Photo Books are Books

HMRC’s Decision regarding Photo Books
The First Tier Tribunal has ruled in favour of the tax payer in the Harrier LLC case. As a result HMRC has issued Revenue & Customs brief 04/12 accepting that Photo books are books and should therefore be a zero rated supply. HMRC has decided not to appeal the decision.

Background
Harrier provided customers with a photo book that comprised a number of photographs taken by the customer. Typically, the customer uploads his or her photographs and other images of text, drawings, handwritten text and so on to a third party website. The customer chooses the particular photo book template they desire and can arrange the layout of individual pages.

Once the customer has completed their action they can then place their order. The order is electronically transmitted to Harrier who then produces the photo book using printing presses.

Harrier claimed that the photo books were zero-rated for VAT purposes as they fell within the definition of book under the law.

HMRC’s Argument
HMRC’s contention is that what Harrier supplies is a service and not goods. They further argued that the photo books are only ancillary to that service and the entire supply should therefore be standard rated.

The Decision
The Tribunal decided that the majority of the items in question were books and dismissed HMRC’s argument that the photo books were ancillary to a supply of services.

In making its decision the Tribunal took support from the High Court case of Colour Offset Ltd [1995], where it was found that a book has the minimum characteristics of having a significant number of leaves, usually of paper, held together by front and back covers usually more substantial than the leaves. The book must also be designed to be read or looked at.

Two items were found not to be books because they consisted of spiral binding and the pages had the quality and appearance of individual photographic prints.

HMRC’s Policy Going Forward
Subject to certain exceptions, HMRC accepts that a photo book which possesses, as a minimum, several pages, a cover stiffer than its pages and is bound, will qualify for zero-rating as a book. The book must also be designed to be read or looked at.

The Effect of the Decision
If you consider that the supplies that you make are similar to those of Harrier and the ‘books’ that you supply have the characteristics described above then your supply is likely to be of a book and therefore zero-rated.

If they do not then it is likely that they will be taxable at the standard rate.

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SA Donate will close in April 2012

SA Donate is the scheme for Self Assessment taxpayers to direct HM Revenue & Customs to pay any Self Assessment tax refund to a charity of the taxpayer’s choice. They can also claim Gift Aid on the donation where appropriate.

The scheme, introduced in 2005, has not been used very much, and would need an extensive upgrade to safeguard it from fraud. As a result, at Budget 2011, the Government announced its intention to withdraw the scheme from April 2012.

This means that donors will no longer be able to send a tax refund to a charity straight from their tax return from April 2012. This option will be removed for forms for tax years 2011-12 onwards and while it will still appear on forms for earlier years these repayments will be sent to the taxpayer and not to the nominated charity.

Donors can still donate their tax refund to any charity themselves and claim Gift Aid if the qualifying conditions have been met.

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EC to slash accounting red tape for micro-businesses

The European Council has approved new requirements that will slash red tape and create a less onerous accounting and financial reporting regime for micro-enterprises.

The new rules should dramatically cut administrative bureaucracy for companies that do not exceed the limits of two of the following criteria: a balance sheet total of €350,000 (£293,000), a net turnover of €700,000 and an average of 10 employees during the financial year.

The directive allows EU member states to exempt micro-enterprises from the publication of annual accounts.

Dr Nigel Sleigh-Johnson, ICAEW's financial reporting faculty chief, said the decision — a conclusion to the three-year project, was a long-awaited step towards establishing a more appropriate accounting regime for small companies.

'Micro-businesses represent a substantial proportion of the UK economy, and is a key source of start-up activity and innovation, vital to the UK's economic recovery. Reducing the regulatory burden on these businesses where possible is something we strongly support.

'It is, however, paramount that any potential changes to the UK reporting requirements for our smallest businesses do not reduce access to reliable financial information or send misleading signals about the importance of sound financial management.'

He said that now the UK — along with other EU member states — had been given free rein to determine their own rules for the smallest companies, it 'is a good time to revisit the debate about the FRSSE (Financial Reporting Standards for Smaller Entities), and how a reporting regime can be designed for all small companies that is fit for purpose - there is still important work to do in this area.'

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HMRC Got Smart on Phones

HMRC has revealed it is to now classify employer-issued smartphones as mobile phones; five years after the gadgets came onto the market.

Previously, when employees were given the devices for work purposes, HMRC had classified them as personal digital assistants (PDAs), rather than as mobile phones. The department has now accepted that the hi-tech phones satisfy the conditions to qualify as 'mobile phones'.

HMRC was however careful to point out that not all gadgets offering telephonic functionality will automatically be treated in the same way; with specific conditions needing to be met in order to fall in to the mobile phone category.

Employers, who are affected by the classification change, will now be able to reclaim any National Insurance Contributions backdated as far as 2007/08, provided only one phone was issued to the employee and the circumstances do not fall into the exemptions outlined in section 319 of the Income Tax (Earnings and Pensions) Act 2003.

As a rule of thumb, HMRC has stated that PDAs, tablets and laptops 'using Voice Over Internet Protocol ('VOIP') systems to make and receive phone calls will not satisfy the primary purpose test'.

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Late Tax Returns Half A Million Less Than 2011

Over half a million fewer penalties for late tax returns will be issued than at the same time last year, HMRC has revealed.

The department will, nonetheless, still be sending out 850,000 £100 fee notifications to individuals who failed to file their 2010/11 Self-Assessment papers before the 2 February 2012 deadline.

The figure of 550,000 less late-comers was likely to have been influenced by the allocation of two extra days that HMRC provided for receiving tax returns, following a staff strike scheduled for the original cut-off date of 31 January.

Those who still have not sent their returns are encouraged to do so by HMRC, given that the fine amount will, after three months, increase by £10 a day for 90 subsequent days.

Stephen Baynard, HMRC's acting director general personal tax, said: 'We want the returns, not the penalties. So anyone who still hasn't sent theirs should do so as soon as possible.'

Anyone in receipt of one of the penalty notices will be able to appeal should they have a 'reasonable excuse', including illness, family bereavement or delayed issuing of an activation code by HMRC.

For those that don't believe they should be in Self Assessment, HMRC advise calling 0845 900 0444 to cancel the fee.

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Tax Break for Your Teens

Introduction

Last week my 18 year old daughter told me her grand dad is cooler than I am. In my attempt to prove her wrong I am dedicating this article to teenagers who work during the holidays and who may be eligible for a tax refund or tax break.

To demonstrate my coolness each heading represents the latest dance moves…go cool dad.

The Shuffle

Employment Tax
If you employ a student who works for you only in their holidays and whose earnings from employment do not exceed their personal allowance for the tax year, then to save tax get the student to complete form P38(S). If the student is covered by the P38(S), you don’t have to follow normal P45 and P46 procedures and you can pay them without deducting tax.

Getting interest on your savings paid without tax
To receive interest on your savings without tax being deducted you need to fill in a registration form R85 which you can obtain from HMRC or from your bank/building society.

Hand in the form at your bank or building society. You will then start to get your interest without tax taken off. You need a separate form for each different bank or building society.

You can register more than one account with the same bank (or building society) on a single registration form, providing you write the account numbers clearly in the boxes provided.

This interest registration scheme is only for people who usually live in the UK. If you have come here from abroad, or if you intend to live or work abroad, you should call HMRC’s Helpline.

The Wiggle

Get any overpaid tax back
If however the student has missed out on the shuffle above, no need to worry. After the Shuffle then came the Wiggle.

If you have overpaid tax on your earnings or interest from your savings you can claim it back, if your taxable income is covered by your tax allowances. You may have paid too much tax if you don't earn much or if your only, or main, source of income is savings interest or simply if you didn’t complete Forms P38(S) and/or R85.

Pay/wages
If you think you have paid too much tax you can ask your Tax Office for a repayment claim form P50. Or, you can ask your Tax Office to review your tax position at the end of the tax year to see if you might be due a repayment.

Savings
To reclaim tax paid on savings you should complete a form R40 and return it to your Tax Office.


HMRC will accept claims during the year including where:

• after giving your bank or building society a registration form R85,they have not paid back the tax they've already taken off your interest during the tax year.

The time limit for making a repayment claim is five years and ten months from the end of the tax year. For example, you must make a claim for repayment of tax paid in the tax year that ended in April 2004 by 31 January 2010.

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REMEMBER APRIL 2012

Since April 2010 all newly registered businesses and existing businesses with a turnover of £100,000 or more have been legally required to submit their VAT Returns online and pay electronically.

From April 2012 all remaining VAT-registered businesses will also be legally required to submit their VAT Returns online, meaning that all VAT- registered businesses, apart from a very small number that are exempted, will have to submit their VAT Returns online.

Who should submit their returns online?

You currently have to submit your VAT Returns online and pay any VAT due electronically if either of the following applies:

• you registered for VAT before 1 April 2010 and had an annual VAT-exclusive turnover of £100,000 or more for the 12 months ended 31 December 2009

• you registered for VAT on or after 1 April 2010, regardless of your turnover

From April 2012 all VAT- registered businesses, apart from a very small number of exemptions, will have to submit their VAT Returns online.

Penalty for Paper

If you are required to submit your return online and instead submit on paper you will be charged a penalty. HMRC may also charge a penalty if you pay late or make an error on your return.

Amount of the Penalty

The amount of the penalty will depend on your annual turnover excluding VAT denoted as follows:

Penalty                Turnover Excluding VAT

£400                   £22,800,001 and above

£300                   £5,600,001 to £22,800,000

£200                   £100,001 to £5,600,000

£100                   £100,000 and under

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