July 2006

Points to Ponder

This is now our nineteenth newsletter – produced during July 2006 and issued in August, to keep you up to date with some of the changes in Income tax, National Insurance and VAT along with compliance regulations for businesses. We have been running these notes on a rolling three or four month basis, but they have become rather bulky so it’s mostly just new news from now! Having said that, not much has come up this month, so I’ll review some of the topics from last month’s news too. If you would like a copy of any past newsletters, please call and we can either send or e-mail them to you.

From June’s Newsletter

220 Chessington Road is fully operational with Angela and her new assistant John. Please do drop in to whichever office is more convenient for you, but Angela will be pleased to have visitors at 220. She has the limited company files there and is now planning to expand our tax advice service. If you would like a tax “health check” or need to do some tax planning for the future, please do call Angela. The full address and phone and fax numbers are at the top of this page.

The new CIS arrangements and Worker Status questions are still a great worry; we are trying to ensure all information comes to us monthly. We are recommending that small contractors move in to limited liability companies.

The new minimum wages have been announced ready for October.

It is now official - Revenue staff have a target of collecting extra tax in 78% of all enquiries.

Although returns are supposed to be selected at random for Revenue enquiries, certain ones are being targeted first – and that’s official. The main criteria are late returns, late payment of tax, omissions (for example, missing taxed interest off your returns when the Revenue know you have received it – it may have been taxed at source and may only be pennies, but it must go on your form) and property income.

If your trade or profession would normally carry stock or work in progress and no entry appears on your accounts or there are no adjustments for private use, especially of motor vehicles, the Revenue will want to know why not.

Again the Revenue won’t admit that they are targeting specific trades but will continue to closely watch the construction industry. It’s 1984 and Big Brother moved in to the 21^st Century.

High street banks are now obliged to inform the Revenue of all offshore accounts held by UK residents. Please insure that you give us all the information relating to these accounts, so that your Self Assessment returns are complete. If these accounts are paying large amounts of interest, the Revenue WILL investigate the source of the funds and levy tax accordingly. Please be warned.

From 21^st August 2006, the Royal Mail is introducing a new pricing structure, based on the size of the item as well as its weight. This means that the large envelopes we use to send out accounts will cost more but nothing will be going down, I’m afraid. Please do check thoroughly as under-paid post takes an age to be delivered. We recently received a letter that had been posted in January with insufficient postage paid on it. This was sent by a client to the Inland Revenue and contained his self assessment returns. The Revenue refuse to accept underpaid postage, so it was eventually returned to us as it had our letter attached to the returns. Needless to say, the client has been fined for late submission, with no appeal allowed.

July’s News

1. Microsoft and Windows 98

Microsoft has announced that it will not be supporting Windows 98 for much longer. This means that new software will only be designed to run on later operating programmes. If you are considering updating your computer equipment, now might be the time, but be sure to do so before the end of your accounting year.

2. Carshalton College

On Friday 14^th July, Angela and I were treated to a very entertaining and useful morning at Carshalton College, featuring guest speakers, Kriss Akabusi and Andrew Neil. We were then introduced to the teaching staff and the courses the college can provide, including IT, accounts, leisure services, and motor engineering. We were impressed by the refurbished facilities and the cheerful and smart students who showed us round and also by the extremely impressive lunch, prepared by the catering students and staff. With apprentiships being reintroduced, colleges can help arrange Government funding with any additional costs incurred in training being fully tax-deductible. So if you are considering taking on a youngster to train, or want to add to your own skills, have a look at what these colleges can offer.

Carshalton’s website is at www.carshalton.ac.uk

3. Composite Companies

These are often known as “Umbrella” companies, where sub-contracting staff are employed plus given shares so that their income is made up of part salary and part dividends. The Revenue feels these workers should be brought in to IR35 and is planning to enforce this. The administering companies, such as the biggest one, Gabem, are ignoring this and leaving it up to the individual workers to deal with their own tax affairs.

4. HMRC Enquiries – Trials of Alternative Interventions

Although the Revenue is successfully meeting its target of additional tax collected through enquiries, it is failing to reach the target for the number of enquiries being completed. It is therefore going to try other means of intimidating taxpayers, by asking them voluntarily to join in the new scheme. This will take the form of telephone questions but stating that they feel an error has been made; a correction challenge where the Revenue amends a return to what they think should be on it and challenging the taxpayer to prove them wrong; risk questionnaires; current records reviews or a “health check” in to the status of the business. The last two items are not covered by law, so they are the only ones you can refuse. If you do, the Revenue will just open a full enquiry. These new enquiries are being put out as designed to “help” the taxpayer, but it just seems like another case of Guilty Until Proven Innocent. If you do receive any of these forms of contact, please let us know immediately.

The Summer is usually a quiet time with most Government departments on holiday, but there are still a few “nasties” creeping out from the dusty corridors of Whitehall, so we’ll try and spot them before they creep up on us all – more Summer madness!