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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

Michael Brookes & Co is a trading name of Michael Brookes & Co Ltd
Company number 2254561 (England)
Michael Brookes & Co, Hampton House, Oldham Road, Middleton, Manchester M24 1GT.
Tel: 0161 655 2000. Fax: 0161 653 5358. Email: accounts@mbrookes.co.uk
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Page last updated 05 Apr 2010