4.6 Tax - PAYE, NIC & VAT

Question 1

When must an entity pay over deductions of PAYE/ NIC?

Answer 1

Pays tax/ NIC for month by 22nd day of the month following month of deduction

Question 2

Who (should?) calculates PAYE & NIC claims?

Answer 2

IP - outstanding claims up to relevant date fall into insolvent estate.

Question 3

What happens to any arrears of wages outstanding?

Answer 3

The insolvency office holder will either:

IF NOT TRADING ON:
 Not pay arrears and invite employees submit claims to Redundancy
Payments Service

IF TRADING ON:
 Pay as preferential claim or treat as a cost of trading on – deducting (and accounting) PAYE and employees’ NIC, but no requirement to pay employer’s NIC

Question 4

What happens when an IP pays a dividend to an employee?

Answer 4

The office holder deducts PAYE

 Generally, at the basic rate unless de minimis

 Account the amounts deducted to HMRC under company’s PAYE reference
 No requirement to deduct employee’s NIC

Question 5

What is the position if OH trading wrt CIS?

Answer 5

If acting as contractor, entity needs to register with HMRC
 Office holder would check registration
 Verify status of any subcontractors

 Deductions made by contractor need to be paid over by 22nd of following month

 If entity is acting as subcontractor, need to register
 Payments to OH will either be made net of tax or gross

Where an insolvency officeholder is appointed to a subcontractor, they can reclaim overpayments immediately, without waiting until the year end

Question 6

What is the current threshold for VAT?

Answer 6

£85,000

Question 7

When must VAT be paid over to HMRC?

Answer 7

Within 1 month following quarter end

Question 8

How is VAT calculated?

Answer 8

On an accruals basis i.e. when an invoice is issued or received NOT when actually paid. Unless:
 Annual accounting
 Flat rate scheme
 Cash accounting

Question 9

When is bad debt relief available?

Answer 9

Applies where output VAT paid to HMRC but customer does not settle debt

 Available 6 months after date of invoice/ or date became payable
 Must be written off in traders books
 Reclaimed as if input VAT
 If eventually debt paid by customer must repay HMRC
 Time limit for claim – 3.5 years

Question 10

What is the office holders obligations for VAT?

Answer 10

Voluntary arrangements–debtor retains responsibility for VAT returns and payments

Other insolvencies:
 Where prior to their insolvency the company or the individual was
registered for VAT (the “insolvent trader”)
 then the IP when appointed must also continue to account for VAT on assets realised (and remember to charge it)
 and can reclaim VAT on any costs borne by the estate

On appointment to a VAT. registered business, submit form VAT769 within 21 days
 Office holder then asked by HMRC whether they wish to de- register the trader for VAT
 If continuing trade or there are significant assets to realise, it is usual to maintain the registration
 Office holder will be required to submit VAT on form VAT100