To keep you informed with any details both within the Joseph Lawrence company and externally through changes in legislation or other factors, we have set up this news page.
CIS PENALTIES
Contractors and sub contractors
Have you been charged a disproportionate penalty for late submission of CIS returns? Has your accountant told you there are no grounds for appeal? Some have been overcharged thousands. Contact us now to get your money back.
HMRC targets small business records keeping
Inspections could raise £600m
Plans by HM Revenue & Customs (HMRC) to investigate small and medium businesses (SMEs) who fail to keep trading records properly could bring in £600m in fines.
HMRC is to target 20,000 SMEs by inspecting records going back six years to see if they are ‘adequate’ and ‘accurate’. The penalty for poor records keeping can be up to £3,000.
With HMRC expecting to visit 20,000 businesses per year, the exercise could raise £600m over the next four years.
Please contact us for further information or our assistance to protect your position.
Research and Development (R & D) tax credit
If your business is set up as a limited company, and therefore subject to corporation tax, it is potentially able to claim R & D Relief. Additionally, if your company is categorised as small or medium sized, you can convert an R & D Relief claim into a tax credit, a refund.
For small and medium sized businesses the scheme offers high rates of relief. From 1 August 2008 the tax relief on allowable R & D costs is 175%. Consequently, for every £100 of qualifying costs, your company could claim £175 against its profits.
If an R & D Relief claim is considerable the claim may create tax losses. If these losses cannot be utilised effectively it may be possible to surrender the R & D Relief element of the losses for a tax credit. Presently, for small and medium sized businesses, this is 14% of the R & D Relief. To receive a tax credit you must be able to demonstrate that your company can continue to trade without the benefit of the claim - its accounts must be prepared on a going concern basis.
Larger companies
If your business is classified as a larger concern the relief is limited to 130% of allowable expenditure and there is no provision to sacrifice R & D relief for a tax credit.
What projects are likely to qualify?
To qualify a project will need to incorporate an advance in science or technology - it is not sufficient to claim that a product is commercially innovative. Here is an extract from HMRC's web site that outlines the criteria:
"Rather than stating the name of the product, process, functionality, etc, being developed you should consider what scientific or technological advance is being sought. This focuses attention on the project's aim for an advance, which is the key issue in judging whether R&D for tax purposes is being undertaken.
Science does not include work in the arts, humanities and social sciences (including economics).
It's not enough that a product is commercially innovative. You can't claim in respect of projects to develop innovative business products or services that don't incorporate any advance in science or technology."
Making a claim
If your business has been, or intends to be, involved in R & D how do you make a claim? The short answer is make an application but of course the devil is in the detail. If you believe you may benefit from this relief please call to organise an initial fact find.
New restrictions to pensions tax relief
A consultation with the Government is still ongoing that may eventually mean you are not required to cash in your pension fund for an annuity when you reach age 75.
The purpose of this article is to warn readers of new restrictions to the amount of tax relief you can achieve from making pension contributions. The changes were announced by the Treasury Secretary on the 14 October 2010.
There are two principal changes:
1. From April 2011 the annual allowance for tax-privileged pension saving will be reduced from £255,000 to £50,000. This is a significant reduction that is targeted to affect 100,000 pension savers, 80% of whom will have incomes over £100,000.
Tax payers who are likely to be affected should revisit their personal tax planning for 2011-12 and beyond with some urgency. There may still be other planning opportunities that can be utilised to minimise the impact of loss of personal allowances and the 50% income tax charge.
2. From April 2012 the lifetime allowance will be reduced from £1.8m to £1.5m.
Apparently there will be provisions introduced to protect the pensions savings of individuals whose contributions "spike" in one year by enabling them to utilise unused allowances from previous years.
These two proposals are the outcome of a consultation on the overall simplification of the tax rules that apply to pension contributions. It is likely that formal legislation will be included in the 2011 Finance Bill.
Training costs
Any cost associated with the improvement of skills that are used in your business or employment are potentially tax deductible - but not always!
Employees
It is much more difficult for employees to justify a claim for training costs that they meet personally and claim for on their tax return. HM Revenue & Customs would look hard at the circumstances. Claimants will need to prove that the training costs were incurred wholly and exclusively in the performance of the duties of the employment. In other words that there is no personal value to the employee and the particular job cannot be performed without incurring the expenditure. In practice this is almost impossible to prove.
Employers
The position of the employer is much clearer. Any expenditure on work-related training should be allowed for tax purposes.
Salary sacrifice solution
A solution may be a salary sacrifice by the employee in favour of the provision by the employer of work related training. The exchange of salary for training creates no benefit in kind complications and as the exemption applies for tax and NIC purposes, both parties should enjoy NIC savings.
Self-employed
Self-employed traders will need to satisfy the rules for deduction of costs, namely, that they are incurred wholly and exclusively for the purposes of the trade or profession. This is an easier test to satisfy than that required for employees although there can be issues if brand new skills or qualifications are involved.
Do you need to complete a Tax Return?
The recent press coverage of taxpayers who may be receiving unexpected tax refunds or tax demands has created yet further anxieties about the integrity of our tax system. The refunds and demands are due to HMRC errors in tax codings and other issues for the two tax years ending 5 April 2009 and 5 April 2010. In the main, tax payers who are not required to complete a self-assessment tax return will be affected, although not all tax payers in this category will be included.
If you complete a self-assessment tax return your annual tax position is reconciled as part of the filing process.
Certainly, if you do receive an unexpected demand you should check HMRC's calculations - if you have multiple employments or other complicated matters that affect your tax position you could well benefit from a consultation with a tax professional. Please call if you would like our help.
If you don't presently complete a tax return we have included a list below of tax payers who should be submitting a return. Again, if you would like our help in organising registration, please call.
Who needs to complete a tax return?
The most common reasons for needing to fill in a tax return are listed below:
• You're self-employed
• Company directors, ministers, Lloyd's names or members
• Income above a certain level from savings, investment or property - income from savings and investments of £10,000 or more; income from untaxed savings and investments of £2,500 or more; income from property (before deducting allowable expenses) of £10,000 or more; income from property (after deducting allowable expenses) of £2,500 or more; annual trust or settlement income on which tax is still due (even if you’re only treated as receiving this income); income from the estate of a deceased person on which tax is still due
• If you receive a reduced age-related allowance because you're 65 but your income is over a certain level (£22,900 for the 2010-11 tax year), you'll need to complete a tax return. But there are exceptions, for example if your tax affairs are very straightforward.
• Income from overseas
• Your annual income is £100,000 or more
• You need to claim certain expenses or reliefs
• You owe tax and HMRC can't collect it through your tax code, or you prefer to pay direct
• You have Capital Gains Tax to pay
• You've lived or worked abroad or aren't domiciled in the UK
• You're a trustee
National Insurance holiday for new businesses
The new regional National Insurance Contributions holiday came into effect on 6 September 2010.
New businesses set up outside London, the South East and East of England are now eligible for a NIC holiday of up to £5,000 for each new employee they take on in the first year of their business. The scheme will last from 22 June 2010 to 5 September 2013.
You can claim if your new business started after the last Budget date, 22 June 2010.
The following conditions apply:
1. Holiday applies to the first 10 employees taken on in the first year of the new business.
2. The holiday period for each employee will last for the first year of his or her employment or a shorter period to 5 September 2013 when the scheme ends.
3. The maximum saving of NIC contributions for each employee will be limited to £5,000.
4. The NIC holiday is subject to a formal application to HMRC when you engage your first employee.
5. There are anti-avoidance provisions to prevent existing businesses from reorganising their affairs to qualify for the relief.
6. The NIC savings are limited to secondary employer's contributions.
7. The principal place of business must not be in an excluded area (see full list below)
If you think you may be eligible for this new relief and would like our help applying to HMRC please call.
Excluded regions:
• Greater London
• Eastern Region comprising; the counties of Bedford, Cambridgeshire, Central Bedfordshire, Essex, Hertfordshire, Norfolk and Suffolk. The non-metropolitan districts of Luton, Peterborough, Southend-on-Sea and Thurrock.
• South East Region comprising; the counties of Buckinghamshire, East Sussex, Hampshire, the Isle of Wight, Kent, Oxfordshire, Surrey and West Sussex. The non-metropolitan districts of Bracknell Forest, Brighton and Hove, Medway, Milton Keynes, Portsmouth, Reading, Slough, Southampton, West Berkshire. Windsor and Maidenhead and Wokingham.
HMRC – Time to pay rejections on the rise
The previous Government's support in giving businesses time to pay their debts to HMRC via the Business Payment Support Service has been widely acknowledged as having provided a lifeline to many businesses. Continued support was assured in their March 2010 Budget although from the increasing number of referrals we have seen in recent weeks there are clear signs that HMRC are taking a stricter view when dealing with outstanding debt. This experience has been supported by information released by HMRC showing there has indeed been an increase in the number of applications being rejected with the rate having risen in the three months to 31 March 2010 compared to 5.3% in the first quarter of last year.
Whilst no formal comment on the continuance of the BPSS has been made by the new Coalition Government, pressure on it to cut the national deficit will inevitably lead to greater scrutiny of all applications made under the scheme. Rejection rates are likely to continue to increase as HMRC will at best apply more stringent criteria when assessing which applications for time to pay arrangements to support. As for existing arrangements in place, breaches of such agreements are likely to lead to support being withdrawn.
As long as the BPSS remains in place it will remain a valuable source of funds for companies able to demonstrate the existence of a viable business. However, businesses that are relying upon rolling over their deferrals are taking immense risk. Alternative funding options need to be explored and be put in place before any deferral period ends. We are seeing an increasing number of businesses following this course. As is always the case the sooner matters are addressed the more likely a distressed situation can be avoided.
If you need assistance in negotiating a payment plan with HMRC contact us today for our professional help to secure a feasible solution for you.
HMRC and Distraint – The way forward
Distraint is a process whereby HMRC may take some of your possessions for sale at auction towards settlement of an unpaid tax bill. The collector has the legal power to do this without any court order.
Distraint is a very ancient course of action, involving many unfamiliar terms like 'seizure', which can sound quite frightening. There will be a very short period of just five days between the time that the collector visits, and the time that your goods are removed for sale. An item of great importance to you may fetch only a small fraction of its true value at an auction.
So threats of distraint should not be ignored, but it may be reassuring to know that:
• the collector should act within the law, and you need not fear the illegal behaviour that is sometimes reported of bailiffs who carry out distraint for other debts.
• the collector cannot force his way into your premises without a court order, and such orders are very unusual, and
• in practice only a tiny number of distraint visits lead to sales at auction (about one visit in a thousand).
Contact us today to for further professional guidance.
HMRC and Statutory Demands
If HMRC has served a Statutory Demand on you for unpaid taxes be aware that:
• you have only 18 days to apply to the court to have the demand set aside, and
• you have only 21 days before HMRC may present a bankruptcy petition.
If you wish to avoid a bankruptcy petition being presented against you, you must pay the debt within 21 days after its service upon you.
However, if this is impossible for you and does not appear fair and reasonable contact us immediately for our assistance to negotiate with HMRC a settlement plan.
Reasonable care
HMRC expects that you take reasonable care in preparing information that underpins entries made on your tax returns. For all returns made for 2009/10 they are entitled to judge the accuracy of your returns based on three criteria:
1. Lack of care
2. Deliberate mis-statement, and
3. Deliberate & concealed mis-statement
If you underpay tax as a result of an incorrectly filed return HMRC are now empowered to charge a penalty which can range up to a maximum of 100% of the additional tax due following an investigation. If HMRC consider that you have taken reasonable care, but they still discover tax has been underpaid, no penalty will be charged.
If you require our services to ensure your tax return is accurate, please contact us today to arrange an appointment.
Trearddur Bay Scorpions
Joseph Lawrence is proud to sponsor the Treadrddur Bay Scorpions under 11's football team for the 2009/10 season and the directors are pictured recently presenting them with their new kit.
2011 Tax Diary
1 January 2011 Due date for corporation tax payable for the year ended 31 March 2010.
19 January 2011 PAYE and NIC deductions due for month ended 5 January 2011.
19 January 2011 Filing deadline for the CIS300 monthly return for the month ended 5 January 2011.
19 January 2011 CIS tax deducted for the month ended 5 January 2011 is payable by today.
31 January 2011 Last day for electronic filing of Self-Assessment returns for 2010.
31 January 2011 Due date for payment of any balance of self-assessment liability for the tax year ending 5 April 2010, plus any payment on account due for the tax year ending 5 April 2011.
1 February 2011 Due date for corporation tax payable for the year ended 30 April 2010.
19 February 2011 PAYE and NIC deductions due for month ended 5 February 2011.
19 February 2011 Filing deadline for the CIS300 monthly return for the month ended 5 February 2011.
19 February 2011 CIS tax deducted for the month ended 5 February 2011 is payable by today.
1 March 2011 Due date for corporation tax due for the year ended 31 May 2010.
19 March 2011 PAYE and NIC deductions due for month ended 5 March 2011.
19 March 2011 Filing deadline for the CIS300 monthly return for the month ended 5 March 2011.
19 March 2011 CIS tax deducted for the month ended 5 March 2011 is payable by today.
1 April 2011 Due date for corporation tax due for the year ended 30 June 2010.
19 April 2011 PAYE and NIC deductions due for month ended 5 April 2011.
19 April 2011 Filing deadline for the CIS300 monthly return for the month ended 5 April 2011.
19 April 2011 CIS tax deducted for the month ended 5 April 2011 is payable by today.
1 May 2011 - Due date for corporation tax due for the year ended 31 July 2010.
19 May 2011 - PAYE and NIC deductions due for month ended 5 May 2011.
19 May 2011 - Filing deadline for the CIS300 monthly return for the month ended 5 May 2011.
19 May 2011 - CIS tax deducted for the month ended 5 May 2011 is payable by today.
19 May 2011 - The payroll forms P35 and P14s must be filed by this date.
31 May 2011 - Ensure all employees have been given their P60s.
1 June 2011 - Due date for corporation tax due for the year ended 31 August 2010.
19 June 2011- PAYE and NIC deductions due for month ended 5 June 2011.
19 June 2011 - Filing deadline for the CIS300 monthly return for the month ended 5 June 2011.
19 June 2011 - CIS tax deducted for the month ended 5 June 2011 is payable by today.
1 July 2011 - Due date for corporation tax due for the year ended 30 September 2010.
6 July 2011 - Complete and submit forms P11D return of benefits and expenses and P11D(b) return of Class 1A NICs.
6 July 2011 - Deadline for submission of new Tax Credit application for 2011-2012, if you want to secure a full year's claim.
6 July 2011 - Deadline for submitting form 42 (reporting of transactions in employment related securities).
19 July 2011 - Pay Class 1A NICs.
19 July 2011 - PAYE and NIC deductions due for month ended 5 July 2011.
19 July 2011 - Filing deadline for the CIS300 monthly return for the month ended 5 July 2011.
19 July 2011 - CIS tax deducted for the month ended 5 July 2011 is payable by today.
1 August 2011 - Due date for corporation tax due for the year ended 31 October 2010.
19 August 2011 - PAYE and NIC deductions due for month ended 5 August 2011.
19 August 2011 - Filing deadline for the CIS300 monthly return for the month ended 5 August 2011.
19 August 2011 - CIS tax deducted for the month ended 5 August 2011 is payable by today.
1 September 2011 - Due date for corporation tax due for the year ended 30 November 2010.
19 September 2011 - PAYE and NIC deductions due for month ended 5 September 2011.
19 September 2011 - Filing deadline for the CIS300 monthly return for the month ended 5 September 2011.
19 September 2011 - CIS tax deducted for the month ended 5 September 2011 is payable by today.
1 October 2011 - Due date for corporation tax due for the year ended 31 December 2010.
19 October 2011 - PAYE and NIC deductions due for month ended 5 October 2011.
19 October 2011 - Filing deadline for the CIS300 monthly return for the month ended 5 October 2011.
19 October 2011 - CIS tax deducted for the month ended 5 October 2011 is payable by today.
1 November 2011 - Due date for corporation tax due for the year ended 31 January 2011.
19 November 2011 - PAYE and NIC deductions due for month ended 5 November 2011.
19 November 2011 - Filing deadline for the CIS300 monthly return for the month ended 5 November 2011.
19 November 2011 - CIS tax deducted for the month ended 5 November 2011 is payable by today.
1 December 2011 - Due date for corporation tax due for the year ended 28 February 2011.
19 December 2011 - PAYE and NIC deductions due for month ended 5 December 2011.
19 December 2011 - Filing deadline for the CIS300 monthly return for the month ended 5 December 2011.
19 December 2011 - CIS tax deducted for the month ended 5 December 2011 is payable by today.
30 December 2011 - Deadline for filing 2010-11 self assessment online to include a claim for under payments (under £2,000) be collected via tax code in 2012-13.
New time limits for assessments and claims
The normal time limits for Corporation Tax are decreasing from six years to four years from the end of the accounting period. There is now a new normal four-year time limit for assessments and claims, from 1 April 2010, for Capital Gains Tax, Corporation Tax, Income Tax, PAYE and VAT.
For more information on this please contact us today.
New failure to notify penalty
HM Revenue & Customs is introducing the failure to notify penalty across most taxes when people fail to tell it about a relevant obligation, at the correct time. The new penalty will apply from 1 April 2010 to a company that has not received a notice to file a company tax return and has not told HM revenue & Customs that they are chargeable to tax within twelve months from the end of their accounting period.
For further information, please contact us today.
Publishing details of deliberate defaulters
From 1 April 2010 under strictly controlled circumstances, HM Revenue & Customs can publish the details of people who are penalised for deliberately evading at least £25,000 of tax, if they do not fully cooperate with its investigation.
Should you be interested in more detail on this, please contact us today.
Incorporation
Following recent tax changes the benefits of incorporation have been eroded. Ten points to consider when deciding whether or not to incorporate a business are considered below. Please be aware that this is not an exhaustive list and professional advice should be sought before incorporating as exiting a company can be a taxation minefield.
1. Administration
There is more administration involved in running a limited company, as compared to a sole trade or a partnership. For example the company will need to prepare accounts for the tax authorities and Companies House, as well as submitting an Annual Return. A PAYE scheme will also attract year end returns and returns of director's benefits in kind. The directors will also need to submit personal Self Assessment Tax Returns.
2. Legal
The Company Officers are responsible for their actions as officials of the Company. Under the provisions of the Companies Act 2006 there is no need to appoint a Company Secretary but if you do they will be have legal responsibilities in the same way as directors do.
3. Tax considerations
Will incorporating save you tax and National Insurance? This will normally only be achieved if you are a higher rate tax payer.
4. Remuneration
The normal practice for owner managed Companies is to take low level of remuneration to save tax and national insurance, supplemented by dividends. Other factors should be borne in mind such as the need to maintain income for the purposes of obtaining personal finance or pension purposes.
5. Husband and wife
Is your spouse going to be involved in the business?
6. Motor expenses
Unless only a small business mileage is being undertaken it is not generally tax efficient for owner managed companies to provide directors with company cars. It is generally more tax efficient to claim mileage expenses using the approved mileage rates.
7. Other expenses
Expenses such as office running and travelling costs are deductible against company profits using less stringent rules than is applicable to employees claiming expenses. Overhead costs such as telephone should be paid using accounts in the company's name and not in the name of directors, thus avoiding issues arising with benefits in kind. A company credit card or debit card should be used for company expenses as the reimbursement of amounts paid on personal credit cards will lead to problems with benefits-in-kind.
8. Company vans
Company vans are now taxed at a higher rate than previously because directors and other employees who fall within the scope of benefits in kind are penalised where vans are provided for private use.
9. Property
It is not generally tax efficient to introduce properties into limited companies. Consequently, great care needs to be taken and advice in relation to Value Added Tax, Capital Gains Tax and Inheritance Tax should be sought.
10. IR35
Management Consultants and IT Contractors who incorporate should ensure that they are complying with the requirements of IR35. Contracts should be drawn up which provide for independent working patterns and the ability to provide a substitute. The practical reality should reflect the provisions of the contract. In all cases travel from home to work and travel expenses incurred whilst working away from home will only be allowable for up to two years from the commencement of the contract.
Please contact us for further details.
Travel and subsistence rules
H M Revenue & Customs has introduced new legislation regarding the treatment of subsistence costs for the self-employed.
From 6 April 2009 onwards, a deduction is allowed for any reasonable expenses incurred on food or drink for consumption by the trader at a place to which he travels in the course of carrying on the trade, or while travelling to a place in the course of carrying on the trade, but only if conditions A and B below are met.
• Condition A is that a deduction is available for the associated travelling costs (or, in a case where such costs are not incurred by the trader, a deduction would be available if they were so incurred).
• Condition B is that either:
(i) at the time the expenses on food and drink are incurred, the trade is by its nature itinerant (for example a commercial traveller); or
(ii) the trader does not visit the place more than occasionally in the course of the trade and the travel is undertaken otherwise than as part of a normal pattern of travel in the course of the trade.
The above legislation deals only with food and drink and not with overnight accommodation.
However, in practice, where a business trip necessitates one or more nights away from home (and away from the business base), the hotel accommodation is deductible.
Interpreting the above rules incorrectly could be costly for any business. Please contact us for professional advice.
Changes in PAYE interest charges
Current position: interest is charged on PAYE / NIC paid after the 19 April after the tax year, e.g. for 2009-10 anything paid after 19 April and penalties are charged if annual returns P35 / P14 / P60 are not submitted by 19 May. There are currently no penalties or interest charges if PAYE / NIC due during the year is not paid until 19 April 2010.
New position: starting from 2010-11 penalties will be charged if in year payments are not made on time. This means the practice of some employers of deferring payment of all PAYE / NIC until the end of the year will incur penalties.
Trap: the new régime starts on 5 April 2010 and the first set of penalties will be incurred if month one payments for the period to 5 May are not paid by 19 May. But penalty notices are not being issued until the following April, April 2011 - it seems possible therefore to continue for a year on the basis of "ignorance is bliss" and have a large shock!
Business leadership skills
Instinctively, leadership is associated with power. However, the power to make your business successful does not just lie with the owner. What about the team members who are meeting your customers every day? A great deal of power lies with them. They have the ability to create - or to lose - business through their actions.
Leadership is less about power and more about empowerment. One of the goals of great leadership is to engender a culture in which the team is self-motivated. This means that team members know and understand the goals, their roles and how their actions impact on the success of your business. The team understands the flow of money through your business and the importance of meeting the needs of every single customer.
The best business teams are project driven. This means the leader has to be able to convey their unique vision to the team about where their business is heading and what is needed to get there. Small teams inspired by this vision are given specific projects and encouraged to use their own initiative and enthusiasm to create the agreed outcome.
In this style of leadership, the leaders have to inspire their teams.
Inspirational Leaders have discovered that attracting a team of people to the leader’s vision for the future creates energy and positivity in their team, particularly if the team clearly understands what is in it for them. The Inspirational Leader is a master of communication, a great speaker and listener, who shows the team how they should behave in their own conversations with colleagues and customers. The team is brought together regularly to ensure that everyone is on the same page and concerns are dealt with before they become problems. Systems put in place that facilitate the team’s day-to-day care are achieved while making the business profitable to reward the whole team well. This approach should produce real improvements throughout the business.
Run your business - don't let it run you
One of the most important principles of being a business owner is to run your business and don’t let it run you. To run your business is to create a vision of what is possible, a vision that’s bigger than doing the day-to-day work associated with your skill or trade. To lead your business is to forge a path based on your strengths and to take inventory of your weaknesses so that you can fill in the gaps.
To run your business is to leverage the opportunities that present themselves and to find the resources that you need. To run your business is to become aware of the limiting beliefs that you hold and replace them with beliefs that empower you, motivate you, and propel you forward. To run your business is to own a business and have a balanced life and not have the business run you.
Letting your business run you means:
• You settle for what is and ignore what can be.
• You spend your time doing the day-to-day tasks that you are familiar with and comfortable doing.
You ARE the business. Without your time and energy, the business is nothing.
Being a business owner means taking responsibility for the business you’ve created. It’s easy to be resentful of all the time it takes to run a business. Put one eye on the future, and decide where you want your business to be in one year, five years, ten years, and twenty years. Then put your other eye on what’s happening in the business right now. A business owner can simultaneously hold both the current reality and future possibilities.
Whilst we are professionally qualified to provide you with accountancy advice we are also keen to offer our business advice on areas you had probably never thought of to make your business even more successful and profitable. Contact us now to make an appointment.
Bonuses or dividends v higher salary
If you run your own company and are considering an increase in your salary in 2010-11 you might like to consider the following points:
- From 6 April 2010 if your income is in excess of £100,000 you will start to lose your tax personal allowance, initially this can create a marginal tax rate up to 60%.
- From the same date if your income is over £150,000 you will be subject to the 50% rate of income tax.
Consequently increasing your earnings in 2010-11 may not be a tax effective move if you are a high income earner. Instead you may like to consider paying yourself a bonus in March 2010? You must have a clear and commercially sound reason for a bonus payment. If you were to follow this strategy the bonus would be taxable at the current highest rate, 40% and would have no effect on your current year personal allowance.
There is a timing downside to this arrangement; any tax and NIC due on the bonus would become payable on 19 April 2010 (22 April if you pay electronically) instead of being spread over the year if you settled on a salary increase instead.
Of course, when practical to do so, extra dividends are usually a better option than bonuses. Dividends voted in March 2010 will mean extra higher rate tax due 31 January 2011.
If you are a high income earner and would like to discuss this and other strategies for minimising the impact of the changes coming in the next tax year please get in touch. There are still options we could look at before 6 April 2010.
Is your accountant up to date with technology? Using modern computer systems which offer efficiency savings, clients of Joseph Lawrence will not be caught out by HM Revenue & Customs' plans for 2011.
Online Corporation Tax returns and paying electronically
HM Revenue & Customs (HMRC) is phasing out paper Corporation Tax returns in favour of electronic filing. With effect from 1 January 2010 new rules came into force so that companies will now have to submit Corporation Tax returns online and pay any Corporation Tax electronically if:
• Company tax returns for Corporation Tax periods ending on 1 April 2010 or later must be delivered electronically as of 1 April 2011.
• Corporation Tax, and related interest and penalties, must be paid electronically as of 1 April 2011.
If Joseph Lawrence is not already preparing your Corporation Tax return form consider whether your accountant will have the technology to lead your business in 2011.
Online VAT Returns and paying electronically
Online filing will save you time and will give you extra days to submit your return and pay the VAT due.
HM Revenue & Customs (HMRC) plans to phase out paper VAT returns. From April 2010 you may have to submit your VAT Returns online and pay any VAT due electronically (for example by Direct Debit).
From 1 April 2010 you will have to submit your VAT Returns online and pay any VAT due electronically if either of the following applies:
• you have an annual turnover of £100,000 or more (exclusive of VAT)
• you register or should have registered for VAT on or after 1 April 2010 (regardless of your turnover)
If you fall into either of the groups mentioned above, you will have to file all your VAT Returns online (including nil and repayment returns) even if your turnover drops below £100,000 in the future.
You won't have to submit your VAT Return online and pay VAT electronically if you registered for VAT before April 2010 and your turnover stays below £100,000. You will still be able to submit your VAT Return on paper but this may change in 2012.
So, if we are not already assisting you with VAT why not appoint us today and start taking advantage of the benefits of online filing.
DISCLAIMER - PLEASE NOTE: The news and ideas shared with you are intended to inform rather than advise. Taxpayer’s 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.
Copyright © 2009 Joseph Lawrence is a trading name of Joseph Lawrence & Co (Accountants) Limited
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