Points to Ponder
Welcome to our forty fourth newsletter issued in November 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.
Credit Crunch or Media Hype?
We asked this question in our last newsletter and are asking you
again! The news broadcasts are still pushing out tales of doom and
gloom, with banks and financial institutions suffering but what is the
effect on the “real world?” More especially, how is the current
financial situation affecting you? We have been asking clients as we see
them and in the majority of cases they are cautiously optimistic. We
have welcomed new clients, just starting out in business and talked to
those who are planning expansions. This is a time to review, consolidate
and then plan ahead. Review your budgets and monitor your business. If
you would like help with a review or forward planning, please let us
know.
Set off of liabilities.
Since the Revenue departments combined, they have shown a great lack
of co-operation. They are finally getting at least part of their act
together. All tax revenues are the “property” of the Exchequer, but VAT,
PAYE, Corporation Tax, Personal Tax and National Insurance
contributions have always been collected separately. From April 2009,
each Revenue department will be able to recoup tax owed to it from
refunds due from other tax areas. So, if you normally expect to collect a
refund on your VAT and you are behind with your PAYE or any other tax,
your refund will be withheld to offset your debt.
Commercial Waste
We have just had a visit at the Ewell office, from a Council
official, checking to see what we did with our “Commercial waste”. Up
until now, we have carefully recycled what we could and took anything
else, such as apple cores and used tea bags, home for disposal. It
appears we have been acting criminally and, unless we changed our ways,
we could be liable to a fine of up to £50,000 and 5 years in prison! The
only alternative is to pay over £100 per year to the Council to have
one plastic sack collected each week. If we want to continue recycling,
we are welcome to take anything to the tip and pay for the privilege! So
where is the encouragement to “go green” if all that means is
additional costs? The rates we pay on each office are equivalent to
those on a 2-bedroom house in these boroughs but rubbish collection is
extra, plus we have no vote for the council. We already pay out about
£200 a year to have old records security shredded, so this all adds to
the overheads. It appears that councils across Britain have just woken
up to this additional source of revenue, so be warned – once you bring
food in to commercial premises, its wrappers constitute commercial
waste.
Performing Rights
Do you play music in your workplace, either for the public or just
for you and your staff? I must admit I don’t like a radio on when I’m
working, but many businesses do, especially retail outlets and
professions such as hairdressers. If you do play music, you need a
licence, issued by the Performing Rights Society. This licence is issued
under the Copyright, Designs and Patents Act 1988. The money collected
pays royalties to musicians and composers. The areas and types of music
are wide-ranging, extending to “music on hold” on a telephone system,
staff parties and even Radio 2 through your computer! Yet another good
reason not to listen to Russell Brand or Jonathan Ross!
Bank charges & Interest
The Government has bailed out the large banks with a huge amount of
money but are the banks passing on their rescue funds to help small
businesses? The answer seems to be No. Check your bank statements and
the details of interest rates and charges and see if yours have gone up
in recent months. If so, challenge your bank manager – he may agree that
there has been a “mistake”.
31st October filing deadline
The publicity about the 31st October deadline has been
causing rather unnecessary worries for some of our clients. This
deadline is for paper Self Assessment returns. As we make all your
returns on line, the deadline is still 31st January for filing. However, please don’t think that you can put off getting your records to us until 30th
January – we need them NOW. The on-line filing date is going to be
brought forward, so please get ready for the changes to come and start
bringing your records in earlier.
New Penalties To Come
HMRC is shaking up its penalties and saying that it will be using a “reasonable approach” to how they are assessed after 1st
April 2009. (Does this constitute an acknowledgement that they are
currently unreasonable?) The new regime is likely to lead to a great
deal of confusion, so the answer is to make sure all records are correct
in the first place. As soon as the details of the changes become
clearer, we’ll pass on more information.
New Minister for Business
He’s back – Peter Mandelson has been recalled from Europe to look
after businesses in the UK, with one of his team, Shriti Vadera, taking
charge of looking after small businesses. Wow!
Finally this month, we are welcoming Shirley as the latest
addition to our team. Based at the Chessington office, she will be
helping with accounts and personal tax.
Previous items revisited
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.
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!
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!
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.
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!
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.
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
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. You also need a fire marshal if there are more than 3 people in your place of work!
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.
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 1st 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%.
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Jackson-Scott Associates Limited
