Penalty free period is now over

* Construction Industry Scheme (CIS).

When the new CIS scheme was implemented in April, HM Revenue and Customs agreed to waive the penalties for late returns for the first six months. However, this penalty free period, April to September, is now over, and automatic penalties for late returns now apply.

The following rules now apply:

* All late returns means just that - if you have any unsubmitted monthly returns for the period April 6 to October 5, and they have been received by HM Revenue and Customs after October 19, penalties will be levied on all the returns;

* A return needs to be made even if it is a nil return - penalties will still be applied if filed late;

* The penalty charged will be £100 for each month that the return is outstanding. This amount will be increased by £100 for each additional 50 sub-contractors who should have been entered on the return.

For example, the return for the month ending May 5 was due to be filed by May 19 this year - if this has subsequently been filed after October 19, an automatic fine of £100 will be levied.

If the return for the month ending June 5 has also been filed after October 19, this will incur a separate penalty of £100;

* In future, these monthly returns must be received by HM Revenue and Customs by the 19th of the following month.

The return for the month ending 5 November, must be filed by November 19, and so on. The emphasis here is the word received. It will not be sufficient to claim that the return was sent by the 19th of the month.

To summarise, if contractors have failed to submit any of the monthly returns issued by HM Revenue and Customs for the period April 6 to October 5, by October 19 (October 22 if you file electronically), the penalty notices will have been issued, automatically.

VAT on computers provided for home use - revised treatment.

On April 6, last year, the Government withdrew the Home Computer Initiative - from that date the provision of a computer for home use to an employee may become a taxable benefit.

On August 13, the VAT rules caught up.

Up until August 13, employers could still reclaim all the VAT they paid when they purchased a computer for an employee's home use, as long as there was an element of business use.

Now, the position is as follows:

* If the use of a computer at home is necessary for an employee to carry out their duties, the employer can reclaim all the VAT;

* In all other cases, the reclaim of VAT will have to mirror the business to private use percentage.

In a notice relating to this issue, Revenues and Customs said: "HMRC will accept any method of apportioning the VAT incurred as long as the result fairly and reasonably reflects the extent of the business use."

Full-time education support - tax-free limits raised.

If you support a member of staff attending a full-time course of further education, the tax and National Insurance free allowance you can pay them is increased from £15,000 to £15,480 for the academic year 2007-8 and subsequent years. (From September 1).

Please note that the provision of a scholarship for the son or daughter of a director or employee will likely be treated as the parent's earnings under the benefits code. The conditions of this are:

* The employer must require that the employee be enrolled at the educational establishment for at least one academic year and must attend the course for at least 20 weeks in that academic year. Or, if the course is longer, the employee must attend for at least 20 weeks on average in an academic year over the period of the course;

* The educational establishment must be a recognised university, technical college or similar educational establishment, which is open to members of the public generally, and offers more than one course of practical or academic instruction. For example, an employer's internal training school or one run by an employer's trade organisation will not satisfy the educational establishment condition for this relief;

* The payments, including lodging, subsistence and travelling allowances, but excluding any tuition fees payable by the employee to the university etc, should not exceed £15,480 for the 2007-8 academic year, which commenced on September 1.

Exclusion - This exemption does not apply to payments of earnings made for any periods spent working for the employer during vacations or otherwise. These payments would be taxable as earnings in the normal way.

David Wibberley is principal accountant of Darlington TaxAssist Accountants, and can be contacted on 01325-284499.