Simpler Tax Returns?
The budget contained an announcement that from next year the threshold for completing the simple, three line, version of the self employment and property pages on a tax return will be increased to the same as the VAT threshold.
On the face of it, this is welcome news. A simpler tax return means less time and lower accountancy fees, doesn’t it? Unfortunately, probably not. Businesses will still be required to keep records analysing expenditure and income so someone still has to produce the information. Someone still has to go through the accounts to identify disallowable expenses and calculate capital allowances and annual investment allowance.
Most bookkeeping is computerised these days so transferring the full information onto a tax return is quick and simple. The only saving is likely to be a few minutes at the most.
One of our concerns is that the “simpler” system will lead to more enquiries because the information which might clarify a query isn’t readily available. For example, if an HMRC Inspector can’t see what the Gross Profit percentage actually is, which is a useful tool for spotting potential fraudulent returns, the information will have to be requested. The result is that your accountant will probably spend considerably more time answering questions from HMRC than currently, probably resulting in larger bills, not lower.
If your records are kept properly, this will help considerably – as it does now. If you have any doubts about your record keeping, look at using some decent software.
KashFlow online accounting
Easy access and availability for accounting and bookkeeping are becoming more essential to ensure accurate and up to date information for businesses. The ability to see at a glance just how the business is performing means that owners feel much more confident. Online accounting is the solution.
When your accountant can also see your records and work on them at the same time as you, the whole accounting and bookkeeping process becomes much smoother and transparent.
One of the leaders, possibly the leader, in the online accounting market is KashFlow. We have decided to offer Kashflow as a service through our website, together with a special offer on the price. For more details have a look at this page.
What’s an Insolvency Practitioner?
Someone who arrives after the battle and bayonets all the wounded.
If you really want to make money in the recession, become an Insolvency Practitioner. I knew one once who so upset a workforce that they came to get him. He had to barricade himself in a room and call the police to get him out.
Self employed – First tax return?
It’s early April and the dreaded tax returns are landing on doormats across the country with the words, “This notice requires you, by law, to make a return of taxable income and capital gains ….” prominently displayed.
If you became self employed during the past year, this may be the first time you’ve seen the tax return. It isn’t really anything to worry about – so don’t. You have quite a long time before anything actually has to be submitted. Most accountants will file on line these days, so the deadline is likely to be 31st January next year. This doesn’t mean that you can be complacent – it just means that you have time to complete the required information.
If you haven’t already done so, speak to your accountant about how, and when, they would prefer to receive the information. Once you know this, start collating the requested documentation and, once you have everything, pass it on to your accountant. It is generally better to wait until you have everything (bank statements, late supplier invoices, CIS statements etc) before passing them on to your accountant. An accountant will usually prefer to have one lot of documents, rather than receiving dribs and drabs.
If time has gone by and you are still waiting for a document, give the rest to your accountant and highlight what you think is missing. Your accountant will decide just how important the missing document is and what action should be taken, if any.
If you are doing your own return, follow the same process and collect everything together so that you know where it is and you are sure that you have it.
Your accountant will normally prepare a set of accounts to show you the profit calculated. There may be some differences between the prepared accounts and the information which goes on your tax return because some expenses are not deductible for tax and there are reliefs and allowances which may be claimable. Many people preparing and submitting their own returns make mistakes in showing the disallowed expenses and claiming reliefs. This is important so, if you are not sure, seek advice.
You may be self employed but not have received a tax return. This means that either you are not registered as self employed with HMRC or the correct box on their database hasn’t been ticked. Don’t presume that, just because you haven’t received a tax return, you don’t need to do one. It is your responsibility to submit a return, even if you haven’t been sent one. To correct the situation, either speak to your accountant or contact HMRC direct and request a form.
There is also a presumption that, if you don’t make a profit, you don’t need to submit a tax return (or tell HMRC). This is common amongst landlords who may find that the rent received doesn’t cover the interest paid. The presumption is incorrect. If you have a “taxable” source of income – even if it is not profitable, it must be declared. It is actually in your interest to do so because, apart from avoiding possible penalties, losses can either be offset against other income or, in the case of property letting, carried forward to subsequent years until you do make a profit.
We are always pleased to help the newly self employed complete their tax returns. See our main site and contact us from there.
Depreciation, Capital Allowances & Annual Investment Allowances
Very little seems to cause more confusion amongst small business owners than Depreciation, Capital Allowances and the Annual Investment Allowance (AIA). Many eyes glaze over when the subject is raised – usually the eyes of the person asking the question in the first place.
For a brief explanation of these concepts a longer article is available at this link.
Tax Credits – Protective Claim
Many people who wouldn’t normally qualify for Tax Credits because of high income may suddenly find that Tax credits income becomes important if they are made redundant. If you are forced to apply for Tax Credits later in the year, you will find that your claim can only be backdated three months. However, if you have made a “protective claim” within three months of the start of the tax year, you will be recorded in the system and your claim will cover the whole of the year.
It is a strong recommendation that anyone earning more than the Tax Credit threshold who has children, should submit a Tax Credit claim, sooner rather than later. You will be awarded “nil” but, if you are then made redundant, your drop in salary is a “change in circumstances” rather than a new claim.
You may have a problem in submitting the claim because some officials at the Tax Credit Office have apparently refused to accept claims from people who clearly don’t qualify – but insist.
More holiday – Increase in Statutory Minimum Holiday
From 1st April 2009 the minimum statutory holiday in the UK increased from 4.8 weeks to 5.6 weeks. These are inclusive of bank and public holidays. This is a minimum so the holiday entitlement can be greater.
In practice this means that someone working a standard five day week will be entitled to a total of 28 days paid annual leave. This is pro rated for shorter working weeks so an employee working 4 days per week will be entitled to 22.5 days leave, 3 days per week will equate to 17 days holiday leave etc.
The situation is more complicated for staff working flexible or variable hours and you are advised to check these carefully.
Where a holiday year doesn’t start on 1st April and therefore spans the date of change the holiday entitlement should be apportioned to take account of the increase.
The rules concerning carrying holiday over from one leave year to the next have been changed slightly. Subject to the employer’s agreement, holiday entitlement in excess of four weeks can be carried over to the next year, but at least four weeks must be taken.
When looking at holidays, you should remember a recent ruling which determined that anyone on long term sick continues to accrue holiday.
We offer a payroll service and, as part of the service, can help you determine a holiday policy and comply with the rules.
