August 2008

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Points to Ponder

 

Welcome to our forty third newsletter – produced during August 2008 and issued in September 2008,
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.

 

 

 

Late paid invoices

 

Like many other businesses, we suffer cash flow problems and like all
too many other small businesses, we don’t impose the legal right to
charge statutory interest on late paid accounts which was introduced in
the Late Payment of Commercial Debts (Interest) Act 1998. We have now
decided that we shall start doing this on all overdue accounts – we have
noted on our invoices that interest may be charged, but from now, it WILL
be charged. However, if we have made an arrangement with you to pay
your account by standing order, there will not be any interest charges.
We would be happy to discuss this facility with you.

 

 

 

Credit Crunch or Media Hype?

 

The news is full of hints of a recession but is this just because
there is nothing much else to report? Certainly we may all feel the
effect of American imprudent lending, but is the current slow down a
knee-jerk reaction? Some of our clients have noticed more of a slowdown
in this holiday period than in previous years, but others have more work
than ever. How have you been affected? We would be interested to know.
One organisation that is reporting a major fall in income, due, they
say, to increased unemployment and a fall in High Street spending, is
the Treasury. This means that the Government will have to cut its
spending or borrow more money. Not so different from the rest of the
country then! By the way, the “Credit Crunch” is officially a year old
now – Happy Birthday!

 

 

 

PAYE Time Bomb

 

HMRC has just issued a series of new leaflets relating to worker
status, so it looks as if the investigations are about to start. Have
you reviewed your workforce properly? Last month we reported “HMRC and the Construction Industry. Contrary
to what all accountants believed, there have as yet been no major
reported cases in respect of investigations in to Worker Status in the
Construction Industry. Is this because HMRC doesn’t know where to start,
or is waiting until they can impose higher levels of fines? At £10,000
per error per month, finding something in July 2008 could bring in
£40,000, but this time next year, that could be £160,000. Representation
is being made to the Revenue not to backdate claims for errors if the
businesses concerned can prove they have made every effort to correct
the situation. We know how difficult it is with a workforce that has
always been self-employed, but the Revenue will not accept that as an
excuse.” We have carried out Workforce Reviews for some clients – can we
help you?

 

 

 

Business Use of Home

 

HMRC is reviewing its policy on this claim at the moment. Up until
now, we have used a “round sum” approach but it is now likely that we
should review this. The initial guidelines suggest that costs should be
apportioned in respect of mortgage interest, light and heat, insurance
etc. It is all based on “exclusivity of use”. The area deemed used for
business should be available to that business exclusively during normal
business hours, but used for other purposes the rest of the time. If
your spare bedroom is fitted as an office and used as such between 9am
and 5pm but is then used as family space the rest of the time, there is
grounds for a claim. However, if your business use of a space is shared
during business hours, e.g. working at the kitchen table while someone
else is cooking, the round sum approach is the best basis of claim. If
you have a space, such as a converted garage, that is only used for
business, you can certainly make the apportioned costs claim, but will
almost certainly be liable for pro-rata’d capital gains tax on the same
proportion of any profit realised on the sale of the house.

 

 

 

Family Tax Credits

 

This is really a misnomer as Family Tax Credits are a Social Security
Benefit and nothing to do with tax. However, we do try to help with
these. If you feel you could be eligible, then we need to complete a
form with estimates, if necessary as soon as possible. Please be aware
that Social Security does have the right to reclaim overpaid credits. If
your profit fluctuates significantly from year to year, your claim will
be affected, including a possible demand for some to be repaid. An
unexpected drop in profit, perhaps caused by a vehicle replacement or
other one-off capital expenditure or a major refurbishment, could give
the opportunity for a larger claim for Family Tax Credits. However, a
claim can only be backdated for 3 months, not to the beginning of the
tax year. If you do claim Family Tax Credits, please let us know and
more importantly, get your records to us early!

 

 

 

It’s official – HMRC is a poor communicator.

 

HMRC has been slammed for its poor communications by the Government’s
Public Accounts Committee – especially its website. I for one hate
trying to find anything on the site. Have any of you tried searching for
information on the Government site? How did you get on?

 

 

 

VAT Flat Rate Scheme

 

Many of you are using this scheme and completing your own VAT
returns. This is a considerable time saving facility but does have its
drawbacks. You must be sure that you are using the correct rate for your
profession and that you remember to increase the rate by 1% after you
have been registered for a year. Also if the nature of your business
changes, the scheme may no longer be saving you money. For instance,
delivery drivers – with the major increases in fuel costs and possible
repair bills, you may no longer be saving money by remaining on the Flat
Rate Scheme. You must also leave the scheme when your turnover exceeds
£150,000 in a rolling twelve-month period.

 

 

 

Government U-turn costs Taxpayers millions

 

The Chancellor’s U-turn over the abolition of the 10% tax band has
cost all taxpayers millions – not just from the Treasury’s reduced tax
income, but in the costs involved in telling everyone! As we run a large
number of payrolls for clients, we are receiving dozens of new Employer
CD-ROMs for 2008, with a full colour, glossy 16 page A4 leaflet (more
like a magazine), explaining what has to be done. There will be an
additional CD issued in February, with on-line year-end filing guidance –
more expense. Higher rate taxpayers will not benefit from the
reintroduction of the 10% band.

 

 

 

Increase in tax code doesn’t affect National Insurance

 

For many years, the tax free coding allowance was the same as the
starting point for National Insurance but the new code increases only
affect your tax allowance. Taxable pay is anything above £6,035 per
annum, but National Insurance still kicks in on pay above £5,435 per
annum.

 

 

 

Underpaid postage – Still a major on-going problem.

 

We are experiencing increased major problems with this. Letters that
have the wrong stamp, or no stamp, on them are being delayed for up to 6
weeks before the Post Office lets us know. Recently this has resulted
in a student failing to get a grant and difficulties over claims for
Children’s Tax Credit. Please do check you are putting the right postage
on letters? Most letters are underpaid by only 6p, but we have to pay
that amount plus £1 handling charge and get to the sorting office to
collect them.

 

 

 

From previous newsletters:

 

 

 

Offshore account.

 

HMRC has announced that it collected over £400million via the
voluntary disclosure and expects to raise even more from those who
didn’t own up!

 

 

 

HMRC On-line filing.

 

A recent survey of accountants has proved that the HMRC service has
been worse this year than in previous years. There are also rumours that
the current free access may become chargeable. So, by law returns must
be filed on line but you will have to pay for the privilege!

 

 

 

Back tax bills for some pensioners

 

The Birmingham Tax Office has just admitted that it has been issuing
incorrect PAYE codes for some pensioners since 1983 and now plans to
start collecting the underpayments. All tax offices have been advised to
look at codes issued to pensioners in receipt of company pension.

 

 

 

 

The new head of HMRC

 

Two women and five men are now chasing the job as head of HM Revenue
& Customs – let’s hope whoever comes in can improve things there –
no more lost disks?

 

 

Corporate Manslaughter & Corporate Homicide Act 2007.

 

We’ve all read reports of major disasters that would now result in a
prosecution under this new act, but it covers all sizes of companies,
partnerships and even sole traders. The only way to stay within the law
is to ensure that your Health and Safety policy is reviewed regularly
and is enforced. If you expect an employee to use their own cars, for
example, you must ensure that these cars are road-legal – include this
provision in your Health and Safety policy and make sure all employees
have seen a copy.

 

 

 

Allowances for cars

 

Within the next couple of years, the tax allowances for business cars
will be much reduced on cars with CO2 emissions above 160g/km.

 

 

Royal Mail failures.

 

The British Chambers of Commerce has announced that its research in
to companies’ use of the Royal Mail has found that 86% of the
respondents had started using e-mails and the Internet for
communication, instead of the post. 68% believe the Royal Mail is not a
professional service anymore.

 

 

ACAS Services

 

If you have queries about employment regulations, your first line of
enquiry should be a call to ACAS, as they are there to advise both
employees and employers. Their Helpline number is 08457 47 47 47 or
their website is www.acas.org.uk.

 

 

Tax doesn’t have to be taxing – but it is!

 

Adam Hart-Davis – the face of the Revenue advertising campaign, has
said in an interview on Radio Five Live that tax IS too taxing and far
too complicated. HMRC responded furiously that “We will not be using Mr.
Hart-Davis for any self assessment advertising in future”.

 

 

First Aid at Work

 

All businesses must have first aid cover. The extent of the cover
required depends on the number of employees and details can be found on
the Health and Safety Executive’s website at www.hse.gov.uk/firstaid/index.htm or call 0845 345 0055 or e-mail This email address is being protected from spambots. You need JavaScript enabled to view it. .

 

 

Earlier non-on-line Self Assessment filing date. This has now officially been brought forward to 31^st October. The on-line filing date has stayed at 31^st January, but this may be altered next year.

 

Proposal to make record keeping standards statutory -
in other words, if your records don’t meet the proposed new legal
requirements, you will have committed a criminal offence!

 

Increased Revenue powers to obtain information These points come back to what we have been asking all clients to do – HELP US TO HELP YOU BY KEEPING RECORDS AND TELL US EVERYTHING. We can only help you comply with the new laws if you let us have all the relevant information.

 

 

CIS Certificate withdrawals

 

The Revenue has started its review of gross certificates for
sub-contractors and is withdrawing them when tax payments and returns
have not been kept up to date.

 

 

Corporation Tax

 

The Chancellor is increasing this to 22% over the next couple of
years, effectively making it higher than the basic rate of income tax,
which is reduced to 20%.

 

 

VAT Registration Level

 

This has been increased to £67,000 in any rolling 12 months.

 

 

Income Shifting Regulations

 

Now is the time to review “family” arrangements in respect of business shares.

 

 

Lower VAT Rate on renovations (Speak to Sue)

 

From 1^st January 2008, renovations and alterations to
residential properties that have been empty for at least 2 years will be
eligible for the reduced VAT rate of 5%.