There are less than two weeks to hit the deadline
The next tax self-assessment deadline is almost here - 31 January 2010.With Christmas and the New Year festivities over, it is that time of year again when the final deadline for filing tax returns, and also paying any tax you owe, looms.
This is the second year when we have had new filing deadlines.So it is worth re-emphasising what they are, and how the self-assessment deadlines are twin track, with one for the tax return and another for the tax payments.
Electronic tax return
There are in fact two separate deadlines for the tax return: one for the paper return and the other for the electronic filing.For paper filing for the tax year ended 5 April 2009, known as 2008-09, the deadline was 31 October 2009. That was only the second year in which there had been an October deadline.But if you missed that relatively new paper filing deadline then you can now only file electronically. Whether we feel comfortable about it or not, more and more of what we do is becoming electronic.In this particular case there were two reasons why a later deadline of 31 January for electronic filing was set. It was Lord Carter who suggested it, with the aim of encouraging people to switch away from paper filing. His first reason was that with paper filing, HM Revenue and Customs (HMRC) had to deploy its employees to input the tax return information into their computer systems. This was a burden they wished to see reduced during a time of staff reductions in the organisation.The second reason was that HMRC wished to receive clean data: clearly, tax information inputted by staff was susceptible to human error.
What to do
You can only start the process by having a Pin code to get into HMRC's online system. Where you have filed online in previous years you will already have a Pin, hence you can get started straight away. HMRC started sending out Pin codes to many taxpayers a few years ago and you may well be one of those organised people who has kept it. Otherwise you will need to go to the HMRC website and register. It is a fairly straightforward process but you need to be aware that the Pin code will be sent to you by post. HMRC advise that you should allow seven days for this to arrive. Therefore please do not delay - get your skates on and register today.
The detail
Let us now turn to the tax return preparation itself. The whole process is actually quite similar to that of completing the paper return. First off, set aside some time to devote to the return. There is nothing worse than starting and then being disturbed and having to go and do something else. But before you start working on your tax return, have all your usual source material at the ready.
This will include:
• your P60 form - you must enter the precise figure for your income and not just a rounded approximation
• specific details of self-employment income, together with receipts and invoices for items you consider deductible from this income
• all bank and building society interest details
• details of any dividends.
The payment
At this stage you will need also to pay any tax you owe. Under the twin track deadlines I mentioned earlier, 31 January is also a payment deadline. If the electronic tax return had been filed by 30 December 2009, and if the tax due was below £2,000, then HMRC would have taken payment for the tax owed, month by month, from your income during the next tax year 2010-11, by adjusting your PAYE coding. But as we are looking at filing the return in January, the full and final tax payment will need to accompany the tax return. If you have been within self-assessment for a number of years and usually owe tax of over £2,000 then you are likely to be within the payments regime.This means that you will make a payment on account within the tax year on 31 January. So, for the tax year 2008-09, a payment on account was required on 31 January 2009.A second payment on account was then required on 31 July 2009.And you will now be required to pay the final amount on 31 January 2010, together with the payment on account for the subsequent tax year 2009-10.
One last point on this
Please note that the HMRC bank account details have changed from last year. Therefore go to the self-assessment part of the HMRC website to double check if you are unsure.
Late returns
As the tax return and the tax payment follow their own requirements then so too does the late penalties regime. A late tax return penalty is £100. This is automatic and is issued by an automated process by the HMRC computer. A penalty for the late payment of the tax will apply from 28 February and is 5% of the tax unpaid. However interest will also be payable on non-payments or under payments of tax from 1 February and will also payable on the penalty too. The rate currently applying is 3%. If for any reason you are unable to file your tax return on line by the 31 January then you may still have the chance to claim reasonable excuse and have HMRC extinguish the £100 penalty. There is a dedicated form which enables you to put forward your reasonable excuse and it is available from the HMRC website. What if you received the paper tax return, but have not got around to sending it in, and you have not contacted the banks, building societies and others who need to provide you with information to complete your tax return? You should press on now and register for online filing anyway, as mentioned above.Even if you are late filing and do incur the £100 penalty you must work towards getting your tax return in as soon as possible.Otherwise HMRC will pursue you for it and you could end up paying much higher penalties in the long term. The message is simple - burying your head in the sand will not work.
Cannot pay
If you are under self-assessment and think you may not be able to pay your tax liability then you must take note that help is at hand. At the end of 2008, HMRC were instructed by the government to set up the business payment support service. The service is available to both businesses and individuals. One telephone call to the support service should allow you to defer paying your tax liability on the due date. However, you need to be considered viable.That is, you are not likely to fold up and HMRC can be confident that they will receive their tax in due course. By having your tax payments deferred by the payment support service you will escape the imposition of the 5% tax penalty surcharge. But in order for you to take advantage of this help your tax return needs to be filed.
Wednesday 20 January 2010
Thursday 24 September 2009
Get your kicks from a VAT 66!
If you travel or incur costs in the EU, it is now that time of year to make sure that you claim the VAT back on any of these costs, for example, hotel bills, conferences or exhibitions you have attended.
How do I make a claim? The first thing you need is a VAT 66 certificate from the Grimsby VAT Registration Unit, which can be requested by letter, fax, or email (they don’t provide a number for telephone requests for some reason). You will next need to get a VAT 65 application form, which is on HMRC’s website at http://www.hmrc.gov.uk/index.htm Remember that the VAT65 form must be completed in the language of the country you are claiming the refund from. This can prove difficult, but in a lot of cases, the actual amount of text you will need to write is minimal. Once you have both forms, you can then list all the invoices and VAT amounts, and send the VAT 65 and 66 along with the original invoices to the country’s tax authority. A list of the relevant addresses can be found in Notice 723 or on the HMRC website.
Tip 1 The period of a claim is a calendar year, and you have 6 months to make the claim. This means that you should have sent the claim by 30 June in the following year. Most countries are fairly stiff about the time limits and late claims are normally rejected, so make sure you make your claim on time.
Tip 2 The current paper-based process for reclaiming EU VAT is to be replaced by a fully electronic system from 1 January 2010. HMRC are still consulting on this, so those expecting to make a claim next year will need to keep track of developments over the summer.
How do I make a claim? The first thing you need is a VAT 66 certificate from the Grimsby VAT Registration Unit, which can be requested by letter, fax, or email (they don’t provide a number for telephone requests for some reason). You will next need to get a VAT 65 application form, which is on HMRC’s website at http://www.hmrc.gov.uk/index.htm Remember that the VAT65 form must be completed in the language of the country you are claiming the refund from. This can prove difficult, but in a lot of cases, the actual amount of text you will need to write is minimal. Once you have both forms, you can then list all the invoices and VAT amounts, and send the VAT 65 and 66 along with the original invoices to the country’s tax authority. A list of the relevant addresses can be found in Notice 723 or on the HMRC website.
Tip 1 The period of a claim is a calendar year, and you have 6 months to make the claim. This means that you should have sent the claim by 30 June in the following year. Most countries are fairly stiff about the time limits and late claims are normally rejected, so make sure you make your claim on time.
Tip 2 The current paper-based process for reclaiming EU VAT is to be replaced by a fully electronic system from 1 January 2010. HMRC are still consulting on this, so those expecting to make a claim next year will need to keep track of developments over the summer.
Tuesday 1 September 2009
When is Paying a Dividend "illegal"?
A dividend may be 'illegal', in that it is contrary to Company Law, when the proper procedures are not followed. If the Taxman examines the paperwork and decides the payment from your company was not a legal dividend he may treat the amount paid as a loan, or even as a bonus payment.
In both cases additional tax may be due from the company and sometimes from you.
To pay a legal dividend it is not sufficient just to write 'dividend' on the cheque stub or against the entry in director's loan account.
We recommend following these steps when paying dividends...
In both cases additional tax may be due from the company and sometimes from you.
To pay a legal dividend it is not sufficient just to write 'dividend' on the cheque stub or against the entry in director's loan account.
We recommend following these steps when paying dividends...
- The directors should first review the profits available for interim dividends. This is not the same thing as cash in the bank, as you have to take account of other assets and liabilities. Those deliberations should be recorded as a formal board minute, so if the Taxman ever asks, you can prove the profits were there when the decision to pay an interim dividend was made.
- If the final accounts for the year are complete and show the accumulated profit and loss account is positive, the directors can recommend the profits, which are not required for investment, can be paid out as a final dividend to the shareholders. The shareholders can either accept the directors' recommendation or suggest a lower figure of dividend. Both these decisions also need to be properly recorded at the time they are made.
- Dividend vouchers need to be prepared when either a final or interim dividend is paid, for each shareholder showing the total due, the tax credit attached to the dividend and the date of payment.
- The dividend should be paid. The cash can be transferred from the company's account by cheque or bank transfer into the shareholder's own bank account. If the shareholder is a director his account in the company books may be credited with the dividend due to him or her, but this needs to be done as soon as possible after the decision to pay a dividend is taken.
We can help you with all this paperwork, but it is important that the decision to pay a dividend is made in advance of any cash being paid out of the company.
Wednesday 26 August 2009
When is a Pick-Up a Van?
Certain pick-up trucks and other commercial-type vehicles are built to very high comfort standards these days, so a pick-up or 'van' can easily be used as the main family vehicle. In which case does the company owned van become a company car?
The distinction is important because the benefit in kind tax charges are far higher for a car than a van (see example). Also vans, but not cars, qualify for the annual investment allowance (AIA), which allows the full cost of the vehicle to be set against profits in the year of purchase, subject to the AIA cap of £50,000.
Example
The Mazda BT-50 2.5 TD double cab pick-up has a list price of £15,063 and a CO2 emissions rating of 244g/km. The table below shows the difference in the taxable benefit for 2009/10 should this vehicle be classed as a car or van.
Taxable benefit of private use: Car:£5,272 Van:£3,000
Fuel provided for private journeys: Car:£5,915 Van:£500
Total taxable benefit: Car:£11,187 Van:£3,500
In tax law a van is a goods vehicle that has a design weight not exceeding 3,500kg. In addition the HMRC guidance specifies that a pick-up truck is a goods vehicle if it has a payload of at least 1 tonne. Payload is the difference between the kerb weight and the gross weight as stated in the vehicle's specifications. So if the pick-up is primarily designed to carry goods rather than people and can safely carry 1 tonne in weight, it falls squarely into the van category.
For advice on choosing the right vehicle to qualify as a van please contact us.
The distinction is important because the benefit in kind tax charges are far higher for a car than a van (see example). Also vans, but not cars, qualify for the annual investment allowance (AIA), which allows the full cost of the vehicle to be set against profits in the year of purchase, subject to the AIA cap of £50,000.
Example
The Mazda BT-50 2.5 TD double cab pick-up has a list price of £15,063 and a CO2 emissions rating of 244g/km. The table below shows the difference in the taxable benefit for 2009/10 should this vehicle be classed as a car or van.
Taxable benefit of private use: Car:£5,272 Van:£3,000
Fuel provided for private journeys: Car:£5,915 Van:£500
Total taxable benefit: Car:£11,187 Van:£3,500
In tax law a van is a goods vehicle that has a design weight not exceeding 3,500kg. In addition the HMRC guidance specifies that a pick-up truck is a goods vehicle if it has a payload of at least 1 tonne. Payload is the difference between the kerb weight and the gross weight as stated in the vehicle's specifications. So if the pick-up is primarily designed to carry goods rather than people and can safely carry 1 tonne in weight, it falls squarely into the van category.
However, this statement about the 1 tonne payload is not law, it is only HMRC guidance. If you have a pick-up that carries less than 1 tonne it will be a van for tax purposes if you can show that it is either:
- a goods vehicle; or
- a vehicle of a type not commonly used as a private vehicle and unsuitable to be so used.
For advice on choosing the right vehicle to qualify as a van please contact us.
Friday 21 August 2009
Free professional help for entrepreneurs
Free professional help for entrepreneurs
A new website has been launched specifically to provide entrepreneurs with free tools, resources, training and guidance from some of the UK’s leading authors, accountants and business advisers.
In June 2009 the Governor of The Bank of England predicted that the UK would face a "long, hard slog" back to recovery, so for the unprepared there will still be a great deal of pain ahead before the recession is really over. Therefore www.recessionresources.co.uk has been designed to give business owners access to all the no-cost help and support they need to avoid that pain, including:
1. A comprehensive diagnostic review of your main opportunities to strengthen your business and personal cashflow – covering everything from improving sales and margins, to working capital management and leading edge tax planning. The findings will be presented in the form of a hard-hitting ‘Key Improvement Possibilities’ report. As part of this you can also request the following:
2. Detailed benchmarking report – This report will reveal how your business compares to others in your industry across 19 key measures. It will identify where your true strengths and weaknesses lie. It will calculate how much higher your profits and cashflow could be if you were able to emulate the results of your more successful rivals. And it will make preliminary recommendations for what the evidence suggests you can do to beat the recession. To help you to develop these ideas further you can also request the following:
3. Suite of multi-media profit improvement software - Since the only sustainable source of non-repayable cash is making more profitable sales, this software uses hundreds of practical UK examples, case studies and video/audio files to help you to develop a detailed action plan, and estimate the financial impact of that plan. And in case that is not enough you can also request the following:
4. Five "How to beat the recession" videos and books - Four of the world’s leading business authors have contributed their key thoughts to the website’s resource bank. As a result you can watch their specially commissioned videos and claim a complimentary copy of what many regard as the most practical anti-recession book on the market, Nicholas Bate’s "Beat the recession".
All of these recession resources, along with the related one-to-one support and guidance from leading professional accountants across the UK, are available free of charge through www.recessionresources.co.uk Together they will help entrepreneurs to develop, fine tune and implement their action plans so that they come out the other side of the recession stronger than ever before.
Entrepreneurs using the service will not have to switch accountant or do anything to upset existing arrangements with their accountants and business advisers. All of the help provided through www.recessionresources.co.uk is intended to sit alongside rather than replace what their existing advisers are doing for them.
A new website has been launched specifically to provide entrepreneurs with free tools, resources, training and guidance from some of the UK’s leading authors, accountants and business advisers.
In June 2009 the Governor of The Bank of England predicted that the UK would face a "long, hard slog" back to recovery, so for the unprepared there will still be a great deal of pain ahead before the recession is really over. Therefore www.recessionresources.co.uk has been designed to give business owners access to all the no-cost help and support they need to avoid that pain, including:
1. A comprehensive diagnostic review of your main opportunities to strengthen your business and personal cashflow – covering everything from improving sales and margins, to working capital management and leading edge tax planning. The findings will be presented in the form of a hard-hitting ‘Key Improvement Possibilities’ report. As part of this you can also request the following:
2. Detailed benchmarking report – This report will reveal how your business compares to others in your industry across 19 key measures. It will identify where your true strengths and weaknesses lie. It will calculate how much higher your profits and cashflow could be if you were able to emulate the results of your more successful rivals. And it will make preliminary recommendations for what the evidence suggests you can do to beat the recession. To help you to develop these ideas further you can also request the following:
3. Suite of multi-media profit improvement software - Since the only sustainable source of non-repayable cash is making more profitable sales, this software uses hundreds of practical UK examples, case studies and video/audio files to help you to develop a detailed action plan, and estimate the financial impact of that plan. And in case that is not enough you can also request the following:
4. Five "How to beat the recession" videos and books - Four of the world’s leading business authors have contributed their key thoughts to the website’s resource bank. As a result you can watch their specially commissioned videos and claim a complimentary copy of what many regard as the most practical anti-recession book on the market, Nicholas Bate’s "Beat the recession".
All of these recession resources, along with the related one-to-one support and guidance from leading professional accountants across the UK, are available free of charge through www.recessionresources.co.uk Together they will help entrepreneurs to develop, fine tune and implement their action plans so that they come out the other side of the recession stronger than ever before.
Entrepreneurs using the service will not have to switch accountant or do anything to upset existing arrangements with their accountants and business advisers. All of the help provided through www.recessionresources.co.uk is intended to sit alongside rather than replace what their existing advisers are doing for them.
Thursday 20 August 2009
Employee Benefit Trust
We are in the process of setting this up for one of our clients.
It was inspired by Mr Cauldwell of Phones4U. Who a year or two back set up a company in Jersey or Guernsey. The company was to provide benefits to Phones4U employees. Phones4U paid £20m to this "Benefit Company" - reducing their corporation tax (CT) bill by £6m (big companies then paid CT at 30% [now 28%]).
Mr Caudwell personally applied to the Beneift Company for an interest free loan of £20m and surprise surprise was granted it.
Result - Mr C got £20m tax free out of his business AND reduced his CT bill by £6m.
There is quite a bit of cost involved in doing this - and you need to have the readies to pay over. so for the benefit to outweigh the costs for our clients, you need to have available profits of £100k.
The other criteria you need is to be happy for the taxman to crawl all over it - it is a registered scheme with HMRC, but that doesn't mean they like it!
It was inspired by Mr Cauldwell of Phones4U. Who a year or two back set up a company in Jersey or Guernsey. The company was to provide benefits to Phones4U employees. Phones4U paid £20m to this "Benefit Company" - reducing their corporation tax (CT) bill by £6m (big companies then paid CT at 30% [now 28%]).
Mr Caudwell personally applied to the Beneift Company for an interest free loan of £20m and surprise surprise was granted it.
Result - Mr C got £20m tax free out of his business AND reduced his CT bill by £6m.
There is quite a bit of cost involved in doing this - and you need to have the readies to pay over. so for the benefit to outweigh the costs for our clients, you need to have available profits of £100k.
The other criteria you need is to be happy for the taxman to crawl all over it - it is a registered scheme with HMRC, but that doesn't mean they like it!
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