TaxCert Accountants

Splitting Businesses to Avoid VAT

2011-10-10T07:09:00.000-07:00

Now that the standard rate of VAT has been raised to 20%, some business owners are increasingly tempted to split their businesses into different entities, so the part with non-business customers or both parts falls under the compulsory VAT registration threshold when split. This enables them not to register to have to charge VAT to those customers. The Taxman is watchful of this type of tax planning and where he believes they have been artificially separated to avoid VAT, he will direct that the businesses should be re-aggregated.

A frequent target of the Taxman on business-splitting grounds are VAT-registered farms, where a member of the family runs a bed & breakfast business which is not VAT registered, from the same location. He will argue that because some buildings have both a farm use and a B&B function, the two businesses are part of a whole and should come under one VAT registration.

Although the use of the same building can be a factor that indicates two businesses are connected, the Taxman is required to consider a range of factors to determine whether the businesses are genuine separate entities. He must judge whether each factor points towards one business, two separate businesses, or is neutral. If the majority of the factors are either neutral or point towards separate businesses, the Taxman should not direct that the businesses be combined for VAT purposes. If you are not happy with the Taxman's decision you can appeal to the Tax Tribunal.

Where you operate two or more businesses within your family, the following questions can help you decide whether the Taxman will challenge your businesses as being artificially split:

1. Is the business designed to operate as an individual business, despite utilising central resources, for example a franchised business?
2. Is the business so intrinsically linked with other 'connected' businesses that it can only be considered to be one indivisible business, for example wet sales and catering in public houses and restaurants?
3. Is the business carried on in separate departments or divisions, but is in reality one legal entity, for example a quasi partnership?
4. How much independence does the business have from any other 'connected' businesses by way of legal and technical resources?
5. Does the business owner have autonomy in the way he/she operates the business, for example access to premises, opening times, recording sales, purchase of stock and materials, bank accounts and annual accounts?
6. What would happen if the business owner was unable to operate their business personally?
7. Has the business owner registered the business with HMRC for corporation tax or income tax separately from those businesses that are 'connected'?
8. Is the business owner working together with their partner/spouse in his/her business as a quasi co-owner or just assisting them as a family member in their business?

The Taxman has the power to direct that two or more businesses should be treated as one business for VAT purposes, even where those businesses are contained within separate legal entities, such as limited companies. Please discuss your business structure with us if you think it could be challenged by the Taxman.

Our Contact Details:
TaxCert Accountants in Taunton: 01823 353765
TaxCert Accountants in Weston-super-Mare: 01934 441765
TaxCert Accountants in Bristol: 0117 2000765

http://www.taxcert.co.uk/

New Mileage Rates

2011-09-08T00:48:00.000-07:00

Where your employees use a company car or van, but pay for the fuel themselves, the company can pay a fuel-only mileage rate for business journeys. This fuel-only rate is guaranteed to be tax free when it is equal to or less than the advisory fuel rates set by HMRC. These advisory fuel rates are now revised every quarter. The latest rates applicable from 1 September 2011 are shown below for different engine sizes, with the previous rates that applied from 1 June to 31 August 2011 shown in brackets. Petrol & LPG Engines 1400cc or less: Petrol 15p (15p), LPG 11p (11p) 1401 to 2000cc: Petrol 18p (18p), LPG 12p (13p) Over 2000cc: Petrol 26p (26p), LPG 18p (18p) Diesel Engines 1600cc or less: 12p (12p) 1601 to 2000cc: 15p (15p) Over 2000cc: 18p (18p) Note there is now a different scale for diesel vehicles. The advisory fuel rates are based on average fuel prices per litre: - Petrol: 134.6p - Diesel: 139p - LPG: 75.8p If the prices in your local area are significantly higher, or your company cars are less fuel-efficient than average, you can pay a higher mileage rate. You need to keep a record of how you calculated that higher rate. Where your employees use their own cars for business journeys, you can pay a tax free mileage rate of 45p per mile for the first 10,000 business miles driven in one tax year, and 25p per mile for extra miles in the same year. This rate was increased from 40p per mile on 6 April 2011, so remember to pay the higher rate to your employees and to yourself when you undertake business journeys in your own car. Where the company is VAT registered it can reclaim VAT on the fuel element of mileage rates paid to employees, if the employee supplies the company with VAT receipts for fuel showing enough VAT to cover the claim. The advisory fuel rates are purely for fuel. The 45p per mile rate is only partly for fuel, the excess above the advisory fuel rate is to pay for other costs of running the car which are incurred by the employee. If you are self-employed, with an annual turnover below the VAT threshold of £73,000, you can use the 45p rate as an approximation for the cost of business journeys in your own car.
Our Contact Details: TaxCert Accountants in Taunton: 01823 353765 TaxCert Accountants in Weston-super-Mare: 01934 441765 TaxCert Accountants in Bristol: 0117 2000765 http://www.taxcert.co.uk/

What if You Don't Pay Your Tax!

2011-07-03T01:59:00.001-07:00

July is one of those big tax-paying months...

- If you are self-employed you need to pay your income tax and class4 NIC on-account payment for 2010/11 by 31 July.
- A company with a 30 September 2010 year end must pay its corporation tax by 1 July 2011.
- Employers must pay class 1A NICs on benefits by 19 July.
- Quarterly payments of PAYE are due by the same date. Monthly payments of PAYE and CIS deductions are due by 19th of every month, or by 22nd if paying electronically.

If you or your company will not be able to pay the tax due on time you should contact the Tax Office business payment support line (0845 302 1435) without delay, or we can do this for you. Once the tax due is actually late, even by a day, it is much more difficult to negotiate a reasonable payment plan with the Taxman.

The Taxman is now very keen to chase every penny of tax owed, and you will start to receive aggressively worded letters if you don't pay on time. If you do not react or pay promptly you will receive telephone calls and possibly personal visits from professional debt collectors. The situation can escalate quite quickly into bailiffs being authorised to seize your goods, or a court judgement being enforced.

If you receive a letter demanding tax due, don't ignore it. Even if you believe there is nothing owed you need to sort the situation before the heavies turn up!

Our Contact Details:

TaxCert Accountants in Taunton: 01823 353765
TaxCert Accountants in Weston-super-Mare: 01934 441765
TaxCert Accountants in Bristol: 0117 2000765

http://www.taxcert.co.uk/

Changes to NIC Class 2 Payments

2011-04-12T13:09:00.000-07:00

As a self-employed person you probably pay your class 2 NIC, (formerly known as 'NI stamp') by monthly direct debit, or when the quarterly bill arrives from the Tax Office.

From April 2011 the Tax Office is changing the way it collects class 2 NICs. The payment will be due in two equal installments on 31 July and 31 January. The Tax Office will send out separate bills for the class 2 NICs in April and October that demand payment for the amounts due in the following July and January.

If you already have a monthly direct debit set up to pay your class 2 NICs, those direct debits will be suspended from April 2011 and will start again in August 2011. You can opt to pay your class 2 NIC bill when the payments become due in July and January, by telephone banking, Bank Giro, at the Post Office, by direct debit or by cheque.

Our Contact Details:

TaxCert Accountants in Taunton: 01823 353765
TaxCert Accountants in Weston-super-Mare: 01934 441765
TaxCert Accountants in Bristol: 0117 2000765

http://www.taxcert.co.uk/

Plumbers Tax Safe Plan

2011-04-07T12:16:00.001-07:00

The Taxman has launched a new tax disclosure opportunity called the Plumbers Tax Safe Plan (PTSP). It is aimed at plumbers and heating engineers who have not fully disclosed all of their income on their tax returns in the past. However, anyone in any trade or profession can use this disclosure opportunity to make a full disclosure of previously undeclared income to the Tax Office.

If you use the PTSP disclosure opportunity to declare unpaid tax, you will be charged a low penalty on the tax due. If you delay and are later found out by the Taxman the penalty could be as high as 100% of the tax due, or 200% if funds have been hidden off-shore. You will also be subject to a full tax investigation and possibly charges under criminal law.

To take advantage of the PTSP you need to fully disclose all your additional tax liabilities by 31 August 2011, and pay all the tax, interest due on late paid tax, and penalties by that date as well. To start the PTSP process you must first notify HMRC by 31 May 2011 that you wish to disclose. We can help you do this and HMRC will respond with a disclosure reference number.

You will need the disclosure reference number to complete the PTSP disclosure form, which can be done online or by using a PDF of the form downloaded from the HMRC website. Most taxpayers will need some help with this disclosure form as the tax, interest and penalties all need to be calculated. It is up to you to decide which penalty rate should apply to your tax errors under the PTSP:

- Innocent mistakes have zero penalty;
- Careless errors attract 10% penalty; and
- Deliberate errors attract 20% penalty.

Think very carefully before admitting to a deliberate error, as this could lead to very strict sanctions in future.

If you think you will not be found out by the HMRC investigators, consider the information HMRC can collect from other sources. To back-up this PTSP scheme HMRC have obtained information concerning plumbers and heating engineers from the Gas Safe Register (formerly CORGI registered). They have cross-referenced this information to advertising directories to work out who was trading as a plumber or heating engineer but were not registered with HMRC.

If you would like some assistance in making a full disclosure of unpaid tax, or know someone who does need help, please contact us as soon as possible.

Our Contact Details:
Accountants in Taunton: 01823 353765
Accountants in Weston-super-Mare: 01934 441765
Accountants in Bristol: 0117 2000765
http://www.taxcert.co.uk/

Budget March 2011 - Main Measures

2011-03-24T06:15:00.000-07:00

This blog post aims to summarise the main measures from the 23rd March 2011 that affect our clients. If you need further assistance just let us know

Individuals

Personal Allowances

These allowances represent the amount of an individual's income in the tax year that is not subject to income tax. Some people are eligible for several allowances such as the personal allowance, and married couples allowance. The married couples allowance is available to married persons and civil partners, but only where at least one person of the couple was born before 6 April 1935.

The personal allowance for 2011/12 will increase by £1,000 to £7,475, but the 40% tax threshold will reduce to £35,000 (see below). This ensures that higher and additional rate taxpayers do not benefit from the increased personal allowance in this year. From 6 April 2012 the personal allowance will be increased again by £630 to £8,105, and in that year the 40% threshold will be reduced further to £34,370.

Personal allowances are withdrawn at certain income thresholds, indicated below, and cannot be claimed by non-domiciled individuals who elect to have their foreign income and gains taxed on the remittance basis for the tax year.

The 2011/12 personal allowances are...

Under 65 - £7,475

65-74 - £9,940

75 and over - £10,090

Minimum married couples allowance* - £2,800

Maximum married couples allowance* - £7,295

Blind person's allowance - £1,980

Income limit for allowances for those aged 65 or more - £24,000

Income limit for allowances for those aged under 65 - £100,000

* given where one partner was born before 6 /4/1935, and only as 10% reduction in tax.

Income Tax Rates

The tax rates for 2011/12 have been frozen at the 2010/11 levels but the threshold at which the 40% tax rate is applied is reduced to £35,000. This introduces a subtle tax increase as it pulls more taxpayers into the 40% tax bracket, and increases the amount of income subject to tax at 40%.

The 2011/12 rates and bands are...

Savings rate* (10%) - 0 to £2,560

Basic rate (20%) - 0 to £35,000

Higher rate (40%) - £35,001 to £150,000

Additional rate (50%) - over £150,000

* Only applies if non savings income is below this amount

Non-Domiciled and Non Resident

Individuals who are domiciled outside of the UK (non-doms), and who have been resident in the UK for at least 7 years out of the previous 9 tax years, must pay a remittance basis charge if they want to exclude their off-shore income and gains from UK taxation. This remittance basis charge is current set at £30,000 per year. It is proposed that from 6 April 2012 the remittance basis charge will increase to £50,000 for non-doms who have been UK resident for at least 12 years. Those who have been resident in the UK for at least 7 years but less than 12 years will continue to pay the £30,000 charge.

There is currently no clear measure by which an individual can determine whether they are treated as resident for tax purposes in the UK. The Government intends to introduce a legal test of residence with effect from April 2012.

Tax Credits

The main changes to Tax Credits as it applies to the self-employed, is the change in the income disregard from £25,000 in 2010/11 to £10,000 in £2011/12.

The income disregard provides a buffer for changes in income, so overpayments of tax credits do not arise where income varies within this threshold year on year. The reduction in this threshold is likely to adversely affect families with fluctuating incomes, such as the self-employed. In the future, in order to avoid a claw-back of tax credits, the claimant will need to finalise their self-employed profit figures as close to the tax year end as possible.

Savings and Investments

Enterprise Investment Scheme

Income tax relief for investors is to be proposed to be enhanced as follows:

Rate of income tax relief: 2010/11 - 20%, 2011/12 - 30%, 2012/13 - 30%

Annual maximum investment qualifying for income tax relief: 2010/11 - £500,000, 2011/12 - £500,000, 2012/13 - £1,000,000

These changes will be subject to State aid approval from the EU.

Venture Capital Trusts

The range of companies that can accept investments through the EIS or Venture capital Trusts is to be increased from April 2012 to include those with gross assets less than £15 million, and with less than 250 employees. At present only companies with asset value of less than £7 million and with less than 50 employees can qualify for these tax favoured investments. The cap on the amount a company can raise through these schemes in any year will also be increased from £2 million to £10 million.

Pension Contributions

The level of contributions that can be made with full tax relief to a registered pension scheme is to be reduced from £255,000 to £50,000 per pension input period (PIP) falling in the tax year. However, this cap can be expanded by bringing forward unused relief from the previous three tax years, up to a maximum of £50,000 from each year. If the annual allowance is exceeded the taxpayer must pay an annual allowance charge on the excess at their marginal rate of income tax.

The Lifetime Allowance will reduce from £1,800,000 in 2011/12 to £1,500,000 in 2012/13.

Independent Savings Accounts (ISAs)

The ISA savings limits applicable in 2011/12 for those over 18 are:

Overall limit - £10,680

Cash up to - £5,340

Balance in stocks and shares up to - £10,680

For those aged 16 & 17:

Overall limit - £5,340

Cash up to - £5,340

Balance in stocks and shares up to - nil

From April 2012 the ISA savings limits will be increased in line with the consumer Prices Index (CPI) rather than in line with the Retail Prices Index (RPI), as has been the case so far.

Savings for Children

Children born between 1 September 2002 and 2 January 2011 inclusive were eligible for a child trust fund account (CTF). Each child received a voucher to allow the account to be opened which also provided an initial deposit. The existing CTF accounts will continue and funds of up to £1200 per year can be contributed for each child tax free. The CTF account can only be accessed by the child when he or she reaches age 18.

Junior ISA

The Junior ISA is a replacement for the CTF but no funds will be provided by the Government. The junior ISA will be available to all children resident in the UK who do not have a child trust fund account. It will also have the following features:

- No tax will be charged on income or gains earned within the ISA.

- Funds placed in the account will be owned by the child and locked in until the child reaches age 18.

- Accounts can be opened from autumn 2011 (exact date to be announced).

- Sharia compliant products will be offered as Junior ISAs.

- The annual savings limits will be announced later, but are likely to be similar to normal ISAs.

Capital Taxes

Capital Gains Tax Rates and Thresholds

The rates and thresholds for capital gains tax are as follows for 2011/12:

Annual exemption - £10,600

Annual exemption for most trustees - £5,300

Rate for gains in basic rate band - 18%

Rate for gains above basic rate band - 28%

Rate for gains subject to entrepreneurs' relief - 10%

Lifetime limit for entrepreneurs' relief - £10,000,000

Entrepreneurs' Relief

This relief applies to gains made on the disposal of businesses, parts of a business, shares in trading companies and certain business assets disposed of after a business ceases or in association with a business disposal. The taxpayer and the business must both meet a number of qualifying conditions for the relief to apply.

Each taxpayer has a maximum amount of gains that they can include in a claim for entrepreneurs' relief, called the lifetime limit. This lifetime limit was initially set at £1 million from 6 April 2008. It was increased to £2 million from 6 April 2010, increased again to £5 million from 23 June 2010. The lifetime limit will be doubled to £10 million for gains made after 5 April 2011.

Inheritance Tax

The nil rate band for inheritance tax (IHT) will remain frozen until 2014/15 at £325,000. This is the amount of a person's estate that is free of inheritance tax.

The rate payable on death for 2011/12 remains at 40% with the rate payable on lifetime gifts to certain trusts remaining at 20%.

From April 2012 those that give at least 10% of their estate on death to charity will pay a reduced rate of IHT of 36%. Gifts made to charities are exempt from IHT.

Business Tax

IR35 Review

The Office of Tax Simplification was tasked with reviewing the operation of IR35, or the provision of services through intermediaries as the legislation is more correctly called. Unfortunately the Government does not agree that IR35 should be abolished. However, it has promised to improve the way HMRC provide guidance to businesses who are trying to operate IR35.

Capital Allowances

The rates and thresholds of the main capital allowances will apply as follows for the year from April 2012:

Main pool writing down allowance: reduced from 20% to 18%

Special rate pool writing down allowance: reduced from 10% to 8%

Annual Investment Allowance (AIA) cap: reduced from £100,000 to £25,000

Short Life Assets

At present a business can elect for named assets (not cars) to be treated individually for capital allowance purposes rather than being included in the main pool or special rate pool. The assets subject to this election are called short life assets as they are deemed to have a useful life of less than 4 years. If the business sells or scraps the short life asset before the end of its deemed life, the business will get tax relief for the full cost of that asset while it is being used by the business. This would not apply when the asset is included in one of the capital allowance pools.

For assets purchased on or after 1 April 2011 (6 April 2011 for unincorporated businesses), the life of the short life asset will be deemed to be 8 years. This will benefit larger businesses that incurred expenditure on assets in excess of their Annual Investment Allowance cap for the year.

Enterprise Zones

The Government will create 21 Enterprise Zones around the country. Further details of the exact location and duration of these zones will be released later. All we know so far is that businesses within these zones will be able to apply for up to 100% discount on business rates.

Tax Reliefs to Go

The Office for Tax Simplification has suggested a list of more than 40 tax reliefs that could be abolished because they are rarely used, or are in fact obsolete. Most of these reliefs will be abolished after consultation. Reliefs on this list which may be of interest to small businesses include:

- Tax free meals for employees who cycle to work

- Tax free late night taxis for employees

- Additional tax relief for companies that clean up contaminated land or buildings (land remediation relief)

- Relief from CGT for grants for giving up agricultural land

Corporation Tax Rates

The small profits rate of corporation tax will be cut from 21% to 20% from 1 April 2011, and is expected to remain at that rate for the next four years, but this has not been confirmed. The small profits rate applies to profits of up to £300,000 where the company has no associated companies which are trading.

The main rate of corporation tax was due to be cut from 28% to 27% from April 2011, but that rate will now be 26%, reducing by 1% per year thereafter until the rate reaches 23%.

Research and Development Tax Credits

Small and medium sized companies could previously claim tax relief of 175% for qualifying revenue expenditure incurred on research and development (R&D) projects. This tax relief will increase to 200% for R&D expenditure incurred after 31 March 2011. A further increase in this tax relief to 225% is planned for qualifying R&D expenditure incurred after 31 March 2012.

The rules that govern what type of expenditure qualifies for this relief will also be revised with effect from 2012 to make it easier for small companies to claim this relief.

Employers

NIC

When business owners and accountants are asked what single action could simplify the tax system, most suggest merging income tax and NI. This message has finally been heard by the Government, who will start consulting on how the operation of the NI and income tax could be combined.

This does not mean these two taxes will be merged. The Government has stated that NI will not be applied to savings, dividends or pensions. The likely changes will involve aligning the rules and mechanics of collecting the two taxes. However, don't expect big changes any time soon!

From 6 April 2011 the rates and thresholds for the main NI contributions were already known with most increasing by 1%. The main figures for 2011/12 are:

Lower Earnings Limit (LEL) for Class 1 NICs - £102/week

Employer's class 1 above £136/week not contracted out - 13.8%

Employee's class 1 not contracted out from £139 to £817/week - 12%

Employee's additional class 1 above £817/week - 2%

Self-employed class 4 from £7,225 to £42,475 per annum - 9%

Self-employed class 4 additional rate above £42,475 per annum - 2%

Self-employed class 2 - £2.50 per week

Voluntary contributions class 3 - £12.60 per week

Approved Mileage Rates

Where an employee uses his or her own car for business journeys their employer can pay them an approved mileage allowance payment (AMAP), free of tax and NIC.

This AMAP rate has been stuck at 40p per mile since about 2002, and at current petrol prices many employees who need to use their car for business cannot afford to do so. The AMAP will increase to 45p per mile from 6 April 2011 for the first 10,000 business miles per year, any additional miles can be reimbursed at 25p per mile. If the employer does not pay the full AMAP rate the employee can claim the additional amount in tax relief from HMRC.

The tax free AMAP can also be paid by charities to volunteers. The self-employed, who have profits below the VAT registration threshold (£73,000 from 1 April 2011), may also use the AMAP rate as a substitute for motor expenses claimed in their accounts.

Where an employee carries a fellow employee as a passenger on a business journey, an additional 5p per mile tax free can be paid. The rate will also now apply to volunteer drivers who take other volunteers on business/ charity related journeys.

Car Benefit

The tax charge for personal use of a company car is based on a percentage of the list price of that car when new.

From 6 April 2011 the percentages are all increased by 1% for those in the 15% to 35% range but with a 35% maximum kept. The taxable benefit of using a car with CO2 emissions of 121-129g/km is 15% of the list price. This percentage increases by 1% for each additional 5g/km of CO2 emissions to a maximum of 35% for cars with CO2 emissions of 225g/km or more.

Where a company car driver receives free fuel, the taxable benefit is calculated as the percentage of the list price for the car applied to a set value, currently £18,000. This value will increase to £18,800 from 6 April 2011. The maximum taxable benefit of receiving fuel for personal use will increase from £6,300 (for 2010/11) to £6580 (for 2011/12).

VAT

VAT Rates and Thresholds

There were few changes announced for VAT. The rates and thresholds are as follows from 1 April 2011:

Lower rate - 0%

Reduced rate - 5%

Standard rate - 20%

Registration turnover - £73,000 (up from £70,000)

Deregistration turnover - £71,000 (up from £68,000)

Low Value Consignments

Low value consignment relief allows goods to be imported into the UK by post from outside the EU, with no VAT or duties charged, if the value of the package is less than £18. This has encouraged suppliers of CDs, DVDs and other durable items, to supply goods via the Channel Islands and other non-EU territories to avoid VAT being applied on the sale price. The monetary limit for low value consignments will be reduced to £15 from 1 November 2011, and this limit will be reviewed in March 2012. The Government will also look at other ways of closing this loophole.

Online Filing

It will be compulsory for all VAT registered businesses to file their VAT returns online from 1 April 2012. At present only businesses who became VAT registered from April 2010 or those with turnover of £100,000 or more must file VAT returns online. Also from 1 August 2012 all requests to register or deregister for VAT will have to be made online.

Our Contact Details:
Accountants in Taunton: 01823 353765
Accountants in Weston-super-Mare: 01934 441765
Accountants in Bristol: 0117 2000765
http://www.taxcert.co.uk/

Taxman Starts Business Records Check

2011-03-21T04:32:00.001-07:00

The Taxman is concerned that many small businesses are not keeping adequate records to support the entries on their tax returns. To encourage better record keeping he is taking a carrot and stick approach.

The carrot encouragement comes in the form of a number of new HMRC leaflets, and an online tool www.businesslink.gov.uk/recordkeepingcheck designed to help small businesses decide what records they must keep. These tools and leaflets contain quite a lot of jargon words and phrases, so we would recommend discussing your requirements with us.

The stick is a letter he is about to send to 50,000 small businesses, advising that they may be subject to a detailed records check.

Only a minority of these businesses will actually receive a visit from the Tax Office compliance check unit, and those visits will normally be arranged in advance. However, if your business is visited and your records are found to be inadequate you may receive a penalty of up to £3,000, which cannot be suspended even if you promise to keep better records in future.

Our Contact Details:
Accountants in Taunton: 01823 353765
Accountants in Weston-super-Mare: 01934 441765
Accountants in Bristol: 0117 2000765
http://www.taxcert.co.uk/

More PAYE Reconciliations

2011-02-17T03:54:00.000-08:00

In October and November last year we told you the Taxman was issuing 6 million tax reconciliations (forms P800), for the tax years 2008/09 and 2009/10. This process is still not complete, but the Taxman has started to issue a further 450,000 forms P800 for the tax year 2007/08.

There are likely to be similar problems with inaccurate data for 2007/08 as have emerged for the later tax years, but you may not have the records to check against the Taxman's figures. If you do not run your own business you are only required to retain your tax records for 2007/08 until 31 January 2010. If you need some help checking a tax calculation for 2007/08, please contact us.

The Taxman has also discovered that the State Pension received by up to 250,000 pensioners in 2008/09 and 2009/10 has not been taxed as it should be. When a person retires they normally receive an occupational pension paid by their former employer, or an annuity paid from their personal pension scheme. In either case the payments will be subject to PAYE and will have some tax deducted by the payer. The pensioner may also receive the State Pension, which does not have tax deducted by the payer (i.e. Department of Pensions), but it is taxable.

The PAYE code applied to the occupational pension or annuity should take into account the amount of State Pension paid, but for up to 250,000 pensioners in 2008/09 and 2009/10 it did not! This meant those pensioners paid too little tax through no fault of their own. The Taxman will not collect the tax due in these circumstances, but only where he can identify the State Pension has been missed altogether.

If you receive a P800 tax reconciliation which shows tax has been underpaid due to an inaccurate figure of State Pension, you have good grounds for asking the Taxman to write-off the tax due under Extra Statutory Concession A19. This concession applies where the Taxman failed to make use of information (such as the State Pension figure provided by the Department of Pensions), to calculate the right amount of tax. We can help you apply for the A19 concession.

Our Contact Details:
Accountants in Taunton: 01823 353765
Accountants in Weston-super-Mare: 01934 441765
Accountants in Bristol: 0117 2000765
http://www.taxcert.co.uk/

Personal Tax Changes 2011/12

2010-12-22T01:52:00.000-08:00

Personal AllowancesThe tax-free personal tax allowances for 2011/12 have not been announced but we do know that the tax free allowance for those aged under 65 will be at least £7,475, although the increase of £1,000 from the present limit will only benefit basic rate taxpayers.

Child and Working Tax Credits
Working and Child Tax Credits are to be withdrawn at the rate of 41% from families with total income of £40,000 or more from 6 April 2011. Families with income of over £40,000 may no longer be eligible for the family element of £545 per year. The baby addition to the family element (also £545) will be withdrawn completely at the same time.

The change in income that can be disregarded for a tax credit claim will be reduced from £25,000 to £10,000 with effect from 6 April 2011.

Pensions
From 6 April 2011 the state pension will be increased by the greater of: the annual increase in earnings or prices, or 2.5%.

The standard minimum income guarantee given under the Pension Credit will be increased by the same cash amount as the state pension.

From 2011/12 a member of a pension scheme can contribute up to £50,000 per year into registered pension funds, and receive full tax relief on those contributions. This £50,000 cap includes employer contributions and the deemed increase in value of defined benefit pension schemes. If contributions of less than £50,000 have been made for three immediate preceding tax years when the individual was a member of a pension scheme, the unused cap for each tax year can be carried forward up to three years.

Savings
The overall tax-free ISA limit for 2011/12 will be £10,680, of which £5,340 can be saved in a cash form such as a bank savings account.

Our Contact Details:
Accountants in Taunton: 01823 353765
Accountants in Weston-super-Mare: 01934 441765
Accountants in Bristol: 0117 2000765
http://www.taxcert.co.uk/

Business Tax Changes 2011/12

2010-12-13T11:47:00.000-08:00

Corporation Tax The small profits rate of corporation tax will fall by 1% to 20% from 1 April 2011.This rate applies to profits of up to £300,000 if there are no associated companies. The corporation tax rate for large companies with profits over £1.5million will also fall by 1% to 27%, making the marginal rate for profits between those limits 28.75%. The main rate for larger companies will also fall by 1% in each of the following 3 years down to 24% in the year beginning 1 April 2014.

Capital Allowances
Capital allowances will be reduced with effect from 1 April 2012 (6 April 2012 for income tax purposes), as follows:

- Main pool writing down allowance - reduced from 20% to 18%
- Special rate pool writing down allowance - reduced from 10% to 8%
- Annual Investment Allowance (AIA) maximum investment - reduced from £100,000 to £25,000

Where expenditure on integral features, plant and equipment (excluding cars) is within the annual investment allowance, the business can claim a 100% deduction for those costs in the year bought.

NI
From 6 April 2011 the rates for NI contributions will be increasing by 1% and the new rates become...

- Employer's class 1 above secondary threshold: 13.8%
- Employee's class 1 above primary threshold and below upper earnings limit: 12%
- Employee's class 1 above upper earnings limit: 2%
- Self-employed class 4: 9%
- Self-employed class 4 additional rate: 2%

The reduced rates of NI for contracted out contributions for employers and employees have not been confirmed as yet.

From 6 April 2011 if you are self-employed you will be able to pay your class 2 NICs in two instalments on 31 January and 31 July, the same dates as your income tax payments on account are due. You can continue to pay your class 2 NIC by monthly direct debit if you wish, but there will be a break in DD requests by HMRC from April 2011 to August 2011.

Contact Details:
Taunton Office: 01823 353765
Weston-super-Mare Office: 01934 441765
Bristol Office: 0117 2000765
http://www.taxcert.co.uk/

It's Christmas Time Mr Taxman!

2010-12-06T09:25:00.000-08:00

It's that time of year when staff parties abound, and you may be thinking of handing out small seasonal gifts to employees, customers or suppliers. Before you get too generous, make sure you know the tax implications.

Entertaining your staff is tax allowable as long as the entertaining is not part of an event aimed primarily at your customers. The cost of entertaining customers or potential customers or suppliers is not tax allowable for income tax or corporation tax. Your accounting records need to distinguish between the cost of hospitality such as the provision of food or drink, and significant gifts to customers, from your other marketing expenditure. The amount classified as non-allowable entertaining is added back to your profits to calculate the total tax due.

You can reclaim the VAT on the cost of entertaining your staff, but a proportion of the costs must be disallowed for VAT purposes where non-staff, such as family members, customers or suppliers also attend the event. However, where customers from overseas are present the VAT can be reclaimed on their portion of the costs. This is because the Tax Office recently removed the block on reclaiming VAT on entertaining overseas customers. Note the VAT block is only lifted for overseas customers, not suppliers, or UK customers, or other third-parties.

An event laid on free or below cost for employees would normally be a taxable benefit for those staff who attend, but it is tax free if it is designated as an 'annual event'. The other requirements are that the event is open to all staff and the cost does not exceed £150 per head, including VAT. If the cost exceeds this threshold, your employees will be taxed on the total cost of the event as a benefit in kind. You can pay this tax and NI on behalf of your employees using a payroll settlement agreement (PSA), which you need to agree with the Tax Office. So to avoid this hassle, keep the cost of the event, including all free transport and accommodation, below £150.01 per head.

Small seasonal gifts to staff, such as a bottle of plonk or a turkey, can be treated as 'trivial benefits'. These trivial benefits can be excluded from the report of benefits and expenses (form P11D) provided to staff, if you agree a dispensation for these gifts with the Tax Office. Don't push it with the Tax Inspector by trying to pass off expensive hampers or cases of champagne as trivial benefits.

Contact Details:
Taunton Office: 01823 353765
Weston-super-Mare Office: 01934 441765
Bristol Office: 0117 2000765
http://www.taxcert.co.uk/

2010 Autumn Statement

2010-11-30T03:38:00.000-08:00

The Chancellor George Osborne delivered his Autumn statement on 29 November 2010, but this was NOT a Pre Budget Report full of tax information as we had come to expect from Gordon Brown.

George Osborne was primarily responding to the report from the Office of Budget Responsibility (OBR) which was released earlier the same day. The OBR report is a forecast of the UK's economic performance for the next few years. Previously this forecasting was performed by the Treasury and was not independently checked. The purpose of the OBR is to provide independent economic forecasts that are not influenced by political concerns.

The central message conveyed by George Osborne is that there is not going to be a double dip recession, as the UK economy is growing steadily at about 2% per year. Employment is forecast to grow, but the unemployment rate is expected to remain at around 8% for the next year. The apparent contradiction is due to more claimants being moved from long-term sickness benefit (Employment and Support Allowance) to unemployment benefit.

George Osborne mentioned tax only briefly in his speech, when he announced a series of consultations concerning the reform of corporation tax. Most of the areas under review are only relevant to multinational companies. However, there will be a review of the tax incentives for expenditure on research and development (R&D).

Currently enhanced R&D tax relief is available to large and small companies at different rates, but it can be very difficult to prove to HMRC that the work undertaken qualifies for the R&D tax relief. This system of R&D tax relief may be tweaked after this review to make it easier for small high-tech companies to claim the relief.

We are still waiting for a number of key tax figures to be announced for the tax year 2011/12, including the rates and allowances for income tax, and the thresholds for both NI and income tax. However, we do have details of a number of other tax changes in the pipeline which we will outline in future posts.

Refund of Overseas VAT

2010-11-15T05:22:00.001-08:00

From 1 January 2010 you were able to reclaim VAT incurred on business expenses in other EU countries, by using the online portal set up by HMRC. The UK end of this EU-wide system has been operating smoothly, but there have been significant delays and problems in other EU countries, which have meant that claims have not been processed.

Due to these problems the European Commission decided to push back the deadline for submitting claims for refunds of VAT incurred in 2009 from 30 September 2010 to 31 March 2011. If you have not got round to making a claim for repayment of VAT on expenses incurred while travelling abroad since 1 January 2009, you can now do so.

However, before you take hours preparing your claim, check that it will be worthwhile. The minimum claim you can submit per country is €50. Once your refund is approved you will be paid by credit transfer into your business bank account. Such a transfer of foreign currency into a sterling bank account may well cause high bank charges, which will be deducted from the refund.

Pension Changes Ahead

2010-11-06T02:37:00.001-07:00

The Government wants to restrict the amount of tax relief claimed for making pension contributions. This will now be achieved by restricting the annual allowance for everyone to a nominal £50,000 per tax year from 6 April 2011, subject to adjustments described below.

You will get full tax relief on all your pension contributions made up to the annual allowance cap. If you have made pension contributions of less than £50,000 in any of the last three tax years, you will be able to carry forward the difference between £50,000 and your actual contribution level into 2011/12 to add to your annual allowance for that year. This carry forward of unused annual allowance will apply on a rolling three-year basis for future tax years.

The only condition for the carry forward to apply is that you were a member of a registered pension scheme for the earlier tax year concerned. If you were a member and made no pension contributions in that tax year, you can carry forward the full £50,000 of unused annual allowance. Both your own and your employer's contributions to your pension fund are deducted from the available annual allowance.

Update on PAYE 'Errors'

2010-11-04T09:20:00.000-07:00

The Taxman's new computer has been busy reconciling the PAYE records for millions of people for the 2008/09 and 2009/10 tax years. About 4.7 million of these calculations have led to under or overpayments of tax, and in those cases a form P800 is issued to the taxpayer to show how the tax difference has arisen.
From examining the first batch of P800 forms, we've noticed a number of recurring problems with the Taxman's figures, such as:

Incorrect state pension – check this against your notice from the Pensions Service.
Estimated amounts of interest or rental income – check to your bank statements.
No extension of basic rate limit for pension contributions or gift aid payments – check whether you did make pension contributions or gift aided donations.
Missing married couple's allowance – only applies if you are already over 75.

If you do not agree with the figures shown on your P800 form you need to contact the Taxman on the telephone number shown on that form, or we can do this for you.
If you agree the Taxman's figures, and you do have some tax to pay, we have some good news. The maximum amount which will be written-off by the Taxman is now £300 per tax year, not £300 for the two tax years taken together as was previously announced by the Treasury Minister.