need to apply by April 5th every year. The maximum and deadline for each year is:

  • £279 for the 2013/14 tax year – claim by 5th April 2018
  • £271 for the 2012/13 tax tear – claim by 5th April 2017
  • £256 for the 2011/12 tax year – claim by 5th April 2016
  • £244 for the 2010/11 tax year – claim by 5th April 2015

If you need help making a claim get in touch with us. We might be able to help you claim back for more than just the tax on your savings. Call us today on 01228 520477 we’d be happy to assist you.

Tony Shanks

 

 

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