2011

Our Human Resources Winter Quarterly Update includes proposals for changes to employment law, announced in November by Business Secretary Vince Cable, case studies of the Bribery Act and Wrongful Dismissal and information on managing your staff through tough times.

CLICK HERE FOR - HR Winter Quarterly Update

CKLG Accountants in Cambridge are here to help.

The Government has published the draft clauses of the Finance Bill 2012 three months prior to the Budget on 21 March 2012. The clauses are intended for consultation until 10 February 2012. Many of these provisions have been pre-announced in the 2011 Budget, but there are still a few surprises.

CLICK HERE FOR - Summary of the Finance Bill 2012 draft clauses

CKLG Accountants in Cambridge are here to help.

Most businesses must now submit their VAT returns online, and this will apply to all VAT registered businesses from April 2012. Online filing gives you an extra 7 days to file, but the VAT due must also reach HMRC by the end of the extended filing period. The VAT payment will take at least 3 days to reach HMRC, even where it is made electronically (see link below for what HMRC regard as electronic means). Don’t leave your VAT form filing and payment to the last possible day as you will receive a surcharge for late payment.

CLICK HERE - How to pay VAT

CKLG Accountants in Cambridge are here to help.

HMRC are writing to over 2,500 doctors and dentists who did not take advantage of the Tax Health Plan disclosure opportunity in 2010, but who may have received undisclosed income from pharmaceutical companies, insurance companies or locum agencies. HMRC has details of the payments made by these bodies, and will issue tax assessments to those medical practitioners who do not respond to their letter within 21 days. If you receive such a letter from HMRC, contact us immediately for assistance in sorting out any misunderstanding with HMRC.

CLICK HERE FOR - Tax Health Plan follow-up

CKLG Accountants in Cambridge are here to help.

If you run a caravan site read the Revenue & Customs brief 37/11. This sets out a change in the VAT rules that will to apply from 1 January 2012. Essentially when you recharge council tax, water rates or utility connection fees to your site residents, you will have to apply the VAT rate applicable to the caravan pitch. This will be 20% for holiday pitches, but residential sites will be exempt from VAT.

CLICK HERE - R&C brief 37/11: Caravan sites

CKLG Accountants in Cambridge are here to help.

This scheme allows mortgage providers to check income details of mortgage applicants directly with HMRC. However, the scheme is only supposed to used when the mortgage provider has inadequate evidence of the applicant’s declared income, and they suspect mortgage fraud. When a taxpayer’s details are requested under the mortgage verification scheme, HMRC will mark that taxpayer’s file for further investigation.

Please beware that if your mortgage application is tested using the mortgage verification scheme, this will significantly increase your risk rating with HMRC, and may lead to a tax investigation.

CLICK HERE - Council of Mortgage Lenders announces verification scheme

CKLG Accountants in Cambridge are here to help.

If your business is not already VAT registered you need be aware of the current VAT registration threshold (£73,000), to check when your turnover is approaching that limit. However, if you buy business services from abroad, you need to understand the VAT rules for cross-border services. Essentially your UK business must treat the cost of the internationally-supplied service as if you both purchased and sold that service. The cost of the service is added to your turnover for VAT registration purposes, which may mean you have to register for VAT in the UK.

CLICK HERE FOR  - Cross-border services: VAT 741A

CKLG Accountants in Cambridge are here to help.

If you are VAT registered, but your turnover has dropped below the VAT deregistration threshold (£71,000 from 1 April 2011), you can apply to cancel your VAT registration. This is done on form VAT 7, which has recently been reissued. Cancelling your VAT registration may also be appropriate if you change the type of goods you sell, so most are subject to VAT at the zero rate.

CLICK HERE - Application to cancel VAT registration form: VAT 7

CKLG Accountants in Cambridge are here to help.

There is a long list of non-taxable state benefits. Also some state benefits, such as the Widowed Parent’s Allowance (WPA) have taxable and non-taxable elements. The Department of Work and Pensions (DWP), which responsible for paying most state benefits, should inform your tax office (HMRC) of amount of taxable state benefit you receive. However sometimes DWP sends the wrong figures to HMRC, including perhaps the non-taxable amounts of your benefit payments. Check your PAYE code to see if the right taxable amount of your state benefit has been included. We can help you with this. 

CLICK HERE - List of non-taxable state benefits

CKLG Accountants in Cambridge are here to help.

HMRC has set up an R&D relief assurance pilot to encourage small companies to claim R&D tax relief. Companies who use this pilot will be assigned an R&D relief expert within HMRC, who will help the company agree the basis for its first R&D claim. Once this basis is agreed the R&D claim should be accepted without query from HMRC, unless a significant issue arises.

CLICK HERE - R&D advance assurance pilot

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CKLG Acountants in Cambridge are here to help

The Chancellor delivered his speech at 12.30pm on Tuesday 29 November 2011 and mainly covered the revised projections from the Office of Budget Responsility, public finances and measures to stimulate the economy. These include proposals for tax relief on investment in small businesses.

Read the full report here

Or read our synopsis here

CKLG Accountants in Cambridge are here to help

HMRC are writing to 6000 UK-based individuals, trusts and companies whose bank account details were stolen from a private bank in Geneva, in 2006. HMRC are using this information to ask whether all income from the bank accounts was correctly declared in the UK. HMRC are giving the recipients of these letters just 30 days to respond, or a tax investigation may be launched under Code of Practice 9. This is the procedure used for cases of suspected serious fraud. Talk to one of our tax investigation experts if you receive such a letter from HMRC.

CLICK HERE - Code of Practice 9 (2011 version)

CKLG Accountants in Cambridge are here to help.

Did you know parish councils now have to register as employers with HMRC, and operate PAYE for amounts paid to the council officers? HMRC issued advice on this in February 2011, and some parishes registered immediately, when they were not required to register until 6 April 2011. Early registration has meant that penalties for late PAYE forms were automatically issued by the HMRC computer. These penalties can be cancelled if the parish applies in writing. We can help with this.

CLICK HERE FOR - Appeals against P35 penalties by parish councils

CKLG Accountants in Cambridge are here to help

HMRC has launched a scheme to encourage private teachers to pay tax on any undeclared earnings. Its called: Tax Catch Up Plan for tutors and coaches (TCup). If you want to use this scheme, which carries relatively low penalties for late disclosure, you need to notify HMRC by 6 January 2012, and make a full disclosure and pay of all tax, interest and penalties due by 31 March 2012. You can notify HMRC using the online form on the HMRC website or by telephoning: 0845 601 8817. We can help you with the full disclosure.

Click here for more info on TCup

CKLG Accountants in Cambridge are here to help

Most lecturers who work in educational establishments are categorised as employees for NIC purposes, but not necessarily for income tax purposes. There are exceptions for lecturers who work for less than three days per month, or who give public lectures. Where the exceptions do not apply the college or university should deduct and pay Class 1 National Insurance (employees’ and employers’ NICs) in respect of the lecturer’s fee. We understand a number of universities, colleges, and language schools have received formal notices from HMRC asking about payments to lecturers in the tax years 2008/09 to 2010/11.

CLICK HERE FOR - Further guide to NICs: CWG2 (2011) – see page 6

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Don't miss our Breakfast Seminar Wednesday 23rd November 8am -10.30am with speakers from CKLG Accountants, N W Brown and Taylor Vinters. The topics to be covered during the session are:

Caroline Pepper, NW Brown, "Spotlight on Pension Regulatory Reform".

Faye Toomey, CKLG, "Change - Are You Prepared.  Employment tax update".

Roger James & Jason Gordois, Taylor Vinters, "The Removal of the Default Retirement Age".

CLICK HERE TO REGISTER

If you pay your PAYE deductions to HMRC late after 19 May 2010, you may well receive a late payment penalty. HMRC are starting to issue these late payment penalties for 2010/11, which can amount to 4% of the total amount paid late in the tax year. You may not be aware that the PAYE payment had been received a few days late by HMRC until you receive a penalty. Our specialist tax advisers can help you appeal late payment penalties.

CLICK HERE FOR - Late payment penalties for PAYE

Welcome to the latest issue of the CKLG newsletter which focuses on the currently known aspects of the new Business Angel Seed Investment Scheme, pithily abbreviated to BASIS, that aims to encourage investment in new businesses. Further details are expected in the Chancellor’s Autumn Statement on 29 November and if you register your interest with us we will report back to you with any updates.

We also look at a number of imminent tax changes and are happy to say that at least one could be described as a perk!

If you have any questions on any area of your business or personal accounting life please email help@cklg.co.uk or call us on 01223 810100.

NEW STAND-ALONE BUSINESS ANGEL SEED INVESTMENT SCHEME (BASIS)

There is an exciting new opportunity which is scheduled to start next tax year.

BASIS is based on the existing Enterprise Investment Scheme (EIS) but is more narrowly targeted at the seed level and to business angels.

The possible structure is up for consultation, but there are plenty of valuable tax breaks associated with an investment under BASIS, and it should also be a useful additional source of new finance. It is likely to involve the following:

1. More flexibility around the use of debt instruments, whereas EIS covers subscriptions for shares only.

2. Rather than based on company size, number of employees and gross assets, as with EIS, the new scheme may enable a more accurate target for investor and company by way of identifying characteristics of an angel investor and seed-stage company.

3. BASIS relief could be available only where the company is in pre-trading stage and intending to use the funds raised to develop business concepts. There may also be a restriction in the definition of a business angel entitled to the new relief as that may require that person to have invested in at least four seed stage companies, so as to demonstrate valuable experience and at the same time have a record of previous EIS investment.

At this stage it is well worth flagging this up for you to consider in detail when the exact rules are known which is not the case yet – for example we do not yet know the rate of tax relief under BASIS but this likely to be more than the 30% applying to an EIS investment given that BASIS has a higher risk profile. We will be pleased to discuss this with you as a prospective investor or where you have a business idea you wish to develop and need to look at all possible sources of finance.

WATCH OUT FOR BIG INCREASE IN COMPANY CAR TAX FOR SOME

The income tax charge on the valuable benefit of having a company car available for your private use is often changed, so as to encourage car makers and drivers to lower CO2 emissions. Plenty of notice is usually given of each change, given that naturally it is not realistic to expect anyone to be able to change the company car without a good deal of lead time.

There is a sharp increase in the taxable car benefit on many company cars with effect from 6 April 2012. This is by reference to a new emissions scale which creates an income tax charge (and Class 1A national insurance liability) for the private use of a company car on 10% of the car’s list price from 76 g/km to 99 g/km, rising by 1% per 5 g/km to the usual maximum of 35% (there is also a reduced charge on 5% where the emissions do not exceed 75 g/km).

That may not sound much of an increase, but it is in fact a 50% increase in tax if you have a company car with CO2 emissions of 120 g/km, or 40% if they are between 115 and 119 g/km. We can advise of the exact tax charge in your particular circumstances, and include advanced warning of a further but more modest increase in the taxable benefit from 2013/14 of 1% of the list price where the CO2 emissions are between 95 and 219 g/km.

 TAX-FREE EXPENSES IF YOU TRAVEL OVERSEAS AS AN EMPLOYEE

HMRC publish benchmark scale rates for accommodation and subsistence payments made to you by your employer where you travel overseas, so that up to those rates there is no income tax charge on you nor any exposure to national insurance contributions.

The rates are reviewed once a year and new rates have just been announced. They represent a useful increase which hopefully your employer will implement. They vary considerably between countries and indeed between different areas of a country. Furthermore, the benchmark scale rates are split between items such as room rate, meals (separate rates apply to each meal), drinks and specified travel.

TAX CATCH UP PLAN

This is the somewhat quaint name of the latest HMRC initiative to tackle tax defaulters. It is aimed at those delivering tuition and coaching or who use those skills in another way to supplement income, but it also provides a means of telling HMRC of ANY undeclared income or gains with the promise of lower penalties than would normally apply.

If you hear of anyone who is worried about their tax not being up to date please refer them to us and we will make sure they get the best tax deal possible.

A POSSIBLE TAX-FREE PERK

A nice thought, and it can be achieved in specific circumstances.

The point is that certain gifts from a third party such as a supplier or customer are exempt from tax. The list is short, not surprisingly, and if the cost of all gifts made by the donor to the same person exceeds £250 in the tax year there is no exemption. However, if the gift counts as entertainment there is no monetary limit so this could cover tickets for the Olympics. Furthermore, the exemption applies to members of the individual’s family as well.

Care is needed in the detail and we will be pleased to advise.

PENALTIES FOR LATE PAYMENT OF INCOME TAX AND LATE FILING

Tax returns for the year to 5 April 2011 filed late will create a penalty even if the correct amount of tax is paid on time or indeed there is no more tax to pay. Arguably that was a move which could have been expected before now, and at least the basic penalty stays at £100.

What may not be so apparent to those of you who tend not to pass the papers we need until close to or even after the deadline (31 January 2012 for the tax return for the year to 5 April 2011) is how quickly penalties can now stack up. The new penalties for late filing of Self Assessment returns result in, for example, an overall penalty after 3 months delay of £10 per day up to a maximum of £900.

Please therefore help us to help you - by giving us enough time to prepare your tax return well before the deadline of 31 January 2012.

REDUCED RATE OF IHT IF YOU LEAVE AT LEAST 10% OF YOUR ESTATE TO CHARITIES

A novel new tax break due to come in from 6 April 2012 attempts to encourage you to pass at least 10% of your estate on death to a charity (or charities). If that happens the rate of inheritance tax on the rest of your estate reduces from the normal 40% to 36%.

Whether this is a big enough carrot for you to pick up is obviously a personal matter and we will be pleased to advise on exactly how it all works in your particular circumstances.

HMRC are beginning to issue penalties for late forms P35 and P14s for 2010/11, which should have been submitted by 19 May 2011. However, many penalties will be issued for ‘dead’ PAYE schemes. If you receive a penalty that you believe is not due, you need to appeal against it within 30 days of the date of the penalty notice. Also tell HMRC that no PAYE annual return is required by telephoning the Employer Helpline on 0845 7143 143, or use the online form below.

Employer to notify that no PAYE annual return needed

CKLG Accountants in Cambridge are here to help

The HMRC Employer Bulletin is no longer sent out in hard copy form to most employers, which is a shame because it contains some very useful articles. To get an email reminder to view new editions of Employer Bulletin register with HMRC for ‘employer email alerts’. Only one email address per employer can receive the email alert, so if the nominated person leaves, remember to change the employer notification on the HMRC website.

CLICK HERE TO - Register or amend employer notifications

During a business records check (BRC) a Tax Officer will view your business records to assess whether those records are ‘adequate’. The Tax Officer will be looking for the following errors in the business records:

• Understated sales;
• Overstated expenses; and
• Private expenditure claimed as business costs.

If the Tax Officer concludes that your business has failed to keep adequate records he can impose a penalty of up to £3,000. If you are asked for an appointment for a business records check contact us immediately.

CLICK HERE - Extension of business records checks

CKLG Accountants in Cambridge are here to help you

From 1 October 2011 the standard industry classification codes on a company’s annual return form are changing from a four-digit classification (SIC 2003) to a new five-digit system (SIC 2007). When you submit an annual return for your company to Companies House, you must use the new SIC 2007 code for returns made up to 1 October 2011 or later. Use the old codes (SIC 2003) for annual returns due before that date.

CLICK HERE FOR  ANNUAL RETURN CHANGES

CKLG Accountants in Cambridge are here to help

If an employee believes they have not been paid statutory sick pay (SSP) by their employer, the employee can complain to HMRC. If HMRC agrees with the worker they will direct the employer to pay the SSP due, but the employer can appeal to the Tax Tribunal. Health for Work Advice provides free advice to small businesses about how to handle employees who are reporting as sick. Remember the old ‘sick note’ has been replaced by a doctor’s ‘fit note’, also know as a ‘Statement of Fitness for Work’.

CLICK HERE - Health for work advice

CKLG Accountants in Cambridge are here to help you

Employers have to collect repayments of loans their employees took out through the Student Loan Company (SLC) when studying since 1999. The employer is told to start making student loan deductions by a form SL1 from HMRC. HMRC is currently tidying-up the data it holds on employers who collect student loan repayments. Some employers may receive an unexpected SL1 notice for a current employee from whom they are already collecting student loan deductions. Other employers may receive SL1 notices for employees who have left their employment. In both cases the employer should simply file the SL1 notices and take no further action. 

CLICK HERE - Calculating student loan deductions

CKLG ACCOUNTANTS IN CAMBRIDGE ARE HERE TO HELP YOU

Many ordinary business people don’t appreciate how the VAT registration rules apply. Say you are a sub-contractor in the building industry; you may feel like an employee but technically you are likely to be self-employed. Where you also provide plumbing services to domestic customers directly, both your sub-contractor income and your plumbing income must be aggregated to see if the VAT registration threshold has been breached. If you have several businesses running side by side talk to us about your VAT obligations.

CLICK HERE - How to register for VAT

CLKG Accountants in Cambridge are here to help you

If your business is VAT registered you run the risk of VAT penalties if you do not pay the VAT due to HMRC on time each quarter. HMRC has started to issue VAT penalty notices on yellow paper. Pay extra attention to any letter from HMRC on yellow paper and forward it to us immediately. We may not receive a copy of the penalty notice addressed to you from HMRC.

CLICK HERE - Penalties for delayed VAT

CLKG Accountants in Cambridge are here to help you

If you have been forced to leave your job in the Middle East and return to the UK, you may be considered resident for tax purposes in the UK in the current tax year (2011/12). This will affect for tax liability of this year and possibly next year. Your tax position for last tax year (2010/11) may depend on a special HMRC ruling concerning workers who have been forced to return to, or stay in the UK, following Foreign Office advice concerning the following counties; Bahrain, Egypt, Libya, Syria, Tunisia and Yemen. Talk to us if you are in this position.

CLICK HERE FOR - HMRC statement on full-time working abroad (see Annex)

CLKG Accountants in Cambridge are here to help you.

The Tax Office computer has been sending out incorrect tax computations and refund cheques. Where a taxpayer completes a self-assessment tax return and also has some income taxed under PAYE, the computer should wait until the tax return has been received before calculating the tax to be refunded. In a few cases this has not happened, and the tax refund has been based only on the PAYE income. If you receive an unexpected cheque from HMRC, please ask us to check the tax calculation.

CLICK HERE - Understanding your tax refund

CLKG Accountants in Cambridge are here to help you.

The Tax Inspector may raise questions if you make a persistent loss and want to set that loss against your other income. Only where your trade is conducted on a commercial basis with a view to a profit can the losses be available for relief against your other income of the same or immediately preceding tax year. For periods ending after 11 March 2008 the loss relief can be restricted if you do not spend at least 10 hours on average per week working in the business. This restriction will normally only apply where your loss for the year is £25,000 or more, but it can apply to any level of loss that has been artificially created.  

CKLG ACCOUNTANTS IN CAMBRIDGE ARE HERE TO HELP, CONTACT US OR CLICK ON THE LINK BELOW.

Helpsheet for self-employed losses 2010/11

US citizens who are resident in the UK may be eligible to use the remittance basis when reporting their overseas income and gains to HMRC, which means such overseas income can escape UK tax. However, in most cases the US citizen must pay the remittance basis charge in the UK (£30,000 p.a) in order to use the remittance basis for a particular tax year. Until recently it was not clear whether the remittance basis charge could be set against US tax liabilities. The US tax authority: the Internal Revenue Service (IRS), has now confirmed the remittance basis charge can be set against US tax, see ruling 2011-19. 

Contact CKLG Accountants in Cambridge for further information or click on the link below.

Internal Revenue Service Ruling 2011-19.

The recent Swiss/UK tax deal will affect all holders of Swiss bank accounts who are resident in the UK, even where the income and gains from those investments have been correctly taxed. Significant tax deductions will be made from Swiss bank accounts held by UK residents from 2013, unless the bank account holder authorises the bank to disclose all details of the account to HMRC, and pays all the taxes due in the UK on the investment income.

Contact CKLG Accountants in Cambridge for further information or click on the link below.

UK and Switzerland deal announced

If you owe money to HMRC you may soon receive a letter arranging for collection of that debt through your 2012/13 PAYE code. Up to £3,000 of outstanding tax, or overpaid tax credits, can now be collected by a restriction on your PAYE code. The letter should also contain a summary of the debt. Do check this summary as mistakes can occur. You can ask HMRC not to amend your PAYE code, and arrange to pay the debt in a different manner. We can help you with this.

CLICK HERE - Ways tax debts can be collected

If you are a contractor registered in the Construction Industry Scheme (CIS), you are required to submit a CIS return (form CIS300) by 19^th of every month. The penalties for late submission of these returns are changing for periods beginning after 5 October 2011. The new penalty structure will generally impose a lower total penalty where the CIS return is less than 6 months late, but higher penalties in other cases. New contractors will also have their initial penalties capped at £3,000, where they are late in submitting their first return.

New penalties for late CIS returns

Do you still submit a paper form P11D(b) to HMRC? This year HMRC has rejected a number of forms that were not signed by the employer. If you receive a rejection letter for your 2010/11 form P11D(b) call HMRC on the telephone number given in that letter. This should ensure any penalty raised for non-submission of the form P11D(b) is cancelled. 

HMRC statement concerning rejected P11D(b)s

If you have been tempted to avoid tax by using a trust loan scheme, partnership loan scheme, or another tax scheme that uses an off-shore company or employer funded retirement benefit scheme (EFURBS), you may be disappointed. HMRC have recently announced that they believe these sorts of schemes are caught by the new anti-avoidance law known as ‘disguised remuneration’. We can advise you on this.

CLICK HERE - Spotlights 11 &12: articles on schemes to avoid income tax and NICs

Do you operate two or more businesses within your family, which could be connected for reasons other than your family relationship? VAT Inspectors are aware that some people split their businesses artificially so that one part of the business remains under the compulsory VAT threshold. They will challenge business they suspect of artificial splitting, such as VAT registered farms that are home to B&B businesses which are not VAT registered. We can help you defend your position if you are unfairly challenged on these grounds.

VAT Notice 700/1:Should I be registered for VAT, see section 13

Generally UK land can be held as joint tenants when the owners hold an equal undivided interest in the whole property, or as tenants-in-common where the individuals hold separate and identifiable shares, say 10% and 90% of the property (the legal terms may be different under Scottish law). Where the owners are either married or in a civil partnership, the property will be treated for tax purposes as being held in equal shares (50:50), even if this is not the case. To be taxed on the actual interest each holds in the property the couple need to sign the declaration on Form 17 and submit it to HMRC.

CLICK HERE FOR FORM 17

There has been a delay in sending out some self-assessment statements this year, and as a result HMRC has waived the interest due on tax payable by 31 July 2011, where this is paid late. However, the interest free period only runs to 27 September 2011 and only applies to the second payment on account of income tax for 2010/11. Any other late tax payments, such as for amounts due on 31 January 2011 will accrue interest as normal. 

CLICK HERE FOR MORE

If two or more electronic PAYE payments arrive within the same tax month the Tax Office computer will allocate those payments to that month even if one or more payments relate to a later or earlier period. To avoid misallocation of PAYE payments you must use the correct 13-character reference number for your PAYE scheme. If the payment is made earlier or later than the computer expects it, you should add on four extra digits to the reference number to indicate the tax year and month the payment relates to. For example for payments for the month to September 2011 add 1206 (year 2011/12, month 6).

CLICK HERE - How to pay PAYE

Please contact us immediately if you receive a demand for PAYE titled ‘notice requiring payment’. Payment is normally requested within seven days or recovery by distraint will ensue (the bailiffs arrive). However, the amount demanded may be an estimate and may not be due at all. In many cases the underpayment has arisen because the Tax Office computer has allocated a PAYE payment to the wrong period.

CLICK HERE FOR THE NOTICE REQUIRING PAYMENT

It is now possible to set up an email reminder service for Company or LLP accounts and annual returns due to be submitted to Companies House. Once registered you will receive an email reminder of when to submit your documents, and all paper reminders from Companies House will cease. You can nominate up to four separate email addresses for each organisation, so we can also receive reminders for your company if you wish.

CLICK HERE FOR COMPANIES HOUSE eREMINDER SERVICE

HMRC is reorganising the tax offices that deal with corporation tax compliance work. Companies currently dealt with in Ipswich, which were previously handled by compliance teams in Tees Valley, Cambridgeshire and South Essex, will be transferred to the Norwich office. All the affected companies should shortly receive a form CT210 to inform them of the new HMRC contact details for corporation tax matters.

CLICK HERE FOR CT OFFICE MOVES

Many sub-contractors in the construction industry scheme (CIS) are waiting for CIS tax repayments. HMRC expect to clear the backlog of CIS claims by 31 August, and to deal with new claims within 15 days.

If you are waiting for a CIS tax repayment, which you need to pay another tax bill, you should contact the HMRC Business Payment Support Service (BPSS) on 0845 302 1435 before the tax becomes overdue. The BPSS can arrange to defer payment of your tax bill until the CIS refund arrives.

CLICK HERE TO READ MORE

Tax Office staff are calling newly registered self-employed individuals to provide them with information on tax issues. This is a pilot project designed to help new businesses. If you receive such a call you haven’t been marked out for special attention by the Tax Office. The caller will not have access to your tax records.

CLICK HERE FOR MORE - HMRC telephone education for new businesses

Jeremy joins CKLG Accountants as an Associate following his retirement from a major accountancy firm. With expertise in strategic tax planning for wealthy families, business planning for owner managed businesses and international tax issues Jeremy brings a wealth of experience to the team.

Jeremy will also help clients of CKLG who have complex or international tax issues, and those involved in buying, selling or restructuring their businesses.

Where your cumulative sales for a 12 month period exceed the VAT registration threshold (currently £73,000), you must register for VAT. HMRC are writing to around 40,000 businesses whose turnover has apparently exceeded the VAT registration threshold, inviting them to register for VAT under the special ‘VAT initiative’ campaign.

If you receive such a letter from HMRC, or realise you should now be VAT registered do contact one of our VAT experts.  If you register for VAT under this ‘VAT initiative’ will be charged a penalty of only 10%, or possibly no penalty at all if the delay in VAT registration is less than 12 months.

CLICK HERE FOR MORE

If your business has registered for VAT since 1 April 2010, you are required to submit all your VAT returns online. You do not have the option of submitting a paper VAT return.

Some newly VAT–registered businesses have missed the deadline for submitting their first VAT returns because they did not receive a paper VAT form from HMRC. If no VAT return is submitted HMRC will estimate the VAT due (based on the VAT registration application), and raise an assessment for that VAT. If you receive an estimated VAT assessment do contact one of our VAT experts.

CLICK HERE - Online filing missed by new VAT traders

CLICK HERE - Penalties for late VAT returns

HMRC are posed to investigate employers who are not applying PAYE correctly to gross wages and travel expenses. An employer should not give their employees tax relief through the pay packet for the travelling expenses, where a P11D dispensation is not in place. We can help you apply for a P11D dispensation, and apply PAYE correctly to all wages paid.

CLICK HERE - Pay day by pay day tax relief models 

HMRC is currently sending out thousands of PAYE reconciliations (forms P800) for the year to 5 April 2011. This form shows what tax was deducted under PAYE and how much tax should have been paid for the tax year. Some people will be due a repayment of tax, others will have tax to pay. It is important that you check all the figures on any P800 form you receive, as they may not be correct. We can help you with this.

PAYE reconciliations Q&As - CLICK HERE

Blank SA payslip to download - CLICK HERE

When you buy a property in the UK you must generally submit a Stamp Duty Land Tax return (SDLT) to the Stamp Office within 30 days of completion of the deal. Your solicitor will normally do this for you. The SDLT return must now include an identity number such as National Insurance number and date of birth of the lead purchaser. Where the purchaser is a company the company’s tax reference number (UTR) or VAT registration number should be used. Partnerships should use their UTR or VAT registration number. 

CLICK HERE TO READ MORE

Capital Allowances trap

If you leave the decision of whether to buy new equipment until the end of your accounting year, you could get caught out by the changes to capital allowances effective from April 2012. Large purchases made from 1 April 2012 to the end of your accounting period may not qualify in full for the 100% deduction against profits in the year of purchase. Ask us to help you plan your purchases so you maximise your capital allowances.

CLICK HERE TO READ MORE

The PDV is a free HMRC tool to help employers manage PAYE notices and reminders. The tool was updated on 17 June, so the new version should be downloaded and installed ASAP.

CLICK HERE TO DOWNLOAD THE PDV TOOL

Creating & Preserving Wealth – July 5th Jockey Club Newmarket

Once again a beautiful July morning and the perfect location of The Jockey Club Newmarket welcomed almost 50 delegates to the annual summer seminar held by CKLG Accountants and Money Matters Wealth Management.

The theme of this year’s seminar was Creating & Preserving Wealth and after registration and breakfast on the terrace, delegates listened to presentations from Katie Holmes of CKLG Accountants, Tom Elliott, Global Strategist from J.P.Morgan Asset Management and Adrian Atkinson of Money Matters Wealth Management.

Our feedback indicated that the presentations were well received and the excellent talk by Tom Elliott gave us all a fascinating insight into the stock market recovery over the last two years. This annual event is now well established as one of the key financial seminars in the region and one not to be missed!

If you would like to be added to our mailing list for our forthcoming seminars please contact rebecca.curry@cklg.co.uk     

The French Government’s has shelved its plans to impose a 20% annual tax on the rateable value of residential properties owned by individuals who were not resident in France for tax purposes. However, changes to French wealth tax will go ahead which will bring into the ambit of that tax properties worth €1.3 million or more that are owned by a company.

French Wealth Tax - find out more!

If you company is solvent but  has ceased trading and you want to close it down, you should inform HMRC of the date it ceased trading as soon as possible. This date will be the end of an accounting period, which is known as a stub period.  The accounts and tax return for the last full accounting period must normally be submitted online. However, HMRC will accept a paper tax return and accounts for the stub period and any subsequent period to the date the company ceases to exist. We can help you with these final forms and accounts.

CLICK HERE - HMRC guidance on the final CT return

Everyone in the Eastern Region is being asked to get creative with their wardrobe and wear something green for Magpas – The Emergency Medical Charity. The charity urges people to give Green Day a go and so CKLG Accountants held their fundraising day on Wednesday 29th June.

All CKLG staff paid a £1 to wear green and had an amazing selection of cakes for the "Tea at 10" to sell to all the residents of Quy Court.

A grand total of £164.85 was raised through selling the cakes and holding a raffle! Well done to all and a big thank you to those who supported us and supplied the delicious cakes!

The second on-account payment of income tax for 2010/11 is due for payment on 31 July 2011. You can pay this tax electronically by instructing your bank, or through the HMRC website. If you would rather pay by cheque you should use the personalised payslip attached to your self-assessment statement. If you have lost this personalised payslip you can download a blank payslip from the HMRC website (see link below). Send this completed payslip with your cheque for the tax due to the HMRC Accounts office in Bradford. As a safety measure write your Unique Tax Reference (UTR) number on the reverse of the cheque.

 Blank SA payslip to download

HMRC is planning to target tax evasion by online traders by harvesting information from the internet and comparing it to other sources such as bank interest and tax returns. If you have paid tax on all of your profits and earnings you have nothing to fear, but those who earn a little bit extra by selling things they make or buy need to declare this income to HMRC. If you have not registered your business with the Tax Office, you should complete form CWF1 by 5 October 2011 to do so. HMRC will then send you a tax return form for 2010/11, which we can help you to complete.

CLICK HERE TO DOWNLOAD FORM CWF1

HMRC will start a campaign later this year to investigate traders who declare turnover just below the VAT threshold. HMRC suspect any trader in this position of depressing their true sales to stay outside the VAT net. However, many small businesses who sell only to the general public, deliberately decline extra work if the extra income would take their turnover over the VAT threshold. This is not illegal just sound business practice, as it protects their prices from 20% VAT, and avoids administration costs. However, it is very difficult to prove there were no undeclared cash sales.

HMRC to target VAT cheats

CLICK HERE TO READ MORE

If you business is picked for a business records check (BRC) please consider asking us to attending the visit to ensure the Tax Inspectors stick to their brief. Problems reported so far include:

• Threats of penalties (the trial phase of BRCs should be penalty-free);
• Questions about private sources of income (the BRC should apply to business records only); and
• Records categorised as sub-standard when only a few purchase invoices are missing.

The standard letter issued after a BRC visit includes a promise by HMRC to return within three months, outside of the trial phase, when penalties can be imposed.  

HMRC update on business records checks

CLICK HERE TO READ MORE

Charities and Community Amateur Sports Clubs (CASCs) can reclaim tax from HMRC in respect of donations they receive under the Gift Aid scheme. The Tax Office occasionally examines individual Charities or CASCs to ensure the Gift Aid scheme is being operated correctly. This examination is called an audit. The organisation will normally be given 30 days to correct any errors. We can help you understand the records you need to keep under the Gift Aid scheme.

Guidance for charities to correct errors

CLICK HERE TO READ MORE

Some paper repayment claim forms issued for 2010/11 (forms R40) contain a printing error on page 2. The tax year end is shown as 5 April 2012 when it should read 5 April 2011. HMRC will accept these forms as applying to 2010/11, and you should complete the form with the details for that tax year, ignoring the error. Ask us if you need assistance with your tax repayment claim.

Notes on how to complete form R40

CLICK HERE TO READ MORE

The address for submitted paper forms P11d and P11d(b) for the tax year 2010/11 has been changed to:

HMRC NIC&EO
P11D Support Team
Tynemouth House
Room BP8019
Benton Park View
Longbenton
Newcastle Upon Tyne
NE98 1ZZ 

The forms P11d and P11d(b) can be submitted electronically, and we can help you with this. If you want to submit paper forms please use the above address.

Advice on P11d forms - CLICK HERE TO READ MORE

The advisory fuel mileage rates (AFRs) have been revised for journeys taken on and after 1 June 2011 (see link below). The AFRs are a guide for employers who wish to reimburse the cost of fuel used for business journeys company cars, where the fuel is paid for by the employee. The employer is not obliged to use the AFRs, and can use different rates if the vehicle fleet typically less or more fuel-efficient than average cars, where this can be shown to be the case.

New advisory fuel rates

CLICK HERE TO READ MORE
 

You must become VAT registered when your business turnover for 12 consecutive months reaches £73,000 (from 1 April 2011). However, where you operate more than one business in your own name the turnover from all those businesses is generally aggregated to determine if the VAT registration threshold has been reached. Having said that you do not include turnover of a partnership business which you a member of, or of a company where you hold all or some of the shares. This is because partnerships and companies are separate legal entities to sole traders for VAT purposes.

Registering separate businesses for VAT

CLICK HERE TO READ MORE
 

The HMRC software that accepts corporation tax returns filed online has not been updated for the new corporation tax rates that came into effect on 1 April 2011. So companies that are due to pay corporation tax at anything other than the small profits rate (20%) cannot yet file their corporation tax return for a period that ends after 31 March 2011. The next upgrade to the HMRC software is expected in October 2011, after which it should be possible to file all corporation tax returns.

Returns requiring the new CT rate

http://www.ion.icaew.com/TaxFaculty/22155

It used to be easy to tax severance pay paid after the employee has left and the P45 form has been issued. In the past a BR (basic rate) tax code was applied which meant only basic rate tax at 20% was deducted. Since 6 April 2011 employers are required to apply an OT tax code on a month 1 basis to severance payments made after the employee has left. This means tax is deducted at the basic, higher and additional rates without the benefit of the personal allowances.

Income Tax (PAYE)(amendment) regulations (SI 2011/729)
http://www.legislation.gov.uk/uksi/2011/729/contents/made

Do you need to be registered with HMRC under the anti-money laundering regulations? All accountants, lawyers and currency exchanges need to be registered either with their trade body or HMRC, but so do the following types of businesses:  
- Casinos
- Estate Agents
- High value dealers
- Trust or company service providers.  
The last category is applied to any business that: ‘provides a registered office, business address, correspondence address or administrative address for a company, partnership, or other legal person or arrangement.’

Who needs to be registered under the MLR
http://www.hmrc.gov.uk/mlr/getstarted/register/who.htm

What are trust or company service providers
http://www.hmrc.gov.uk/mlr/getstarted/register/tcsp.htm

If you are in the restaurant trade you need to be aware that specialist Tax Office investigation teams are primed to investigate restaurants in the London area. Other trade-specific tax teams will be formed to look at different types of businesses over the next two years. These specialist teams cannot force entry to a business premises and do not have search powers, but you need to be prepared. Talk to us to plan what to do if this crack tax team comes knocking on your door unexpectedly.

New tax investigation teams

http://nds.coi.gov.uk/clientmicrosite/Content/Detail.aspx?ClientId=257&NewsAreaId=2&ReleaseID=419461&SubjectId=36

Do you have a second home in France? If it is not let-out you may have to pay an additional annual property tax of 20% of the cadastral value (similar to rateable value). This new tax is currently being considered by the French Parliament, and if the law passed it will apply from January 2012, but only where the property owner is not resident in France. Ask us for further details as there are other exemptions.

New French property tax

Click here to read more

In this type of fraud a VAT registered business in the UK buys small high-value goods (such as mobile phones) in other EU countries and imports them into the UK (with zero-rate VAT). The importer then sells those goods at a VAT-inclusive price within the UK. However, before the VAT collected from the UK customer is paid over to HMRC, the importing company is liquidated and its directors disappear (become a missing trader), leaving the VAT unpaid. If you are the customer who bought those goods, or are involved in the supply chain in anyway, the Taxman can come after you for the VAT due. How to spot missing trade fraud:

Click here

All employers must now submit the employee starter and leaver forms to HMRC online. These include parts 1 and 3 of the form P45 and all forms P46 including P46(pen) for when a new pension is paid, and P46(expat), which a person is seconded to work in the UK. If you submit paper forms instead of filing online you could be charged a penalty of between £100 and £3000.

Filing P45 and P46 online

http://www.hmrc.gov.uk/paye/employees/start-leave/notify-online.htm

The apparently endless reorganisation of the HMRC offices means that it is sometimes difficult to know which HMRC address to write to. This is not helped by HMRC staff using out of date letter paper that shows defunct telephone numbers and addresses. If you are in doubt about the address of your HMRC office check HMRC office locator (see below) on the HMRC website.

HMRC office locator page

http://search2.hmrc.gov.uk/kbroker/hmrc/locator/locator.jsp

The Annual Allowance (AA) for pension contributions is now capped at £50,000. But your AA cap can be expanded by unused AA carried forward from the three immediately preceding tax years, if you were member of a UK registered pension scheme for at least one day in the earlier tax year.

Frozen rights in say a Civil Service pension scheme would make you a member of that Civil Service scheme. If you paid into a pension scheme many years ago, but have made no contributions since, as long as that old pension scheme is open to contributions your will still be a member of that scheme.

HMRC guidance on carry forward of annual allowance

http://www.hmrc.gov.uk/pensionschemes/annual-allowance/carry-forward.htm

The new tax year has brought a set of new repayment claim forms. The new R40 (2011) can be used for any tax year from 2005/6 to 2011/12. However, if you have a capital gain to report you must not use the form R40 but should register for self-assessment and complete a full self-assessment tax return form. This applies even if you may be due a refund of income tax for the same tax year.

New R40 repayment claim form

http://www.hmrc.gov.uk/forms/r40.pdf

Notes for new R40 form

http://www.hmrc.gov.uk/forms/r40notes.pdf

Peter German from the Personal Tax Team at CKLG ran the London Marathon in aid of MAGPAS. Peter completed the marathon in the impressive time of 4 hrs 21 mins and 35 secs and raised a total of £1565.20 from friends, family and colleagues through donations on JustGiving and personal fund raising.

CKLG is committed to supporting MAGPAS throughout 2011. MAGPAS is based and operates in the East of England and provides the UK’s only night time Air Ambulance with a doctor and paramedic on board in partnership with Cambridgeshire Police. Their highly trained doctors and paramedics work together to help save lives.  

HMRC have clarified that the current business records checks (BRC) taking place between 4 April and 15 July 2011 are a trial. HMRC does not intend to charge businesses penalties for inadequate records during this trial period. However, you still need to take any BRC visit very seriously as there is nothing to prevent a repeat visit when the full BRC programme has been rolled-out later this year, when penalties can be imposed.

 HMRC update on business records checks

http://www.tax.org.uk/media_centre/LatestNews-migrated/HMRCupdateonBRCtrial

The incidence of mis-allocated PAYE payments is increasing. If you need to confirm the allocation of the last two or three payments of PAYE with HMRC you can do this by calling the Employer Payment Helpline (0845 3667 816). However, if you want to confirmation of a long string of payments you need to write to HMRC with full details of the payments made, which HMRC will either confirm or point out the difference with their records.

See item 18 of Employer Bulletin no. 38

http://www.hmrc.gov.uk/paye/employer-bulletin/bulletin38.pdf

Back in 2008 the tax law was changed to exempt from tax any benefit in kind arising from the use of an overseas holiday home owned through a non-trading company. Certain other conditions also had to be met. The NIC regulations have now also been amended so HMRC can issue refunds of class 1A NICs paid by the company concerned for the tax years 2007/08 and earlier.

How to reclaim class 1A NIC on holiday home

http://www.hmrc.gov.uk/thelibrary/tax-paye/nics-refund-holiday-homes.htm

If you have teenage children you may worry how you will support your offspring through university after September 2012, when the increased tuition fees for English Universities come into effect. The Department for Business Innovation and Skills (BIS) website explains how students will be able to access loans, and how graduates will have to pay the money back. The new student loans will carry interest at 3% above the RPI, which amounts to about 8% interest at today’s rates. We can help you understand the amounts that will be repayable by the graduate over the first 30 years of their working life.

Student finance page on BIS website

http://www.bis.gov.uk/policies/higher-education/students/student-finance

Welcome to the May issue of help@cklg which brings you a brief digest of information which may affect your financial life. It includes some rare good news for motorists, further benefits for companies involved in R & D and changes to the pension scheme annual allowance charge. Do make contact with us if you have any questions and remember that every issue is easier to resolve if it is addressed early.

USING YOUR OWN CAR AS AN EMPLOYEE OR DIRECTOR

A modest but nonetheless welcome increase in the mileage allowance on which you can claim tax relief applies from 6 April 2011. Instead of a maximum claim of 40p per business mile, you can now get 45p. However, as before, this applies only for the first 10,000 business miles in the tax year, with the excess mileage only qualifying for a mileage allowance of 25p per mile. If your employer will not pay as much as 45p, you can claim tax relief on the shortfall. If you receive more than the statutory rate, the excess is taxed.

If you drive your own car on a business trip and take colleagues with you, your employer (which of course includes your own company) can also pay you a tax-free 5p per mile per passenger. But if they won’t do this you cannot claim tax relief on 5p per mile – confusing but typical when it comes to the tax system for employees!

Despite the increase, the system still penalises high business mileage employees driving a car of over 2 litres. This again raises the old question of whether it is better to have a company car, or whether to get a car allowance for your own car. If you have the choice, we will be pleased to advise you of what is the better option.

A self-employed person can also use these new rates as if your annual turnover does not exceed the VAT registration threshold (currently £73,000). You still of course have the option to claim actual business use expenses. The same situation applies to volunteer drivers to calculate the taxable profit on mileage allowances received from hospitals, social service agencies and other voluntary organisations.

ENTREPRENEURS’ RELIEF

This is available for qualifying business disposals and gets ever more attractive.  The relief is in the form of a reduction in the CGT rate to 10% on the first £10 million of gains in certain circumstances (£5 million if the disposal was between 23 June 2010 and 5 April 2011; £2 million if the disposal was between 6 April 2010 and 22 June 2010, and £1 million if the disposal was before 6 April 2010). It is therefore now worth a maximum of a staggering £1,800,000 (£10 million taxed at 10% rather than 28%) per individual, so clearly any methods of making sure you qualify for the relief have to be carefully considered.

We will be pleased to offer advice on this increasingly valuable relief by reference to your specific circumstances, as it can apply not just on a business sale but also with care on the sale of an asset used in the business (such as the property from which the business is run).

There are new techniques available to maximise entrepreneurs’ relief in the event of a business sale where there is an “earn out” element offered by the new owners, so that, with care, the complete package is subject to tax at only 10%.

PENSION SCHEME ANNUAL ALLOWANCE CHARGE

If you are a member of a final salary pension scheme, the increase in your pension accrual on a year-by-year basis can result in an immediate tax charge. This arises if, and to the extent that, 16 x the annual increase exceeds £50,000. The excess is then charged to tax at your top rate, via your self-assessment tax return.

Under a new rule, if this annual allowance charge exceeds £2,000 it can be paid, by election, by 31 July following the end of the tax year from the pension benefit rather than via the self-assessment tax return. If it is £2,000 or less there is the ability to pay the tax charge through the PAYE system so that effectively 1/12th is paid each month in the next tax year through the Notice of Coding.

HMRC BUSINESS RECORD CHECKS

HMRC have scored another own goal by starting these checks earlier than originally planned. In addition, they have commenced these checks without telling anybody beforehand! This is hardly a customer-friendly move, and HMRC concede that they should have informed all concerned of their change of plan.

Rather than consulting fully with businesses before commencing the checks in Autumn, HMRC have already started them on a “test and learn” basis. This means that no penalties will be charged if poor records are detected, although HMRC have failed to make this totally clear when notifying businesses that their records are to be checked. This seems to be another example of a high-handed and insensitive approach by HMRC, you should urgently review your record-keeping to ensure it can withstand any new scrutiny.

SHORT LIFE ASSETS

When claiming capital allowances on plant and machinery purchased in excess of the annual investment allowance limit, if the asset(s) concerned only have a short life they can by election be looked at separately. That is a very useful tool, as it means that when the asset is sold for a small amount (or perhaps more realistically scrapped) you get the balance of expenditure written-off for tax straight away.

The expected life to be a short-life asset increased from 4 years to 8 years from April 2011. Perhaps the best practical example of an asset this will benefit is a commercial vehicle, which ordinarily could be expected to last more than 4 years but not more than 8.

RESEARCH AND DEVELOPMENT TAX RELIEF

If you undertake any research and development within your business, and operate as a limited company, you should look at the big improvements being introduced to this enhanced tax relief regime.

As from 1 April 2011, the relief is to be increased to 200% of the qualifying expenditure, up from 175%. Then from 1 April next year, and subject to EC State Aid approval, for every £1,000 you spend on R & D you will get tax relief on £2,250 = 225%. Well worth having!

There is currently a minimum expenditure level of £10,000 in a 12-month accounting period, but this to be removed from 1 April 2012. The definition of R & D is clearly vital to know. Basically it covers activities treated as such under generally accepted accounting practice. Under DTI guidelines it covers an activity, which is seeking to achieve a significant advance in science or technology through the resolution of a scientific or technological uncertainty.

We will be looking to help you identify the scope for claiming this relief under the more relaxed regime, talking to HMRC specialist units where any doubts arise before submitting a claim on your behalf. 

As part of its campaign to encourage small businesses to keep better business records HMRC officers are starting to visit businesses the check the quality of their record keeping. If you receive a business records check appointment letter please let us know ASAP. Although HMRC have said they will not impose a penalty based on the first visit, they could revisit at a later date and charge a penalty of up to £3,000 for inadequate records.

Business records checks have started

http://www.tax.org.uk/media_centre/LatestNews-migrated/BRCstartearly

HMRC make mistakes and sometimes these lead to you being asked for tax you don’t owe. HMRC has outsourced the collection of tax debts to four private sector companies, who are expected to operate according to guidelines set by The Office of Fair Trading (OFT). If you believe the debt collector is not acting reasonably when you explain you do not owe the tax demanded, you can complain to the OFT.
 
How to complain about debt collectors

http://www.oft.gov.uk/about-the-oft/legal-powers/legal/cca/debt-collection

All VAT registered businesses will be required to submit their VAT returns online for periods that start on and after 1 April 2012. At present only VAT businesses with turnover of £100,000 or more, and those that registered for VAT after 31 March 2010 must file VAT returns online. If you are required to file your VAT return online you must also pay any VAT due by electronic means. Ask us for help with filing online. 

VAT notes No. 1 of 2011

CLICK HERE TO READ MORE

If you first received the state pension in the year to 5 April 2011, HMRC forgot to include that pension income in your PAYE code for 2010/11. If this is the case you may not have paid enough tax for that tax year. HMRC will send you a PAYE reconciliations (form P800), which will set out how much tax remains underpaid for 2010/11.

If the tax due is less than £2,000, the amount will be automatically collected through your PAYE codes for the three years to 2014/15. Where the amount due is £2000 or more we can help you negotiate with HMRC to spread the payment over time.

Tax Faculty comment on pension PAYE errors

http://www.ion.icaew.com/TaxFaculty/21959

HMRC have recently issued P9 notices of coding and student loan notices to employers for the tax year 2011/12, and most of those notices will have been issued electronically. You need to look for the new employee PAYE codes on the HMRC website. To view codes or student loan notices the you need to log on to the PAYE online service, and chose the option required (e.g tax code notices). Remember to change the option ‘tax year’ to see the notices for 2011/12.

Viewing PAYE notices online

http://www.hmrc.gov.uk/paye/file-or-pay/fileonline/intro.htm#5

If you have a PAYE scheme that has been dormant for the tax year 2010/11 you need to tell HMRC there is no end of year PAYE return to make. You can now do this online.  It is essential to enter the PAYE reference correctly. An incorrect reference means the HMRC computer cannot match the form to the right PAYE scheme and penalties will be issued for non-submission of the end of year return.

Form to notify HMRC no PAYE return needed

https://online.hmrc.gov.uk/shortforms/form/P35NilEmployer?dept-name=&sub-dept-name=&location=1&origin=http://www.hmrc.gov.uk

Small charities, clubs or societies who are required to submit a Corporation Tax return can continue to submit their accounts to HMRC in PDF format after 31 March 2011. The tax computation and the tax return must be submitted in iXBRL format, although where no income or gains are subject to corporation tax, no tax computation is required. All companies that are subsidiaries of charities must submit both their tax computation and their accounts in iXBRL format from 1 April 2011.

Exemptions for clubs, societies and charities

http://www.hmrc.gov.uk/charities/guidance-notes/chapter6/partb.htm#69

Self-employed individuals generally pay class 2 national insurance by monthly direct debit, or when the quarterly bill arrives from the Tax Office.

From 6 April 2011 the class 2 NI for the tax year will be due in two equal instalments on 31 July and 31 January. The Tax Office will send out separate bills in April and October for two instalments of class 2 NI.  If you already have a monthly direct debit set up to pay the class 2 NI, those direct debits will be suspended from April 2011 and will resume in August 2011. You will also have the option of paying by direct debit in two instalments in July and January.

Changes to class 2 NI
http://www.hmrc.gov.uk/payinghmrc/news-nic2-payments.htm

HMRC have helpfully brought together all the tax rates, thresholds and other wages data an employer may need for the new tax year that starts on 6 April 2011. For the first time in many years the National Insurance thresholds for class 1 primary (employees) and secondary (employers) are not aligned, so double check the figures if you are trying to calculate an individual’s net pay.

Rates and thresholds for 2011/12

http://www.hmrc.gov.uk/paye/rates-thresholds.htm

All actors on standard Equity contracts will be treated as employees for national insurance purposes from 6 April 2011, although those individuals may continue to be treated as self-employed for income tax purposes. This means the company who hires the actor will be required to pay employers’ class 1 NIC contributions on all payments made to the actor under new and existing contracts from 6 April 2011.

Revenue & Customs Brief 10/11

http://www.hmrc.gov.uk/briefs/national-insurance/brief1011.htm

The Tax Office has become very slow in dealing with its post, which can result in a late filing penalty being issued where the tax return was received on time. If you have received a late filing penalty for a tax return submitted on paper, ask to see the physical return complete with the HMRC date-received stamp. This may well result in the penalty being withdrawn. If you want some help with challenging a penalty imposed by HMRC, do ask one of our tax investigation specialists.

Heronslea Ltd case TC00978

http://www.financeandtaxtribunals.gov.uk/Aspx/view.aspx?id=5347

PAYE FORMS FOR EMPLOYERS

HMRC will now no longer routinely issue paper Employer or Budget Packs, or indeed any employer information by post. These will be replaced by online guidance and downloadable applications, as part of the cost reduction exercise.

Where we deal with all your payroll work, there will of course be nothing to be concerned about, but otherwise we recommend that as an employer you should register for the free email alert service so that HMRC can let you know when the latest information is available. 

HMRC also say, with their “customer” approach apparently forgotten, that they now expect the vast majority of employers to use the online route as opposed to requesting paper products and can only supply copies to those employers who are exempt from online obligations or who are unable to access the internet.

PENALTIES FOR LATE FILING OF YOUR INCOME TAX RETURNS

New late filing and late payment penalties will apply from 6 April 2011 (in relation to tax years ending after 5 April 2010) for personal, trust and partnership returns.

The existing rule that the late filing penalty is the lower of £100 and the balance due will be replaced.  That is hardly a surprise, but the good news is that the level of the basic £100 penalty remains.

The penalties for late filing will include:

• £100 penalty immediately after the due date for filing (whether or not the tax has been paid)
• Daily penalties of £10 per day for returns that are more than 3 months late, running for a maximum of 90 days
• Penalties of 5% of tax due for the return period (or £300 if greater) for prolonged failures, which arise after 6 months and again after 12 months
• Higher penalty of 70% of tax due where a person fails to file for over 12 months and has deliberately withheld information necessary for HMRC to assess the tax; this is 100% if deliberate with concealment)

Rest assured, we will do all we can to file your tax returns on time, but the consequences of that not happening are about to get worse.

INCREASED PENALTIES FOR OFFSHORE TAX EVASION

We knew that the sanctions available to HMRC for tackling offshore non-compliance were to be increased, and we now know when and how this will happen.

Basically, the normal maximum penalty of 100% of the tax (in practice, discounted to reflect a whole set of circumstances which we argue as part of the negotiating process) will be determined by the tax transparency of the jurisdiction in which the non-compliance arises.  Where the jurisdiction only exchanges information with HMRC on request, inaccuracies arising offshore will be subject to penalties of up to 150% of the tax.  Where a jurisdiction shares no information from HMRC, penalties will be up to 200%.

The new penalty frameworks for offshore non-compliance will apply to income tax and capital gains tax from 6 April 2011.  It categorises the source area with Category 3 being the worst.  This includes Monaco, UAE, Brazil to name just a few.

 IS YOUR BUSINESS BASE YOUR HOME?

If you are self-employed and do the core work at the premises of the client, there may have been doubts before in being able to claim that your business base is your home.  That can seriously restrict the scope for claiming tax relief on travel costs to and from your home to your various places of business.

Following a new tax case that could change this, it was decided that a sub-contractor must have a base for his business.  The same could be said of other businesses, where your work on issues such as plans and quotes at home must be a part of your trading activity which does not therefore cease when you arrive at home to deal with these.  Accordingly your base for the business is your home.

We will have to wait and see whether this decision is appealed against, but subject to that, we will ensure that any claim for tax relief for you is fully explored.

END OF TAX YEAR PLANNING ACTION

We are ready to advise on all tax planning possibilities by reference to your specific circumstances, with plenty of opportunities to save tax either by taking action by 5 April or indeed delaying until the new tax year.

Areas worth considering include:

• Planning for reduced corporation tax rates. 
• New calculations for distributing profits as a dividend.
• If self-employed, look at becoming a limited company now.
• Maximising Capital Allowances claims before the reduced allowances take effect.
• Pension Contributions – better to pay now or later?
• Married couples/civil partners – use this tax year’s annual CGT exemption and save tax of £5,656.

GET YOUR TEAM TO THINK CREATIVELY & DEVELOP NEW MARKETING IDEAS

One of the biggest challenges faced by managers today is getting ideas from their team. A successful leader is one who can motivate their team to think and produce ideas that can be implemented in the firm. The team are often well placed to come up with new and innovative marketing ideas – after all they are more familiar with your products and services than anybody else! Here are some approaches to help you to get your team feeding into your marketing strategy.

• Ensure team meetings allow people to contribute and express their thoughts without being judged.  Encourage your team to contribute. Don't just tell them what needs to be done, ask them how it can be done.
• Bounce ideas off your team. If there's something in your mind, ask them. You will see how different people in the team can put a new spin on things. Your staff will appreciate being included in the marketing process and will feel like they are really part of the machine that is your business.
• Communicate your goals clearly across the firm. It is imperative that your team understands exactly what the firm is trying to achieve. When they know what needs to be done they will be able to think clearly about how best to achieve the firm’s goals and they will be able to come up with better ideas.
• Incentivise your team to feed into your marketing strategy. Incentives do not necessarily need to be monetary. A word of appreciation can go a long way in motivating employees to contribute marketing ideas again and again. Saying “thank you” helps the team members to feel like they are really contributing to the success of the business.
• Create an atmosphere of healthy competition among your team. Give people similar tasks to do. For example ask two people to come up with new promotional ideas. When people find that others are given similar tasks their human nature automatically wants them to do better. This friendly rivalry among team members encourages productivity and motivation among the team and ultimately results in more and better marketing ideas.

The Tax Office has obtained information from the Gas Safe Register (formerly CORGI), about registered plumbers and heating engineers, which it is preparing to use as the basis of tax investigations. If you are on that list and you have not declared all of your earnings on your tax returns, start worrying.

Where you make a full voluntary disclosure and pay all outstanding tax to HMRC by 31 August 2011, you will be charged a modest penalty of up to 20% of the tax due. If you wait until the Taxman calls you, the penalty will be 30% to 100% of the tax due. We can help you make that disclosure, whether you are in the plumbing trade or not.

Plumbers safe tax plan

http://www.hmrc.gov.uk/trades-disclosure/index.htm

The charges imposed by Companies House for access to information they hold, and to file forms and documents, are changing from 6 April 2011. For example the fee to accompany the annual return for a company or LLP is currently £15 for an electronic return and £30 for a paper return. From 6 April 2011 these fees will be £14 for electronic returns and £40 for paper returns.

 List of old and new fees

 http://www.companies-house.gov.uk/toolsToHelp/proposedChanges.shtml

As it is now compulsory for all employers to file end of year PAYE returns online, HMRC has dispensed with most paper forms and guidance for employers. The employer CD-rom has gone and in its place is a new set of Employer tools, which are found on the Business Link website.  If you have previously used the employer CD-rom you need to download these basic PAYE tools to complete the 2010/11 PAYE filing.

PAYE tools for employers

www.businesslink.gov.uk/basicpayetools.

Download PAYE forms and tables

www.businesslink.gov.uk/payeformsandpublications

Where you have failed to register your business for VAT on time, you will be charged a penalty, but the level of that penalty will vary depending on when you were first required to register. For VAT registrations due before 1 April 2010 the maximum penalty that can be imposed is 15% of the VAT due. Where VAT registration was first required after 31 March 2010 the penalty can be 100% of the VAT due. Although an unprompted disclosure within 12 months of the date when VAT registration was due can attract a nil penalty.  

Obligation to register for VAT before 1 April 2010

http://customs.hmrc.gov.uk/channelsPortalWebApp/channelsPortalWebApp.portal?_nfpb=true&_pageLabel=pageLibrary_ShowContent&id=HMCE_CL_000120&propertyType=document

Obligation to register for VAT after 31 March 2010

http://www.hmrc.gov.uk/compliance/cc-fs11.pdf

The value of childcare vouchers that are tax and NI free is currently capped at £55 per week. From 6 April 2011 this cap will be restricted to £28 or £22 per week where the recipient employee is taxed at the 40% or 50% rates respectively. However, this restriction only applies to employees who join the employer’s childcare voucher scheme on or after 6 April 2011. If you or your employees have young children, setting up a childcare voucher scheme before 6 April 2011 could save you both tax and NI, particularly where the vouchers are provided in place of some salary. 

If you have questions about the operation of childcare voucher schemes do ask one of our tax experts.

Childcare vouchers – FAQs

http://www.hmrc.gov.uk/thelibrary/employer-qa.pdf

BUSINESS RECORDS CHECKS

HMRC have just announced a consultation on their planned programme of checks of business records within the small and medium enterprise (SME) sector. They attempt to justify the introduction of this programme by claiming that research by the OECD suggests (to HMRC that is) that poor business record keeping is responsible for a loss of tax in up to 2 million SME cases annually. The consultation exercise is limited to consideration of the best way to implement the programme – not whether it is a good idea in the first place. 

This is an ideal time, therefore, for your record keeping to be reviewed by us to ensure that it will withstand any new attack from HMRC under this programme.

NEED TO BUY AN ANNUITY FROM YOUR PENSION FUND?

The new rules applying from 6 April are now known, with flexibility being the name of the game. Annuity rates are very low at present, with no signs of that changing, and the new rules will allow you to draw income from your pension fund without having to buy an annuity. If you have a secured pension income of at least £20,000 a year you will even be able to access 100% of your pension fund if you wish (with an income tax charge on it of course) and the options in your particular circumstances need to be reviewed.

REDUCING YOUR CAPITAL GAINS TAX BILL

If you are expecting to pay CGT at the new rate of 28% on all or part of a capital gain on a sale in the current tax year, there may be scope to reduce the rate. This involves making a contribution to your pension scheme or a donation to a charity. It works by reducing your taxable income for all purposes – including the rule that says your rate of CGT is found by adding the gain to your taxable income. If the latter does not exceed the basic rate band of £37,400 it means that some or all of the gain is taxed at 18% instead of 28%.

FURNISHED HOLIDAY LETS

New restrictions are to be introduced from 6 April 2012. Specifically, the advantageous tax regime is only likely to apply from 6 April 2012 if the property in the EEA is available to let for at least 210 days (30 weeks) in the tax year and is actually let for at least 105 days (15 weeks). The latter requirement may well be fine for a property in France, Spain or Portugal, but you could struggle to let a property in the UK for that number of weeks given the vagaries of our climate. 

 A concession may help if you own more than one holiday lettings property. Then, if the 210 days availability test is not met for each property there is an averaging election which can be made between the properties (but keeping UK properties separate from EEA properties). Another concession is where the 105 day condition is met from 2012/13 for a specific tax year, in which case an election can be made to treat the property as continuing to qualify for the next 2 years - but not if the averaging election above is in place.

Where the timing has not changed is where you are unfortunate enough to make a loss on the lettings. From 6 April 2011 (not 2012) the loss cannot be set against your other income and instead it has to be carried forward to set against future profits - or profits from other property lettings in some cases.

We will always be mindful of the possibility that even if your lettings pattern falls short of the above new rules, we may be able to argue that given the level and extent of the services you provide to the holidaymakers, the lettings are a trade in the normal meaning of that magical word. Then, the advantageous tax regime will still apply whatever the number of days that the property is let.

USING THE CGT ANNUAL EXEMPTION

This has always been worth considering towards the end of a tax year, but the potential tax savings are now substantial and careful planning can be highly effective.

Specifically, for a married couple or civil partnership it is worth up to £5,656 each tax year.  The exemption is £10,100 x 2 = £20,200 at a rate of 28% = £5,656.

If the exemption will not ordinarily be used by each spouse or partner, it is worth looking at creating disposals by 5 April 2011 subject of course to the costs involved. The asset sold can, if desired, be repurchased although there are special restrictions for quoted investments (even they can be avoided if the other party makes the repurchase). Assets can be transferred between a married couple or civil partners without any CGT arising, and in that way the gains can be made by the right person so as to utilise two sets of the annual exemption.

A MORE EFFICIENTLY RUN OFFICE FOR THE NEW YEAR

 As we begin 2011 many firms are looking at improving the way they do business. Here are some steps to help boost productivity levels in your office this year.

• Limit social media use among staff. Research has shown that a blanket ban can have negative effects on productivity levels so just introduce an office policy on usage.
• Although some people consider meetings to be a waste of time, you can boost productivity by having meetings between individuals, different departments or even the entire firm. Make sure you have a flip chart or white board in the boardroom to note down the ideas you discuss. A monthly staff meeting could highlight new ideas that develop into new revenue streams for the firm.
• Consider replacing older / malfunctioning office equipment. Slow printers that often jam could damage staff morale by frustrating workers and hindering productivity. It may be an expensive task, but an update could be an important step.
• Make sure you always have a healthy stock of stationery and other office products available. From packaging supplies to envelopes and paper, it's vital that everything is there for when you need it most.
• Consider offering more flexible working conditions to your staff. Flexible working hours for some staff may help them to get more done, so don't rule it out.
• One reason for an office's poor levels of efficiency could be low motivation amongst the team. Perhaps staff could do with a team building day in order to re-establish morale. Consider introducing new incentives. Communication is key. Let staff know that the firm is doing well and announce new client / new business wins. This will act as a “pick me up” for staff morale.

The Tax Office is going to hassle those who deliberately cheat the tax system, as opposed to those who make careless mistakes. Taxpayers who have received a penalty for making deliberate tax errors will have all aspects of their tax affairs closely monitored by HMRC for two to five years, or for as long as the HMRC believe the person is a tax risk. The taxpayers affected will be told in writing that they are in this monitoring programme. 

Announcement of deliberate defaulters programme

http://www.hmrc.gov.uk/about/tax-defaulters.htm

Factsheet on managing deliberate defaulters

http://www.hmrc.gov.uk/compliance/cc-fs14.pdf

All company cars that run on something other than petrol or diesel currently attract a discount in the percentage of list price used to calculate the car benefit. Hybrid electric/petrol cars qualify for a 3% discount, and LPG cars are given a 2% discount. All such discounts are abolished from 6 April 2011, and the regular 1% increase in list price percentages will apply to all cars with CO2 emissions of 130g/km or more. This could have a significant effect on the taxable benefit for larger hybrid cars.

Changes to company car benefit from 2011/12       

http://www.hmrc.gov.uk/budget2009/bn64.pdf

If a business does not keep adequate records to support the entries on its tax returns, it can be fined up to £3,000. HMRC has just launched a campaign to encourage better business record keeping, which includes advice on the Business Link website and an online tool designed to test if sufficient business records are retained. This online guidance includes quite a lot of jargon words and phrases, so please speak to us if you can’t follow what HMRC is asking for.

Advice on how to set up accounting records

www.businesslink.gov.uk/recordkeeping

Online tool to determine if sufficient records are kept

www.businesslink.gov.uk/recordkeepingcheck

Are you ready for the changes coming on 1 April 2011? From that date you will have to file online in iXBRL format your corporation tax return, tax computation and accompanying accounts. Also you must pay your corporation tax and related payments electronically.

If you don’t want to struggle to understand how to use the HMRC free software for submitting a company tax return (which doesn’t cope with charities or companies with odd sorts of income), ask us to help you file online. There are some concessions for small charities, but not for small companies.

HMRC approach in transitional period for iXBRL filing

http://www.hmrc.gov.uk/ct/mandatory-online-filing.pdf

Concessions for small charities

http://www.ion.icaew.com/TaxFaculty/20990

Paying corporation tax

http://www.hmrc.gov.uk/payinghmrc/corporationtax.htm

Some companies pay their employees a lump sum to cover the motoring expenses they incur when using their own cars for business journeys. This is a perfectly acceptable way to pay for the business mileage. However, HMRC want to see a clear link between the mileage claims and the amount of the lump sum payments. If there is no link, the lump-sum amounts should be subject to NICs as part of salary. This was the issue in the Total People Ltd case, which HMRC are taking to the Upper Tax Tribunal.

Total People Ltd case TC00661

http://www.financeandtaxtribunals.gov.uk/Aspx/view.aspx?id=5028

HMRC reaction to Total People Ltd case

http://www.hmrc.gov.uk/paye/total-people-v-hmrc.pdf

The postal system is often blamed for delaying tax returns or tax payments, but you need to have evidence of when the return was posted to claim a reasonable excuse for late filing, and escape the penalty. This evidence could be a proof of posting certificate issued by the Post Office. Alternatively if you have a system  for recording when each return was posted and follow up non-receipt promptly, the Taxman should accept this. To avoid postal delays submit your tax returns online and pay your tax electronically.

Runham and another TC 00933

http://www.financeandtaxtribunals.gov.uk/Aspx/view.aspx?id=5300

How to file online

http://www.hmrc.gov.uk/carter/compulsory-deadlines.htm

CKLG staff has voted Magpas Helimedix as the charity that they would most like to support throughout 2011. Following an interesting presentation at the weekly staff meeting from the Chief Operating Officer Daryl Brown and their Communications Coordinator Antonia Brickell the staff are now planning how and when they will fund raise throughout the year!

First off is the resident marathon runner Peter German all set to run the London marathon in April! please support Peter by donating at the Magpas Helimedix Just Giving site -

http://www.justgiving.com/Magpas-The-Emergency-Medical-Charity0

Magpas - Saving lives and reducing disability by the rapid provision of on the spot emergency medical expertise wherever it is needed within the East of England.

Magpas Helimedix – Saving Lives, Anyone, Anywhere, Anytime!

If you discover a CIS return contains an error, you need to contact the CIS helpline on 0845 366 7899 to correct the fault as soon as possible. When you make this call you will now be subject to some additional security checks, and you will need to have a copy of the original CIS return to hand during that call.

How to correct errors on a CIS return

http://www.hmrc.gov.uk/cis/returns/correct-return.htm

Further security for CIS returns

http://www.hmrc.gov.uk/cis/returns/security.htm

Following the Thexton Training Ltd case, the treatment of interest received by a business operating the flat rate scheme has changed. Where bank interest paid as a core part of the business activities the interest should be included in the turnover for the flat rate scheme. However, where the interest is received as a passive activity, such as on a current or deposit account it is outside the scope of VAT and should not be included in the turnover for the flat rate scheme.

If you have included bank interest in your turnover subject to the flat rate you can make a claim for refund of the VAT paid within the last four years. Ask one of our VAT experts if you need some assistance with this claim.

Thexton Training Ltd case TC00919 http://www.financeandtaxtribunals.gov.uk/Aspx/view.aspx?id=5287

HMRC has left out the amount of the State Pension from the PAYE codes of up to 250,000 pensioners for the tax years 2008/09 and 2009/10, although the pension information was provided to HMRC by the Department of Work and Pensions. HMRC will not collect the extra tax due from the affected pensioners, where the error is identified.  In other cases the taxpayer may have good grounds for using ESC A19 to deny HMRC the right to collect the underpaid tax.

Update on PAYE reconciliations

http://www.ion.icaew.com/TaxFaculty/21344

If you receive a VAT penalty you should always accept the Taxman’s offer of an internal review into the penalty decision, as recent statistics show 56% of penalty and other decisions reviewed by HMRC are eventually overturned.

To accept the offer of a review, you must reply to HMRC in writing within 30 days of the date of the penalty notice. You can present evidence with the acceptance form of anything that may support your position, such as your reasonable excuse for submitting the form late, or whatever was the cause of the penalty. If you need advice on what to send to HMRC to get the review process moving, please ask one of our VAT experts.

How to appeal an indirect tax decision

http://www.hmrc.gov.uk/complaints-appeals/how-to-appeal/indirect-tax.htm

If you are self-employed your business may be based at your home address, although you perform the majority of your work at your customers’ sites. In such cases the Taxman may argue that you can’t claim the cost of travelling to your customer’s sites, as your business is not truly home-based. Paul Mellor proved to the Tax Tribunal that his self-employed work as an electrician was based at his home as he prepared quotes there, so he could claim the costs of travelling to his customer’s sites.

 Paul Mellor TC 00906

www.financeandtaxtribunals.gov.uk/Aspx/view.aspx?id=5275

HMRC are beginning to issue PAYE reconciliations (forms P800) for 2007/08.
If you owe tax for this year it will normally be collected through your 2011/12 PAYE tax code, but you can ask for the debt to be spread over three years, or written off completely in cases of financial hardship. If the tax is due because HMRC have not made use of information they held, you have good grounds for asking for the tax to be written off under Extra Statutory Concession A19. Where the tax due for 2007/08 is less than £300 it will be written-off in all cases.

Using ESC A19

http://www.hmrc.gov.uk/esc/esc.htm

HMRC have changed their view on what should be defined as ‘debt collection services’ following the judgement in the case AXA UK plc (case ref C-175/09).
Debt collection services are subject to standard rate VAT, although other financial services are generally exempt from VAT. If you need help in working out how this new VAT rule applies to your business do ask one of our VAT experts.

Revenue & Customs Brief on AXA UK Plc

http://www.hmrc.gov.uk/briefs/vat/brief5410.htm

Janet Cronk, CEO of CKLG Accountants was delighted to present a cheque for £1012.50 to Dr. Lynn Morgan Chief Executive of Arthur Rank House in Cambridge. CKLG chose ARH as their charity of the year during 2010 and held several group and individual events to help raise funds.

The funds raised went towards paying for a major refurbishment of the craft room at the hospice. Creative therapy aims to facilitate motivation through creativity. Projects that patients can enjoy range from painting and drawing to flower arranging, music, simple DIY and even graphic design.

Katie Read, Creative and Diversional Therapist at ARH comments “It is a welcome distraction from any pain or anxiety associated with a patient’s condition as well as helping them to practice motor and cognitive skills that may be deteriorating, helping to restore their self-esteem”

You will be aware that the standard rate of VAT increased to 20% on 4 January 2011, but did you know about the knock–on effects on VAT retail and small business schemes? If you use a VAT retail or small business scheme, make sure you refer to the latest VAT leaflet for the scheme you use.

VAT notice 733: Flat rate scheme

http://customs.hmrc.gov.uk/channelsPortalWebApp/channelsPortalWebApp.portal?_nfpb=true&_pageLabel=pageVAT_ShowContent&id=HMCE_CL_000345&propertyType=document

Where you have taken advantage of a tax scheme to receive virtually tax-free loans or assets through employee benefit trust (EBT) in place of taxed salary, you may find the supplier of this scheme suddenly backs-out. This is because new a tax charge on disguised remuneration is coming into effect in April 2011. In addition, loans made or assets provided since 9 December 2010 may be caught by the new tax charge. Speak to us to sort out any tax pickle you find yourself in.

Draft legislation and notes on ‘disguised remuneration’

http://www.hm-treasury.gov.uk/d/disguised_remuneration.pdf

When you acquire a property from your spouse, or civil partner, in the year you are living with them, you take on the cost of the property as it was when your spouse acquired it. This means your spouse makes no gain or loss on the disposal to you, but when you sell the property you are taxed on the full gain made over your combined periods of ownership. Please talk to us before giving away properties, or shares in a property to family members.

 No gain no loss transfers

http://www.hmrc.gov.uk/manuals/cgmanual/CG22200.htm

The Tax Office PAYE computer is not coping well with the 50% tax rate. If you are in this tax bracket for the current tax year, you may have paid insufficient tax under PAYE where you hold more than one concurrent employment or pension. This means you will be racking-up an income tax bill in 2010/11 due for payment by 31 January 2012. This seems a long way off, but advance warning allows you to save up the tax due.

PAYE underpaid at 50% rate

http://www.att.org.uk/technical/newsdesk/HMRCPAYEUpdate44

If your PAYE payments go missing within Tax Office, you may be charged a penalty for late payment, receive chasing letters, and possibly a visit from the bailiffs.

 To avoid problems always include the Accounts Office (AO) reference on any PAYE payment you send to the Tax Office, by post or electronically. Also add the year and month the payment relates to, at the end AO reference, without leaving a space. Eg: PAYE for month 09 in 2010/11 (due 19 January 2011) add 1109 to the AO reference.

PAYE issues

http://www.att.org.uk/technical/newsdesk/HMRCPAYEUpdate40

Many of the inaccuracies in PAYE reconciliations for retired people involve the mistakes with government–generated information such as:
· Inclusion of non-taxable state benefits;
· Incorrect State Pension figure;
· State pension included even where it had been deferred; and
· Married couple allowance not restricted to 10%.

Non-taxable state benefits include the pensioners Christmas bonus, the winter fuel payment and the attendance allowance. If you are puzzled by the PAYE reconciliation you have received, please talk to us.

PAYE calculation problems for pensioners

http://www.litrg.org.uk/News/2010/paye-tax-calcs-pensioner

HMRC have set-up a single telephone number for employees and pensioners to call if they have questions about their tax affairs: 0845 300 0627.

Employers can use this number to raise queries about an employee’s PAYE code. However, if your have questions about how to operate PAYE for your employees you should call the employer helpline: 0845 7143 143, or call us.

 New telephone number for employees

http://www.hmrc.gov.uk/employers/new-tel-no.htm

There is good news for small companies who find themselves associated merely because the shareholders happen to be married to each other, or in a civil partnership. Say company A is owned by the Andrew and company B is owned by his wife Belinda. For periods ending on and after 1 April 2011, companies A and B will no longer be associated unless there is substantial commercial interdependence between them. As a result companies A and B could each save up to £13,125 in corporation tax. Ask us for further details.

Regulations and notes for associated companies rule

http://www.hmrc.gov.uk/budget-updates/autumn-tax/small-profits-1335.htm

Changes to the taxation of furnished holiday lettings will be made from 6 April 2011 and 6 April 2012 (1 April for companies). Losses from these lettings business will not be available to set against other income, and the properties will have to be let for longer to qualify. If you let holiday accommodation please discuss your lettings business with us without delay.

Proposals for Furnished holiday lettings

http://www.hm-treasury.gov.uk/d/furnished_holiday_lettings.pdf

There is a new problem with PAYE reconciliations for 2008/09 and 2009/10. Some taxpayers are receiving the same tax repayment twice. This happens where the taxpayer has submitted a tax return for the year concerned and received a tax repayment based on that return. Then an identical or very similar tax repayment is issued by the Tax Office PAYE computer system (NPS). If this happens to you, it in not your fault, but you can’t keep the extra repayment. You must tell HMRC as soon as possible. 

 Contact HMRC

http://search2.hmrc.gov.uk/kbroker/hmrc/contactus/start.jsp

It is often difficult to determine whether assets qualify as plant and hence the cost is deductible for tax purposes, or if the assets have become part of a building, when in general the cost will not be tax deductible. A decision must always be made on the particular facts relating to your business. If this is proving to be a headache for you why not discuss it with one of our tax experts.

 Whether an asset is plant

http://www.hmrc.gov.uk/manuals/camanual/CA21135.htm