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Accountants Corner April 2012

Apr 5, 2012   //   by Ralph   //   Latest News  //  Comments Off on Accountants Corner April 2012

By the time you read this we will have heard George Osborne tell us how he is going to, or attempt to, balance the Nations books. I will in next month’s article give the edited highlights of how we will be affected by the budget, but here are a few items of note for this month.

WORKING FROM HOME

Employers can reimburse employees who have to work from home for reasonable additional expenses incurred. The amount is increasing to £4 per week from the current £3 from 6th April 2012.

SMARTPHONE OR NOT SO SMARTPHONE?

HMRC have changed their view on smartphones and now they are not a taxable benefit if provided to employees. It is worth noting that this applies to smartphones as understood at the beginning of 2012, and as this is such a rapidly changing area of technology new types of smartphone may not qualify for the exemption. This exemption does not cover apparatus that is “designed or adapted for a primary purpose other than transmitting or receiving spoken messages”. This does mean that those employees who have previously been charged a benefit on their smartphones can apply for a tax refund.

TAX REFUNDS TO CHARITY ENDING

Self-assessment taxpayers who choose to give their tax refunds to charity will no longer be able to do so after April 2012. The option has been withdrawn due to a lack of use.

MORE NEW TASKFORCES

Thirty new taskforces to crack down on tax evasion (that’s the illegal one that Al Capone was found guilty of) are to be launched by HMRC in 2012/13. They will target areas where there is evidence of tax evasion and are likely to include the clothing and motor trades and indoor and outdoor markets. The scrap metal taskforce that was launched in Scotland in November will be heading South.

VAT ON BUILDING WORKS

In Llangollen we are lucky enough to have some wonderful old and not so old buildings. The repair or refurbishment of these properties can not only be difficult to do but the VAT treatment of the work done is far from simple too, and there is not enough space here to detail the various different treatments. The good news is that the lowest rate of VAT that could be applied should be. As well as the building contractor having the responsibility to charge the correct rate it can be costly if too high a rate is charged. Even if you are able to reclaim the VAT, if too high a rate is charged HMRC may restrict the claim to the correct rate. Make sure that the correct rate is charged, particularly if the building works relate to listed properties, those used for charitable purposes, flat conversions, empty properties, or extensions/annexes.

NO EMPLOYER END OF YEAR RETURN REQUIRED?

Those employers who did not have to prepare a deductions working sheet do not need to complete an employer annual return. However the deadline of the 19th May should not be ignored. HMRC have produced two new structured forms for 2011/12 to advise that no return is due.

 

If you need help or advice on any of the issues in this article, contact T A Gittins and Company

Accountants Corner March 2012

Mar 5, 2012   //   by Ralph   //   Latest News  //  Comments Off on Accountants Corner March 2012

Welcome to the March edition of Accountants Corner. Although, as I write this, there is a light dusting of snow just to remind us that winter is not over. It is said that, in the spring, a young man’s thoughts turn to what a woman has been thinking about all winter, which is of course, how to make sure I utilise my allowances before the end of the tax year on the 5th April.

ISA ALLOWANCES

The limits for 2011/12 are £10,680, of which a maximum of £5,340 can be cash with the remainder having to be stocks and shares. It is of course only the income that is tax free and the investment itself does not qualify for tax relief.

PENSION CONTRIBUTIONS – END OF HIGHER RATE RELIEF?

Although we are in difficult financial times it may be worth considering making a contribution before the tax year ends. There is now a limit of fifty thousand pounds in the tax year, but the unused allowance for the previous three years can be brought forward. Currently higher rate relief is available on pension contributions. Some commentators are saying that it is likely that the higher rate relief will be abolished in this month’s budget. It is worth considering that, if you have made a capital gain in the year, in order to extend the basic rate tax band and save 10% on the capital gains tax rate. Of course any tax saving depends upon your personal circumstances.

INHERITANCE TAX ALLOWANCE

As the nil rate limit for Inheritance tax remains at £325,000 then it may be prudent to ensure that the gift relief of £3,000 per annum is utilised. If a gift is not made in the previous tax year then the unused amount may be brought forward. The £3,000 limit excludes the usual birthday or Christmas gifts as that are funded out of income.
If sizeable gifts are made, as long as they are made out of income, they need not be added back in for IHT purposes should the donor pass away prior to the seven year anniversary of the date of the gift.

ANNUAL INVESTMENT LIMIT REDUCTION ON NEW EQUIPMENT

As I have detailed in previous articles, from the 1st April for Companies and 6th April for unincorporated traders, the annual investment allowance relating to the purchase of assets is reducing from its current limit of £100,000 to £25,000. Therefore, it may be worth bringing forward to this month, the purchase of any assets that you are considering purchasing in the next few months.

NEW CAMPAIGNS BY HMRC – INTERNET TRADERS AND THE HOME IMPROVEMENT MARKETS

HMRC are planning further campaigns for 2012 targeting areas where people who should be submitting tax returns, but are not, and trades people working in the home improvement industry. HMRC will use new technology to search the internet to obtain information about specific targeted people and businesses.

PPI COMPENSATION

Those who have received PPI compensation will need to declare the interest received on the compensation. The compensation itself is not taxable, however the interest will need to be declared if tax has not been deducted from it, or you are a higher rate taxpayer.

 

Finally some good news…

BUSINESS RECORD CHECKS PUT ON HOLD

Following an internal review HMRC have put their business record checks on hold, albeit temporarily, while an internal review is held. When the programme restarts it will target those types of business that are considered to be at higher risk of inadequate record keeping. I interpret this as small businesses and those who deal mainly in cash. Initial contact will be by a telephone call to discuss the bookkeeping with the proprietor, and then HMRC will decide whether a visit is required.

If you need help or advice on any of the issues in this article, contact T A Gittins and Company

Accountants Corner – February 2012

Feb 8, 2012   //   by Ralph   //   Latest News  //  Comments Off on Accountants Corner – February 2012

Thank goodness for that! By the time you read this the tax return deadline of the 31st January will have passed and all of the returns will have been submitted. To those that haven’t, then there will be a penalty notice in the post shortly, no doubt.

HMRC ANNOUNCE MORE TASK FORCES

HM Revenue and Customs has announced more task forces to focus on particular areas.

Those that will affect us here in North Wales cover two areas. The first is those landlords who have more than three properties will fall under the scrutiny of the Taxman.

One area that HMRC will be looking at is the mortgage interest claimed. Some landlords have been incorrectly claiming all of the monthly instalments on repayment mortgages. Only the interest is an allowable expense.

The second area of scrutiny is the construction industry. Of course the usual areas will be looked at including the under-declaration of sales and the over-claiming of expenses.

INVESTMENTS FOR YOUR CHILDREN

The government announced not long after it was elected that the Child Trust Fund was to end, being replaced by the Junior ISA. These ISA rates have been reasonable, but the CTF rates have fallen behind.

Unfortunately for children born between the 1st September 2002 and the 2nd January 2011 the CTF automatically opened means that they cannot have a Junior ISA nor can it be converted.

There is a campaign to redress this anomaly. However, as even minors are entitled to a full personal allowance, as long as the income from investments is less than £7,475 for 2011/12, and £8,105 for 2012/13, then there is no liability, therefore it may be better to hold investments outside the Junior ISA/CTF regime.

It must be borne in mind however, that any income over £100 as a result of gifts from parents is taxable upon the parents in its entirety. It is always best to have two accounts to keep gifts from parents separate from others.

TAX PAYABLE THROUGH CODE – LIMIT INCREASED

From April 2012, HMRC will collect debts of up to £3,000 through the taxpayers PAYE code. This applies to amounts currently outstanding. HMRC will write and then issue a coding notice to take this into account. If you do not wish to settle any outstanding liability this way then alternative arrangements need to be made. Any accrued interest will not be collected through the code.

COMPANY LOSES WEIGHTY BATTLE

As has been reported in most of the mainstream press (albeit not in the first few pages) Weight Watchers has lost its battle against HMRC regarding the status of its leaders. This will cost the company in the region of £23million. The case reiterates the point that it is not what the contract says but what happens in practice that actually matters. Avoid including any conditions that are given to employees, such as holiday or sick pay, in a freelance contract.

MEDICAL PROFESSIONALS TRADING THROUGH LIMITED COMPANIES

With the advent of the 50% and effectively 60% tax rates those consultants in the medical profession may be bearing the brunt of these rates on their private income. If the income is not required to be spent then the private practice can be incorporated in order to shelter the income from higher rate tax. Obviously everyone’s circumstances are different and the suitability of this needs to be reviewed on a case by case basis.

Next month, I shall ponder the tax year end in April and things to consider prior to it, in order to ensure that any suitable tax allowances and reliefs are utilised.

If you have yet to file your tax return, need advice about investing on behalf of your kids or need help and advice on any aspect of your financial affairs, contact T A Gittins and Company

Accountants Corner – January 2012

Jan 3, 2012   //   by Ralph   //   Latest News  //  Comments Off on Accountants Corner – January 2012

Oh well, that’s the festivities over for another year! The decorations are down and packed away, and after a few days off, its back to preparing tax returns.

PENALTIES FOR LATE TAX RETURNS


Just to remind you that if your tax return is late then there is a penalty payable even if all of the tax has been paid or you do not have a tax liability.

The penalty is £100 per return and payable even if the return is submitted one minute after midnight on 1st February. These penalties escalate depending upon how late the return is. Full details are available on our own or HMRC’s websites.

REASONABLE EXCUSE

If your tax return is late and a penalty inevitably ensues, what can be done? If you have a strong, legitimate excuse for the late submission of your form then HMRC is now more likely to cancel the penalty. Recent tribunal decisions have gone against the Taxman and having to have “some unforeseen and exceptional event beyond your control” is no longer required. In fact, the legislation has never said such a thing, it was merely HMRC’s interpretation of it. You have 30 days from the penalty notice to appeal, which must be in writing.

REPAIR OR IMPROVEMENT?


It is always best to get repairs to business assets as a trading deduction rather than a capital item due to the timing, and more often than not the tax rate is better too.

The Tribunal has just ruled against HMRC in the Pratt case. Mr Pratt is a farmer and the old tarmac drive leading to his farm had broken up.

He spent £23,300 putting a thick layer of concrete over the broken tarmac. HMRC claimed it was a new asset as the old driveway no longer existed, and that it was an improvement and therefore no deduction for tax purposes should be allowed.

The tribunal said that the old drive was there, it was just under the new one, and as it followed exactly the same path, was the same width as the old one and was not intended to carry any more weight than the old one, then it was a repair.

Therefore, if making substantial repairs to your buildings or property, retain as much of the original as possible (perhaps use photographs taken during the works to assist your case).

The important point is, if you enhance the functions of the asset, then it is an improvement, but if it just did what it did before, then it’s a repair.

NEW CAPITAL ALLOWANCE RULES

As I mentioned some months ago, as from 1st/6th April 2012 the annual investment allowance is being reduced from £100k to £25k. BUT the way that the legislation is written means there could be unfortunate financial consequences of purchasing an asset in the wrong month. If you are considering even modest asset additions it would be best to consult your accountant to see how the new rules work – You have been warned!

TAX RELIEF AT 78%? – SURELY NOT?

In the fairly well leaked Autumn Statement the Chancellor announced the principles of a seed enterprise investment scheme. There will be a 50% tax relief for individuals who invest up to £100,000 in start- ups from April 2012. For 2012/13 only there will also be an exemption from Capital Gains Tax on gains realised and invested in the scheme in the same year.

 

For help and advice with all aspects of self employment and taxation, contact T A Gittins and Company

Accountants Corner – December 2011

Dec 1, 2011   //   by Ralph   //   Latest News  //  Comments Off on Accountants Corner – December 2011

VAT ON SALARY SACRIFICE SCHEMES

There has been a concession by HM Revenue & Customs in relation to the application of VAT to certain salary sacrifice schemes. Where salary sacrifice arrangements were in place on the 27th July 2011 and extend beyond 1st January 2012 there is no need to account for VAT on the benefits provided until the remuneration package of the employee is reviewed.

LATEST HMRC INITIATIVES

HMRC have announced five new taskforces looking into various areas where they feel there are risks of under-declared income or inflated expenses and consequently a tax loss to the Exchequer. Two of these relate to the North West and North Wales. These areas are builders and related trades, and landlords who own or let out more than three properties.

VAT CONCESSIONS FOR CARAVAN SITES WITHDRAWN

 

HMRC have advised that from 1st January 2012 three extra-statutory concessions are being withdrawn. These will result in the changes to the VAT treatment of the following: recharges of business rates will follow the VAT liability of the pitch fee (standard rated in the case of holiday/leisure sites), the same rule will apply to recharges of water/sewerage cost, and lastly the one-off fees for initial connection to gas, electricity, water & sewerage will also follow the liability of the pitch. If, however, there is individual metering of each pitch then the VAT rate will follow the rate of the utility supplied. Issues may arise when invoicing in 2011 for services that will be provided in 2012.

COMPULSORY VAT ONLINE FILING FROM APRIL 2012

 

For VAT periods beginning on or after 1st April 2012 it will be mandatory to submit VAT returns online. There are only two definite exceptions to this, a business going through insolvency procedures, and those where the owners of the business have a religious objection to using computers. Payment of the VAT liability will need to be made electronically or it can be made by bank giro credit using a cheque and the slips provided by HMRC. The credit slips will not be provided automatically and must be ordered in advance.

Finally some good news…

LET THE TAXMAN HELP YOU THROW A CHRISTMAS PARTY

 

If you are a very small firm or company it is still possible to qualify for a tax deductible “bun-fight”. However you must remain within the limit of £150 per head or there will be a tax and National insurance charge on the whole amount. This £150 limit extends to one guest per director/employee.

For example take a Christmas celebration – such as a quiet weekend away – make sure that the room is booked in the name of the company – but the director is authorised to pay the invoice personally. Then reclaim £150 per person back from the company, making up any shortfall personally. This avoids the problem whereby if the total cost is £301 for two people the cost to the company would be £558 whereas if the total is £300 then the net cost to the company is only £240.

On this unseasonably sunny day I can see that the river is busy with ducks preening and putting their bills where the taxman can put his!

 

Contact T A Gittins and Company for help and advice on these and other matters which may affect your business

Accountant’s Corner – November 2011

Nov 1, 2011   //   by Ralph   //   Latest News  //  Comments Off on Accountant’s Corner – November 2011

This article is adapted from our article published in Llangollen News November 2011

 

Welcome to November here in Accountant’s corner.  I thought I would start this month by picking up on a couple of items I mentioned last month.

Tax Return Deadline

The end of October was the deadline for submitting your 2011 tax return forms if you wished to complete a paper return. If you missed this deadline, it will now have to be submitted electronically.  Sufficient time will need to be left in order to obtain an authorisation code from HM Revenue & Customs to enable the form to be submitted.  A recent tribunal case decided that leaving it until “the last minute” to apply for a code and then not receiving it prior to the deadline is not a “reasonable excuse” to appeal against a penalty.

Private Tuition

Last month I gave the difference between advice and tuition.  This month HMRC have launched the “Tax Catch Up Plan”.  It is aimed at individuals who profit from tuition and coaching as a main or secondary income but have not disclosed the income to HMRC.  From 10th October 2011 to 6th January 2012 tutors, coaches and instructors must register with HMRC and pay any tax, interest and penalties by 31st March 2012.  Those who come forward are likely to receive time to pay and be charged a lower penalty of probably no more than 20%.   This is more than the 10% charged in other amnesties and appears to represent a shift from “carrot to stick” by HMRC.

And now for this month……

 

All VAT returns to be sent online

Electronic Submission of VAT Returns

As from April 2012 all businesses that are registered for VAT will need to submit their VAT returns online. The exemption that currently applies to businesses registered prior to April 2008, with a turnover of below £100,000, is ceasing.  The VAT records can still be kept in exactly the same way but the return will need to be completed on HMRC’s website.  The payment will also need to be made electronically either by telephone or direct debit.  Contact us for help submitting your VAT returns online.

 

Beware Scam Emails (Phishing)

Individuals receiving an email claiming to be from HMRC telling the taxpayer that they are due a tax repayment should not follow the email’s instructions, says HMRC. The emails link to a clone of the HMRC website which asks for debit or credit card details enabling the criminal to steal the account. In August, almost 24,000 such emails were reported to HMRC, some three times the amount of the same month last year. Remember, if there is a refund due, HMRC will always contact the taxpayer in writing. Anyone receiving an email they suspect of being fraudulent should forward it to phishing@hmrc.gsi.gov.uk before deleting it permanently.

Capital Allowances on Fixtures

When buying a building it is often very difficult to establish how much, if any, capital allowances have been claimed by the vendors in respect of fixtures. The first tier tribunal of HMRC stated that it was up to the taxpayer to prove that a claim had not been made by the previous owner. Therefore those using a specialist firm to reclaim capital allowances could be disappointed if the claim is challenged. The area is worthy of examination, as significant amounts of tax can be at stake, but unfortunately (some of you will no doubt think, fortunately!) there is insufficient space here to go into detail.  Contact us for further information about Capital Allowances.

And Lastly – Didn’t we know this already?

The UK tax system is inefficient, overly complex and unfair according to the Institute of Fiscal Studies. The report suggests that the system could take a less costly approach while raising the same level of revenue & redistribution as it does currently.  No doubt we all have our own thoughts on how this should be done.

 

Contact T A Gittins and Company for help and advice on Self Assessment matters.

Accountant’s Corner – October 2011

Oct 5, 2011   //   by Ralph   //   Latest News  //  Comments Off on Accountant’s Corner – October 2011

This article is adapted from our article published in Llangollen News October 2011

 

Where has the year gone? Here we are in the final quarter of it.  I saw chocolate advent calendars in one of the town’s shops in the middle of September.  Not only does time seem to go faster, retailers help it along.

Tax Return Deadline

The end of this month (October) is the deadline for submitting your 2011 tax return forms if you wish to complete a paper return. Additionally this year, any returns submitted late will attract a £100 penalty, even if there is no liability, plus further penalties from a month late onwards.  See our taxation page and Key Accounting Dates calendar for further details on the new penalty structure.

Correct Tax Codes

The head of HM Revenue & Customs has admitted recently they have not been meeting their targets.  One of the areas that gives rise to much angst is an incorrect code being issued by HMRC.  It can mean tax being overpaid and subsequently having to be reclaimed or an underpayment causing a nasty surprise.  In order to avoid this, HMRC will be issuing a new form SA252 to taxpayers who are considered to be at risk of having incorrect codes. However, if there is a change to your Benefits in Kind, there is no need to wait for a form, you can notify HMRC by letter or telephone. The latter is preferable as your code can be altered while you are talking.

Pension Contributions for the Retired

I know it seems odd for someone who is retired to make contributions into a pension scheme.  However with low interest rates it might be better to contribute to a pension to get a 25% boost to your savings.

The maximum you can pay in is £2,880 per year if you have no earned income, but the government will make this up to £3,600. You haven’t got to wait ages to get your money out either, as long as the fund is worth less than £18,000, you can withdraw it as a lump sum.

The suitability of this does of course depend upon your circumstances. Contact us for help and advice on the tax implications of paying into investments and pension schemes.

HMRC Cold Calling New Businesses

HMRC staff are to begin calling new businesses to offer advice on how to correctly take care of their bookkeeping and tax obligations.  This is referred to as “telephone education” and is undertaken by the ominously named Education Team.  They intend to contact businesses “at key stages in their lifecycle”.  Presumably this means when they are commencing, or perhaps registering for VAT.

Initially the enquiry will be if the business has an agent (accountant). If so, then only a brief list of their obligations will be given.  If the business is unrepresented, then a full rundown of obligations will follow.  However, they will not be able to answer specific questions as the education team do not have access to taxpayers records.

Car Benefit Rules Change Again

The current emission based car benefit rules are celebrating their tenth anniversary in April 2012, and are changing again from then.  Initial calculations indicate that there are virtually no circumstances where it makes sense for the employer to pay for private mileage of the employee.  Company car drivers might want to consider their position.

What’s the Difference Between Advice and Tuition?

You may think not that much, but the difference could be VAT.  A recent tribunal case defined private tuition as being “in a subject ordinarily taught in schools or university by a teacher”.  If it is not tuition, the exemption from VAT does not apply. This can be particularly applicable where groups of individuals get together to offer a wide range of subjects.

 

Contact T A Gittins and Company for advice on a wide range of taxation matters.

Accountant’s Corner – September 2011

Sep 17, 2011   //   by Ralph   //   Latest News  //  Comments Off on Accountant’s Corner – September 2011

This article is adapted from our article published in Llangollen News September 2011

 

Well, I don’t know about you, but the last few mornings seem to have had an autumnal feel to them.  As one thinks of the oncoming season, those who have received a self-assessment tax return need to remember to  file paper tax returns by the 31st October 2011 to avoid a penalty. The deadline for submitting the return electronically is 31st January 2012.

 

VAT on Salary Sacrifice Schemes

Due to a European Court of Justice decision, from 1st January 2012 employers offering schemes such as cycle to work (as mentioned in last month’s article), will have to account for the output VAT on the value of the salary surrendered by the employee.  The interpretation by HM Revenue & Customs extends to such things as food and cars provided by employers.

Following Incorrect Advice

Following the recent tax case of Noor-v-CRC, advice given by HMRC that subsequently turns out to be incorrect can still be relied upon.  A timely record of the advice is helpful in support of the position, and when dealing with HMRC , it is useful to request written confirmation of any advice received.

Late SA statements

HMRC have been late issuing self-assessment statements to around 500,000 taxpayers this summer.  The second instalment of tax was due on 31st July 2011.  If you did not receive your statement you will not be charged interest as long as you pay by the 27th September, although HMRC have requested that the amount is paid as soon as possible. Outstanding amounts can, of course, be paid electronically.

Employed or Self-Employed?

In the recent Autoclenz Ltd case, the Supreme Court confirmed that an employment tribunal should consider whether the written terms in a contract represent what was actually agreed between the parties.

In summary, the 20 claimants worked as car valeters for Autoclenz on a piecework basis, buying their own materials and uniforms from Autoclenz, and paying their own tax and national insurance as self-employed contractors. There were various clauses within the contract which stated that a substitute could be sent, but none of the claimants were aware of this, and it was expected that a valeter not coming into work should give adequate notice of his absence. It was concluded that they were therefore employees.

HM Revenue & Customs will no doubt cite this case when looking into the status of contractors used and great care will need to be taken to ensure that the true position is reflected in the contracts.

A Cautionary Tale

You may recall, I mentioned in a previous article, the Taxman offered a reduced penalty for disclosure of underpaid tax for plumbers.  As a result of this facility 600 plumbers have disclosed £328,000 in underpaid tax.  The headline is that 5 plumbers have been arrested.  No doubt details will emerge in due course as to the seriousness of their tax evasion.  The arrest will be of those that have not used the disclosure facility.  These initiatives are not the main route to raising tax, but mean that the Taxman can be very harsh with those that do not disclose while they have the opportunity.

 

For help and advice with all aspects of self employment contact T A Gittins and Company

 

 

Accountant’s Corner – August 2011

Aug 17, 2011   //   by Ralph   //   Latest News  //  Comments Off on Accountant’s Corner – August 2011

This article is adapted from our article published in Llangollen News August 2011

CYCLE TO WORK SCHEME

With the summer weather, (although at the time of writing it was raining!), some people may prefer to cycle to work.  You can arrive in the knowledge that you can be saving tax and national insurance as well as burning calories.  The scheme is a Salary Sacrifice scheme where the employee hires a bicycle and safety equipment from the employer.  VAT may be reclaimed by the employer on the bicycle.  There is a maximum cost of £1,000 including VAT, and maintenance is the responsibility of the employee.  The Bicycle must also be used at least 50% for work purposes.

Contact us for more advice on salary sacrifice schemes.

More information regarding the cycle to work scheme can be found at www.cyclescheme.co.uk and www.directgov.uk/en/TravelandTransport/Cycling.

TAX ON CARRIER BAGS IN WALES

The Welsh Assembly Government is to introduce a compulsory charge (to be set at 5p initially) on single use carrier bags which retailers must charge customers in Wales with effect from 1st October 2011.  This charge is subject to VAT at the standard rate and is a minimum charge.  Therefore a VAT registered trader will receive 4.17p plus VAT per bag where an unregistered trader will receive the full 5p.  If using a retail scheme then the scheme takes account of this change.  The income needs to be accounted for as income for corporation and income tax purposes although WAG expects the proceeds to be used for good causes in Wales.  Relief may be available where normal charitable donation/gift aid rules are met.

HMRC FOCUSSES ON VAT REGISTRATION

HMRC in yet another initiative will be sending more than 40,000 letters to traders who are trading above the registration threshold but are not registered. When calculating whether a business should be registered the rolling year calculation is used, therefore although two accounting periods may not be over the limit, a 12 month period within those two years maybe. It is a pitfall for the unwary and penalties can be severe.  If a disclosure is made before the 30th September 2011 then the penalty is reduced to 10%.

ZERO RATED TAKEAWAY FOOD?

VAT is a Brussels controlled tax and therefore we along with the other EU countries are subject broadly to similar rules.  In Germany catering is standard rated, while food benefits from a reduced rate of VAT.  The question pondered by the European Court of Justice was whether takeaway food was catering or merely the sale of food.  The court ruled that Mr Bog was in fact selling food.  The definition of catering in the UK is different from Germany, however it would be wise to make a protective claim to HMRC as soon as possible to preserve the four year error adjustment period should the legislation change.

HOT OR FRESHLY BAKED?

If food is merely hot because it has been freshly baked, rather than being sold for the customers’ enjoyment as hot food, then it can be zero rated. However, caution must be the watchword when zero rating such sales, and it would be sensible to obtain advice prior to taking action, but depending upon circumstances the savings can be significant.

For help with VAT matters, contact T A Gittins and Company

Accountant’s Corner – July 2011

Jul 17, 2011   //   by Ralph   //   Latest News  //  Comments Off on Accountant’s Corner – July 2011

This article is adapted from our article published in Llangollen News July 2011

Renewable Energy

In the last month I have been over in Lincolnshire at Cereals 2011. I was meeting those involved in arable farming to explain the tax position of investing in renewable energy.

Irrespective of your views on global warming an investment in renewable energy technology can help mitigate both capital gains tax and inheritance tax.  Power generation counts as a trade, and therefore an investment in renewables can qualify for both the Enterprise Investment Scheme and Business Property Relief.

 

Why would a farmer invest when they can get Agricultural Property Relief?

The answer is that it is a potentially profitable income stream, and if you have a suitable site, rent could be received from others.

The legislation is complex, the most suitable type of power generation technology and entity to trade in depends upon an individual’s circumstances.  Contact us for professional advice prior to making any investment.

HM Revenue & Customs initiatives

Other news this month is that HMRC have launched more initiatives as part of their £900 million plan to combat tax dodging and raise £7 billion a year.

One is focussing on the restaurant trade.  Initially teams of compliance officers will concentrate on London food outlets and then move on to the North West.  This isn’t as bad as it seems, as these are a specialist team and should therefore understand the problems associated with the trade.

Good record keeping

It is worth ensuring that your business records are in order as another initiative is that HMRC are piloting business record checks.  After the visit, most traders tend to receive a fairly standard letter detailing improvements such as issuing consecutively numbered sales invoices, making a detailed record of personal expenditure and recording details of the use of vehicles within the business.  The letters also threaten a return visit to ensure compliance, and possible penalties for failing to improve the records as required.

Contact us if your business is facing an enquiry by HMRC or if you need help with book-keeping matters

Recovering VAT on Residential Property Lets.

It has always been a widely held view that the VAT suffered on repairs to let residential property is irrecoverable. However if the circumstances are right then it is possible to reclaim it.  If residential let properties are owned personally, but the business trades through a VAT registered limited company, the VAT may be recoverable using the de-minimis rules.  A lease is granted to the company who then sublet the property.  This also means that the income is in the company and therefore it may be easier to control tax rates paid.

Capital Gains Tax on let property.

Whilst talking about residential property, the capital gains tax position upon sale of a let property requires some consideration.  If the property has at some time been your only or main residence, you can also qualify for lettings relief.  This can considerably reduce any liability.

Contact T A Gittins and Company for help and advice regarding property letting and capital gains tax.

 

 

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