Garbetts

HMRC Extend Self - Assessment Deadline to the 2nd February 2012

2012-01-27T16:53:00.000Z

This in from Taxwise, our professional fee protection partners:

"To make sure taxpayers are not disadvantaged if they cannot get through to HMRC's call centres on the 31st January, due to threatened industrial action by its staff, HMRC have announced that they will not impose any late filing penalties for taxpayers who file their self-assessment returns on the 1st or 2nd February.

"The self-assessment deadline remains midnight on the 31st January. However, HMRC will treat all returns that come in by midnight on the 2nd February as though they were submitted by the 31st January. No customer will have to pay interest on payments due on the 31st January that are paid on the 1st or 2nd February.

"Acting Director General Personal Tax, Stephen Banyard, said: 'We've always been very clear that we want the returns - not the penalties. For that reason, we don't want anyone who can't get through for help and advice on 31st January to be disadvantaged in any way.'"

Annual Investment Allowance - Get the timing right

2012-01-19T09:04:00.003Z

If you are considering any major capital purchases (plant, equipment, commercial vehicles etc) now is the time to think about the timing of such purchases. In the 2011-12 tax year the Annual Investment Allowance (AIA) is £100,000. From 6 April 2012 this drops to £25,000. So you could purchase up to £100k of new plant/equipment before 6 April and receive 100% tax allowance.

PAYE coding: A New Season Begins

2012-01-15T15:19:00.000Z

It’s coding time again, how fast the years fly by! It’s the time when you will be expected to read, understand and inform HMRC if they have got your tax codes wrong. This year HMRC tell us that their new computer system is now running at 98% accuracy. This is brilliant news and means that for most of us our tax affairs will be in order.

But hold this thought in mind..... There are approximately 35 million people paying their tax under the Pay As You Earn method (PAYE) and another 5 million paying by both PAYE and Self Assessment. If you quickly do the

math you will see that 800,000 people will still have problems.

You got it... You still need to check your coding notices and statements carefully especially if you have multiple sources of income, have recently retired, been bereaved or had any change in circumstance.

Here are the 2012/2013 rates and allowances and reliefs (subject to the budget) to help you along your way.

Basic rate band (you will pay tax at 20%) 0 to £34,370

Higher rate band (you will pay tax at 40%) £34,371 to £150,000

Additional rate band (you will pay tax at 50%) Over £150,000

Personal allowances

Age under 65 £8105

Age 65 to 74 £10,500 (Can be claimed at the start of the tax year if

If income for the year is less than £25,400)

Age 75 and over £10,660 (As above)

Married couples allowance restricted to 10% £7705

This allowance is only available if one of you was born before 6^th April 1935, it is restricted to 10% so you would expect to see half of this figure in your tax code £3853. You are able to share this allowance with your spouse and if you have done this check your coding notices very carefully.

Blind persons allowance £2100

You do not have to be totally blind to claim this allowance but need to be registered with your local authority on the blind register (England and Wales). If you think you may qualify ask your doctor to refer you to an eye specialist. This allowance can also be shared with your spouse, if your own income is low it may be beneficial to do this.

All you have to do now is match this lot to your own situation. For example;

Mrs A is 63 is still working has deferred her state pension and doesn’t have any other income. She will have a personal allowance of £ 8105 before she pays any tax. Her code will be 810L which will be sent to her employer.

Mrs B also 63 receives her state pension £7105, has a works pension and a part time job. She has the same personal allowance of £8105 but her state pension which is taxable but can’t be taxed at source needs to be subtracted from her allowance, £8105 less £7105 leaving £1000. This will be sent to her pension as it is a continuing source as code 100L, as all of her allowance is used up any other income is taxed at basic rate (BR) 20%. Care has to be taken to make sure that income sources are large enough to operate the code.

This article is by TaxHelp for Older People (TOP) registered charity no 1102276, offering free tax advice to older people on incomes below £17,000 a year. The Helpline number is 0845 601 3321 or geographical 01308 488066

January Newsletter

2012-01-11T15:16:00.001Z

Our January newsletter is now available:

http://www.garbetts.com/news/january2012.htm

Reminder: Self Assessment Penalty Changes

2011-12-30T11:21:00.000Z

A quick reminder that from this January, 2012, the Self Assessment penalty regime changes.

The old situation of any penalty being waived if you owed no tax is now gone. Penalties now apply for late returns, after 31 January, regardless of whether there is tax due or not.

HMRC and faster payments

2011-12-21T10:22:00.000Z

This in from Ross Martin Tax Consultancy:

"HMRC can at last accept Faster Payments by internet or telephone banking.

This applies after 16 December 2011 and payments will be processed on the same or next day.

Taxpayers are advised to check their bank or building society offers this service.

HMRC advises that when making a payment to use the correct bank account details and reference number."

http://www.rossmartin.co.uk/index.php/sme-tax-news/35-sme-tax-news/786-hmrc-accepts-faster-payments

Pension capping: 2011-12 revised limits

2011-12-14T10:21:00.003Z

For tax years 2010-11 and 2011-12 the tax deductible lifetime allowance limit has been reduced to £1.8 million, and this will be reduced further in 2012-13, to £1.5 million. This is a lifetime contribution figure that is quite unattainable for most taxpayers, but more importantly, from 6 April 2011 the maximum annual tax deductible pension contribution limit has been reduced to £50,000 (down from £255,000 in 2010-11). However the good news is that investors will benefit from tax relief at their highest marginal rate. That is, a basic rate taxpayer will receive 20% tax relief, a higher rate taxpayer 40% and a 50% taxpayer 50% relief.

High earners in the UK are being urged to maximise pension contributions before the 50% tax relief disappears following Chancellor George Osborne’s earlier announcement that the rate is temporary.
Currently, people receive tax relief on their pension contributions at their marginal rate. High earners who pay income tax at 50% could make a £50,000 contribution at a net cost to them of only £25,000. If the 50% tax rate was abolished a £50,000 contribution would cost £30,000, an increase in cost of £5,000.

For higher rate owner managed company directors, if pension premiums are paid via their company they should benefit from a similar saving by virtue of dividends being lower.

If income is caught by IR35, or there is a risk it may be, then its better to pay premiums via the company as you get them set off against the IR35 deemed salary.

Many higher rate earners combine regular investment in a pension plan with regular investments in other savings schemes such as a ISA or Unit Trust; ISAs in particular have particular tax advantages and a high annual investment limit.

Contributions to non-pension savings schemes are not tax deductible.

Expert advice from an Independent Financial Advisor (IFA) is needed on pension and retirement investment planning.

Below is an example of a maximised pension arrangement:

Say you have a salary from your own company of £10k p.a., this means the maximum permissable gross personal contribution would be £10k. Your personal contributions will receive 20% tax relief at source, so the actual payments will amount to £8k. If you are a higher rate tax payer, further tax relief will be given via your self assessment return.
To top this up to the cap of £50k, your employer (in most cases this will be your own company) may claim tax relief on £40k, making £50k altogether
The company will pay its contributions gross, and 20% tax relief is given via a reduction in corporation tax, so £8k ct saving in the company. Any "excess" payments made by the company will be added back on the corporation tax computation.

It is most important, when you send Garbetts your year end accounting records for us to prepare the annual accounts, that you inform us of your personal pension contributions in the preceding year at the same time, so we can make due consideration in our tax computations.

ESC C16 - update

2011-12-11T12:31:00.000Z

Back in January we wrote about the conversion of Extra Statutory Concession C16 - ESC C16 - into law, and a unhelpful £4,000 restriction being placed on it:

http://garbetts.blogspot.com/2011/01/proposed-statutory-enactment-of-esc-c16.html

The draft Finance Act 2012, released in the last few days, increases the £4,000 restriction to £25,000 - not completely helpful but better than it was.

Over that amount the only way of accessing favourable Capital Gains Tax treatment on closing a compamny is to use a formal liquidation - which is considerably more expensive, by several thousand pounds.

Quite whats behind HMTs thinking on this unclear - all the same reliefs are available, they are just more difficult to access driving fees into the hands of Insolvency Practitioners - who, confusingly, also do solvent liquidations.

Changes to Auto Enrolment for small employers

2011-12-09T00:07:00.000Z

We've previously mentioned the forthcoming changes to workplace pensions and so called "auto enrolment" - the process where employers have to enrol staff in a pension scheme and make a contribution towards the pension costs.

http://garbetts.blogspot.com/2011/08/workplace-pensions-reform.html

http://garbetts.blogspot.com/2010/04/workplace-pension-reforms.html

Theres a important note on the Pensions Regulator's web site:

"The Government has announced changes to the way that the employer duties are being introduced.

"Employers with fewer than 50 persons in their largest PAYE scheme will not be staged into the employer duties until after the end of this Parliament.

"Employers with 3000 or more persons in their PAYE scheme, ie those with likely staging dates between 1 October 2012 and 1 July 2013, will be unaffected and their staging date will be unchanged.

"As a result of the announcement we will update our guidance on staging and the phasing of contributions as soon as the Government publishes the revised staging schedule."

This should defer the auto enrolment issues - and costs - till at least 2016, based on this Parliament running to 2015 as per the Coalition Agreement, and then a lead in time.

HMRC tackle electricians next

2011-12-08T14:17:00.000Z

This in from LexisNexis:

"Sparkies next for evasion investigation

"Electricians are to be the next group of tradespeople to be scrutinised by the Revenue as it continues to widen its gaze in the lookout for tax evaders.

"The electricians’ tax safe plan (ETSP) will be instigated on 12 January to allow sparkies to come forward with details of unpaid tax without fear of being hit by overwhelming penalties. Fines are likely to be no more than 10% of the amount owed in most cases, while individuals who do not declare their tax debts will risk criminal prosecution."

Read more

Fee Protection Scheme Renewals

2011-12-07T12:31:00.000Z

Just a reminder that the new policy year for our Fee Protecetion Scheme is 1 December - if you haven't renewed yet, and wish to be covered, please let us have your renewal now.

Fee Protection, formerly known as Tax Enquiry Insurance, protects you from the costs of HMRC Tax Enquries and Disputes, across Income Tax, PAYE, VAT and Corporation Tax.

Details are at: http://www.garbetts.com/insurance/

Its not compulsory but on a cost / benefit basis we recomend it to clients.

December newsletter

2011-12-06T12:22:00.001Z

Our December newsletter is now available:

http://www.garbetts.com/news/december2011.htm

Deadlines, deadlines, deadlines

2011-12-06T12:15:00.000Z

This time of year, Santa calls, Snow falls, and filing deadlines are upon us...

First off, limited comany accounts with a 31 March 2011 year end need to be with Companies House by 31 December 2011.

~ Bear in mind Christmas postal delays, if you haven't sent your accounts to Companies House we recomend you do so as soon as possible, and by guaranteed post. It is your responsibility to send the accounts to Companies House. There is a online filing facility but it is terribly thought out and at present we do not support it - alas then, its paper and ink.

~ If your accounts are with us then we will make every effort to make sure the accounts are with you before Christmas, so long as they were with us in good time and complete - you will then need to send them off. However if you are going away before Christmas, please let us know now.

~ If we haven't received your accounts yet, please forward them to us, but at this late stage we cannot make guarantees about their completion. An express charge may be payable for thier processing on time.

~ Late filing penalties are £150 for up to one onth, £375 for one to three months, doubled if this is the second year in a row.

~ HMRC dates are pay Corporation Tax by 1 January 2012, file by 31 March 2012 next year,

~ For companies with year ends other than 31 March, the same time scales apply, adjusted, but, of course, the Christmas issue isn't so acute.

~ For companies in their first year of trading, the deadlines may be shorter,

For unincorporated businesses, sole traders and partnerships, the filing deadline is 31 January 2012 with your self assessment return.

~ If you records are with us, then so long as they are complete they should be with you in good time. If you are going to be away during December or January please let us know.

~ If we haven't received your accounts yet, please forward them to us, but at this late stage we cannot make guarantees about their completion. An express charge may be payable for thier processing on time.

~ we file your accounts and returns electroncially with HMRC, no need for you to worry.

For self assesment returns - individual taxpayers, including company directors and business partners then again the deadline is 31 January 2012.

~ If we don't have all your papers and information, pleae forward as soon as possible.

~ If you are going to be away during December or January please let us know.

We will be closed for Christmas from 5pm Thursday 22 December, and will re open Tuesday 3 January.

Enjoy your turkey....

Autumn Statement 2011

2011-11-30T17:18:00.002Z

Commentry on the Chancellors 2011 Autumn Statement, delivered yesterday, is on our web site:

http://www.garbetts.com/news/autumnstatement2011.htm

Filing VAT Returns Online

2011-11-24T07:31:00.003Z

Just a quick reminder that, from 1 April 2012, paper VAT returns can no longer be used, and all VAT registered businesses, regardless of size, must file their VAT returns online. This means that periods ending on 31 January, 29 February, or 31 March 2012, whichever applies to your business, will be the very last quarter that can be filed using a paper return. Do not leave this to the last minute. Before you can file online it is necessary to register at HMRC for online filing. As soon as you have sent off your paper return for period ended Jan, Feb or March 2012, you should set up the online registration in readiness for the next return. Here is the URL for the registration screen: https://online.hmrc.gov.uk/registration/organisation?httpmethod=post
Select the box "submit returns or change details" and if you are required to complete an EC sales list, select that box too. Have your VAT registration certificate and copy of your most recently submitted VAT return to hand. You will be asked to provide information from those documents.
A word of caution for those not familiar with the on screen VAT return - boxes 3 and 5 do not appear on screen, as they are automatically populated. Therefore you need only to enter figures in boxes 1/2/4/6/7/8/9. Do take extra care when completing these boxes, as you run the risk of entering the figures in the wrong boxes if you don't pay due attention.

Reduction in Annual Investment Allowance from April 2012

2011-11-23T12:19:00.000Z

Just a reminder that from 31 March 2012 (companies) or 5 April 2012 (sole traders / partnerships), Annual Investment Allowance, AIA, will reduce from £100,000 to £25,000.

AIA is the annual total amount of Capital Expenditure that can be written off against tax at the time of it being incurred, rather than over a period of years.

AIA only applies to equipment including vans. Purchase of cars or premises don't count.

Amounts spent in excess of AIA are carried forward and releived at a lower amount, proposed to be 18% per annum from next year - so you get the tax relief but over a number of years.

The key messgae is if you are planning investment in equipment and/or vans in excess of £25,000 then it should be planned for before 31.3.12.

Medics and Dentists may be about to receive a painful prescription from HMRC

2011-11-21T09:37:00.000Z

This in from Qdos Peninsula Taxwise, who underwrite our Professional Expenses Cover scheme (formerly Tax Enquiry Insurance):

HMRC have now moved to the next stage of its activity under the Tax Health Plan (THP) which was originally launched in May 2008. The THP, which gave doctors and dentists and opportunity to disclose any irregular tax affairs, ended in March 2010 and HMRC claim it resulted in an additional tax yield in excess of £10m.

Anyone who thought the THP was now a thing of the past; are mistaken. HMRC will now begin writing to doctors and dentists this week in the next phase of its targeting of the medical and dental professions. HMRC plan to issue 2,500 letters to be sent out this week, varying according to the individual's circumstances. The letters warn: "We know you have outstanding tax returns", this is your "final opportunity" to come forward, and HMRC add. "Your failure to contact us in the past may have been an oversight. However, if you do not respond to this letter, we will treat it as an active choice."

The letters advise taxpayers that they will be given 21 days to respond and if they do not, they face "significant additional charges". The letters go on to add: "Alternatively, HMRC may refer your case to Criminal Investigations with a view to prosecution."

It is thought that as a result of the THP approximately 1500 voluntary disclosures were made under the scheme. However, when HMRC launched the initiative they claimed to have information on tens of thousands of names and addresses. This may suggest that the medical and dental professions did not take HMRC seriously. This latest action would appear to indicate that HMRC are standing by the information they claim to hold and the letters that are now being issued are certainly hard hitting.

The success of the THP would appear to be essential to HMRC to ensure that other voluntary disclosure schemes are taken seriously and not as just a toothless attempt to increase yield.

For further help or guidance please contact the Tax/VAT Advice Line on 01455 825550.

Tax needn’t be taxing….

2011-11-16T10:07:00.002Z

Yeah, right, you mutter, so why is it? Do you feel a strong urge to put a brick through the television screen when you hear that line? Why, you growl, does tax have to be so complicated?

Well, a lot of the answer lies in history. We have income tax because it was introduced as a temporary tax over 200 years ago to help defeat Napoleon. We have a tax year which strangely runs from 6 April to the following 5 April because we lost 11 days in changing the calendar from the Julian to the Gregorian in the 18th century (and there were riots because people thought they were going to die 11 days earlier). We have a Pay As You Earn system set up during the Second World War when the husband worked at the same company a mile down the road for 50 years while his wife stayed at home, made steak & kidney puddings and did the laundry on Mondays (and only 25% of the population paid tax – halcyon days). Nowadays, he has had 9 different jobs in his working life and ends up with 4 different pensions plus his state pension and she stopped paying the Married Women’s stamp and gained state pension entitlement in her own right, and has been allowed to join company pension schemes as a part-timer. We have a tax system where successive Chancellors have added, subtracted and tweaked without a radical overhaul of the structure, resulting in complicated taxation.

We pay tax on working hard but not for winning on the horses, we pay different rates of VAT depending on how frail we are, we get relief for being married but only if we are ancient enough, we pay different rates of tax on our savings depending on how impoverished we are, we get allowances for being blind but benefits for being arthritic, our personal allowances vary according to both our age and our level of income, we pay our taxes through PAYE or self-assessment – or both, the rates of tax wander from 0% to 60% via 5, 10, 18, 20, 22.5, 28, 30, 32.5, 40, 42.5, 50 & 55 and that’s ignoring the disguised tax called National Insurance Contributions……

Still keeping up? Good, because the Government have set up an Office of Tax Simplification (OTS) to examine taxation and make recommendations for simplifying the system. Better, because the OTS would welcome thoughts and contributions from you, however heretical, to assist their deliberations. So now is your chance to make a positive contribution to making tax less taxing and reduce the television repair bill. You can e-mail your ideas direct to them on ots@ots.gsi.gov.uk or if you prefer, you can send them to us at Pineapple Business Park, Salway Ash, Bridport, Dorset DT6 5DB and we will undertake to forward them to OTS. The Office is currently looking at pensioner issues, so now is the time for a bit of Grey Power. Go on, put quill to parchment.

This article is by TaxHelp for Older People (TOP) registered charity no 1102276, offering free tax advice to older people on incomes below £17,000 a year. The Helpline number is 0845 601 3321 or geographical 01308 488066

HMRC's "Taxforces" Hit The Road

2011-11-11T08:59:00.000Z

This in from Qdos Peninsula Taxwise, who underwrite our Professional Expenses Cover scheme (formerly Tax Enquiry Insurance):

HMRC's "Taxforces" Hit The Road

On 7th November HMRC released 5 separate press releases announcing the launch of 5 taskforces aimed at various parts of the UK focusing on varying potential areas of evasion.

In the North West and North Wales there will be two separate taskforces. The first will target tax evasion amongst landlords who own and/or rent more than three properties. The second will be focused on construction traders who are self employed or who run their own companies, where suppression of sales or over-claiming expenses is identified.

The South East is an area where HMRC has identified that there is an increasing problem with some taxpayers not submitting their statutory returns across Corporation Tax, Income Tax, Self Assessment, PAYE and VAT and the taskforce will be focused on this area. Whilst business activities may have ceased in some cases, or there may in fact be no tax liability, HMRC will be targeting those who are fully aware how much money they are due to pay but have made the conscious decision not to submit the necessary declarations.

In Scotland the taskforces will again target two separate areas. The first will be scrap metal dealers who are deliberately suppressing their income or inflating expenditure to evade paying the correct liabilities, and any that may not have registered their business with HMRC. The second group to come under the spotlight will be fast food outlets deliberately falsifying their records and mis-declaring their true sales levels to avoid paying the correct taxes. As part of this activity any business coming under inspection will also have its National Minimum Wage compliance reviewed.
Taskforces are specialist teams that bring together various HMRC compliance and enforcement teams to undertake intensive bursts of compliance activity, typically focusing on groups of up to around 600 taxpayers/businesses, in specific high risk trade sectors and locations across the UK.

These taskforces come as a result of the Government’s £900m spending review re-investment to tackle tax evasion, avoidance and fraud from 2011/12, which aims to raise an additional £7bn each year by 2014/15.

HMRC has announced it is planning 12 taskforces in 2011/12, with more to follow in 2012/13.

Mike Wells, HMRC's Director of Risk and Intelligence, said: “These taskforces will come down hard and fast on those who have chosen to break the rules and deliberately evade the taxes they should be paying. Honest businesses, however, have absolutely nothing to worry about.

“HMRC is clear – if you deliberately seek to evade tax we can and will track you down and you’ll face not only a heavy fine, but possibly a criminal prosecution as well.”

November 2011 Newsletter

2011-11-03T15:17:00.000Z

Our November 2011 Newsletter is now on our web site.

http://www.garbetts.com/news/november2011.htm

HMRC Business Record Checks

2011-10-24T09:28:00.002+01:00

News release in this morning from Qdos Taxwise, who operate our Professional Expenses Insurance Scheme (formerly Tax Enquiry Insurance):

HMRC's Business Record Checks step up a gear

HMRC have released some early findings in respect of their ongoing Business Record Check pilot, confirming that 44% of enterprises had issues with their record keeping and 12% had seriously inadequate records.

During this initial stage HMRC confirmed it would only issue penalties in the most extreme cases. In the longer term it plans to impose penalties of up to £3,000 for serious inadequacies.

The business records check programme stepped up a gear from mid September, with the number of staff on the project rising from 30 to 120 and HMRC plan to conduct 12,000 checks by the end March 2012.

Keeping adequate records has always been vital and clearly now with the prospect of financial penalties for failure it even more important.

We continue to receive claims from insured clients who have been subject to a Business Record Check and our Taxwise Plus Policy has reacted in the same way that it reacts to a PAYE or VAT Compliance Visit i.e. from the outset, without the need for a dispute (the Policy obviously excludes any reconstructive or routine work required as a consequence of the visit).

HMRC’s information on record keeping can be found here.

Self Assessment deadlines

2011-10-21T08:00:00.001+01:00

Just a reminder about these.

You may see reminders in the press and media about a 31 October deadline - this only applies for returns sent to HMRC by paper.

For electronic returns - and we send all ours electronically - its 31 January.

Self Assessment Penalties - all change!

2011-10-20T14:46:00.000+01:00

There are changes coming up for penalties in respect of late Self Assessment returns.

Self Assessment applies to individuals not companies - and covers private tax payers with complex affairs, company directors, sole traders and business partners.

The new penalty regime applies for 2010/11 tax returns onward, so kicks in this coming January, 2012.

Late tax returns:

~ initial £100 penalty - no mitigation if no tax due, or all tax paid on time (previously the penalty could be mitigated on that basis)

~ after three months, £10 per day to maximum £900

~ after six months, the greater of £300 or 5% of tax due

~ after twelve months, the greater of £300 or 5% of tax due

These amounts are incremental of course.

The normal due date for SA returns is 31 January after the tax year if filing electronically (which we would do for clients) or 31 October for paper returns.

Penalties for late payment are:

~ 5% of tax unpaid at 30 days

~ 5% of tax unpaid at 6 months

~ 5% of tax unpaid at 12 months

Interest on top of the above.

HMRC Employer Bulletin

2011-10-20T14:27:00.000+01:00

The latest HMRC Employer Bulletin is out:

http://www.hmrc.gov.uk/paye/employer-bulletin/bulletin39.pdf

This is important reading for all employers, including company directors of one person companies (who constitute employees), and even if your payroll is administered by us the content will be of interest.

National Minimum Wage increases from Autumn 2011

2011-10-20T14:23:00.001+01:00

Just a reminder about NMW changes from 1 October 2011:

~ The basic adult rate increases by 15p to £6.08 per hour.

~ The rate for 18-20 year olds increases by 6p to £4.98.

~ The rate for 16-17 year olds increases by 4p to £3.68.

~ The rate for apprentices increases by 10p to £2.60.