Points to Ponder
Welcome to our thirty first newsletter – produced during August 2007 and issued in September 2007, to keep you up to date with some of the changes in Income tax, National Insurance and VAT along with compliance regulations for businesses, plus other oddments that have caught our eye. If you would like a copy of any past newsletters, please call and we can either send or e-mail them to you.
Feedback please – do you find this newsletter useful? If so, would you like to be sure that you receive it every month and not just when we write to you? Please let Lorraine know and she will then e-mail it to you as soon as it’s available, or send it by post if you prefer.
No Smoking
England is now officially “smoke free” in the workplace. Have you all displayed the required “No Smoking” signs? These must be a minimum A5 size and visible at the entry to all work places. Smaller signs must be displayed on business vehicles too. We have a few spare sets of Government-issued stickers if you need some.
Offshore disclosure
We know of a couple of our clients who received letters from their banks, stating that HMRC had been informed that an offshore accounts was being operated by a UK resident. Has anyone else had a letter or holds an undeclared offshore account? The repercussions from this will go on for a long time.
Business Hobby
A recent tax case has found in favour of a businessman who is a keen and successful rally driver. He offset the cost of the car, its running expenses and sponsoring rallies, against his minibus business. HMRC tried to disallow the expenditure and allowances as excessive, but a Special Commissioner overruled HMRC. The Commissioner found that the motor rallying activities were for the purpose of the taxpayer’s business on five main counts. The business livery and lettering was on the car; the business sponsored local events; the events were used for corporate entertaining; the publicity for the business derived from newspaper and television coverage and the car was displayed at the business premises. What is your hobby?
CIS Changes and fines
The new regulations came in to force in April 2007. Although HMRC has said that it will not be imposing non-compliance fines until October, non-compliance now WILL affect your future registration. Any former gross certificates are reviewed annually by the Revenue’s computer and failure to comply on any three occasions over a variety of regulations will result in your gross status being revoked. Reapplication cannot be lodged for 12 months after gross certification is withdrawn. There is also the possibility that non-gross certified subcontractors who fail to keep their Self Assessment returns up to date and on time may be relegated to the non-verified category of 30% deductions.
Small employers’ incentive payments for filing year end PAYE returns delayed.
HMRC has admitted that yet again it is not keeping up with the processing of year-end on-line returns. Although we have been notified of several payments of £150 being confirmed, there are a great number still outstanding – including our own! Cheque payments are expected to take even longer.
Power of attorney
If you have elderly relatives, you may already have an Enduring Power of Attorney in place, ready to help manage their affairs when they either no longer can or no longer want to do so themselves. If not, sort out the arrangements now – you only have until the end of this month. These arrangements are easy to put in place and not expensive, although you will need a solicitor to prepare the documents. These arrangements are being replaced by a Lasting Power of Attorney, which has to be registered immediately with the Court of Protection, even though it may never be invoked. This greatly adds to the costs involved.
Spam e-mails
Just don’t open these, or they will multiply. If you’re not sure of a message’s content, delete it unread. When sending an e-mail, put something in the subject matter line to assure the recipient that it is a genuine message for them. We are trying to use e-mails more, to save costs and ensure that our message does arrive so please let us know if you have encountered any problems with e-mails.
From previous newsletters
Business Review
We always try to carry out a review of our business each year and in the past have done this in January – it used to be a quiet month. This has moved on now to July. Following this month’s meeting, on the whole we feel that we give a good all-round service. We have increased our skills to cover the wider range of services we offer, and to keep in line with the many changes in legislation introduced over the past few years, and so ensure that our clients get the best. However, this has come at a price with overheads increasing at a far quicker pace than our fees. We shall therefore be increasing some of our charges. As ever, we shall try to keep these increases at a minimum but we have no alternative. Please do call if you would like to discuss how this might affect you.
Rent-a-room
This allowance has been around since Maggie Thatcher and was introduced to encourage people with homes larger than they needed to provide housing to single people. Then, as now, there was a shortage of accommodation in the inner cities for young people. Although the allowance has not gone up much, it still gives £4,250 of tax-free income. You must be letting a room or rooms in your main or only residence and these rooms must not be a self-contained unit, such as a “granny annex”. If you receive more than this, you can opt to be taxed just on the excess, rather than provide detailed accounts of income and expenditure relating to the accommodation.
Another discrimination banned under the Equality Act 2006
We have anti-age, sex, religion, and disabled legislation but now we also have “anti-philosophical belief” legislation. This opens up the opportunity for ex-workers to claim that they suffered discrimination at work for beliefs they held that had nothing to do with religion. Watch this space for reports of interesting and outlandish claims!
Increase in the right to paid holidays.
The Working Time Regulations 1998 state that employees should receive no less than 4 weeks’ paid holiday a year, equating to 20 days for a full-time employee. These 20 days include bank holidays. With effect from 1st October 2007, this is going to increase to 4.8 weeks or 24 days for a full-timer and then on 1st April 2009, increases again to 5.6 weeks or 28 days for a full-timer. These days will still include bank holidays and be pro-rata’d for part-timers. This serves to increase overheads yet more.
Vans in auction
The country’s leading vehicle auction company has revealed that the market has never been so strong for secondhand commercial vehicles as it is now. The leading make and model is still the Ford Transit, with the newest shape often selling for more than its original list price. The director of British Car Auctions suggests checking out an auction before ordering from a retailer. If you are selling, this is an easy and quick way of disposing of your vehicle, but “buyer beware” as commercials are sold as seen. VAT will also be charged on top of the hammer price if the vehicle belongs to a VAT-registered person or business and there may also be a buyer’s premium.
Employing your children.
This idea has several advantages; children learn work ethics before they have to stand on their own in the workplace and their wages are tax –deductible. There are strict laws on hours and rates of pay, but providing your children are recorded on your payroll and you can show that they actually do earn their pay, changing their pocket money into salaries is legal. You don’t need to supply a formal contract of employment, but do draw up a list of jobs to back up their wages. Filing, cleaning the office or washing the company vehicles – there are always jobs that need doing.
National Minimum Wage
Following the previous note, the minimum hourly wage rates from 1st October 2007 will be for 16 – 17 year olds (Development Rate) £3.40; for 18 – 21 year olds (Youth Rate) £4.60 and for workers aged 22 and over (Main Rate) £5.52.
Directors’ Guarantees.
Many self-employed business people chose to incorporate for several reasons, but the most common is the belief that it will protect their personal assets if the business fails. This is not the case if you sign a director’s guarantee. If you are asked to sign a guarantee, read the small print – most of it seems to come from banks and other lenders, but a business lease may also have some hidden points.
Loosing weight almost becomes more expensive, thanks to the VAT-man.
I’m sure everyone, whatever their size, has heard of Weight Watchers (UK) Ltd. The company supplies a weight-loss support programme and leaflets and handbooks to registered members. In the past, the support programme was considered to be a standard-rated supply for VAT purposes, while the handbook and leaflets were treated as a zero-rated supply of printed matter and the company based its returns on that split. HMRC decided to take a different view whereby they alleged that the supplies are linked and that as the support services were the major part of the programme, the rate of VAT applicable to them should cover the whole supply. Thanks to a VAT Tribunal, HMRC lost.
A quick review of previously published topics.
July 1st – no smoking in a public enclosed area.
If you have a company vehicle, van or car, that carries more than one person, you must have no smoking stickers displayed on and in it. We do have a few spare stickers if you haven’t been able to obtain one.
Offshore accounts – the amnesty’s over
The amnesty period has now run out in which to admit to HMRC that you have an account which you have not declared on your Self Assessment returns. If you did inform HMRC, you have until 26th November 2007 to fully declare your income, agree how much you owe in tax and settle that along with the related interest and penalties.
Carrying cash
From 15th June 2007, anyone carrying 10,000 Euros or any currency equivalent must declare it to HMRC at the point of arrival in or departure from the UK. This means notes, coin, travellers’’ cheques and bankers’ drafts. This doesn’t include movements within the EU. This regulation has slipped in under the Money Laundering Regulations but is being enforced by HMRC and the Police under the Proceeds of Crime Act.
Mastermind – name all the countries in the EU
If you can’t answer this question you need a copy of last month’s newsletter!
HIPS and EPC’s – do you need ‘em?
Home Information Packs or an Energy Performance Certificates.
Cash in hand and no VAT – who is the real criminal?
A recent article on one of the tax information websites has suggested that the trader who carries out cash-in-hand work to avoid VAT may be the victim of a crime rather than the initiating criminal. If you suggest to a trader that you will pay cash for no VAT, and they accept and then commit the fraudulent evasion of tax, you are equally guilty as being the instigator of the crime; if the trader gets caught then so may you.
Changes in details for your VAT registration.
Please remember that any changes affecting your VAT registration must be passed on to HMRC within 30 days of that change.
Changes in Road Fuel Scale Charges.
If you recover VAT on fuel used in a car for business, it has to be restricted by charging back a “scale charge”. Prior to returns periods starting on 1st May 2007, this was based on the type of fuel used and the car’s cubic capacity. Now it is based on its CO2 band. As we’re not all Top Gear officianardos, it would be a great help if you could let us know your car’s classification? However, if you drive a “gas guzzler” and use less than £142-worth of fuel a month, it is not worth reclaiming any VAT on fuel.
Earlier Topics Covered
Penalties increased for using your mobile fine while driving - The present penalty is £30 if you are caught using your mobile without a hands-free system while driving but this is being increased to £60 for car drivers. For commercial vehicles, vans, lorries, coaches and buses, it will be £1,200.
New rules on VAT invoices - The main one is that all invoices must be numbered sequentially to give them a unique identification.
Managed Service Companies - Get out of these arrangements as soon as you can!
2% off the basic rate of personal tax– not until April 2008 when the 10% tax band will also cease.
2% off the rate of Corporation Tax - but not for small companies.
National Insurance limits. The ceiling for these is being raised.
Capital Allowances changes - the changes coming through are important for planning for expenditure on capital items, as depending what qualifies for 100%, it may be better to buy on 6th April 2008, rather than a day earlier.
VAT on certain property alterations - The rate of VAT for certain housing alterations for elderly people will be cut from 17.5% to 5%.
VAT registration and deregistration levels - from 1st April 2007, the turnover level at which you must register for VAT is raised to £64,000 with deregistration going up to £62,000.
Income Tax, Personal Tax, PAYE and VAT Payments – your cheque must clear before you are deemed to have paid, not just arrived with HMRC.
Penalties for incorrect returns - Once assent is given to this Finance Act, the rates of penalties will be set in stone. The answer? Get your returns right in the first place!
Charities and Gift Aid limits - If there’s anything left, you can now increase your donations that qualify for Gift Aid relief.
Tax Credits - The time limit for making returns for your tax credits is being reduced.
CIS Deductions – Some good news at last. - From the start of this new tax year, individuals and partnerships who both sub-contract themselves and use the services of subcontractors can net off the deductions they have suffered against those they collect from their subcontractors.
CIS Change of Rate - From payments made after 6th April 2007, the rate of deduction will be 20%.
Inadequate Records - The majority of Revenue enquiries end in additional tax bills for anyone who does not have complete records.
Building work linked to planning applications – a back-door HMRC investigation - HMRC is contacting householders who have had work carried out on their properties that required planning permission to find out who did the work and how they were paid.
Workers from the new EU states - Romania and Bulgaria have now joined but not everyone from these countries will be entitled to work.
Company directors working from home -To be able to claim your due “rent” for office space from your company, make sure you have a written agreement in place.
Interest on directors’ loans – is the company paying the tax
Please contact us if you would like to discuss any of these topics in more detail.
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Jackson-Scott Associates Limited
