Tax Update 2008 
Added : 29th January 2008
Herminder Sandhu updates us on the latest tax news
Construction Industry Scheme – gross payment certificates.
The first tranche of notifications withdrawing gross payment status from businesses in the construction industry have been issued. This exercise is a “rolling” and continuous process which has been termed the “tax treatment qualifying test” (TTQT) by HMRC. In short this is an automatic review by HMRC internal systems to identify any failure by a business in the construction industry to adhere with the strict tests that need to be passed to qualify for gross payment status. There are three stringent tests that need to be passed - the business test, the compliance test and the turnover test. Failure to pass even a minor condition can result in gross payment status being removed. This can have huge repercussions for a business because it will start to receive payment from other businesses net of a tax deduction of at least 20% 90 days after the date of the notice.
NIRS 2 problems – allocation of NIC.
NIRS (National Insurance Recording System) is HMRC’s computer system that records all allocation of National Insurance Contributions to an individual’s personal account. NIRS 2 is the new version & “son” of NIRS 1. A major problem with the system has resulted in thousands of accounts being incorrectly flagged up as having insufficient contributions in the 2005/06 tax year. Notices have been automatically generated and issued to thousands of individuals stating they have not paid enough contributions to ensure the 2005/06 tax year is a qualifying year for contribution based benefits (e.g. state pension). All the affected records are being manually updated which is going to take quite a while.
Homeworker’s additional expenses.
Currently there is no income tax charge where an employee incurs additional household expenses (such as heat and light) to the value of £2 p.w. in carrying out duties of his/her employment at home under home-working arrangements without the need for supporting receipts. HMRC are considering an increase in this tax-free limit (without the need for supporting receipts) to take account of the spiralling energy costs – my guess is a generous £5 p.w!
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