If HMRC delaying repaying overpaid VAT to you, are you due interest on the payment?

You will not be due interest on the repayment when it is made, but there are rules meaning that if HMRC take more than 30 days to make the repayment you may be entitled to a fixed Repayment Supplement of 5% of the refund. However, in calculating the 30 day period you have to exclude the time taken to raise and answer ‘reasonable enquiries’ into the Return. Therefore there are two things to bear in mind: firstly try and deal with any questions promptly (and accurately), it will speed up your repayment; secondly, if HMRC appear to have taken more than 30 days take professional advice about whether you should be getting the Repayment Supplement.

PAYE late payment penalties and the new regime

From April 2010 a new set of penalties came in for PAYE and NIC payments by employers. HM Revenue and Customs have recently sent out the first batch of warning notices to employers who were late paying their PAYE for April 2010 (month ending 5 May). If you continue to pay late you could incur a penalty of up to 4% of the amount you pay late depending how many times you are late during the tax year. If you pay more than six months late you could incur a further 5% penalty.

We currently understand that the penalties will not be issued automatically by the HMRC computer during the year but after 6 April 2011, HM Revenue and Customs will undertake a manual review of late payments and issue penalties manually on a risk-assessed basis. Although we have heard comments that the penalties will be applied ‘gently’ to begin with, we do not know how this will be applied in practice.

To minimise the risk of penalties you should:

• Pay your PAYE/NIC on time if at all possible
• If you are struggling to pay agree a formal Payment Plan with HMRC, if you keep to this the penalty will not arise
• If you are notified of a late payment and believe you have a ‘reasonable excuse’ for the late payment, appeal against the notice or penalty as soon as possible. This can remove or reduce the amount of the penalty

Starting a new business? Will you benefit from the National Insurance Holiday

HM Revenue and Customs have only announced limited details of the scheme but if you start a new business outside the London, East and South East regions in the three years from 23 June 2010 you should be entitled to a twelve month ‘holiday’ from Employers National Insurance contributions (currently at 12.8%) on your first ten employees. The amount of this is capped at £5,000 per employee. It could therefore be worth £50,000 to a new business.

We do not have full details of the scheme but the initial guidance issued by HMRC (http://www.hmrc.gov.uk/budget2010/nics-hol-qa-7076.htm) suggests that there will be rules to prevent abuse and these will restrict what constitutes a ‘new business’, who will qualify as an ‘employee’, which types of business will not qualify for the scheme (coal, agriculture, fisheries, agencies providing staff have all been mentioned).

The latest information we have is that the scheme should formally begin on 6 September 2010 (but new businesses commencing on or after 23 June will qualify from 6 September 2010).

If you are thinking of setting up a new business, you should be careful how much this holiday influences your decision. If your proposal and business plan show a viable business anyway, this could be a pleasant ‘bonus’ to help you early on. However, if your business plan shows that things are marginal, you should be careful allowing this to tip the balance, particularly whilst the detailed rules have not been announced.