Attention Directors - How And What To Pay Yourselves for 2014/15

Salary

If you have other income from outside the company, your monthly standing order in respect of your salary should be increased to £663 in line with the increase in the Primary Threshold for 2014/15.

If you have no other income, then the monthly salary amount should remain at £663, but include a bonus of £2,044 in March 2015- meaning a total salary of £10,000 for the year; equivalent to the personal allowance.

At £10,000 per annum, National Insurance for the company and you will be triggered. But the company’s National Insurance bill will be offset by the Employment Allowance. The Employment Allowance is a new relief available from 6^th April 2014 which can reduce an employer’s National Insurance bill by up to £2,000 each tax year. So only your employee’s National Insurance of £245.28 will be due, (which should not be payable until 19^th April 2015). This salary offers the potential for an additional £1,799 in your back pocket.

In either instance, the salary is a tax deductible expense for the company, should not trigger any PAYE and preserves your entitlement to state benefits.

The payments should occur on the last day of every month in order to correspond with the payroll records we are maintaining for you.

Or

Please ensure the date of the standing order corresponds with the date you are running your own payroll.

 Dividends

Any surplus funds can be drawn as dividends, but these can only be paid from profits after corporation tax, so you do need to have reasonable interim management accounts/ bookkeeping to hand.

Assuming you have no other taxable income other than the salary above, £28,678.50 can be paid be paid to you during 2014/15; without incurring any additional tax liability.

To summarise your company remuneration package could look something like this:

Salary	£10,000.00
Dividends	£28,678.50
Employee’s National Insurance	(£245.28)
Income after tax	£38,433.22

This remuneration package keeps you in the 20% band and ensures there is no further tax to pay. Dividends above this level will attract an extra tax charge of 25% of the net amount you receive, payable through your self assessment tax return.

Due to Real Time Information, we would again recommend that you pay your dividends with a separate standing order/ cheque etc. This should help to distinguish your dividends from your salary in the event of an enquiry from HMRC and therefore minimise the risk of say, underpayment or inaccuracy penalties.

Should you have any queries regarding the above or any other matter, please do not hesitate to contact me. Otherwise, I trust you will deal with my recommendations accordingly.

For further info regarding the Employment Allowance, see link

http://www.taxassist.co.uk/leicester/resources/show-question-and-answer/id/523

FAQS for February 2014

February 2014

What can nurses claim for?
Q: I am a nurse and work for the NHS. What expenses am I able to claim for?

A: As a nurse you should be entitled to claim:

• £100 per annum for laundering your uniform (assuming you are responsible for cleaning your uniform)
• £12 per year for shoes where the wearing of a prescribed style is obligatory 
• £6 per year for stockings or tights, where the wearing of a prescribed style or colour is obligatory

You may claim a higher deduction for laundry expenses, but this will need to be supported by receipts.
For male nurses the reference to stockings and tights should be treated as including socks.
You should also be able to claim for any professional fees or subscriptions, such as to the Royal College of Nursing or the Nursing and Midwifery Council, but you should check these against HMRC’s list of approved organisations. 
To claim the expenses, you can use form P87 if they amount to less than £2,500 per annum (which is available on HMRC’s website) or alternatively, submit a tax return. You may also find that the professional bodies you have subscribed to have their own form to recover the expenses. 
Category: General Business

What happens to penalties when you cancel a tax return?
Q: HMRC issued a tax return for me but my circumstances have changed so I didn’t think it was required. I successfully asked for it to be cancelled, but what happens to the accompanying penalties?

A: In the past, HMRC was required to raise a penalty for a late tax return- although the taxpayer was able to appeal if they felt they had grounds.
However, from April 2012 taxpayers have been able to ask HMRC to cancel a return where they felt it was not required. Where HMRC are agree, any penalties linked to the return, were also cancelled.
But please note that this change only applies to tax returns for 2012/13 and onwards. However, it can apply to individual, partnership or trust returns.
Category: Tax Returns

Growth Vouchers - what is business advice?
Q: I have just started running my own business and I have been reading about these Growth Vouchers. I think my business meets all of the criteria- apart from I’m not sure what qualifies as "business advice". I used an accountant to prepare my accounts and tax return last year- does that mean I am not eligible?

A: At the end of January, the government will launch a £30 million research programme to test the value to small businesses of accessing professional advice. The subsidised business support will be delivered in the form of ‘Growth Vouchers’, enabling businesses to receive a 50% subsidy towards the cost of obtaining advice on 5 key topics that help businesses to grow.
As you quite-rightly stated, one of the criteria for the business is that they must not have had “business advice” in the last 3 years.
The Marketplace who is responsible for administering the Programme, also refer to “business advice” as “strategic advice”. If you have received day-to-day advice from an accountant, bookkeeper or solicitor on completing your annual business accounts, or understanding the legal/ regulatory requirements of running your business, you should still be eligible for the Programme.

Category: General Business

CIS tax refund for companies
Q: I own a small company in construction and some of our customers have been deducting CIS tax from our payments. How do I go about reclaiming this?


A: When a contractor pays your company “under deduction” (i.e. net of tax) for work, it must give your company a statement showing the full amount of the payment and the deduction that it has made from that payment.
You will need to enter these on your company's Employer Payment Summary (EPS) returns. The CIS deductions you have suffered will then be offset against the company’s PAYE liabilities for the year to date.
Limited companies that have an excess of CIS deductions, will not be able to claim a repayment of these until:

• The final Full Payment Submission (FPS) for the year has been submitted (due by 19 April each year where payments to employees are made in the period 6 March to 5 April)
• The company has paid all amounts due to HMRC for the tax year in their capacity as an employer/contractor
• The tax year in which the CIS deductions were made from the company has ended

Please note, you should not attempt to claim any CIS credits on the company's Corporation Tax return as you may incur a penalty.
Category: CIS

Consequences of late tax payments
Q: I am newly self-employed and have been rather unorganised this year. I just managed to get my 2012/13 tax return filed online on 31st January 2014, but I didn’t have enough cash put aside to settle my tax bill. What are the implications of late payment?

A: You will have interest to pay on anything you owe until HM Revenue & Customs (HMRC) receives your payment).
Furthermore, after a delay of 30 days, late payment penalties at 5% of the tax you owe will begin to apply. Additional late payment penalties will be added if the delay exceeds 6 months.
Please note, if you also registered for self assessment late (i.e. after 5th October 2013), you may also incur a Failue to Notify penalty. This will be 5% of any tax outstanding on 31st January 2014
Category: Tax Returns

Disclaimer – advice shared in this column is intended to inform rather than advise and is based on legislation and practice at the time. Taxpayer’s circumstances do vary and if you feel that the information provided is beneficial it is important that you contact us before implementation. If you take, or do not take action as a result of reading this column, before receiving our written endorsement, we will accept no responsibility for any financial loss incurred.

FAQS for November 2013

November 2013

Staff travel expenses
Q: My business is growing and as a result, my staff have started incurring travel expenses. Is there anything I should be aware of?
A: Normally where an employee incurs business-related expenses, the reimbursement of them should be rported on a P11D but the employee can claim a deduction for them. Therefore, there is no impact on the employee’s tax liability but there is some paperwork to be completed.
As an alternative, you could pay the HMRC benchmark travel and subsistence payments, which are:

• 45p per mile for the first 10,000 miles; 25p per mile thereafter
• £5 for breakfast if the business journey starts before 6am
• £5 if the employee spends more than five hours away and buys one meal
• £10 if they’re out for more than ten hours and they buy two meals
• £15 if they are out beyond 8pm, and buy an evening meal

Your staff must purchase some food and with the benchmark subsistence payments, but it could be just a sandwich and anything they don’t spend is theirs to keep tax and NI-free.

Category: PAYE, NIC & Benefits In Kind

VAT on staff Christmas presents
Q: I’ve just purchased a bulk load of chocolates and bottles of wine for staff Christmas presents. Can I reclaim the VAT on them?
A: If you give away goods and are entitled to recover VAT on them, you must account for VAT on their cost value. So I’m afraid this means the VAT position is neutral.
However, 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. A ‘business gift’ is simply a gift of goods that is made in the course of your business.
Gifts and entertaining is a complex area, as it can have a multitude of tax, National Insurance and VAT implications.
Category: Value Added Tax (VAT)

Received a P800
Q: I have received a P800 from HMRC saying I have underpaid tax for 2012/13. What should I do?
A: Most people should have paid the right amount of tax through the Pay As You Earn (PAYE) system and there is nothing more for employers, employees or HMRC to do - so you do not need to be concerned if you do not get a P800 Tax Calculation. However, if you have been sent a P800 tax calculation by HMRC, it either means you’re getting a tax refund or you need to pay more tax.
If you receive a P800 Tax Calculation, it's important you check it to make sure you agree with the information included as HMRC have been known to make errors. The calculation will show your total taxable income, the allowances that are due to you and the amount of tax paid for each of the relevant tax years. It will also show the amount of over or underpaid tax.
Where your P800 shows non-PAYE income such as bank interest or other investment income, the figures will be estimated as HMRC doesn’t have direct access to these details and relies on you to provide them. So make sure you compare these figures in particular to your own records.
If you agree with the tax calculation you do not need to do anything but keep it safe. If you don't agree with the P800 Tax Calculation, you should call HMRC as soon as possible.
If the P800 shows you owe tax of £3,000 or less, where possible will HMRC aim to collect it by adjusting your code for 2014/15 so you’ll pay the extra tax through your earnings for that year.
Where the P800 shows you’ve overpaid tax, you’ll receive a cheque, usually within 14 days.

Category: Income Tax

Tax on Staff Christmas Gifts
Q: I’m looking at what to order for my employees for their Christmas presents. Is there any advice you have for me? I don’t want my employees to pay tax or National Insurance on their gifts- or the hassle of any extra admin!
A: If you buy your employees a seasonal gift such as a joint of meat or a box of chocolates, then this would be deemed ‘trivial’ and therefore, there are no reporting requirements and nor would any tax or National Insurance be triggered.
However, if your gifts are more lavish than the examples above- say a hamper, case of wine or vouchers - then the cash equivalent must be taxed via the payroll, form P11D or a Pay As You Earn Settlement Agreement (PSA). With the first two options, tax and National Insurance will be triggered and will be deducted from the employee. However, with a PSA the employer agrees to settle their liability.
Gifts and entertaining is a complex area, as it can have multitude of tax, National Insurance and VAT implications.
Category: PAYE, NIC & Benefits In Kind

Missed the tax return deadline
Q: I received my paper tax return earlier this year and totally forgot to complete and send it to HMRC. Will I now get fined £100?
A: No, because you still have the option to file your return online with HM Revenue & Customs (HMRC) and as an incentive to go paperless, HMRC allow until 31st January 2014 for submission. Provided you successfully file your return online with HMRC by this date, you will not be charged the £100 penalty.
However, if HMRC receive a paper 2012/13 tax return from you now the 31st October deadline has elapsed, you will be charged the £100 penalty automatically.
And remember, a late return will cost you a £100 penalty; even if there is no tax to pay or you pay the tax due on time. Furthermore, the penalties will increase the longer the delay in filing.

Category: Tax Returns

Lost receipts
Q: I have lost some of the receipts for my business. Where do I stand on recovering the VAT on them?
A: In order to exercise your basic right to recover the VAT on them, you must hold a valid VAT invoice.
However, in the absence of such an invoice, you may still be able to make a claim for the VAT, but these claims are at HMRC’s discretion. According to a HMRC Statement of Practice, they will look for alternative evidence where there is no valid VAT invoice, such as:

• Alternative documents, such as a supplier’s statement, purchase orders, etc
• Evidence of the receipt of the goods/ services, such as delivery notes
• Payment records
• Records of onward sales or consumption of the goods/ services

You should also be able to prove the existence of the supplier, by say having their VAT number.
The above list is not exhaustive and just to reiterate, accepting a claim for VAT where there is no valid VAT invoice is at HMRC’s discretion.

Category: Value Added Tax (VAT)

Disclaimer – advice shared in this column is intended to inform rather than advise and is based on legislation and practice at the time. Taxpayer’s circumstances do vary and if you feel that the information provided is beneficial it is important that you contact us before implementation. If you take, or do not take action as a result of reading this column, before receiving our written endorsement, we will accept no responsibility for any financial loss incurred.

Q&As Accounts & Tax October 2013

New business registration with HMRC
Q: I have just started my own business. When do I need to register with HM Revenue & Customs?
A: Firstly, you need to work out which tax year your start date falls into. The tax year runs from 6th April to 5th April, so your start date falls into the tax year ended 5th April 2014. You must therefore register by the following 5th October, i.e. 5th October 2014. As you are registering as self employed, the form you need to complete is HM Revenue & Customs (HMRC) form CWF1 or you can register with HMRC online at www.hmrc.gov.uk.
You will also need to pay Class 2 National Insurance which is only £2.70 per week for 2013/14 so most people choose to pay for these contributions via Direct Debit. You will need to complete HM Revenue & Customs form CA5601 if you would like to pay via this method.
Although you have some time before you need to register, avoid leaving it too long as you may face penalties for late registration. 
Please note, this is merely with regards to self assessment, and does not include VAT or employer matters for example.

Category: Starting a Business

October Tax Return Filing Deadline
Q: I have received a letter from HM Revenue & Customs reminding me that I need to file my tax return by 31st October 2013.  I do not have all of the information together yet so I cannot complete it. Is there a way I can avoid a late filing penalty?
A: The filing deadline of 31st October 2013 only applies to those taxpayers wishing to complete and submit a paper 2013 tax return. But taxpayers also have the alternative to file the tax returns online. The online filing procedure allows taxpayers to submit 2013 returns up until 31st January 2014.
But it is a good practice to complete your tax return well ahead of the deadline. Doing it early should avoid mistakes being made and allow you time to consider any tax planning opportunities available. Furthermore, you will know what your tax liability is ahead of the due date of 31st January 2014 and therefore, have more time to put some money aside and manage your cashflow better.
Filing your tax return ahead of 31st January 2014, whether you file it electronically or in hardcopy, does not accelerate the due date for the tax either.

Category: Tax Returns

Use of home - repairs
Q: I am self employed but I operate from home at the moment. I’ve just had to make some repairs to the roof. Am I able to claim any of this as a business expense?
A: For the self-employed, their home has a dual purpose- you live there and you carry on some or all of your trade from there. As a result, many of the household expenses cover both business and private use.
The element attributable to the business will depend on the facts; including the extent and nature of the work undertaken from home. The part attributable to the business use should be allowable.
A proportion of the cost of general household repairs and maintenance is allowable in line with the proportion that the house is used solely for the business. For example, redecorating the exterior or repairing the roof.
Repairs that relate solely to part of the house that is not used for the business, such as decorating a room not used for the business, are not allowable. Equally if a room is used solely for business purposes then the cost of redecorating that room is wholly allowable.
Capital expenditure (for example on “improvements” to the property) is not allowable expenditure; though plant and machinery allowances may be appropriate for certain qualifying expenditure.

Category: Sole Traders

Separation and the High Income Child Benefit Charge
Q: My partner and I are separated and don’t live together anymore. I earn £60k a year and my wife has been receiving Child Benefit for our two daughters- who live with her. Will I still be subject to the High Income Child Benefit Charge?
A: Essentially, you may be liable to the High Income Child Benefit Charge (HICBC) if you, or your partner, have an individual income of more than £50,000 and one of you gets Child Benefit or contributions towards the upkeep of a child.
If you are liable and have received a Child Benefit payment since 7^th January then you must register for Self Assessment by 5^th October 2013 to pay the charge.
For the purpose of the HICBC, your “partner” is your husband or wife or civil partner, unless you are permanently separated from them, or the person you are living with as if they were your husband, wife or civil partner. The partner you are living with does not have to be the mother or father of the child.
If the separation occurred during the tax year, you may have to pay the charge for the period that you were living together, but your income for the whole year is taken into account and not just for the period you were living together.

Category: Income Tax

Can I reduce my NI?
Q: I am employed and earning £60,000 plus I have self employment income of £50,000. I am aware that I am now paying rather a large amount of National Insurance. Is there anything I can do about this?
A: The general principle of tax is the more you earn; the more tax you pay. However, there is an annual maximum amount of National Insurance contributions that are payable.
If you only had employment income, your employer would ensure that no more than the maximum annual amount was paid via the PAYE system.
However, where there is more than one employment or where there is a mixture of employment and self employment, there could be Class 1 contributions or Class 1, 2 and 4 Contributions respectively that exceed this maximum annual amount.
Excess payments can be repaid after the actual position has been calculated after the tax year end (5^th April). Alternatively, you may make a claim that National Insurance contributions are deferred; any shortfall being paid once the correct position has been calculated after the tax year end.

Category: PAYE, NIC & Benefits In Kind

Disclaimer – advice shared in this column is intended to inform rather than advise and is based on legislation and practice at the time. Taxpayer’s circumstances do vary and if you feel that the information provided is beneficial it is important that you contact us before implementation. If you take, or do not take action as a result of reading this column, before receiving our written endorsement, we will accept no responsibility for any financial loss incurred.

Review Of Networking Groups

Networking Groups:
This is not a definitive list, but they are groups that I have personal experience of. They are low cost or FREE!
Other networking groups are available!!

1.    Meet & Mingle
Venue: LCB Depot, 31 Rutland Street, LE1 1RE
Frequency: Monthly 6-8pm
Website: http://www.eventbrite.co.uk/event/7428036457/eorg
Cost: N/A
Good: FREE – free refreshments, so a big turnout 40+ people especially start-ups, and speed networking.
Bad: Maybe to many people, speed networking can be a bit chaotic and noisy. Not everyones cup of tea.


2.    Pickle & Paratha Breakfast Networking
Venue: Observatory Meridian
Frequency: Thursday every 2 weeks, 7.30-9.00am
Website:  www.pickleandparatha.co.uk
Cost: £50 one off joining fee, then £10 for full breakfast/ £6 for continental for each meet. Introduce 3 members and you get a FREE i-pad mini.
Good: Parathas!!! Low cost and i-pad incentive. One business from each trade.
Bad: Needs more members and a bit more structure in meetings.


3.    Enterprise Club/Friendly Friday
Venue: Coffee Rupublic, Granby Street
Frequency: 2nd Friday of every month: 10.00-12.30pm
Cost: FREE
Good: FREE!, Friendly and informal, good speakers, good mix of start-ups, established businesses , and pre-start-ups.
Bad: A lot of micro businesses, or those just thinking of starting, so may not be attractive to certain businesses.
Website:  http://engage-multimedia.co.uk/events/friendly-fridays/


4.    Business Biscotti
Venue: Observatory Meridian
Frequency: Every 2 Weeks 10.00am-12pm
Cost: FREE
Good: Very informal, come and go when you like.
Bad: Pot luck –you never know whos going to turn up, no commitment required so lots of one off attendees.
Website:  http://www.businessbiscotti.co.uk



 
5.    BOB- Business Over Beer
Venue: Various
Frequency: Monthly in city pubs
Cost: FREE
Good: Beer!!! Very informal, come and go when you like.
Bad: Pot luck –you never know who’s going to turn up, no commitment required so lots of one off attendees. Better organisation at event to identify whos there for the meeting, and who’s a pub customer!
Website: http://www.creativedirection.info/blog/
STOP PRESS: Have recently launched Business Over Biriyani, so we’ll see how this develops.

September 2013 - FAQS Accounts & Tax

Q: I am a high earner and my wife is in receipt of the Child Benefit for our children. We intend to keep receiving Child Benefit in spite of the High Income Child Benefit Charge. How do I go about getting a tax return and when do I need to file it by?
A: From 7^th January 2013, you may be liable to a new tax charge if you, or your partner, have an individual income of more than £50,000 and one of you is receiving Child Benefit. It may also apply if someone else receives Child Benefit for a child that lives with you.
If you intend to keep receiving the Child Benefit, you need to register with HM Revenue & Customs (HMRC) for Self Assessment by 5^th October 2013. The easiest way to do this is online at HMRC’s website www.hmrc.gov.uk but there is still a paper form to use if you’d prefer.
Your tax return will cover the year ended 5^th April 2013 but you only need to declare the amount of Child Benefit you, or your partner, are entitled to receive for the period 7^th January 2013 to 5^th April 2013.
This tax return needs to be submitted to HMRC by 31^st October 2013 if you file it on paper; or 31^st January 2014 if you file it online. Any tax arising must be settled by 31^st January 2014.
If you would like any assistance in dealing with your tax affairs, please do not hesitate to contact us.
Category: Tax credits

National Minimum Wage: increase?
Q: I believe in the past, the National Minimum Wage normally changes about this time this year. Is there an increase soon?
A: You’re absolutely right; there is typically a change to the National Minimum Wages (NMW) annually on 1st October.
The rates are due to on 1st October 2013 to:

• £6.31 – the main rate for workers aged 21 and over
• £5.03 – 18-20 year old rate
• £3.72 – the 16-17 year old rate for workers above school leaving age but under 18
• £2.68 – the apprentice rate, for apprentices under 19 or 19 or over and in the first year of their apprenticeship

Last year, only the over 21s and Apprentices saw an increase in the NMW. But this year, all of the rates have increased.
Category: PAYE, NIC & Benefits In Kind

Private mileage in company cars
Q: My employee has a company car, and historically, he has always had a benefit for the car itself and the fuel- because he doesn’t reimburse me for any fuel he uses for private journeys. Is there any way we can reduce his benefits in kind, because they’re costing him a lot on tax now.
A: This may sound a bit extreme, but you could discuss the company no longer paying for his fuel. Whilst this may sound expensive for him, if you sit down and do the calculations, you may actually find he is better off this way- particularly if you intend to increase his salary as a result of him losing his fuel benefit.
He could then charge the company for any business mileage he does, using the advisory fuel rates.
The other alternative is that the company continues to pay for all of his fuel, but the company charges the employee for all of his private mileage- again using the advisory fuel rates.
In either case, the fuel benefit could be reduced down to nil if you can meet all of the requirements.
Please note that due to the frequently changing fuel prices, HM Revenue & Customs regularly updates the advisory fuel rates, so always check their website for the latest figures here:
http://www.hmrc.gov.uk/cars/advisory_fuel_current.htm
Your local TaxAssist Accountant would be happy to discuss this in more detail and calculate the differences between each option for you.
Category: PAYE, NIC & Benefits In Kind

Invoices and late VAT registration
Q: I registered for VAT a bit late and must now go back and invoice my customers for VAT. Do I have to charge VAT on top of the invoices I originally issued; or is it already included?
A: Assuming you have already received your VAT registration details from HMRC, you may now begin to issue your customers with proper VAT invoices.
But it is actually up to you whether you charge the VAT on top of the original invoice you’ve already issued; or choose to suffer the VAT yourselves by deeming it to have been included in the original invoice.
However, there is something you should bear in mind. If you are dealing with other VAT-registered businesses, they won’t mind you charging them for the additional VAT because they’ll be able to get it back from HMRC on their next VAT return. But if your customers are members of the public or someone else that can’t recover the VAT, they won’t be too happy to receive this unforeseen bill.
Your local TaxAssist Accountant would be happy to manage your VAT affairs and returns for you. Contact us for more information and to be put in touch with your local office.
Category: Value Added Tax (VAT)

Offsetting trading losses
Q: If, whilst employed and paying tax, I set up as a sole trader as well, can I offset any trading losses against the PAYE I pay?
A: As long as you are genuinely in business to earn a profit then yes, you can offset your losses against current year income or against past or future profits of the trade itself.
You should only claim relief for your loss if you ran your trade commercially for profit. If it was more of a hobby, you should only use the losses against future profits from your self-employment; HMRC will not like you to use to loss against your employment income.
Assuming your business was run on a commercial basis, you can offset your losses in several ways:

• other income for the same year or the previous year
• gains for the same year or the previous year - if your other income is used up
• other income in the previous three years if your business started within the past four years
• profits from the business in later years
• profits for the business in the previous three years if your business has ceased

In order to declare the loss and subsequently make use of it, you will need to register for Self Assessment with HMRC and complete a tax return.
Utilising losses is a complex area. I would encourage you to approach a professional for advice, such as your local TaxAssist Accountant. Please contact us if you would be like to put in touch with your local office to discuss this further.
Category: Starting a Business

Ceased employment and student loans
Q: I recently received a letter from the Student Loans Company querying my employment status. But my circumstances have not changes- I am still employed. What should I do?
A: This sounds like a known issue with HMRC’s systems; a very small number of students' employments have been incorrectly ceased.
This has prompted HMRC's systems to automatically inform the Student Loans Company (SLC) that those individuals had left their employment. As a result, SLC have issued letters to these borrowers, querying their employment status.
HMRC’s advice is to respond to the SLC saying you have not ceased employment or changed employer.
HMRC are now in the process of correcting their systems and are due to complete this within the next few weeks.
Category: PAYE, NIC & Benefits In Kind

Disclaimer – advice shared in this column is intended to inform rather than advise and is based on legislation and practice at the time. Taxpayer’s circumstances do vary and if you feel that the information provided is beneficial it is important that you contact us before implementation. If you take, or do not take action as a result of reading this column, before receiving our written endorsement, we will accept no responsibility for any financial loss incurred.

Aug 2013- FAQS - Accounts & Tax

Rental income – husband and wife
Q: My wife and I have some properties in joint names but I stumped-up most of the cash for the purchase of the properties so it seems only fair that I get the lion’s share of the income from them too. But I have been told the income HAS to be split 50:50- is this correct?
A: I’m afraid to say it is the position by default.  If you live with your spouse or civil partner, the income from property held in joint names will be split in equal shares; regardless of any other circumstances.
However, clearly this puts married couples at a disadvantage to unmarried couples and therefore, there is now a way that married couples can apply to have the income allocated in an unequal way.
It does involve an application process though and you’re unlikely to be successful if for instance, your motives are only to shift more income to an individual paying tax at a lower rate.
Category: Income Tax

P11Ds not due anymore
Q: I had originally advised HMRC that P11Ds would be due for my employees, but I made a mistake and actually there are no expenses payments or benefits to return. Can I just ignore the P11D(b) I have been sent to complete?
A: Absolutely not! HMRC will be expect P11Ds and a P11D(b) from you and therefore, if the P11D(b) does not arrive, you will automatically receive a late filing penalty.
You should complete the P11D(b) accordingly- with nil entries and ticking the appropriate box stating ‘No expenses payments or benefits of the type to be returned on forms P11D have been or will be provide’ etc. Then sign and date it and send it to HMRC as you would normally.
Alternatively, you may inform HMRC online that no P11Ds are due- which might be preferable given the proximity of the deadline.

Category: PAYE, NIC & Benefits In Kind

July tax bill
Q: I have just received my income tax bill for my payment due by the end of July. It seems really high- is there anything I can do to reduce it?
A: The payment due in July is like an “instalment” for next year’s tax. HMRC will use your circumstances last year as a basis for setting these.
However, if you have good reason to believe that this year’s income will be lower than last year’s, you may apply to reduce your July payment. This must be done by 31^st January.
Be aware that if you reduce your payments too low, HMRC will levy interest- but you can amend your application if you discover this in time.
Alternatively, you could just prepare and submit your tax return. This will then trigger the comparison of these estimated payments (called Payments on Account), with your actual tax liability. So any over or underpayment will be calculated.

Category: Income Tax

To furnish or not to furnish?
Q: I have just purchased a couple of properties that I intend to let out. Can you tell me whether I am better to furnish them or not?
A: Furnishing has always been an important distinction, as only furnished lettings entitle you to the valuable Wear and Tear Allowance of 10% of the rents.
Now it is definitely worth reviewing whether you could show the property is furnished given that the renewals basis for replacing items in commercial or residential properties let unfurnished ceased from 6^th April 2013.
Loosely-speaking, HMRC guidance is that a property is furnished if it includes some (but not necessarily all) items that a tenant or owner-occupier would normally provide in unfurnished accommodation.

Category: Income Tax

Tax Credits renewal
Q: I have just received my first tax credit renewal pack since becoming self-employed. Do I need to complete my tax return before I fill in the renewal form?
A: Ideally, you should complete your renewal form with the figures entered from your tax return for the last tax year, i.e. year ended 5^th April 2013. This will ensure your tax credits award is as accurate as possible.
However, if you have not yet completed your accounts and tax return for the most recent tax year, you may submit estimated figures to the Tax Credit Office. This must still be done on the renewal forms and by 31^st July 2013 as normal.
You must supply the Tax Credit Office with the actual figures as soon as possible though- and no later than the 31^st January 2014.

Category: Tax credits

Bookkeeping software
Q: I am just starting out and I’m looking to buy some bookkeeping software. Can you list some of the keys differences between desktop software or subscribing to some online software?
A: Desktop bookkeeping software

• Speed- Can be quicker as you’re not working online and therefore reliant on internet speed
• Price- Can be cheaper as may only be a one-off payment; unlike Cloud-based software which may be infinite, monthly subscription payments

Online bookkeeping software

• Mobility- you can work anywhere; anytime provided you have an internet connection
• Communication- you may be able to email your customers through the software; therefore allowing you to attach documents to the emails such as outstanding invoices. Some may even facilitate you takings payments from your customers and others have Apps to download to your smart phone for use when you’re out-and-about
• Integration- Due to the evolutionary nature of Cloud-based software, it tends to be compatible with more software than traditional desktop products
• Security- Check with your supplier, but generally, the data in Cloud-based software is much more secure than in desktop software- which could disappear during a thunder storm!

The generic features of bookkeeping software should be prevalent whichever route you go for though- such as reporting, invoicing, customer/ supplier management, VAT returns, bank reconciliations etc.

Category: General Business