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August 2008 : In this issue of the newsletter we have included new guidelines from HM Revenue & Customs regarding the tax status of certain workers. We have also included an interesting tip for business owners who trade through a limited company and manage their business from home. There is also a useful tip for charities and voluntary registration for VAT purposes and finally a warning regarding the latest e-mail scam purporting to be from HM revenue and Customs.
The next issue of our newsletter will be published on Thursday 4th September 2008.
Tax status; are you employed or self-employed?
VAT Voluntary registration charity shops
Tax Diary August/September 2008
Running your company from home
The latest email scam!
Tax status; are you employed or self-employed?
If you would benefit from being self-employed rather than employed, or vice-versa, you may be interested in this article. HM Revenue & Customs have recently published new guidelines to help taxpayers decide if they are employed or self-employed. We have reprinted below some of the criteria that they suggest you use in order to arrive at a decision.
The comments that follow are quoted from the HMR&C publication.
"In most cases your employment status will be straightforward. In general terms, you are employed if you work for someone and don't have the risks of running the business. You are self-employed if you are in business for yourself and are responsible for the success or failure of that business.
To help you check your employment status, answer the following questions. These also apply if you are a casual or part-time worker. If you have more than one job the same questions apply for each job.
Employed - if you answer yes to most of the questions you are likely to be employed:
* Do you have to do the work yourself?
* Can someone tell you where to work, when to work, how to work or what to do?
* Can someone move you from task to task?
* Do you have to work a set number of hours?
* Are you paid a regular wage or salary?
* Can you get overtime pay or bonus payments?
* Are you responsible for managing anyone else engaged by the person or company that you are working for?
Self-employed - if you answer yes to one or more of the questions you are likely to be self-employed.
* Can you hire someone to do the work, or take on helpers at your own expense?
* Can you decide where to provide the services of the job, when to work, how to work and what to do?
* Can you make a loss as well as a profit?
* Do you agree to do a job for a fixed price regardless of how long the job may take?
If you can't answer yes to any of the above questions, you are still likely to be
self-employed if you can answer yes to most of the following questions.
* Do you risk your own money?
* Do you provide the main items of equipment (not the tools that many employees provide for themselves) needed to do the job?
* Do you regularly work for a number of different people and require business set up in order to do so?
* Do you have to correct unsatisfactory work in your own time and at your own expense?"
Please note that the opinions quoted above are those of HMR&C; we do not necessarily agree with all of the comments made! If you are at all uncertain about your tax status can we suggest that you give us a call and we will provide you with advice based on your own individual circumstances.
Click here for a call back from our office regarding this article. Back to top
Running your company from home
If you run your business through a limited company and your base of operations is your home office, it is possible to charge your company rent. Of course if you do this the company will be able to deduct the rents from its profits and you will need to declare the rents on your self-assessment return. On the face of it there would seem to be no advantage.
But what if you also have buy to let properties and are making losses? Very often buy to let property owners have more costs (loan interest etc) than they have rents receivable. Unfortunately it is not possible to set off these rental losses against other income. The losses have to be carried forward to be set against rental profits in future years.
If on the other hand you do charge your company rents for the use of a Home Office it would be possible to set off any buy to let losses against this income. The rents from your company and your buy to let rents are taxable as property income. Effectively you would be getting tax relief through your company for the rental losses you personally suffer on your buy to let property. A number of considerations need to be taken into account:
1. If you charge your company rents you must have a proper rental agreement between you and your company, otherwise the revenue could seek to treat the rental payments as part of your salary from the company.
2. The rents that you charge for your home office must be charged on a commercial basis. It may be sensible to have a formal valuation undertaken.
3. The rental agreement should state that the office space at home is only available for fixed periods each day. This is necessary to observe the non-exclusive principle. Without this you could jeopardise your principal private residence exemption for capital gains tax purposes.
4. If you have a mortgage, you may need to check with your lender before entering into such an arrangement
Click here for a call back from our office regarding this article. Back to top
VAT Voluntary registration charity shops
For VAT purposes income from sales in a charity shop are zero rated. if a smaller charity has shop sales under the present VAT registration limit, presently £67,000, it may consider the hassle of voluntary registration to be unnecessary.
This may not necessarily be the best course of action.
Presumably the charity will be paying rents for the use of the shop. It is likely that the landlord will have opted to add VAT to the rent charged. If so the charity will presently be absorbing this VAT as part of its costs.
The solution may be for the charity trustees to register on a voluntary basis, for VAT.
If this is done there will be no VAT to pay on the shop sales, as stated before these are zero rated; however it would now be possible to recover input tax charged to the charity for overheads specifically related to the shop trade. This could include VAT on rents and other direct overheads, telephone etc.
One final tip for charities who pay VAT on their rents. If your charity is paying rents for a building, or part of a building which is used solely for charitable purposes (other than as an office or shop) the supply from the landlord may be exempt from VAT. Even if your landlord is required by other VAT rules to charge VAT on rents this would be the case. If you have been overcharged as a result you could ask your landlord, if justified, to send you a VAT credit backdated three years!
If you feel that this may apply to your charity please call as we would be happy to negotiate or organise appropriate action on your behalf.
Click here for a call back from our office regarding this article. Back to top
The latest email scam!
Please beware that you may receive an email purporting to be from H M Revenue & Customs offering to send you a tax refund if you provide certain information.
H M Revenue & Customs would never advise you of this type of transaction by email.
If you receive this e-mail please delete it immediately. Any action that you take to follow the link embedded in the e-mail will result in a request for personal information that will be used for fraudulent purposes.
Click here for a call back from our office regarding this article. Back to top
Tax Diary August/September 2008
1 August 2008 - Due date for corporation tax due for the year ended 31 October 2007.
19 August 2008 - PAYE and NIC deductions due for month ended 5 August 2008. (If you pay your tax electronically the due date is 22 August 2008)
19 August 2008 - Filing deadline for the CIS300 monthly return for the month ended 5 August 2008.
19 August 2008 - CIS tax deducted for the month ended 5 August 2008 is payable by today.
1 September 2008 - Due date for corporation tax due for the year ended 30 November 2007.
19 September 2008 - PAYE and NIC deductions due for month ended 5 September 2008. (If you pay your tax electronically the due date is 22 September 2008)
19 September 2008 - Filing deadline for the CIS300 monthly return for the month ended 5 September 2008.
19 September 2008 - CIS tax deducted for the month ended 5 September 2008 is payable by today.
Click here for a call back from our office regarding this article. Back to top
DISCLAIMER - PLEASE NOTE: The ideas shared with you in this email are intended to inform rather than advise. Taxpayers circumstances do vary and if you feel that tax strategies we have outlined may be beneficial it is important that you contact us before implementation. If you do or do not take action as a result of reading this newsletter, before receiving our written endorsement, we will accept no responsibility for any financial loss incurred.
Clifton-Crick Sharp & Co,
40 High Street, Pershore, Worcestershire, WR10 1DP.
Telephone: 01386 561100
Clifton-Crick Sharp & Co is a partnership, Registered for VAT under reference 276 7765 02.
Partners in the firm are members of the Institute of Chartered Accountants of England and Wales (ICAEW).
This body has its headquarters in the UK and its rules of Professional Conduct can be obtained from its web site. Clifton-Crick Sharp & Co are authorised to act as statutory auditors by the ICAEW. . . . - Delete | Edit
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September 2008 : As we near the end of the summer season, or is it the monsoon season, we are including information in the newsletter this month to highlight:
* Changes to PAYE tax codes 7th September 2008
* State Benefits that are tax free
* Two important consequences of the new Annual Investment Allowance, and
* Postal and payment changes.
Our October newsletter will be published on 6 October 2008.
Changes to tax codes
Annual Investment Allowance personal considerations
Tax Diary September/October 2008
State Benefits that are tax free
HMRC further online incentive
Changes to tax codes
For those who have not received the HM Revenue & Customs (HMRC) employers letter we have reproduced below changes to tax codes which need to be made from 7 September 2008.
The changes were introduced to soften the effects on some lower paid persons who were adversely affected by the scrapping of the 10% starting rate band for income tax on 6 April 2008. As well as changes to tax codes you should also have received new tax tables or changes to your payroll software that accommodate the lowering of the basic rate band for income tax purposes; from £36,000 to £34,800.
Changes to Tax Codes:
L codes - Add 60 to the existing code. For example 543L becomes 603L.
T codes - No change unless you receive P6 from tax office.
P,V or Y codes - No change unless you receive P6 from tax office.
A or H codes - These codes are no longer in use, seek advice from HMRC immediately if you are still using codes with these suffixes.
Click here for a call back from our office regarding this article. Back to top
State Benefits that are tax free
Please ensure that you take account of the following notes when you declare benefits on your tax return.
The State Retirement Pension
Your state pension is taxable but do not include either the Winter Fuel Payment or the Christmas Bonus as both of these latter payments are tax-free.
Incapacity Benefit (IB)
* Short term IB paid at the lower rates is not taxable for the first 28 weeks, after 28 weeks it becomes taxable.
* Short term IB paid at the higher rates is taxable.
* Long term IB paid at the higher rates is taxable unless benefit commenced before 13 April 1995.
The new Employment and Support Allowance
This new benefit is being introduced from October 2008. It will replace the existing Incapacity Benefit and Income Support for all new claimants.
* If the payment of this allowance is contribution based it will be taxable.
* If the payment is income based it will be tax-free.
Click here for a call back from our office regarding this article. Back to top
Annual Investment Allowance personal considerations
From the 6 April 2008 sole traders and partners can claim up to £50,000 a year as a direct write off against their profits if they invest in certain qualifying assets; plant and equipment, vans and so on. Small and medium sized companies can also claim (from 1 April 2008). This article alerts individuals claiming the allowance of two other matters they should consider before making a claim.
First the good news!
Tax credits
If the claim you make reduces your income sufficiently you may be eligible for tax credits.
The problem is that until the current tax year's earnings are quantified, you will not know for certain that you are eligible to claim - a pity as you can only back date claims for three months!
A possible solution may be to make a protective tax credit claim now. Your initial claim may show £nil but when adjusted for your actual post AIA claim the actual claim achieved may be much higher.
And now the bad news!
Mortgage applications
Many lenders now ask for taxable income rather than trading profits when they consider if you are eligible for a loan. If your trading profits of £50,000 are covered by an AIA claim of £50,000, zero income is not going to qualify for much of a loan. Hopefully lenders will take into account the reason for the dip in your taxable income - but some may not!
Click here for a call back from our office regarding this article. Back to top
HMRC further online incentive
From 1 October 2008 HMRC will no longer send taxpayers a postage paid envelope to use when paying their tax or filing/paying their VAT returns.
This apparently is a signal to us all to make returns and payments online.
To ease the payment process HMRC are also about to make it easier to pay our tax by allowing us to use our credit card. Legislation has just been passed that will allow them to recover the credit card charges. HMRC will charge you 0.91% for the privilege.
Click here for a call back from our office regarding this article. Back to top
Tax Diary September/October 2008
1 September 2008 - Due date for corporation tax due for the year ended 30 November 2007.
19 September 2008 - PAYE and NIC deductions due for month ended 5 September 2008. (If you pay your tax electronically the due date is 22 September 2008)
19 September 2008 - Filing deadline for the CIS300 monthly return for the month ended 5 September 2008.
19 September 2008 - CIS tax deducted for the month ended 5 September 2008 is payable by today.
1 October 2008 - Due date for corporation tax due for the year ended 31 December 2007.
19 October 2008 - PAYE and NIC deductions due for month ended 5 October 2008. (If you pay your tax electronically the due date is 22 October 2008)
19 October 2008 - Filing deadline for the CIS300 monthly return for the month ended 5 October 2008.
19 October 2008 - CIS tax deducted for the month ended 5 October 2008 is payable by today.
Click here for a call back from our office regarding this article. Back to top
DISCLAIMER - PLEASE NOTE: The ideas shared with you in this email are intended to inform rather than advise. Taxpayers circumstances do vary and if you feel that tax strategies we have outlined may be beneficial it is important that you contact us before implementation. If you do or do not take action as a result of reading this newsletter, before receiving our written endorsement, we will accept no responsibility for any financial loss incurred.
Clifton-Crick Sharp & Co,
40 High Street, Pershore, Worcestershire, WR10 1DP.
Telephone: 01386 561100
Clifton-Crick Sharp & Co is a partnership, Registered for VAT under reference 276 7765 02.
Partners in the firm are members of the Institute of Chartered Accountants of England and Wales (ICAEW).
This body has its headquarters in the UK and its rules of Professional Conduct can be obtained from its web site. Clifton-Crick Sharp & Co are authorised to act as statutory auditors by the ICAEW. . . . - Delete | Edit
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: The newsletter this month includes an update on the new H M Revenue & Customs powers; the effect of charging rents and claiming the new CGT entrepreneurs' relief; new filing details for limited companies and limited liability partnerships, and finally new mileage rates effective from 1 July 2008.
Our next newsletter will be published 5th August 2008.
HM Revenue & Customs' new powers!
Companies House filing and other changes
Tax Diary July/August 2008
Selling business property previously rented
Changes to Fuel Rates from 1 July 2008
HM Revenue & Customs' new powers!
The Finance Act 2008 brings together a number of issues that are going to affect your future relationship with H M Revenue & Customs.
In the past regular visits have been restricted to a VAT audit and possibly a payroll check. Additionally inspectors may have picked up on areas of concern in your annual tax return and launched a formal aspect, or full enquiry into your affairs.
The Finance Act 2008 takes this whole process to a new level!
In future you will be penalised if HMR&C believe you have not taken reasonable care in preparing any information (accounting or otherwise) that underpins any return made to them. It is likely that any under-declared tax that is discovered will be subject to a penalty approaching 30%, and if HMR&C can prove negligence or fraud this could rise to 100%.
The way in which these errors will be discovered are set out in changes to HMR&C's legal powers to investigate your returns. It is envisaged that an officer of HMR&C might begin a compliance check in respect of any of the relevant taxes for one or more of a number of purposes. These include checking that:
* a tax return, amendment to a return or claim is correct;
* statutory record keeping requirements are being met;
* tax has not been underpaid or over-claimed; or
* any issues concerning possible tax avoidance are considered.
Accordingly you can expect that future visits by tax officers will take an interest in the care that has been taken to keep proper accounting records. In particular how these records affect your VAT and payroll returns.
Access to information.
HMRC have included changes to the law in the Finance Bill 2008 that would give them rights regarding access to records that underpin your returns.
Accordingly there is to be no right to appeal against HMRC seeing records.
Another interesting development recognises the use of computers in storing relevant data. HMRC are quoted as saying:
"An authorised person may, at any reasonable time, obtain access to, and inspect and check the operation of, any computer and any associated apparatus or material which is or has been used in connection with a relevant document."
This would provide officers of HMRC access to any computer which has been used in connection with the accounting records (including supporting documents) required of the taxpayer. This is a new development, as normally taxpayers would expect HMRC to have access to the records themselves, but not the computers on which the records have been prepared or maintained. The practical implications of this are significant.
You may want to ensure that no critical business information is kept on the same computer as the accounting records, so that risk of breach of confidentiality, or even business disruption, is kept to a minimum should HMRC require access to the computer during the course of an enquiry.
Visits will be made in-year to check that the record keeping provisions are being complied with during the accounting period, and given the significant concern expressed about the quality of accounting records by HMRC and the impact on tax take, this is likely to be the main HMRC compliance contact that small businesses will have in the coming years.
What to do?
For most businesses the new rules will have effect for accounting years ending 31 March 2009. Therefore the records that you are presently updating for this period of account may be open to inspection. Can we suggest you contact us if you are interested in a formal review of your accounting and related administration systems, in order to minimise any possible financial consequences of future HMR&C visits.
Click here for a call back from our office regarding this article. Back to top
Selling business property previously rented
Many business owners have bought commercial property that has been fully or partly occupied at various times by their trading concerns, and rent may have been charged for the use of the property; either the property owner has been paid rent by his business, or by other third parties.
This article discusses the way in which the new capital gains tax rules apply to the disposal of these properties on or after 6 April 2008.
As you may remember, all taxable capital gains are now subject to a flat 18% tax charge. There is one notable exception. If a disposal qualifies as the sale of a business asset you may be able to claim entrepreneurs' relief. If you can claim, the first £1m of qualifying lifetime disposals are subject to tax at the reduced rate of 10%. Generally speaking the disposal of a business property should qualify for entrepreneurs' relief as long as it is sold in conjunction with the sale or cessation of the business, or within 3 years of that date.
Obviously, if you have purchased a property for the purposes of running your business you may feel that this relief will be available to you when you sell the property. Unfortunately the position of certain property owners, particularly those who have charged rent to their business, may not be so straightforward.
The issues that affect the availability of entrepreneurs' relief when commercial property has been rented to a business, are complex and certainly beyond the scope of this article to fully explore. However, we have highlighted below the fundamental difference between a disposal by a sole trader and a disposal by a partner or company shareholder.
1. Sole traders are treated differently to partners and owners of limited companies. If you are a sole trader there would be no commercial or tax purpose in charging your business rent for the use of your property - both property and business are in your name. There could be circumstances where part of the property has been let to a third party. However as long as part of the property is in use by the owner's business when the property is sold, a claim to entrepreneurs' relief should be effective; at least to some extent.
2. Partnerships and limited companies. If a partner or shareholder has purchased a property and made this available to the business for a rental payment, the CGT position on disposal is more complex. If rent has been charged by the owner to the partnership or company, a claim for entrepreneurs' relief on sale may be precluded.
A final point. Relevant legislation has not yet completed its passage through Parliament. The Treasury are aware that a sale of a business property prior to 6 April 2008, that would have qualified for taper relief, may not now qualify for entrepreneurs' relief; purely due to the rental payments issue. There is therefore a possibility that there may be some relaxation of the rules in any amended legislation.
If you are contemplating a sale of this type of property please contact us before completing the sale in order that we can help you organise contracts in the most tax efficient way.
Click here for a call back from our office regarding this article. Back to top
Companies House filing and other changes
Filing deadlines:
Companies with accounting periods beginning on or after the 6 April 2008 should note the following changes to the filing deadlines with Companies House.
1. Private companies and LLPs - the delivery deadline has been reduced by one month from 10 to 9 months.
2. Public companies - the delivery deadline has been reduced by one month from 7 to 6 months.
Consequential changes include:
* Full calendar months for filing periods have been introduced. Where the accounting period ends on a month end date the accounts filing period will end on a month end date. (Except for the first accounting period)
* Qualifying companies can still file abbreviated accounts.
Late filing penalties, private companies:
(Penalties for public companies are shown in brackets)
The penalties shown below apply to late filing of accounts on or after 1 February 2009.
* Not more than 1 month late, penalty £150 (£750)
* More than 1 month but not more than 3 months late, £375 (£1500)
* More than 3 months but not more than 6 months late, £750 (£3000)
* More than 6 months late, £1500 (£7500)
If company fails to file on time for two successive years, the penalties are doubled in the second year.
Company secretary
From 6 April 2008 private companies can chose whether they wish to have a company secretary or not.
If you decide to dispense with a company secretary's appointment you will need to:
* Notify Companies House using the appropriate form.
* Amend the company's articles of association. (Only necessary if the articles specifically require that company has a secretary.)
A company can now have a sole director and no company secretary.
Please note that from 1 October 2008, if you do keep your company secretary, they will be able to file a service address for the public record.
Click here for a call back from our office regarding this article. Back to top
Changes to Fuel Rates from 1 July 2008
From 1 July 2008 the Revenue have published new mileage rates that company car users can use to calculate the fuel cost of running their vehicles for private purposes. If this private element is repaid to employers the employees will avoid the penal car fuel benefit charge. The new rates are:
Engine size:
* 1400cc or less: petrol 12p, diesel 13p, LPG 7p.
* 1401cc to 2000cc: petrol 15p, diesel 13p, LPG 9p.
* Over 2000cc: petrol 21p, diesel 17p, LPG 13p.
Employers can also use these rates to calculate the VAT input tax on fuel included in staff mileage claims - employers will need to retain fuel receipts from staff to prove the fuel was purchased. (Obviously, it is unlikely that staff will have receipts that exactly match the fuel element on their claim forms. Receipts should cover the same time period and be sufficient to cover the VAT claimed.)
Click here for a call back from our office regarding this article. Back to top
Tax Diary July/August 2008
1 July 2008 - Due date for corporation tax due for the year ended 30 September 2007.
6 July 2008 - Complete and submit forms P11D return of benefits and expenses and P11D(b) return of Class 1A NIC's.
6 July 2008 - Deadline for submission of new Tax Credit application for 2008-2009, if you want to secure a full years claim.
19 July 2008 - Pay Class 1A NIC's (by 22 July 2008 if paid electronically).
19 July 2008 - PAYE and NIC deductions due for month ended 5 July 2008. (If you pay your tax electronically the due date is 22 July 2008)
19 July 2008 - Filing deadline for the CIS300 monthly return for the month ended 5 July 2008.
19 July 2008 - CIS tax deducted for the month ended 5 July 2008 is payable by today.
1 August 2008 - Due date for corporation tax due for the year ended 31 October 2007.
19 August 2008 - PAYE and NIC deductions due for month ended 5 August 2008. (If you pay your tax electronically the due date is 22 August 2008)
19 August 2008 - Filing deadline for the CIS300 monthly return for the month ended 5 August 2008.
19 August 2008 - CIS tax deducted for the month ended 5 August 2008 is payable by today.
Click here for a call back from our office regarding this article. Back to top
DISCLAIMER - PLEASE NOTE: The ideas shared with you in this email are intended to inform rather than advise. Taxpayers circumstances do vary and if you feel that tax strategies we have outlined may be beneficial it is important that you contact us before implementation. If you do or do not take action as a result of reading this newsletter, before receiving our written endorsement, we will accept no responsibility for any financial loss incurred.
Clifton-Crick Sharp & Co,
40 High Street, Pershore, Worcestershire, WR10 1DP.
Telephone: 01386 561100
Clifton-Crick Sharp & Co is a partnership, Registered for VAT under reference 276 7765 02.
Partners in the firm are members of the Institute of Chartered Accountants of England and Wales (ICAEW).
This body has its headquarters in the UK and its rules of Professional Conduct can be obtained from its web site. Clifton-Crick Sharp & Co are authorised to act as statutory auditors by the ICAEW. . . . - Delete | Edit
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