Posts tagged ‘Hmrc’

Along with the England flags and hopes of World Cup success the emergency budget is becoming a distant memory, but if you are in business you shouldn’t be so hasty.

Here at George Hay, we regularly advise on the advantages of incorporation and strongly believe that for the majority of small businesses it is the most tax efficient structure, as remuneration (profit distribution) for the owners/directors can be carefully planned to benefit their personal tax circumstances.  These savings can be particularly advantageous if you are operating as a family business.

Corporation Tax reduction

One of the main headlines of the budget was the reduction in the Corporation Tax rate by 1% making the Small Companies rate 20% from April 2011. This was good news for business owners but of course it only applies to those which are incorporated. Those who operate their business as either a sole trader or partnership are subject to Income Tax and National Insurance on their business profits so will instead be hit by the rise in National Insurance rates from April 2011.

The changes in the Corporation Tax rate and National Insurance rate along with forecast reductions in the basic rate threshold for individuals poses the usual question of should those in business consider incorporating and is it beneficial for everyone to do so?

Indicators do strongly suggest that it is widely beneficial for most owner managed businesses to incorporate and when doing the sums at the new rates from April 2011 the tax savings as a result of incorporation increase even more.

Risky Strategy?

There have been many attempts to try to curb the incorporation trend in the past due to the significant tax savings that can be achieved.  Gordon Brown aired his view that business owners are not paying the ‘right amount of tax’,  and we are sure HMRC will continue their expensive and difficult case in the courts.   But I personally have been advising on incorporation for over 10 years and it continues to be a successful strategy, so why not take advantage whilst the regulations allow it?  It is not something that can not be withdrawn from if circumstances change.

Real life example

In 2007 I was recommended to a small business that was earning very handsome profits due the unique nature of its trading activity.  On engagement I quickly did some sums (good old Excel!) and explained the value of Incorporating.  The owner immediately understood and asked me to incoporate the business without delay.  By involving his wife in the business strategy, she was able to take a ‘very nice’ Company Car and between them they saved and continue to save over £15,000 per annum in Tax and National Insurance.  If only they had sought advice years before…..

It’s not all about tax

Careful consideration should be given to incorporation and expert advice sought. It is not always the right choice for everyone and other factors come into play such as legal liability, increased regulation and therefore costs, disclosure of financial information and future business plans such as sale of the business but it is always worth thinking about.


For further details on the key announcements in the ‘Emergency Budget’ download a copy of our budget summary.

Disclaimer: This article is for general guidance only.  All taxation planning should only be undertaken after appropriate professional advice.  George Hay Chartered Accountants are registered to carry on audit work and regulated for a range of investment business activities by the Institute of Chartered Accountants in England and Wales.

The information provided in this blog illustrates my opinions and experiences, it does not constitute advice and I do not accept responsibility for any actions taken or refrained from as a result of reading this post.

HM Revenue and Customs have gradually been trying to standardise the tax system across all the different taxes. From the 1st April 2010 further changes have come in to place in a bid to make the tax system more consistent.

Cross Compliance Inspections

Last year as part of the standardisation process HMRC introduced cross compliance checks enabling them to obtain information regarding various different taxes all at the same time. This meant that HMRC now have one set of powers giving them the ability to inspect records and consider the affect any information obtained has on various taxes such as Corporation Tax, VAT and PAYE, so if an error is found affecting one tax it could now have consequences across other taxes too.

From 1st April 2010 the list of taxes which can be inspected at the same time has been extended to cover almost all taxes imaginable. The major taxes of Income Tax, Corporation Tax, Capital Gains Tax, PAYE, VAT and CIS where all covered last year but this year majority of the remaining taxes have been added to the list, it now also includes Inheritance Tax, Stamp Duty Land Tax, and many more.

Time frames aligned

The standardisation process also covered the alignment of the amount of time a taxpayer has to make a claim and the amount of time HMRC have to make an assessment.  It now means that for Income Tax, Capital Gains Tax and Corporation Tax where the time limit for how far HMRC could previously go back was six years this has reduced to four years. However for VAT time limits have increased from three to four years.

 The changes to time limits largely took effect from 1 April 2010 so it could be well worth considering if a previously out of time claim could now be made or if a deadline is now nearing. Anyone needing to make an Income Tax repayment claim for earlier years should check the new deadlines to ensure they do not miss out.

Consistent and fair?

The new process is supposed to make the tax system more consistent and clearer for everyone to administer, but that remains to be seen.


Disclaimer: This article is for general guidance only.  All taxation planning should only be undertaken after appropriate professional advice.  George Hay Chartered Accountants are registered to carry on audit work and regulated for a range of investment business activities by the Institute of Chartered Accountants in England and Wales.

The information provided in this blog illustrates my opinions and experiences, it does not constitute advice and I do not accept responsibility for any actions taken or refrained from as a result of reading this post.

PAYE notices of coding are notorious for being erroneous, but HMRC have surpassed themselves with this computer generated nightmare that not only leads to extra work and a lot of confusion but may even leave you paying too much tax.

Multiple Notices

In the last few months you may have received several Notices of Coding all showing different codes for the tax year 2010/11. There have been a number of instances where taxpayers have been receiving one tax code one day followed by a different one the next or even more than one code in one day. This has left many people bewildered and uncertain about exactly what tax code will be operated against their income and many of the codes issued are wrong anyway.

New HMRC  system

The problems have occurred as a result of HM Revenue & Customs recently introducing a new system for issuing coding notices called the National Insurance and PAYE Service (NPS). The new service has brought to light various discrepancies in their records and so they have been trying to rectify the errors, hence so many codes being issued all at once. They expect to complete their review by mid April 2010 which will hopefully bring an end to all the confusion.

Resolution?

Any problems occurring as a result of an incorrect code will ultimately be resolved at the end of the tax year once a taxpayer submits their 2010/11 Tax Return to HMRC. However if serious problems are not dealt with near the beginning of the tax year it could result in a large underpayment arising for some people which it may not be possible to collect via a later year’s tax code.  If you are not required to file a Tax Return, over or underpayments may go undetected for quite some time.

A careful review is necessary

In view of the problems which have occurred it is important that any codes received for 2010/11 are reviewed fully. If you believe that your code is incorrect you should either contact your advisor if you have one or HMRC as soon as possible.

Need help?

As agents we receive a copy of the majority of PAYE Coding Notices issued to our clients and therefore we are able solve many of the matters arising before problems begin to appear. We have discovered various reasons for an incorrect code but the problems particularly appear to have affected those with multiple employments. Close scrutiny of your code is therefore important.


Disclaimer: This article is for general guidance only.  All taxation planning should only be undertaken after appropriate professional advice.  George Hay Chartered Accountants are registered to carry on audit work and regulated for a range of investment business activities by the Institute of Chartered Accountants in England and Wales.

The information provided in this blog illustrates my opinions and experiences, it does not constitute advice and I do not accept responsibility for any actions taken or refrained from as a result of reading this post.


The new ‘VAT online service’ (VOS) was launched by H M Revenue & Customs (HMRC) in November in prepartion for the compulsory online filing of VAT returns and electronic payment of liabiliies for VAT periods commencing 1st April 2010.

These new regulations will be enforced and effect all

  • existing VAT registered businesses with a turnover (excluding VAT) of £100,000 or more (taken from the previous four returns submitted)
  • businesses that register for VAT on or after 1st April 2010, regardless of turnover.

 

Once your business has been required to file online once, it must continue to do so.  The only exemptions are businesses involved in an insolvency procedure or those who have satisfied HMRC that the religious beliefs are incompatible with the requirement to use electronic communications!

If your business is VAT registered, you can expect to receive a letter from HMRC during February 2010 notifying you of your obligations.

There are proposals for this to be just the first step of the process and that all VAT registered businesses should manage their VAT returns and payments electronically from 1st April 2011.

The new VOS will enable users to

  • Register for VAT
  • Enrol for electronic filing
  • View previously submitted electronic returns
  • Set up email alerts to remind business owners of when returns should be submitted

Of course, if you do not want to be burdened with this, your accountant will be able to act as your agent in the same way as they can file payroll and self-assessment returns.  They will ask you to an authority to act (HMRC form 64-8 is not adequate for VOS) and may re-issue their letter of engagement to clarify the terms of this service.

More information can be sought from your accountant or HMRC’s online services website


The information provided in this blog illustrates my opinions and experiences, it does not constitute advice and I do not accept responsibility for any actions taken or refrained from as a result of reading this post

Self-assessment deadlines have changed – don’t be late!

H M Revenue & Customs (HMRC) are working hard to encourage businesses and individual taxpayers to file online to help them become more efficient and effective.  As part of this strategy they have changed the deadline if you wish to continue submitting a paper Return.

j0434804Generally, if you are sent a notice to complete a Tax Return you must return it completed before the later of 31 October following the end of the tax year and three months following the date of issue of the notice. Failure to do so will result in a £100 penalty regardless of the tax due. This is a significant change, so beware. (£100 per partner if the Return relates to a partnership)

For paper returns submitted by this date, HMRC will:

  • calculate your tax for you (though you or your accountant can calculate it for yourself if you want)
  • tell you what to pay by the following 31 January
  • collect tax through your tax code (if possible) where you owe less than £2,000.

Returns sent via HMRC’s website or an electronic service provided by your accountant may be submitted up to 31 January.  There are many advantages of electronic submission which all our clients benefit from, the main ones being:

  • Tax Returns are processed almost immediately and an acknowledgement of successful submission is provided.
  • Your liability is calculated automatically and any refund due is issued by the system direct to your bank account.  Typically this occurs within 10 working days and saves banking and postage costs/time.  Manual processing can take weeks, sometimes months.
  • PAYE coding notices are updated and re-issued without delay (if appropriate)
  • The lack of ‘human’ intervention prevents processing errors and re-enforces the process now, check later strategy intended for Self-Assessment

There are a few situations where online tax returns can’t be made. In these cases the submission deadline is 31 January.Its about Time Series II

Companies House deadlines and penalties have changed too…..

If you operate your business through a Limited Company please be aware that the accounts filing deadline has been reduced by one month for accounting periods beginning on or after 6th April 2008.

A private company now only has 21 months from incorporation or in subsequent years nine months from its’ accounting period end to submit financial statements to Companies House.

From 1st February 2009 the late filing penalties imposed by Companies House have also become a lot more onerous.

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If your accounts or Tax Returns are not up to date,

call us for a free no obligation consultation. 01480 426500

The information provided in this blog illustrates my opinions and experiences, it does not constitute advice and I do not accept responsibility for any actions taken or refrained from as a result of reading this post.

Just to make life a little more awkward for the average taxpayer, H M Revenue & Customs (HMRC) have changed the bank accounts to which you would normally make your PAYE and NIC payments.

As most businesses use CHAPS/BACS or internet banking for settling these regular liabilities, as encouraged by HMRC, this is a little irritating, but easily dealt with.  Please make sure any default settings are updated to show the new account details, which are:

 internet user

HMRC Cumbernauld  08-32-10  a/c 12001039

or HMRC Shipley 08-32-10 a/c 12001020

 The old account will remain open for a short while, but it is recommended that the new accounts are used as soon as possible.

 

The information provided in this blog illustrates my opinions and experiences, it does not constitute advice and I do not accept responsibility for any actions taken or refrained from as a result of reading this post.