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Welcome...
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| Pension Changes Ahead |
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The Government wants to restrict the amount of tax relief claimed for making pension contributions. This will now be achieved by restricting the annual allowance for everyone to a nominal £50,000 per tax year from 6 April 2011, subject to adjustments described below.
You will get full tax relief on all your pension contributions made up to the annual allowance cap. If you have made pension contributions of less than £50,000 in any of the last three tax years, you will be able to carry forward the difference between £50,000 and your actual contribution level into 2011/12 to add to your annual allowance for that year. This carry forward of unused annual allowance will apply on a rolling three-year basis for future tax years.
The only condition for the carry forward to apply is that you were a member of a registered pension scheme for the earlier tax year concerned. If you were a member and made no pension contributions in that tax year, you can carry forward the full £50,000 of unused annual allowance. Both your own and your employer's contributions to your pension fund are deducted from the available annual allowance.
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| Update on PAYE 'Errors' |
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The Taxman's new computer has been busy reconciling the PAYE records for millions of people for the 2008/09 and 2009/10 tax years. About 4.7 million of these calculations have led to under or overpayments of tax, and in those cases a form P800 is issued to the taxpayer to show how the tax difference has arisen.
From examining the first batch of P800 forms, we've noticed a number of recurring problems with the Taxman's figures, such as:
- Incorrect state pension - check this against your notice from the Pensions Service.
- Estimated amounts of interest or rental income - check to your bank statements.
- No extension of basic rate limit for pension contributions or gift aid payments - check whether you did make pension contributions or gift aided donations.
- Missing married couple's allowance - only applies if you are already over 75.
If you do not agree with the figures shown on your P800 form you need to contact the Taxman on the telephone number shown on that form, or we can do this for you.
If you agree the Taxman's figures, and you do have some tax to pay, we have some good news. The maximum amount which will be written-off by the Taxman is now £300 per tax year, not £300 for the two tax years taken together as was previously announced by the Treasury Minister.
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| Refund of Overseas VAT |
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From 1 January 2010 you were able to reclaim VAT incurred on business expenses in other EU countries, by using the online portal set up by HMRC. The UK end of this EU-wide system has been operating smoothly, but there have been significant delays and problems in other EU countries, which have meant that claims have not been processed.
Due to these problems the European Commission decided to push back the deadline for submitting claims for refunds of VAT incurred in 2009 from 30 September 2010 to 31 March 2011. If you have not got round to making a claim for repayment of VAT on expenses incurred while travelling abroad since 1 January 2009, you can now do so.
However, before you take hours preparing your claim, check that it will be worthwhile. The minimum claim you can submit per country is €50. Once your refund is approved you will be paid by credit transfer into your business bank account. Such a transfer of foreign currency into a sterling bank account may well cause high bank charges, which will be deducted from the refund.
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| November Question & Answer Section |
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Q. I incorporated my business last year, but I haven't got round to opening a bank account in the company's name. All the business receipts and payments have been processed through my personal bank account. Will that have any tax implications?
A. You must open a bank account for the company as soon as possible as using your personal bank account could create a number of problems.
As the business was previously run in your own name the Taxman may not accept that the business has been transferred to your company, and want to tax you on any business income received into your personal bank account.
If the Taxman accepts the business was transferred to the company, you have further tax problems as your personal account holds funds that belong to the company. The Taxman will argue that those funds represent either a loan to you, or your salary. In either case a tax charge will arise unless you can repay the funds to the company, and this will be difficult without a company bank account! A third option is the funds you hold represent dividends. However, to pay a legal dividend the company must first show that it is making a profit.
Q. One of my employees frequently sustains injuries while playing sport, and as a consequence he takes regular periods off sick. Do I have to pay him statutory sick pay (SSP) for the time he takes off due to these self-inflicted injuries?
A. You are required to pay SSP to your employee if he earns at least £97 per week, for sick periods that last 4 days or more. Your employee needs to notify you of the sickness within the period set by your company rules, or by the 7th day of absence. You may require your employee to provide you with evidence of his incapacity to work from the 8th day of absence, by say providing a certificate from his GP (now called a 'fit note'). Don't forget you can reclaim the amount of SSP that exceeds 13% of the class 1 NIC due for the month of payment.
Q. While collecting together the papers for my self-employed accounts to 30 November 2009, I noticed £1,500 of sales should have been recorded in the accounts to 30 November 2008, but were missed from that year. Should I add those old sales receipts to the 2009 sales and declare the total in my 2009/10 tax return?
A. The correct approach is to amend your 2008/09 tax return with the increased sales figure for the 2008 accounts, so the extra income falls in the 2008/09 tax year. This adjustment will increase the tax due for 2008/09 and you will have to pay some interest on the late paid tax. If you supply the Taxman with a full explanation of the error, without being asked to do so, you will probably get away with a zero penalty.
If, as you suggest, you add the missing 2008 income to your 2009 accounts and include the total in your 2009/10 tax return you will pay approximately the right amount of tax overall, but for the wrong tax years. This mis-timing of tax payments can attract penalties as you need to pay the correct amount of tax at the right time. Both your 2008 and 2009 accounts will be technically incorrect. You would need to declare the adjustment to your 2009 accounts on your 2009/10 tax return. If you don't make a full disclosure of the error on your 2009/10 tax return and the Taxman discovers the 'fix', he may conclude you have deliberately concealed the error and impose a penalty of up to 100% of the tax underpaid for 2008/09.
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| November Key Tax Dates |
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2 Last day for car change notifications in the quarter to 5 October - Use P46 Car
19/22 PAYE/NIC and CIS deductions due for month to 5/11/2010
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Please contact us if we can help you with these or any other tax or accounts matters.
In addition, if there's anyone else who you think would benefit from the newsletter, please forward the email to them or ask them to contact us to be added to the newsletter list.
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If you are not already a client and are interested in becoming one, we would love to come to meet with you to discuss how we can help and provide you with a competitive quote for our services.
All new client consultations are provided free of charge and without obligation.
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TWR Accountants are based in Brandon near Thetford, offering local business owners and individuals a wide range of services to small and medium sized businesses.
All clients receive fixed fees, work delivered on time and free unlimited phone support. Visit our website http://www.twraccounts.co.uk for more information.
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