November 2011

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

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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

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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

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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

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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

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