02.05.2008

New tax penalty regime commences.  Working from home?

New tax penalty regime commences.

The tax authority is in the process of modernising the administration of the tax system, including enforcement and collection of tax. Part of this involves restructuring tax penalties, beginning with those in relation to underpaid tax as a result of an error or omission on a return. The new penalties will affect all taxes eventually, but the new regime which commenced on 1 April 2008 applies to income tax, corporation tax, VAT and payroll. The penalties are stepped according to the behaviour of the taxpayer, and in particular whether in the view of the tax authority the taxpayer took "reasonable care" with his tax affairs. Guidance has now been issued describing what is viewed as reasonable care, and more will be issued soon to help taxpayers understand what is required of them.

Working from home?

When an employee works from home under what are termed "homeworking arrangements", which may be in place for the convenience of either the employer or the employee, then a contribution to the costs may be made by the employer. There is a recommended rate, which has increased from £2 per week to £3 per week from April 2008. Alternatively, the employer may reimburse a greater sum, provided this meets only the additional costs incurred by the employee as a result of working from home. Employers would in practice need to agree a dispensation for sums greater than the recommended amount in order to pay without deducting tax and NIC from the payment.