The BKN Blog

Real time information (RTI) has had a bumpy start. In brief these are the major problems and work-arounds discovered so far.

Annual PAYE Schemes
If you expect to pay all of your employees just once in the tax year, and all on the same date, you can register your PAYE scheme with the Tax Office as an annual scheme.

HMRC's official guidance was that annual schemes only had to submit one FPS (full payment submission) under RTI for the month the payments were made, no nil EPS (employer payment summary) were required for the other 11 months of the year.

However, in practice any PAYE schemes registered as annual in 2013/14 are not acknowledged as 'annual' by the RTI system. This means nil EPS returns have to be submitted for every month when employees are not paid.

The RTI system will be fixed on 17 May 2013 to cope with registrations of annual PAYE schemes, but you need to wait until after that date to tell HMRC you want the PAYE scheme to be annual. In the meantime carry on submitting nil EPS returns.

Forms P45 and P46
Under RTI forms P45 and P46 are not required to be submitted, even if the starting or leaving date of the employee fell before you were mandated to use RTI. If you have employees who started or left in 2012/13, and you didn't submit a P46 or P45 before 6 April 2013 you should:

- If possible, enter the leaving date on your ex-employees' 2012/13 form P14.
- Do not submit revised P14s for 2012/13 if these have already been submitted.
- Don't include the ex-employee on your first FPS or EAS (employer alignment submission). The employment will be then be automatically ceased at 5 April 2013.
- Include details of the new employee in the EAS and/or first FPS and either show a date of starting of 6 April or leave this field blank.

NI Numbers
You don't need your employee's NI number in order to pay him, or to submit the FPS report under RTI.

If the worker arrives without an NI number, you should complete the other data fields for that worker; name, address, and (if you need to check the worker's eligibility to work in the UK) - the worker's passport number. You should leave the NI number field blank if no NI number has been provided. The worker should be told to apply for an NI number as soon as possible.

You can run an NI number verification request (NVR) under RTI, but this should only be attempted once you have sent the first FPS under RTI. If HMRC finds an incorrect NI number on the FPS you will be informed. In that case the worker can be asked to check if the NI number they have provided is correct. This can be done by using the HMRC form CA5403.

From last month (April 2013) the renewals allowance for the replacement of plant other than trade tools will no longer be available.

For residential rental properties the renewals basis gives a specific deduction for expenditure on replacement of fixtures integral to buildings (e.g. bathroom fittings, central heating, boilers, windows etc). The relief is commonly used by landlords of residential accommodation, who are generally not entitled to claim capital allowances on the cost of plant and machinery.

Although there are some exceptions, generally where a property is let furnished landlords have previously been able to choose between the renewals basis or the 10% ‘wear and tear allowance’ (a 10% allowance based on net rental income, intended to give a form of relief in respect of depreciation of plant and fixtures). Landlords of unfurnished properties have only been able to obtain a tax deduction using the renewals basis and therefore ill be most affected by the change.

Have you been approached by firms that promise you instant cash from your pension fund? This is known as pension liberation, and involves taking cash from your pension fund before you reach the retirement age set by your pension scheme.

Unscrupulous firms persuade individuals to apply to move their pension funds out of their current scheme, in order to permit an early release of funds, either by a direct transfer out or by a loan. In some case the individual is told there are no tax implications - but there are.

If an individual gains access to their pension savings before their scheme-set retirement age, that individual will be liable to a 55% tax charge on the extracted funds. This tax rate applies to all taxpayers whatever their marginal rate of income tax. It also applies if the monies are repaid back to the pension scheme. It is the individual who must pay this tax charge, not the new or old pension scheme, or the firm that organised the switch of funds.

Pension funds can be safely transferred from one scheme to another, but if you want to do this you should get advice from a qualified financial adviser who is registered on the financial services register.

In the past sleeping partners and inactive partners didn't have to pay NI contributions on their partnership profits. However, HMRC changed its view on this in April 2013 and it now considers that all partners are liable to pay NICs in respect of their taxable profits, whatever their level of activity within the business. The implications for inactive and sleeping partners are:

- if your client is not already registered as self-employed, the person must register with HMRC and arrange to pay class 2 NICs from 6 April 2013;

- exemption from paying class 2 NICs can be claimed if the taxable profits are low, or the individual has another employment; and

- class 4 NICs will be due on their profits from 2013/14 onwards and will collected through the normal self-assessment for 2013/14.