July 2005

Points to Ponder

This is now our ninth newsletter – produced during July 2005, to keep you up to date with some of the changes in Income tax, National Insurance and VAT along with compliance regulations for businesses. As we don’t write to all of you each month, we shall run the notes on a rolling three or four month basis, so if you think you have missed a month, just call and we can tell what points were covered. Don’t forget to keep us updated with any changes of address, including e-mail addresses. Please note our change of e-mail address above.

November 2004 – (1^st newsletter) December 2004, January 2005, February 2005, March 2005 and April 2005 – notes closed

May 2005 News.

1. P11D’s (Call Sue or Angela)

2. PAYE on-line incentives. (Call Dave)

If you didn’t qualify this year, get ready for next.

3. Selling your sole tradership or partnership into your limited company. (Call Angela)

This is one of the main advantages of incorporation.

4. Husband and Wife Businesses. (Call Angela or Sue)

The Revenue has got its teeth in to this one now.

5. Age Discrimination (Call Sue)

The next wave of bureaucracy comes in to force early next year and affects all businesses.

6. HM Revenue and Customs – it’s official. (Call Sue)

End of May newsletter

June Newsletter

1.Changes to the CIS Scheme (Call Angela or Sue)

The Revenue is changing the CIS scheme from April 2006. At present they have still not finalised all the details but what we do know is as follows:

• Contractors will have to make monthly returns by a set deadline.
• Contractors will have to fully verify the employment status of their sub-contractors and sign a monthly declaration to acknowledge this fact.
• Contractors will have to sign a monthly declaration to state that their sub-contractors are not employees.
• Contractors could be fined up to £3,000 per month if subsequently it is discovered that the employment status of their sub-contractors is not as specified, or if the monthly returns are late or incorrect.
• There will be three levels of payment classification as follows. a) Gross pay – no tax deducted. b) Registered sub-contractor with 18% tax deducted and c) non-registered sub contractor with 30% tax deducted.
• Vouchers will no longer be issued, but a statement showing tax deducted must be give to the sub-contractor – we are hoping the Inland Revenue will issue some further guidance on this.

These are the bare bones of the new system but once we have full confirmation from the Inland Revenue of exactly how the scheme will work, we shall contact all contractors and sub contractors. In the mean time all contractors must review the employment status of their subbies ready for April 2006. We can help with this if required, as it can be a minefield. Please contact us for more details.

2. Limited Liability Status (Call Sue or Angela)

We have previously recommended very serious thought before “going limited”. However, with Revenue and Customs plus the government introducing more and more “Red Tape” legislation, such as the items above, it may be worth considering this step as a personal safeguard.

End of June Newsletter

July 2005 Newsletter

1. 1. CIS Update (Call Sue)

We plan to arrange a date for a Revenue officer to visit our office to give a talk and answer contractor’s questions about the new CIS rules, including status of workers. This is likely to be in November, by which time the Revenue expects to have the new rules finalised. We need at least six contractors to attend, so if you are interested, please let us know as soon as possible, as space may dictate how many we can accommodate.

1. 2. Revenue “Enabling” Letters (Call Sue or Angela)

The Revenue has adopted a policy of sending deliberately frightening letters to taxpayers. These are known as Enabling Letters as they can lead the way to letting the Revenue open an enquiry. The following is the text of a letter we shall send you, if you receive one of these Revenue letters, and we also send a copy to your tax office.

This letter also suggests that your Self Assessment return may contain errors. These letters are being sent to tax payers at random all over the country and are a blatant Revenue attempt to frighten the recipients. All accountants are furious about this Revenue action, which is a slur on our profession and effectively implies that the tax payers receiving these letters are liars!

Under our agreement as set out in our letters of engagement, you supply us with all the necessary paperwork for us to finalise and present your accounts and returns fully and correctly. We totally reject the implications of this Revenue letter, as you are careful to record all your business income and claim legitimate expenses and we then complete your returns from these perfectly adequate records.

Despite the implications in the tax office letter, not all Revenue Enquiries result in additional tax payable, some can result in a refund and, although rarely, costs being awarded against the Revenue. However, their new powers are being used to the extreme and representations are being made to have these powers better controlled, not least in having these letters stopped.

To underline our confidence in you, our valued client, we shall send a copy of this letter to your tax office.

3. Payroll Giving (Call Sue)

With so many charities chasing your money, the Government made it easier to give via your payroll, making sure the tax was properly calculated and that the Charities chosen would receive the money. To encourage setting up the payroll giving schemes, there is a tax-free incentive to employers to set up the scheme. This is £300 but the catch is that the scheme must be in place before the end of December 2005.