Maybe it’s because I’m a Londoner…that I leave tax so late Reply

Big Ben with city bus and flag of England, London

Around one in nine (11%) of the 560,000 people in Inner London who had to send in a tax return last year didn’t do so by the relevant deadline – 31 October for paper returns and 31 January for online submissions.

The one million taxpayers in Outer London were more punctual, with one in 11 (9%) failing to meet the deadline, but they were still the second worst offenders. The tardiest taxpayers outside of London were in the North West of England, with 8% of their 890,000 returns failing to meet the deadline.

Taxpayers in the rest of the English regions fared better. The most punctual were in the South West, with only 6% of their one million tax returns arriving late. The other English regions, as well as Wales, Scotland and Northern Ireland, all registered 7% of late tax returns, which was the UK national average.

HM Revenue and Custom’s (HMRC) Director General of Personal Tax, Ruth Owen, said:

Whether you’re from London, Livingston, Lisburn or Llandudno, the consequences of missing the tax return deadline are the same – an automatic £100 late-filing penalty.

The longer you delay, the more you have to pay. So if you still have to send us your tax return, take action now.

Anyone with an outstanding 2012 to 2013 tax return must send it online, and pay any tax they owe, by 31 January.

Re-blogged from Gov.uk

steve@bicknells.net

Do you use Interns? watch out for NMW 1

hübsche brünette studentin

At the end of last year there was a clamp down on the Fashion Industry, the main target was companies that advertise for unpaid trainees (interns). Its likely this will lead to an even bigger campaign in 2014.

Current minimum wages rates are

    21 Plus     18 to 20   Under 18      Apprentice
£6.31 £5.03 £3.72 £2.68

If you take on unpaid trainees without a contract you could be at risk of a £5,000 fine. The penalty can also apply if you are paying below the minimum wage.

If you find that you are paying below NMW you need to correct the rate of pay now and back date it to avoid the risk of a penalty.

steve@bicknells.net

 

 

How changing your year end can help cash flow 2

Revenue and Customs

Basically if your company makes a loss you carry it forward.

The amount of trading loss available to be carried forward is the loss sustained less any loss relieved in the current year or surrendered as group relief.

Carry forward a corporation tax loss is automatic, therefore as no claim is required there is no time limit.

The legislative reference for a trading loss carried forward is: CTA 2010 s45) [old reference ICTA 1988 s393(1)].

You can also make a claim to carry a loss back 12 months.

The legislative reference for carry back loss relief is: CTA 2010 s37(s)(b)(6)(8) and s38 [old reference ICTA 1988 s393A(1)(b)(2)-(2C)].

But there is another option, to help improve your cash flow, lets say you have been making profits and you have just come to the end of your accounting period, the next few months are going to be tough and you will make a loss. If you change your year end by extending it or having a shorter period you could help your cash flow.

Corporation Tax is payable 9 months and 1 day after your year end, so you will have a return for 12 months and have tax to pay but if you had a 6 month return to follow it you could reduce the time before you claim relief for the loss.

If you extended your accounting period to 18 months the figures might even look better for credit rating.

You can shorten as much as you want but not beyond the start date of the accounting period being changed.

You can only extend once every 5 years.

See the Companies House Checklist for details

steve@bicknells.net

Loan Notes – A Seller’s Dilemma Reply

Retro Drama Woman

When you sell your company your buyer may wish to pay part in cash and part in loan notes to be paid off from future profits. The Loan Notes are known as Qualifying Corporate Bonds (QCB’s), the dilemma is whether to claim Entrepreneurs Tax at 10% now or pay full Capital Gains Tax later.

To obtain Entrepreneurs’ Relief on a disposal of the shares (the “old asset”) at the time of the exchange, the individual may make an election for the gain not to be deferred by TCGA92/S116 (10). The effect of an election is that the gain is brought into charge at the time of the exchange so that Entrepreneurs’ Relief can be claimed in order to benefit from the 10% rate – TCGA92/S169R (2).

In the absence of an election the gain is deferred and will be charged to CGT when it accrues under TCGA92/S116 (10) (b). It would be unusual for the qualifying conditions for Entrepreneurs’ Relief to be met at the later date when the gain comes into charge.

An election under this section, like the claim for Entrepreneurs’ Relief, must be made on or before the first anniversary of the 31 January following the tax year in which the relevant transaction takes place – TCGA92/S169R (4).

So would you claim the Entrepreneurs Tax Relief and pay 10% now or possibly pay 28% later?

You could try selling your shares in stages but that might not suit either you or your buyer?

steve@bicknells.net

 

5 Pitfalls to avoid with Entrepreneurs Tax Relief 1

with computer

If you sell or close your business, you may be able to claim Entrepreneurs’ Relief – this means that you only pay 10% Capital Gains Tax on any qualifying profits.

There’s no limit to how many times you can claim Entrepreneurs’ Relief, and you can claim up to £10 million of relief in total during your lifetime.

Companies

To claim Entrepreneurs’ Relief you must:

  • own at least 5% of the shares in the business for a year
  • be a director, partner or employee of the business

Sole traders

To claim Entrepreneurs’ Relief you must have been trading for at least a year.

Full details are on the HMRC Helpsheet HS275

But here are some pitfalls to avoid…….

  1. Entrepreneurs Tax Relief is not available to companies, so if your company sold the part of its business then that won’t qualify, it’s common for a buyer to want to buy the assets into a New Co but ask that the old company remains alive in case of future claim.
  2. Significant Non Trading Activity could be a problem too, some business contain investments and if these were more than 20% in terms of turnover, net assets, time spent by directors or profit it could mean that your business is not counted as a trading business
  3. Less than 5% share ownership this can be an issue where share options are granted and exercised before a sale
  4. Voting rights of classes of shares or when at an AGM votes are based on a show of hands
  5. Shares transferred to a non working spouse prior to sale to save tax – to qualify you have to be an employee/officer and hold the shares for a year

steve@bicknells.net

Tax Free Childcare will the new rules be better or worse? 2

Mother and daughter with piggy bank

The Government wants to help working families and currently if you are an employee your employer can help with childcare and could for example buy childcare vouchers of up to £55 per week, the vouchers would be a tax free benefit to the employee. However, if you’re self employed you aren’t an employee so the rules don’t apply.

So recently there has been a consultation on what should be be done in the future.

The key proposals are:

  • New Scheme to go live in Autumn 2015
  • Working Families will open Voucher Accounts (self employed or employed)
  • As parents pay in the government tops up the account with 20p for every 80p paid in
  • Top up capped at £1,200
  • To be eligible all parent must work and not receive tax credits or be an additional rate tax payer

The chart below shows how it should work:

Childcare 2

 

steve@bicknells.net

 

 

 

 

 

 

5 reasons why your business should give you an IPad 1

Tablet

What do you use your IPad for? if you’re like me its for checking e mails and doing research related to business

So if its work related here are some great reasons why your business should buy it for you:

  1. Increased Productivity – If an IPad enables you and your team to work more effectively then why not start using them – Office 365 and Google Docs allow you to access your E Mails and Information easily any where any time
  2. Morale Boost – Getting a new IPad should improve morale
  3. Business Only – VAT – IPad’s and Tablets of all types are popular business tools and they are basically no different to a computer or laptop, if you can show that the IPad is necessary for work and there is only insignificant minimal private use then your business can reclaim the VAT, your business may set up a written policy to say that you can only use the the IPad for personal purposes in exceptional circumstances.
  4. Some Private Use –  in this case the business could still reclaim all the VAT if it charged you a hire charge for your private use of the IPad
  5. Capital Allowances – If its a business asset your business can claim capital allowances and reduce your tax bill

steve@bicknells.net

How to have a tax free Christmas 6

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

Christmas Parties

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

  • available to employees generally or
  • available to employees generally at one location, where the employer has more than one location.

·         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.

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.

Christmas Gifts from suppliers to employees

Certain gifts from third parties are tax free 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.

Some other gifts are not taxable. If you earn at a rate of less than £8,500 a year and you are not a director, a gift to mark a personal occasion, such as

a wedding present, which is not a reward of your employment, is not taxable. If you earn at a rate of £8,500 a year or more, or you are a director,

any gift from your employer is taxable unless your employer is an individual and makes the gift in the course of family, domestic or personal relationships.

Seasonal gifts from Employer to Employee

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).

If the gift extends beyond one of the items mentioned above, for example from a bottle or two to a case of wine, or from a turkey to a Christmas hamper, you will need to consider the contents and cost before being able to determine whether the benefit is trivial.

PAYE Settlement Agreement (PSA)

For practical purposes it may be that small cash and money’s worth benefits can be included in a PSA.

PAYE Settlement Agreements (PSA’s) are requested by Employers and subject to agreement with HMRC. Under this agreement the employer will be responsible for accounting for any tax and national insurance liabilities arising. Any items covered by a PSA will not need to be shown on forms P35 and P11D at the end of the tax year.

steve@bicknells.net

10 tax allowances we fail to claim Reply

Tax Money

In 2012 Unbiased.co.uk reported that £12.6 billion was unclaimed by UK tax payers, here is a list with some ideas:

  1. Income Related Tax Credits – Check and find out what you are entitled to – UK Benefits https://www.gov.uk/benefits-adviser
  2. Tax Relief on Pension Contributions – There are estimated to be over 4 million people not paying into a pension, auto enrolment should help to change that, this blogs explains the tax advantages https://stevejbicknell.com/2012/05/02/why-invest-in-a-pension-because-of-tax-relief/
  3. Tax Relief on Charity Donations – Are you using Gift Aid? are you a higher rate tax payer entitled to additional relief?
  4. Saving on Inheritance Tax – Many people don’t have a Will let alone any IHT planning!
  5. Making Use of ISA’s – Why get taxed on the interest on your savings if you could have an ISA? Its easy to get an ISA and you can still have access to your ISA savings if you need it, the current ISA allowance is £11,520 or £5,760 for cash ISA’s
  6. Child Benefit – Use the benefits adviser to check if you can claim – UK Benefits https://www.gov.uk/benefits-adviser
  7. Avoiding tax penalties and late filing – This just requires you to be organised, make sure you know the filing dates http://www.hmrc.gov.uk/sa/deadlines-penalties.htm and get the information needed in plenty of time
  8. Savings on Capital Gains – The current allowance for 2013/14 is £10,900 (previously £10,600) for an individual many people seem to forget they have this allowance
  9. Making Use of Employee Share Schemes – The government love employees to have shares and this year introduced a new share ownership option https://stevejbicknell.com/2013/08/03/employee-shareholders-will-your-employees-want-shares/
  10. Income Tax and Personal Allowances – Consider who should own assets (and get income from those investments)  – you or your spouse – so that you can minimise your tax liability

Steve@bicknells.net

 

How to carry forward unused pension allowances 5

Taking money

If your total pension savings for the tax year are more than the annual allowance you can carry forward any unused allowance from the previous three years to the current tax year. You only have to pay tax on any amount of pension savings in excess of the total of:

  • the annual allowance for the tax year
  • any unused annual allowance you carry forward from the previous three years 

You can only carry forward unused annual allowance if during the tax year you were in either:

  • a registered pension scheme
  • an overseas pension scheme and either you or your employer qualified for UK tax relief on pension savings in that scheme

There’s a strict order in which you use up your annual allowance. First you use the annual allowance from the current tax year followed by any unused annual allowance from the previous three tax years, using the earliest tax year first.

There are special rules when carrying forward annual allowance for tax years 2008-09 to 2010-11. You should calculate the amount of available annual allowance using an annual allowance rate of £50,000 and using the current method of valuing your pension savings amount- more in the link below.

Example

Sam made total pension savings of £80,000 in 2012-13. Sam has been a member of a pension scheme since June 2010. His pension savings for the previous three years are as follows:

2009-10: £0 – he wasn’t a member of a pension scheme

2010-11: £30,000

2011-12: £0 – although he was a member of a pension scheme

Sam can carry forward £70,000 unused annual allowance to 2012-13 calculated as:

2009-10: £0 – because he wasn’t a member of a pension scheme

2010-11: £20,000

2011-12: £50,000

Even though Sam didn’t make any pension savings in 2011-12 he did belong to a pension scheme so he can carry forward all of his unused annual allowance.

The annual allowance for 2012-13 (£50,000) plus the carried forward annual allowance (£70,000) is £120,000.

Sam doesn’t have any tax to pay on his pension savings of £80,000 for 2012-13 as it’s less than the total annual allowance available of £120,000. He also has £40,000 unused annual allowance (from 2011-12) to carry forward to 2013-14.

Tax Year

Annual Allowance

2006/07

£215,000

2007/08

£225,000

2008/09

£235,000

2009/10

£245,000

2010/11

£255,000

2011/12

£50,000

2012/13

£50,000

2013/14

£50,000

2014/15

£40,000

 steve@bicknells.net