December Questions and Answers Section

Newsletter issue - December 2014

Q. HMRC has reminded me to claim the employment allowance for 2014/15 worth £2000. My company doesn't pay any employers' NI on my very low salary, so I thought I couldn't claim the employment allowance. But the Government website referred to in the HMRC letter says I can get a refund of my VAT, PAYE or corporation tax as I haven't used the full employment allowance for the year. How do I get my hands on this money?

A. Unfortunately the GOV.UK website is wrong. The employment allowance can only be set against employer's class 1 national insurance contributions due in respect of wages or salary paid. It cannot be set against any other tax such as VAT, corporation tax or PAYE. The unused portion of any allowance cannot be carried forward to the next tax year.

As your company has not paid any employer's NI for this tax year, due to your low salary, it has nothing to set against the employment allowance. You can claim the employment allowance by submitting an Employer Payment summary (EPS) to HMRC under RTI and ticking the employer allowance box on that EPS, but it will have no effect until the company is due to pay employer's class 1 NI.

Q. I started my new business this summer and raised my first invoice on 1 August, with no VAT added. I realised I would need to register for VAT very soon, so I applied online. The VAT registration confirmation said my business is VAT registered from 4 August 2014. Do I need to do anything about invoice number 1?

A. As your VAT registration date fell after the date of your first invoice you don't have to do anything about that invoice. It has been issued correctly without VAT added. When you do your first VAT return be careful not to include that invoice. However, you can claim for VAT you incurred on services used by the business in the six months before VAT registration date.

Q. My company is closing down. All the bills are paid and I want to close the PAYE scheme. How do I do that under the RTI system?

A. You can simply close the PAYE scheme by submitting an Employer Payment Summary (EPS) or full payment submission (FPS) indicating that it is the 'final' for the year and tick the box to say the PAYE scheme has ceased. You complete the end of year questions on the EPS as if you were at the end of the tax year, and that's it - job done!