Accounting
& Financial News
The
Bottom Line
05 April 2010
Cash
flow management for seasonal businesses
To
read our latest business advice article click
here
Budget
2010
25 Mar 2010
For
the key points from Alistair Darling's third Budget click
here
Pensioners
- could you be paying too much tax?
22 Mar 2010
HMRC recently introduced a new National Insurance & PAYE system.
The transition to the new system has brought to light some discrepancies
which have resulted in incorrect code numbers being issued to persons
receiving a pension or annuity for the first time.
Whilst HMRC have stated that they are doing all they can at present
to identify the problems and correct any errors prior to the start
of the new tax year on 6th April 2010, failure to do so could result
in excessive tax being deducted from these sources.
It is therefore imperative that your code number is checked when received
from HMRC, not only to ensure that it is correct, but also to guarantee
that any adjustments are made as quickly as possible before 6th April
2010.
If you
are concerned about your tax code, want confirmation that it is indeed
correct, or for further information please contact our Tax
Department
Using
tax losses effectively
15 Feb 2010
There
is a difference between a trading loss and a tax loss. There are times
when you may turn in a trading profit which is converted to a tax
loss by claiming capital allowance, particularly the Annual Investment
Allowance. Having arrived at the tax loss there are then a number
of choices.
Primarily
these are:
1.
carry the losses forwards to set off against future profits of the
trade
2.
carry the losses sideways in the same tax year and set off against
other income
3.
or carry the losses back (how far back depends on individual circumstances)
There
is a temptation to go for options 2 or 3 as there is a real opportunity
to recover tax already paid and positively impact cash flow.
Unfortunately
this may not be the best option. The two main circumstances when option
1 may be a better choice are set out below.
a. Sometimes
you will be required to carry losses back or sideways until all of
your taxable income is covered. In some cases this may mean that you
get no benefit for your personal allowance which would be wasted.
b. An
immediate set off of losses may reduce taxable earnings that were
subject to basic rate tax in prior or current tax years when you may
be predicting earning in forthcoming years at higher rates.
With
the advent of the 50% income tax rate from 6 April 2010 and the gradual
loss of personal tax allowances for high income earners, carrying
losses forwards may be a better strategic choice - rather that a quick
set off at lower rates use the losses in the following year.
Please
note that the comments above are a simplification of a complex process.
If you are presently in a loss making position but can see profitable
times ahead, careful tax planning to maximise the benefit of the losses
is essential - give us a call.
Principal
Private Residence (PPR)
15 Feb 2010
If you
own property and are resident in the UK for tax purposes when you
sell the property there could be a liability in the form of capital
gains tax or income/corporation tax if you are a property developer.
The
most notable exception to this general rule is if the property you
are selling is your principal private residence.
For
most of us this is our home, the place where we live.
Of course
some of us may own more than one property. In which case how does
the PPR rule apply?
The
answer, as you would expect, is complicated. Generally speaking if
you own two properties only one can be considered your PPR at a particular
point in time. In the absence of making an election this is determined
based on the facts - generally the property used more. However you
can make an election to choose which property is treated as your PPR
within 2 years of acquiring a second residence. Having made the election
it can be changed at any time and backdated 2 years. Why would you
do this? The main tax advantage is that PPR status exempts the last
three years of ownership from CGT - in some circumstances other tax
breaks may apply if the property has been let. You will need evidence
that you actually took up residence in the second property.
Contact
us for further advice regarding PPR
Avoiding
tax charge for private fuel
05 Feb 2010
If you
are provided with a company car and your employer pays for your private
fuel you may want to consider the options set out below which may
reduce the overall tax cost of the arrangement.
At present
if you receive any free private fuel for your company car you will
be taxed as a benefit in kind according to a fixed rate calculation.
For the tax year to 5 April 2010 this is £16,900 multiplied
by a percentage based on CO2 emissions or in some cases the size of
the engine. For CO2 emissions in excess of 220 g/km this can be as
much as 35%. For a 40% rate tax payer this would add £2,366
(£16,900 x 35% x 40%) to their annual tax bill.
Unless
your private motoring is exceptionally high this may be a tax cost
that is entirely avoidable at much lower cash cost.
For
instance HMRC allow you to reimburse your employer for your logged,
personal mileage at an agreed rate - the details of current rates
are added as a footnote to this article. If say your private mileage
this tax year was 2,000 you would need to repay £400 (2,000
miles x 20p). Or you could pay the tax on the fuel benefit £2,366...
The
key point is that it is worth crunching the numbers to see if you
would be better off reimbursing your employer for private fuel rather
than accepting the tax charge.
This
type of arrangement also has benefits for the employer who will see
a reduction in Class 1A National Insurance contributions due to the
elimination of the car fuel benefit charges.
From
the 1 December 2009 the advisory fuel rates are:(figures in brackets
applied from 1 July 2009)
Up to
and including 1,400 cc: petrol 11p (10p); diesel 11p (10p); LPG 7p
(7p)
1,401
to 2,000 cc's: petrol 14p (12p); diesel 11p (11p; LPG 8p (8p)
Over
2,000 cc: petrol 20p (18p); diesel 14p (14p); LPG 12p (12p)
Use
of Home as Office
05 Jan 2010
For
a self employed individual, where part of the home is used by their
business, they may be able to claim a deduction for the costs relating
to that use. For our full article, click
here
VAT - Reversion Of The Standard Rate To 17.5%
01 Jan 2010
The VAT rate reverts back to 17.5% with effect from 1st January 2010.
HMRC have produced an excellent guide to the change, available on
their website.
It is interesting to note, however, that HMRC have not as yet
published the rates for the Flat Rate Scheme which suggests that this
will not be a simple reversion to the pre-December '08 regime. We
will update you once these have been published.
Basic
rules
1.Retailers should start accounting for VAT at 17.5% with effect
from 1st January, using the VAT fraction 7/47ths.
2.
For all other businesses issuing VAT invoices after 1st January,
they should be at 17.5%, unless the goods/services were supplied
before the rate change. You can then choose to charge at 15%.
3. Refunds or credit notes should be dealt with at the same rate
originally declared or invoiced
4. Invoices issued for 12 months in advance, with monthly payments
plus VAT must show VAT at 15% for all monthly payments up to 31st
December 2009. All payments after that date must be at 17.5%
5. Sales of tickets to events (theatre, cinema, football season
tickets) before 1st January 2010 will attract VAT at 15%, even if
the event takes place after the rate change in 2010. The tax point
is the receipt of payment.
Remember
The increase in VAT will lead to changes to the Flat Rate Scheme percentages
and to the Fuel Scale Charges - all effective from 1st January 2010.
Those people, whose VAT returns span the change, will have to carry
out two separate
For
a look at the Pre Budget Report from Dec 2009, click
here
