Article Archive List SEP 09 "TIME TO PAY" AND OTHER TAX MATTERS
SEP 09 "TIME TO PAY" AND OTHER TAX MATTERS
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By Claire Elston FCCA
Here, Claire Elston FCCA of Kathryn Gigg Chartered Accountants Hunstanton lists a number of tax points to be aware of currently:
· Is your company about to take up the HM Revenue & Customs “Time to Pay” lifeline to defer payments of VAT or PAYE? This initiative to save jobs and businesses is, of course, to be applauded and in some circumstances payments are being spread over as much as 2 years. However, think carefully before signing up for the initiative as the Revenue is rather surprisingly sometimes agreeing arrangements without seeing any figures at all. This is good if it enables a business to survive the effects of the downturn, but if it is actually just delaying recognition of insolvency, then the risks to the directors personally are great as they can be held to be personally liable if it later transpires that the company was insolvent when it took on the “Time to Pay” lifeline. Make sure therefore that you prepare valid forecasts, for your own purposes, taking into consideration all of your creditors before you proceed.
· Are you aware of the 2009/10 “Business Rates Deferral Scheme” which started in July this year. You may be able to spread the payment of the increase in your 2009/10 business rates bills over the next 2 – 3 years. Make sure that you don’t forget to apply as otherwise your cash flow could suffer unnecessarily. Hunt down your application form now!
· Don’t fall victim to online fraud. Criminal gangs are currently targeting taxpayers with scam emails offering bogus tax refunds. This is a very sophisticated scam but the Revenue only ever contacts taxpayers who are due a refund by post. So, whatever you do, do not be tempted to respond to these emails.
· If you are in business, are your accounting systems going to quickly and easily adjust for the VAT rate reverting back to 17.5% on 1 January 2010? For many retailers particularly this change will come at one of the busiest times of year with the New Year sales. If you are not prepared you may end up paying over the wrong amount of VAT and face being fined heavily as a result. Protect yourself from surcharges that can now be anything up to 30% by sorting out your systems now.
· Get yourself an additional 7 days in which to pay over your VAT liability each quarter by registering to file online. All VAT registered businesses with turnovers exceeding £100k, and all newly registered traders, will be required to submit their VAT Returns online, and pay over any VAT electronically, with effect from April 2010; so you may as well get ahead of things and benefit from this cash flow incentive.
· Do you check and understand your PAYE Coding Notice? If not, you could be missing out on valuable allowances and reliefs. If your coding is wrong you may either be paying over a material amount of additional tax which is strictly not due, or, storing up a liability which will only come back to haunt you at the end of the tax year when the demand drops on your doormat.
· All 2008/09 Forms P11D “Returns of Expenses & Benefits” should have been submitted in July. Now is therefore the time to review matters and to make sure you identify all expense payments to ensure that they have been correctly categorised. Don’t forget that it is possible to remove the burden of having to prepare P11Ds entirely by applying to the Revenue for a dispensation. Always remembering that thereafter you must comply with the terms of such dispensation as it will specify the type of expenses to which it applies.
Now is the time to be thinking of ways to make the maximum use of losses and perhaps generate a welcome tax repayment. You may, unfortunately, currently be sitting on assets such as shares that are worthless in terms of their marketability. In these circumstances a negligible value claim may be made and this will enable a capital loss to be crystallised. Alternatively you may have made a loan to a trading company which has “gone bust”, i.e. your loan is irrecoverable. In this situation it may be possible to claim CGT loss relief, and, as there is no time limit for such a claim, and the claim can be related back by up to 2 years, you can pick and choose when the best time would be to trigger such a claim in order to shelter your Capital Gains to your best advantage.
· You do not have to have a child to claim Tax Credits. Dependant upon your income levels you may be eligible for Working Tax Credits. Additionally if you are in business and considering capital investment and you have never claimed Tax Credits before, it may be worth submitting a protective claim. Such a claim can only be backdated 3 months so the sooner you get it in the better. Assessable income can be dramatically reduced as there is currently a 100% annual investment allowance on the first £50000 of capital expenditure which can have material implications for Tax Credits. Take advice and see whether it would be worth you considering such an application. In certain cases the benefits can be material.
Anyone who is tax resident in the UK is taxable on worldwide income. It is a commonly held misconception that interest received on offshore bank accounts is completely outside the scope of UK tax. A little while back the Revenue obtained information from the banks which indicated that there were in excess of 400,000 undisclosed offshore accounts held by UK taxpayers. A couple of years ago HM Revenue & Customs gave offshore account holders an opportunity to disclose details of their investments at greatly reduced levels of penalties. Less than the expected number of taxpayers took up this opportunity. With the increase in overseas property ownership by UK residents, the number of offshore accounts e.g. those set up to handle the rental income and the running costs of such a property, have increased substantially. The Revenue are therefore now announcing plans for a further amnesty, to be introduced later this year. So if you need to regularise your affairs and take advantage of this second amnesty do so straightaway. Take advice and get the matter sorted. Otherwise, when the Revenue do eventually catch up with you there will be no possible mitigation of the heavy penalties that will follow.
· Home owners have taken in an extra 500,000 lodgers to help them pay their mortgages during the current recession. If you are already doing so, or thinking of doing the same, then take advice to see if you can take advantage of “Rent a Room Relief” where householders are able to earn rent up to £4250 p.a. tax free.
It is, by far, more cost effective to retain existing staff than to take on new employees, so be creative about holding on to your existing team. One idea, if you are at risk of losing someone on maternity, is to consider what could be called an SMP “Bump Plan”. Take advice and see if it would work for you.
Don’t forget that the National Minimum Wage levels go up on 1 October 2009 to:
£5.80 per hour for adults aged 22 and over
£4.83 per hour for 18 – 21 year olds
£3.57 per hour for 16 – 17 year olds above school leaving age.
This is of particular concern if you are employing part time or young members of staff as the NMW limit can easily be overlooked. If you are paying staff their tips or expenses as part of their remuneration package you must specifically ensure that you are not breaching NMW legislation. If you are unsure of your position on NMW take advice immediately! HM Revenue & Customs are hot on compliance.
Finally, if you are getting into difficulties with your personal or business tax affairs, seek professional advice as soon as you can. The situation will only escalate if you leave it.
For more information on all of these topics, plus many more tax planning issues, please contact either myself or Kate on 01485 534800 for an appointment to ensure that you are not missing out.