Month: December 2012

Have you filed your 2012 Self Assessment Tax Return?

SA monthly online figures 2011-12

While millions of people were exchanging presents, feasting on turkey, and nodding off in front of the television, 1,548 people decided to take time out from the yuletide festivities and do their tax return online – a 40 per cent increase on Christmas Day 2011, when 1,100 people filed online.

A new HM Revenue and Customs (HMRC) advertising campaign starts this week, urging anyone who still hasn’t sent in their 2011-12 tax return to “do it today, pay what you owe and take a load off your mind”, so they can experience “inner peace” – something that the 20,563 Christmas Eve, Christmas Day and Boxing Day filers are no doubt feeling already.

Images of the new “inner peace” ads, as well as infographics on last year’s filing trends, are available from HMRC’s Flikr channel at http://www.flickr.com/hmrcgovuk

The penalties for late Self Assessment returns are:

  • an initial £100 fixed penalty, which applies even if there is no tax to pay, or if the tax due is paid on time;
  • after three months, additional daily penalties of £10 per day, up to a maximum of £900;
  • after six months, a further penalty of 5 per cent of the tax due or £300, whichever is greater; and
  • after 12 months, another 5 per cent or £300 charge, whichever is greater.

There are also additional penalties for paying late of 5 per cent of the tax unpaid at: 30 days; six months; and 12 months.

http://hmrc.presscentre.com/Press-Releases/Many-happy-returns-of-the-season-68585.aspx

You may find some of my previous blogs useful:

Subcontractors

http://stevejbicknell.com/2012/05/07/self-assessment-tips-for-subcontractors/

Late Filing

http://stevejbicknell.com/2012/10/15/reasons-excuses-for-filing-your-self-assessment-return-late/

Pension Payments

http://stevejbicknell.com/2012/10/06/employer-vs-employee-pension-payments-net-relevant-earnings/

Tax Codes

http://stevejbicknell.com/2012/01/21/is-your-tax-code-right/

Loan Interest

http://stevejbicknell.com/2012/01/05/lend-money-to-your-company-and-get-interest/

Dividends

http://stevejbicknell.com/2012/01/04/things-you-need-to-know-about-dividends/

Business Expenses

http://stevejbicknell.com/2011/12/20/how-to-claim-tax-relief-for-employment-expenses/

Business Mileage

http://stevejbicknell.com/2011/12/19/tax-refund-for-business-mileage/

Self Employed

http://stevejbicknell.com/2011/12/23/self-employed-tax-allowances/

Capital Allowances (companies need to file these on their CT600 Corporation Tax Returns)

http://stevejbicknell.com/2012/02/15/the-hidden-capital-allowances-in-your-building/

http://stevejbicknell.com/2012/01/09/capital-investment-appraisal-tax-and-depreciation-the-basics/

Unclaimed Tax Relief  £12.6bn

http://stevejbicknell.com/2012/05/12/12-6-billion-in-unclaimed-tax-relief-and-refunds/

You will need to file on-line, but just in case you would like to see what the 2012 return looks like here is a link:

http://www.hmrc.gov.uk/forms/sa100.pdf

steve@bicknells.net

WordPress Blog – www.stevejbicknell.com 2012 in review

The WordPress.com stats helper monkeys prepared a 2012 annual report for this blog.

Here’s an excerpt:

4,329 films were submitted to the 2012 Cannes Film Festival. This blog had 17,000 views in 2012. If each view were a film, this blog would power 4 Film Festivals

Click here to see the complete report.

Are your workers ‘Fit for Work’? or would use of a tax free fitness option help?

Fit for Work

Now Christmas is over and we may have eaten more than we should, many of us will be thinking of getting back into shape.

Did you know the NHS daily recommendation for steps per day is 10,000 steps and a recent article in Workplace Savings and Benefits pointed out that according to an American study:

  • Secretaries take 4,300 steps per day
  • Lawyers take 5,000 steps per day
  • Construction and Factory 9,000 steps per day

Sickness absence in the UK costs £17bn per year.

You could reduce sickness by promoting an active lifestyle and it could be tax efficient too!

http://stevejbicknell.com/2011/11/07/tax-free-fitness/

steve@bicknells.net

How do I calculate the VAT on a Sales Promotion?

VAT Sale

Now Christmas is over the shops are full of sales promotions, discounts, double counts, 50% off but how much VAT should be charged? And what type of business promotion would be best for your business?

Here are some to consider:

Discounts

Provided you aren’t connected to the person you are selling to, VAT is only payable on the discounted price. If you offer a retrospective discount or volume discount a credit note can be issued when the target is achieved.

Buy one get one free

Sounds simple but needs to be handled carefully as for VAT purposes the default assumption would be that one item is at full price and the other item is a gift, the gift would be subject to VAT (if it’s over £50 in value).  So for accounting and VAT purposes you should sell both items at 50% of their value.

Money-Off Coupons

These work in similar way to Discounts but in some cases the retailer will be able to recover the value of the Coupon from their supplier.

Cash-Back

The purchaser pays the full price and gets cash back. Often the manufacturer gives the cash back rather than the retailer, so the retailer accounts for VAT on the full price. The manufacturer pays the Cash Back to purchaser. The Manufacturer can then reduce their output tax for the Cash Back.

Gift Vouchers and Face Value Vouchers

There is no VAT on purchased gift vouchers as they are treated as cash equivalents, its only when they are used to purchase items that VAT needs to be accounted for.

It’s also common for Gift Vouchers to be lost and never used, which is great for the retailers.

If the voucher is sold for more than its cash equivalent then part of the value will be vatable.

Reward Cards

There are several ways to handle these let’s assume the points operator pays the retailer the value of the points, the operator will then reclaim input tax. Alternatives could follow the Discount rules or Voucher rules.

steve@bicknells.net

Are you looking to re-skill your work force? UKCES Employer Ownership of Skills Pilot

Wind park

SCA Group, Navitus Bay Wind Farm, Weymouth College, Portland Port and Dorset LEP are now progressing their bid proposal for £1m in funding from UKCES to re-skill workers to work on Wind Turbines.

During January 2013 other businesses with renewable energy training needs will be able to join the bid.

The £3bn proposed wind farm off the south coast will provide about 1,000 temporary jobs and 100 permanent posts.

A 1,000 temporary jobs will be created during the construction period, which would start in 2017.

http://www.bbc.co.uk/news/uk-england-19978951

There will be 218 Wind Turbines, it will be the largest offshore wind farm in the World but bigger wind farms are currently being planned.

There are almost 1,000 turbines being built in the UK offshore and onshore and a further 2,300 with planning consent.

Eventually the Government hope to have up to 6,000 onshore and 4,000 at sea.

UKCES Employer Ownership of Skills Pilot

The Employer Ownership of Skills pilot is a competitive fund open to employers to invest in their current and future workforce in England. Employers are invited to develop proposals that raise skills, create jobs, and drive enterprise and economic growth. Government will invest in projects in which employers are also prepared to commit their own funds in order to make better use of our combined resources.

http://www.ukces.org.uk/ourwork/employer-ownership

steve@bicknells.net

Are you planning to buy Assets? Annual Investment Allowance increase starts in January

Investment Capital Allowance

In the Autumn statement (Finance Bill 2013) it was announced that for 2 years from 1st January 2013 the Annual Investment Allowance will be increased from £25,000 to £250,000 (an increase of 10 times!).

This is fantastic news if you are planning asset purchases because it will reduce your tax bill.

Some examples of AIA qualifying expenditure

‘Plant or machinery’ actually covers almost every sort of asset a person may buy for the purposes of his/her business. Really the only business assets not covered are land, buildings and cars (which are excluded by one of the ‘general exclusions’). Typical examples of plant or machinery include:

    • computers and all kinds of office furniture and equipment
    • vans, lorries, trucks, cranes and diggers
    • ‘integral features’ of a building or structure, see CA22320
    • other building fixtures, such as shop fittings, kitchen and bathroom fittings
    • all kinds of business machines, such as printing presses, lathes and tooling machines
    • tractors, combine harvesters and other agricultural machinery
    • gaming machines, amusement park rides
    • computerised /computer aided machinery, including robotic machines
    • wind turbines and fibre optic cabling.

Transitional Calculation

A company with a financial year chargeable period from 1 April 2012 to 31 March 2013 would calculate its maximum AIA entitlement based on:
(a) the proportion of a year from 1 April 2012 to 31 December 2012, that is, 9/12 x £25,000 = £18,750; and,
(b) the proportion of a year from 1 January 2013 to 31 March 2013, that is, 3/12 x £250,000 = £62,500.
The company’s maximum AIA for this transitional chargeable period would therefore be the total of (a) + (b) = £18,750 + £62,500 = £81,250, although in relation to (a) (the part period falling before 1 January 2013, no more than a maximum of £25,000 of the company’s actual expenditure in that particular part period would be covered by its transitional AIA entitlement (the maximum claimable before the increase to £250,000).

http://www.hmrc.gov.uk/tiin/2012/tiin1278.pdf

steve@bicknells.net

When should you charge VAT on inter company recharges?

3D Vat button block cube text

The answer depends on whether you have made a Taxable Supply or not.

A vatable inter company charge would be where one company buys business services and goods from suppliers and shares them with another related company so for example the invoice might say:

Recharge from Company A to Company B

10% Insurance

5% Rent/Rates

8% Motor/Travel

12% Office Salaries (but check notes below on employment)

As long as the charges have a logical and reasonable basis for them then these costs can be recharged plus VAT (even if the original item such as insurance wasn’t originally vatable)

However, the following are not Taxable supplies for VAT:

Common Directors – Notice 700/34 (May 2012)

An individual may act as a director of a number of companies. For convenience one company may pay all the director’s fees and then recover appropriate proportions from the others.

The individual’s services, such as attending meetings or approving expenditure, are supplied by the individual to the companies of which they are a director. The services are supplied directly to the relevant businesses by the individual and not from one company to another. Therefore there is no supply between the companies and so no VAT is due on the share of money recovered from each company.

http://customs.hmrc.gov.uk/channelsPortalWebApp/channelsPortalWebApp.portal?_nfpb=true&_pageLabel=pageLibrary_ShowContent&id=HMCE_CL_000871&propertyType=document#P87_8714

Joint Employment – Notice 700/34 (May 2012)

Where staff are jointly employed there is no supply for VAT purposes between the joint employers. Staff are jointly employed if their contracts of employment or letters of appointment make it clear that they have more than one employer. The contract must expressly specify who the employers are for example ‘Company A, Company B and Company C’, or ‘Company A and its subsidiaries’.

Paying a Bill on behalf of an associated business

This is basically an inter company loan which will be repayable in full, its not a taxable supply.

Why does this matter?

An article in Tips and Advice  – VAT issue 11October 2012 reported that HMRC have applied penalties of up to 30% of the error where incorrect treatment has been applied.

So it is very important to get the VAT treatment correct.

Alternatively you might consider forming a VAT Group so that you don’t need to charge VAT on inter company charges but this isn’t always a practical solution as it means changing the VAT registration and doing a single return for all companies/businesses in the VAT group.

steve@bicknells.net

Will the Christmas Party be tax free?

the unlike trio 01/Devil, Angel and Santa celebrating Xmas

The answer is probably! maybe?

HMRC have an Exemption (not an allowance) of £150.

If the employer provides two or more annual parties or functions, no charge arises in respect of the party, or parties, for which cost(s) per head do not exceed £150 in aggregate. Where there is more than one annual function potentially within the exemption, we do not expect employers to keep a cumulative record, employee by employee, of functions attended. But for each function the cost per head should be calculated. The cost per head of subsequent functions should be added. If the total cost per head goes over £150 then whichever functions best utilise the £150 are exempt, the others taxable (see examples at EIM21691).

The figure of £150 is not an allowance. For functions that are outside the scope of the exemption (see example at EIM21691) directors and employees, except those in an excluded employment, are chargeable on the full cost per head, not just the excess over £150, in respect of:

  • themselves and
  • any members of their family and household who attend as guests.

The cost of the function includes VAT and the cost of transport and/or overnight accommodation if these are provided to enable employees to attend. Divide the total cost of each function by the total number of people (including non-employees) who attend in order to arrive at the cost per head.

http://www.hmrc.gov.uk/manuals/eimanual/eim21690.htm

Things to watch out for:

1. The function must be open to all staff, if its just directors, its taxable

2. The cost must not exceed £150 per head, otherwise it will all be taxable http://www.companychristmas.co.uk/news/tax_free_christmas_parties

3. If you have several events during the year you may have to choose which ones qualify if the total exceeds £150

steve@bicknells.net

Will I be taxed on Christmas gifts recieved at work?

Christmas Gifts

It’s Christmas and even though times are tough, you could still get a gift from your employer or client or supplier, will it come with a tax bill attached?

The answer depends on the value.

HMRC Helpsheet 207 – Non-taxable payments or benefits for employees

The Helpsheet says, certain gifts from third parties are non-taxable if all these conditions are satisfied:

• the gift consists of goods or a voucher or token only capable of being used to obtain goods, and

• the person making the gift is not your employer or a person connected with your employer, and

• the gift is not made either in recognition of the performance of particular services in the course of your employment or in anticipation of particular services which are to be performed, and

• the gift has not been directly or indirectly procured by your employer or by a person connected with your employer, and

• the gift cost the donor £250 or less, and

• the total cost of all gifts made by the same donor to you, or to members of your family or household, during the tax year is £250 or less.

http://www.hmrc.gov.uk/helpsheets/hs207.pdf

An employer may provide employees with a seasonal gift, such as a turkey, an ordinary bottle of wine or a box of chocolates at Christmas. All of these gifts can be treated as trivial benefits. . For an employer with a large number of employees the total cost of providing a gift to each employee may be considerable, but where the gift to each employee is a trivial benefit, this principle applies regardless of the total cost to the employer and the number of employees concerned. If a benefit is trivial it should not be included in a PSA (EIM21861).

http://www.hmrc.gov.uk/manuals/eimanual/EIM21863.htm

Will the employer or supplier or client have to account for VAT?

You do not have to account for VAT on business gifts made to the same person so long as the total cost of all the gifts does not exceed £50, excluding VAT, in any 12-month period. To check this it is acceptable for you to adopt any 12-month period that includes the day on which the gift is made.

But where the following apply:

  • the total cost of business gifts given to the same person in any 12-month period exceeds £50
  • you were entitled to claim the VAT on the purchase as input tax

you must normally account for output tax on the total cost value of all the gifts. How to work out the cost is explained in Notice 700, ‘The VAT Guide’.

http://customs.hmrc.gov.uk/channelsPortalWebApp/channelsPortalWebApp.portal?_nfpb=true&_pageLabel=pageLibrary_PublicNoticesAndInfoSheets&propertyType=document&columns=1&id=HMCE_CL_000091#P32_2034

steve@bicknells.net

What did you think of the UK Autumn Statement?

Big Ben with city bus and flag of England, London

The key points were:

Individuals

Tax

• Income tax personal allowance to go up to £9,440 next year, £235 more than previously announced. The rise will be extended to higher rate tax payers.

• Threshold for 40% rate of income tax to rise by 1% in 2014 and 2015 from £41,450 to £41,865 and then £42,285.

• Inheritance tax threshold to rise from £325,000 now to £329,000 in 2015/16

• Planned 3p per litre rise in fuel duty scrapped

• Capital gains tax annual exempt amount to increase by 1% over the same period, reaching £11,100

• No new tax on property

Pensions

• From 2014/15 will further reduce lifetime pension relief allowance from £1.5 to £1.25m. Annual tax-free allowance reduction from £50,000 to £40,000

• Basic state pension to rise by 2.5pc next year to £110.15 a week

• Increase in capped drawdown limit for pensioners from 100pc to 120pc

Savings

• Overall ISA limit increased to £11,520 from next April

Business

• SME equity markets to be held directly in stocks and shares ISAs

• The main rate of corporation tax to be cut by 1% to 21% from April 2014

• Bank levy rate to be increased to 0.13pc next year

• Temporary doubling of the small business rate relief scheme to be extended by a further year to 2014

• £1bn extra capital for Business Bank

http://www.telegraph.co.uk/finance/budget/9723417/Autumn-Statement-2012-key-points.html

Department for BIS key points:

  • An additional £600 million for science, research and innovation, which takes the total investment since the 2010 spending review to an additional £1.5 billion.
  • An extra £270 million to be spent on laboratories, classrooms and other facilities in our Further Education colleges.
  • £1 billion confirmed for the business bank, which will address the long-term structural gap in lending to small businesses.
  • An extra £120 million invested in supply chains, to encourage companies to invest here in the UK.
  • The Regional Growth Fund will also receive an additional £350 million, bringing the total available in 2012-13 to £2.75 billion.
  • Extra money for the Employer Ownership Pilot, taking it to £340 million overall and giving businesses funding so they can design and develop their own training programmes.
  • Increased funding of £140 million for UK Trade & Investment (UKTI) to help small and medium sized business export abroad.
  • £1.5 billion to help our smallest companies to access growing markets overseas. For the first time UK Export Finance, the Government’s export credit agency, will be able to issue loans to overseas customers and buyers wanting to purchase goods from UK businesses.
  • A package of measures to cut back red tape that business has told government stops them from growing.

http://www.bis.gov.uk/news/topstories/2012/Dec/autumn-statement-2012

Britain’s small businesses were given a boost in the Autumn Statement when the Chancellor instigated a tenfold increase in allowances on capital spending such as tools, office equipment and commercial vans to £250,000.

http://www.standard.co.uk/business/business-news/autumn-statement-uturn-on-allowances-will-help-small-firms-8386468.html

steve@bicknells.net