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Happy New Year...
This, our first newsletter for 2010, includes a few ideas for
self employed businesses in the run down to the end of the current
tax year on 5 April 2010; two updates from HMRC on tax claims
and penalties for late payment of PAYE; a few notes on the change
in VAT to 17.5% on 1 January and finally your options if you
are considering making charitable donations this year.
As all our self assessed clients will be aware, the deadline
for filing your 2009 SA returns is the end of this month. If
by chance you have still not sent in all the information we
need to complete your return, now would be a good time to respond
please - time is running out. All returns filed electronically
after the 31 January, apart from those where the tax is overpaid,
will be penalised!
Our next newsletter will be published on 4 February 2010.
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Year end tax planning April 2010
There are a number of year end tax planning issues that it
may be productive for you to look at before the end of the current
tax year 5 April 2010 (individuals and self employed).
The list we have added to this article is not comprehensive
- if you would like to discuss your individual circumstances,
please contact us as soon as possible as action may need to
be taken before the end of the tax year.
Individuals
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Have you maximised your ISA investments this year?
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Have you maximised your pension contributions?
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If possible have you utilised your capital gains tax personal
exemption? £10,100 2009 -10.
-
If your employer still pays for the private fuel used in
your company car you can effectively avoid the car fuel
benefit charge if you repay your employer for the private
fuel before the end of the tax year. It may be worth crunching the
numbers as the tax benefit in kind is expensive and the
private fuel refund may be less.
-
For Inheritance Tax purposes each person can give £250
a year to any number of recipients, as well as £3,000
annually over and above that. They can also make regular
gifts out of their income (not capital) that should fall
to be exempt.
-
If you are married or in a Civil Partnership and one partner/spouse
has a much lower level of earned income, consider transferring
income producing assets to the lower income earner. With
income tax rates due to rise to 50% next year savings could
be significant.
Self Employed
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If you are carrying stock on your balance sheet at cost
and it is now worth less than cost, you could revalue, reduce
the stock to its current realisable value. This will reduce
your trading profit in the current year or increase your
losses; it will also reduce your tax bill or increase any
loss relief carry backs.
-
If you are about to invest in new vehicles or equipment
you should work out the most effective purchase date. Should
you commit to the expenditure before the tax year end or
afterwards? If your trading year end is 31 March this could
make a significant difference. It may help you avoid wasting
personal tax allowances or maximise the benefits of loss
relief carry back.
-
If you are considering the sale of a business or business
property which will create a chargeable gain for capital
gains tax purposes you might be advised to delay contracts
until after 5 April 2010. Any tax payable on gains
made on or after 6 April 2010 will not be due for payment
until 31 January 2012. Tax payable on gains on or before
5 April 2010 will be due for payment a year earlier, 31
January 2011. At present CGT rates are still 18% with the
generous Entrepreneurs' Relief of 10% on sales of qualifying
business assets - up to a lifetime maximum of £1m
chargeable gains. In his recent Pre-Budget Report the Chancellor
made no mention of increases in the 18% rate 2010. However,
there is always the possibility that CGT rates may be increased
in the 2010 Budget....
-
Consider your pension options. Could you make additional
contributions before 6 April to reduce your higher
rate tax this year? But beware of the anti forestalling
provisions if your income is more than £130,000.
-
Are you able to bring forward revenue expenditure, repairs
to equipment, redecorating the office, that will help you
to reduce profits or increase losses for carry back?
As indicated in the opening to this article the ideas outlined
above are by no means all the options you may have to minimise
the amount of tax you pay this year. The key is to bring your
current management accounts up to date and weigh the various
options. Please call if we can help.
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HMRC updates
Tax repayment deadlines
HMRC have recently published the deadline dates for making
claims for a repayment of tax. If you have outstanding claims
which need to be sorted out make sure they are resolved quickly.
The deadlines for tax years 2003/04 and onwards are:
within self assessment
2003/04 - 31 January 2010
2004/05 - 31 March 2010
2005/06 - 5 April 2010
2006/07 - 5 April 2011
2007/08 - 5 April 2012
2008/09 - 5 April 2013
Filing payroll forms P45 and P46.
Larger employers, 50 or more employees, already have to file
these forms online. From April 2011 all employers will have
to file starter and leaver forms online (P45 and P46).
PAYE/NIC New Late payment penalties from 6 April
2010
All employers will be subject to the new late payment penalties
from May 2010. This includes payments of:
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Tax
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National Insurance Contributions (Class 1, 1a,)
-
Construction Industry Scheme deductions
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Student Loan deductions.
The penalties payable will be calculated as follows on the
amount of the late monthly or quarterly payment:
-
On the first late payment in a tax year - no penalty
-
Between 2 and 4 late payments a year - 1% (ignoring the
first late payment in the year)
-
Between 5 and 7 late payments a year - 2% (ignoring the
first late payment in the year)
-
Between 8 and 10 late payments a year - 3% (ignoring the
first late payment in the year)
HMRC also have powers to charge penalties at 5% if an amount
is outstanding for 6 months and again at 12 months.
Interestingly, if you can argue that you have a reasonable
excuse for being late in your payment HMRC may waive the penalty.
HMRC define reasonable excuse as something:
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unusual
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that you could not reasonably have known would happen,
and which
-
you could not do anything to prevent.
If you do experience difficulties in keeping your PAYE payments
up to date you can still ring the Business Payment Support Service
on 0845 302 1435, or call us and we will negotiate for you.
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VAT Rate change 1 January 2010
On the 1 January 2010 the VAT basic rate returned to 17.5%.
For many traders who pay VAT on the difference between what
they charge on invoiced sales and pay on invoiced purchases
and services, changes to accounting software should be fairly
straight forward. The more well known software providers should
have issued clear guidelines.
However if your VAT quarterly returns end on 31 January or
29 February 2010 they will include VAT collected and paid at
both 15% and 17.5%. Care should be taken especially if you use
Cash Accounting or the Flat Rate Scheme. Also take care to access
the new flat rates which will apply from 1 January 2010; not
all the rates will have returned to the same level set at 1
December 2008! You can access the new rates on the HMRC web
site at:
http://www.hmrc.gov.uk/vat/start/schemes/flat-rate.htm#5a
If you are concerned about the changes you need to make and
need help with the first two or three VAT returns in 2010 please
call. For those clients who already use our services to produce
their VAT returns we will make sure all relevant changes are
taken into account.
Readers may also find the following notes useful:
-
The new VAT fraction to use if an invoice includes VAT
and you want to know the VAT figure within the charge, is
7/47 with a VAT rate of 17.5%. For example to calculate
the VAT in a VAT inclusive price of £235 multiple
the amount by 7/47, (£235 x 7/47 = £35).
-
If you want to increase prices to pass on the VAT increase
to customers (e.g. if you are a retailer), multiply the
previous VAT inclusive price by 47/46. For example
- £115 (old price) x 47/46 = £117.50 (new price).
There are also complications if you make a supply of services
which span the 31 December 2009, or if you issue a credit note
after the 1 January 2010 for goods or services supplied before
that date. Please call for more information
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Charitable giving - the options
There are now a number of options to consider when giving or
gifting money or other assets to charities. In a nut shell they
are:
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Gift Aid - if you make a cash donation to a charity and
sign its gift aid declaration form the amount of your
gift is deemed to be received by the charity net of basic
rate tax. The charity can subsequently claim back the deemed
tax credit and significantly increase the value of the gift.
To qualify your donation must be paid out of your taxed
income. If you don't pay tax you cannot make a Gift Aid
donation. If you are a higher rate tax payer you can claim
tax relief at the marginal rate, currently 40%-20%, or 20%.
-
Giving through your pay or pension - effectively the donation
will be deducted from your gross pay or pension providing
you with full tax relief.
-
Giving assets to charities - if you give UK land, property
or shares listed or traded on a recognised stock exchange,
to a charity you can claim income tax relief. In most cases
these transfers will also be free of capital gains tax charge.
-
Leaving gifts in your will - the amount of the gift will
be excluded from the valuation of your estate for inheritance
tax purposes.
-
Gift via your self assessment tax return - this is a very
cost effective way to gift donations to a charity. You give
permission on your return for a tax refund to be made direct
to the charity. When HMRC make the payment they add on the
tax credit and a 3p supplement. In this way the charity
has no additional administrative cost to reclaim the Gift
Aid tax.
-
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Tax Diary/January/ February 2010
1 January 2010 - Due date for corporation
tax payable for the year ended 31 March 2009.
19 January 2010 - PAYE and NIC deductions
due for month ended 5 January 2010. (If you pay your tax
electronically the due date is 22 January 2010)
19 January 2010 - Filing deadline for
the CIS300 monthly return for the month ended 5 January
2010
19 January 2010 - CIS tax deducted for
the month ended 5 January 2010 is payable by today.
31 January 2010 - Last day for electronic
filing of Self Assessment returns for 2009
31 January 2010 - Due date for payment
of any balance of self assessment liability for the tax
year ending 5 April 2009, plus any payment on account due
for the tax year ending 5 April 2010.
1 February 2010 - Due date for corporation
tax payable for the year ended 30 April 2009.
19 February 2010 - PAYE and NIC deductions
due for month ended 5 February 2010. (If you pay your tax
electronically the due date is 22 February 2010)
19 February 2010 - Filing deadline for
the CIS300 monthly return for the month ended 5 February
2010
19 February 2010 - CIS tax deducted for
the month ended 5 February 2010 is payable by today.
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. |
