If you have not yet filed your 2011/12 tax return the self assessment deadline is the end of this month (31st Jan), if you miss this date by even a day you will incur an automatic £100 penalty regardless of the tax you owe. We can take the worry and stress away for a very competitive fixed fee, we offer weekend and evening appointments and free tax advice throughout the year, we will also deal with HMRC on your behalf, leaving you free time to concentrate on running your business.
With just over three months to go before changes to Child Benefit entitlement for higher earners comes into effect, it's an ideal time to see how or if the changes impact you.
Those affected are any individual who claims child benefit and has income in excess of £50,100, or a couple where one partner is claiming child benefit and where either partner has income in excess of £50,100 per annum.
Only those who earn over £60,000 per annum will lose their child benefit entirely while a couple each earning less than £50,100, they will keep all of their child benefit payments. There is a sliding scale of loss in benefit for income in excess of £50,000.
An election can be made not to receive the child benefit, for example where it is known that one income will be in excess of £60,000 and therefore all child benefit would be clawed back.
The changes mostly affect high earning employees where often the mother in the relationship stays at home to look after the children. Where an election is made not to receive child benefit, this group, which could comprise over 350,000 women, could lose their National Insurance contributionswhich in turn will impact on their state pension.
Contributions over 30 years are required to qualify for a full state pension. Full-time mothers currently receive National Insurance credits towards their state pension in recognition of the contribution that full time parents make to society.
However, because of the way the changes have been drafted, it is possible to claim child benefits and then elect to withdraw and, in so doing, the full time parent does not lose NI credits.
Clearly, there is a danger that some people will be unaware of this potential trap and because those affected by the new changes will most likely have received their income through PAYE structures, many of them will have had little recourse to consult a technical accountant.
This is likely to change for a number of reasons. Firstly the child benefit ‘clawback’is mostly to be made under self-assessment and will therefore mean that many more people than previously will need to complete a tax return.
The higher earner in the couple is also responsible for notifying HMRC of their chargeability. Penalties will be imposed by HMRC if this is not done.
The changes to child benefit entitlements come into effect on 7th January 2013.
Taxpayers who have yet to file tax returns for 2009/10 have less than a week left to take advantage of reduced penalties for late returns.
Under HMRC's tax return initiative, outstanding tax returns up to and including 2009/10, if submitted before 2 October 2012, will be subject to reduced penalties, even though new penalties for late tax returns have already come into effect.
“Time is running out, so taxpayers with tax returns outstanding should act immediately if they wish to keep the weight in their wallet and off of their shoulders,” Baker Tilly said.
Under the new rules a penalty of £100 is charged when a return is just a day late. When the return remains outstanding after 3 months, a daily penalty of £10 is levied for up to 90 days. When the return is 6 months late, the higher of £300 or 5% of the tax due is imposed and this penalty is then repeated if the return remains outstanding 12 months after the deadline.
In serious cases, HMRC can charge penalties of up to 100% of the tax due for a return that is over a year late. These staggered penalties are automatic and cannot be mitigated without a “reasonable excuse”, such as a serious illness or a breakdown in HMRC’s computer system.
Where late payment applies, further penalties equal to 5% of the tax due are levied 30 days and 6 months after the 31 January and 31 July payment deadlines. There is also interest to pay.
London lawyers have become the latest target in HMRC’s taskforce initiative as the Revenue widens its net to tackle tax dodgers from hair and beauty businesses to the motor trade in Scotland.
HMRC has called the latest campaign an “intensive burst” of activity in specific high-risk trade sectors and locations, and is expected to bring in £19.5m.
Read the full article here
_The Self Assessment deadline is fast approaching for for the tax year ending 5th April 2012 and you need to make sure that you meet the following deadlines or you will receive a penalty from HMRC.
Deadline for Paper Returns
All paper returns must be received by HMRC by midnight on 31 October 2012.
The only exception to this is if HMRC have written to you after 31 July 2012 asking you to make a self assessment return. Then you have three months after the date on your letter to submit the return.
All self assessment notifications are usually sent out by HMRC during April.
Deadline for Online Returns
All online returns must reach HMRC by midnight on 31 January 2012.
Again you will only have an extension on this date if HMRC write to you requesting a self assessment return after 31 October and you will have three months from the date on the letter to submit the return.
If you want HMRC to collect any tax due through your tax code then you must submit your return before 30 December 2012. This is only an option if the tax owed is less than £3,000
Length of delay
Penalty you will have to pay
1 day late
A penalty of £100. This applies even if you have no tax to pay or have paid the tax you owe.
3 months late
£10 for each following day - up to a 90 day maximum of £900. This is as well as the fixed penalty above.
6 months late
£300 or 5% of the tax due, whichever is the higher. This is as well as the penalties above.
12 months late £300 or 5% of the tax due, whichever is the higher.
In serious cases you may be asked to pay up to 100% of the tax due instead.
These are as well as the penalties above.
Thousands of higher rate taxpayers that have failed to submit Self Assessment tax returns are about to receive a letter from HMRC reminding them that they have less than three weeks to get their affairs in order.
click here for the full story
Whatever your business sector you must prepare annual accounts which report on business performance and activities during the financial year.
What you may be unaware of, is that businesses are allowed a free choice of when to end an accounting year.
So, for 2012/13 tax, accounting dates can vary between 6 April 2012 and 5 April 2013. The date that you choose may be dictated by commercial reasons, but also by external factors such as interest rate movements, inflation, changes in rates of tax and changes to the tax system.
Generally speaking, using a date towards the end of the tax year leads to the simplest application of a current year basis of assessment, although this leaves very little time before tax is payable. Alternatively, businesses expecting an upward trend in profits may benefit from cashflow advantages if their accounting date is set on or shortly after the beginning of the tax year, although this also has its disadvantages including increased liability should the business cease less any applicable overlap relief.
Do you need us to review your accounting date?
Sole Trader Vs Limited Company
Corporation tax is currently 20%, for profits under £300,000 and 24% for profits above £1,500,000. Therefore conversion of your business into a limited company is more beneficial than before. You will enjoy a marginal rate tax saving of 9% from 1 April 2011, compared to 8% previously. This is compared to running your business under self assessment where Income Tax is 20% and Class 4 National Insurance is 9% for profits up to £42,475, profits up to £150,000 will be subject to 40% Income Tax and 2% National Insurance. Profits over £150,000 will be taxed at 50%. There are other factors to consider before incorporation its best to get in touch with us first.
Annual Investment Allowance
Where a business currently purchases plant and machinery, the first £25,000 of the expenditure qualifies for 100% tax relief in the year of the expenditure.
VAT Flat Rate Scheme
If you are mainly working for commercial customers it may suit your circumstances to register for VAT under Flat Rate Scheme voluntarily, even if your turnover is below the new VAT turnover threshold of £77,000 per annum. This is on the basis that you do not have much input VAT to reclaim (i.e. service companies). The scheme allows you to charge 20% to your customers, but only pay a smaller percentage of the gross turnover to HMRC. For example a computer consultant with a turnover of £50,000 would charge his customer 20% VAT and therefore receive £60,000, the additional £10,000 would be paid to HMRC, however under the Flat Rate Scheme only 14.5% of the gross turnover needs to be paid i.e. £60,000 x 14.5% = £8,700. Therefore a VAT saving of £1,300, which is taxable.
You will also enjoy a 1% discount during the first 12 months from date of VAT registration under the Flat Rate.
N.B - each industry has its own specific flat rate percentage.
The forms P11D, and where appropriate P9D, which report employees and directors benefits and expenses for the year ended 5 April 2012, are due for submission to HMRC by 6 July 2012. The process of gathering the necessary information can take some time, so it is important that this process is not left to the last minute.
Employees pay tax on benefits provided as shown on the P11D, either via a PAYE coding notice adjustment or through the self assessment system. In addition, the employer has to pay Class 1A National Insurance Contributions at 13.8% on the provision of most benefits. The calculation of this liability is detailed on the P11D(b) form.
HMRC have issued some guidance as to common errors on the forms in the latest Employer Bulletin. These include the following:
HMRC has a number of task forces to investigate certain business sectors, A summary of the current work of those task forces can be found below, each task force will move on to a new geographical area once the first area has been investigated.
This task force is investigating commercial property deals in Greater London, where the VAT rules may not have been applied correctly. Where they find this is the case, the HMRC officers will review the entire tax compliance of the property owner, across all taxes. Landlords HMRC are targeting landlords with three or more let properties in the North West of England and North Wales. Have you or your family correctly declared all of your rental income?
The targets are self-employed builders (including small companies) in the North West of England and North Wales. The task force is looking for under-declared sales (such as cash jobs) and over-claimed expenses (where there are no supporting invoices). Remember to keep every receipt for purchases and keep a log of all business mileage. We can help you by advising what expenses are allowable to claim against your income.
No Tax Return Submitted
This task force is operating in the South East of England, looking for businesses who have not submitted tax returns for corporation tax, VAT, PAYE or income tax.
Licenced Accountant in Brighton