Changes to Child Tax Credits
With recent changes to the tax credit thresholds and changes to the working requirements of claimants, I thought it may be useful to post a rough guide to the new tax credits changes and how they may affect you.
The child tax credit is paid to lower income families with children whether they are working or not. As a rough guide claimants with one child may not receive child tax credit if their income is more than around £26,000 and those with two children may not receive the credit if their income is more than around £32,200. This is a substantial reduction from the £41,300 income limit in 2011/12.
However, claimants with higher incomes and with larger families, disabled children or who spend a lot on formal childcare, could still be entitled to some payments. Child tax credit is paid directly to the main carer in the family either weekly or monthly and is usually paid directly to a designated bank or building society account.
The working tax credit assists taxpayers on low incomes by providing top-up payments. The rules for couples claiming the working tax credit changed from 6 April 2012 with an increase in the minimum amount of working hours from 16 to 24 per week. One member of the couple will have to work at least 16 hours a week. Single people who are responsible for children (for example single parents) are not affected by the new rules.
The rules for backdated claims are also changing, from April 2012 claimants are only able to backdate the increase in their entitlement by one month and not three months as before and there are also changes to the tax credits rules where a claimant’s income drops during the tax year as well as the withdrawal of part of the working tax credit known as the ‘50-plus element’ for taxpayers aged over 50.
The leaflet also reminds claimants to notify HMRC should their circumstances change such as stopping or starting work, changes in income and changes in family circumstances. HMRC have also published a revised copy of the factsheet entitled ‘Tax credits – coming to the United Kingdom’.
Plumber – 12 Month’s Sentence for Tax Evasion
John
To underline how seriously HMRC are chasing tax evasion, it was reported that a self employed plumber was jailed for 12 months after admitting charges of evading tax and National Insurance totalling £91,000 over 10 years.
David Williams from the West Midlands was investigated by HMRC after he failed to use the Plumbers Tax Safe Plan to own up to his underpayment of tax. When they launch these initiatives HMRC have already drawn up a list of suspects from their own records and failing to come forward is virtually an invitation to HMRC to investigate.
This is a statement issued about the case by Adrian Farley, Assistant Director of Criminal Investigation for HMRC - ‘Today’s sentencing is a result of our drive to clamp down on tax evasion committed specifically by plumbers, gas fitters, heating engineers, electricians and others who fail to declare their earnings and pay the right tax. Tax evasion deprives our country of vital resources and gives tax cheats an unfair advantage over their business competitors so we will not hesitate to investigate those we suspect of evading tax. I would ask anyone with information about people who may be involved in tax evasion to contact the Tax Evasion Hotline on 0800 788 887.’
Nine other plumbers have been arrested and investigations are continuing so there could be more court cases to follow.
How many other plumbers, electricians, builders haven’t bothered to declare earnings of £9,000 (or more) per year? The fact that HMRC are taking these to court and that prison sentences are being handed out should make a few of them think.
HMRC are currently running the Tax Catch Up Plan for private tutors, the Electricians Tax Safe Plan and the e-marketplaces campaign. If you think you fit into one of these categories, now might be the time to take advice.
2012 Budget facts and figures Newsletter
We have today published a round up of the relevant facts and figures from yesterdays budget for you to take a look at.
The newsletter lays out the changes that will happen over the next twelve months that will basically effect everyone who is liable to pay tax.
We have shown a comparison for some of the changes to the figures for the current year (2012/13) so that you can see how the budgetary changes may affect you.
Take a look at the newsletter; and if you have any questions or queries about any of the topics covered then you can contact us at anytime, we would be pleased to answer your question(s) and help you in any way we can.
Ebay or Amazon trader? – The taxman is looking at you!
John
HMRC have announced an initiative where online traders can “come clean” about their activities and disclose their profits – without suffering the same level of penalties which would be charged if the taxman himself finds out about the undisclosed profits.
Anyone regularly trading on Ebay, Amazon or any other online outlet and intending to make a profit should be declaring their income. The taxman believes there is substantial under declaration of profits from this source and is already looking at quite a number of traders – and intends to be more active on this front, but is giving traders the opportunity to own up with reduced penalties.
If you only sell the odd item which you have used and don’t want any more, you are fine because this won’t be classed as trading for a profit. However, if you are buying items with the intention of selling them (even secondhand goods) this is likely to be treated as a self employed business and this income should be declared. There is a video on YouTube in which HMRC outline some common scenarios to show what they would treat as declarable income.
Online trading is a relatively easy target for HMRC because the information is all readily available. They can see how many trades each trader is doing, make test purchases and therefore have readily available evidence. Even if you have been trading for a number of years and feel secure – don’t. This may be the opportunity to regularise your business.
If you have any doubt, take advice. You can contact us, we will be pleased to help.
March 2012 Newsletter published
We have now published our March 2012 newsletter to keep you up to date with how to save money and tax. This months features include how to get the most from Tax Efficient investments, Capital expenditure gains and losses are explained and you can read about claims against your tax on working from home. Tou can read our newsletter by clicking here.
Also featured this month’s newsletter is a link to our updated “meet the team” page introducing Chloe and Marie.
If you have any questions about any of the items or any business or tax queries please do not hesitate to contact us
Intrastat, Commodity Codes & a BIG Fat Headache!
- Anna Perry
(Anna asked if she could contribute an article on Intrastat because she feels that many businesses don’t understand the reporting requirements – so welcome Anna, our newest contributor)
I for one am quite impressed with the online filing system for Intrastat. After getting off to a slow start I now find myself happily searching for correct commodity codes and tracking CPT’s & EXW’s.
I do know however, some of you are having great difficulty coming to terms with the new reporting regulations and the endless paperwork HMRC is asking us to compile on a monthly basis to ensure we are compliant.
After learning recently that as from April 2012, the deadline is now 10 days shorter, I quite honestly cringed. My current clients, along with over half of the VAT registered business in the UK currently compile their VAT returns on a quarterly basis! Monthly Intrastat reports you say? Just to make our jobs easier and to give us more time concentrating on running our businesses – no, I disagree, my personal experience is that clients find the whole process a headache & they can’t seem to understand why the information is needed in the first place!
So why should we report our Dispatches and Arrivals? Well put it this way, if we didn’t, not only would the Intrastat department slap you with a VERY big fine, we would send this country into a financial downspin. All the information we report (regardless of how small) is used to help set interest rates by the Bank of England each month. Trade statistic information is vitally important; it helps set trade policies & initiatives on new trade areas. So, in a nutshell it’s unavoidable, and if you make the mistake of thinking it’s unimportant & a waste of time – it will hit your pocket hard!
The current fines in place for failing to submit your Intrastat reports are pretty hefty, one-off fines for £1000 for late submissions, missing information or incorrect reporting are not to be sniffed at.
So what should you do? Firstly, check your thresholds, Intrastat works on rolling totals, you may hit the threshold mid way through your accounting period/year and you will be expected to submit returns from the month you reach that threshold. The current arrivals threshold is £600,000 and the dispatches are £260,000. For each sale or purchase made from the EU you will need to match your item to a commodity code, the database online is actually quite good and allows you to carry out a simple search to find the correct code. You also need to track the amount of your dispatch (minus the transport costs) and record which different method you have used to dispatch or receive goods to/from the EU. These are only a few of the requirements, and already you are scratching your head! From experience, record keeping (as always) is key, ensuring your have tracked your items from sale or purchase, from freight to payment really is vital, and go back to basics, if you are VAT registered you would have had to perhaps make changes to the way you file and keep on top of your books. Intrastat is no different, if anything, having to compile this information on a monthly basis may actually help you to finish your VAT returns earlier!
Most of my clients that fall into the Intrastat category ask I do the reporting on their behalf, now the system is online, its much user friendly and reliable to do this. Reports can be completed on a transaction basis, so as a client, you could email information on a transaction by transaction basis or on a summary at the end of the month. I also try and encourage clients to pass over information at the month end, the knock on effect to VAT, Payroll & Year End is always a positive one, work goes through the system quicker and it’s so much nicer facing the VAT quarter with only one months work to enter!. From a client perspective it’s sometimes nice to know how much money they own HMRC at the start of the month rather than mid way through, or worse, right at the very end!
I’d like to think Intrastat is one of my specialities, helping clients to keep a track of their imports and exports and supporting them to ensure they are compliant is something I take great pleasure in. Like most things Intrastat is one of the many things HMRC like to try and baffle us with, a pro active approach and the right support, this shouldn’t be a headache. If you’d like to speak to me to talk about your current methods for Intrastat reporting to see if there is anything I could support you with, hit the contact me button. I always like a challenge, and endeavour to help your business run better!
Anna Perry
Now for the Electricians – new HMRC Tax initiative
John
After their success targeting plumbers, HMRC have decided that electricians and electrical contractors should be their new target. Known as the “Electricians Tax Safe Plan” (ETSP), HMRC will be writing to electricians asking them to regularise their tax affairs and declare any undisclosed income. In return HMRC will greatly reduce any penalties chargeable – but they will not be lenient if they subsequently find that an electrician has not taken the opportunity to make a full disclosure and has undeclared income.
In order to qualify, any electrician or electrical contractor wishing to take advantage of the reduced penalties must advise HMRC by 15 May 2012 of their intention to make a disclosure and then provide the information to HMRC by 14 August 2012.
Obviously we don’t recommend that anyone should not disclose all of their income, but are realistic enough to know that it does happen – either accidentally or deliberately. HMRC are getting better and better at identifying suspicious activities. They now have sophisticated software to analyse tax returns and will probably already have applied it to the submitted tax returns of electricians and electrical contractors so may know which ones they expect to take advantage of the ETSP. If you think you may be on that list, you should definitely consider taking advantage because, if you don’t and they select you for investigation later, it could become extremely expensive for you. They were very successful in collecting a lot of unpaid tax (and penalties) from plumbers in the similar scheme operated last year.
The first thing to do is speak to your adviser. If you don’t have one or would prefer to speak to someone who hasn’t been involved with your affairs, contact us. We are always prepared to listen and help where we can. If necessary we can call on our team of associated specialists to help and advise. Just don’t bury your head in the sand.
CBS February Newsletter Published
This months Newsletter features Clare and Anna in the “meet the team” section, and we have articles considering the processes you need to think about and follow when closing your business, including the submission of the C16 form.
Also included are tips on how to avoid costly PAYE fines by understanding deadlines and using the HMRC new faster payment facility.
HMRC are keen to track down instances of fraud and are offering business owners the opportunity to come forward and confess using their contractual disclosure facility (CDF). However there (as always) is small print and so if you think you may be affected or are thinking of making a disclosure; read the article and come and speak to us first, we may be able to help!
To access February Newsletter click here.
If you want to subscribe to the free monthly edition you can do so from here
Is cutting costs the answer?
John
Times are difficult and many businesses are cutting costs as an (apparently) easy way to maintain profits. Sometimes this can be counter productive. I was reminded this week of the work and philosophy of William Edwards Deming. I guess most of you won’t have heard of Deming but he has played a major role in 20th century business. Deming is credited with having been a major influence (possibly the major influence) on the revival of Japanese industry after the Second Worl War – and we’ve all seen how well the Japanese have done in that time.
The one part of Deming’s philosophy which I am highlighting is his theory on the relationship between Quality, Total Costs and Profit. To put it simply, Deming believed that if a business concentrates on Quality, Quality will increase and costs will ultimately fall and profits will increase. However, if a business concentrates primarily on Costs, Quality will suffer and Costs will actually rise and profits will fall.
This may seem counter intuitive but when put into practice, along with other Deming principles, it saw the rise of the Japanese car industry from virtually nothing to the producers of quality, reliable cars. One story which illustrates this concerns Ford Motor Company who were fitting (supposedly) identical gearboxes into one particular model. Some of the gearboxes were produced in a US factory and some were produced in a Japanese factory. It became apparent fairly quickly that the Japanese produced gearboxes were more reliable, less noisy and generally better so, not unnaturally, customers started specifying that they wanted a Japanese gearbox. The Japanese factory had concentrated on producing a quality product and worked to tighter tolerances than specified but, ultimately, their costs were the same or lower than the US factory.
I’m not saying that costs shouldn’t be a factor but be careful when trying to cut costs that the quality of your product or service doesn’t fall. Customers are fickle and they notice small differences. The decay in sales may not happen immediately so you may think you’ve got away with using a slightly inferior part or not quite finished off as you used to – but these differences are noted and reduce the loyalty your customers feel which ultimately results in fewer recommendations and a greater liklihood of your customer going to one of your competitors.
Sometimes just talking through your problems and queries with someone who is independent, unbiased and has a wide knowledge of business practice can be useful. We would be happy to do this for you.
If you haven’t done so already, subscribe to our Newsletter to keep you informed of information and events.
Tax penalties for armed forces in Afghanistan – Free Appeal
John
There are reports that soldiers serving in Afghanistan will be fined by HMRC for late submission of tax returns even though they may not have access to the internet to be able to file the tax return.
It is correct that anyone, even serving soldiers in Afghanistan, failing to file their tax return on time will automatically receive a penalty notice. As the HMRC spokesman quoted correctly said, that is the law so the penalties will be issued. But, of course, that isn’t the end of the story. I’m no great defender of HMRC but in this instance they are being criticised unfairly.
HMRC don’t actually know which members of the armed forces are serving in Afghanistan – or anywhere else – so they can’t really be expected to make special arrangements for servicemen in this category. There is, however, an appeals process. If someone can provide a “reasonable excuse” for not submitting their tax return on time the penalty will be cancelled. There aren’t a lot of excuses which will be considered as reasonable – but it’s a good bet that no taxman is going to turn down an appeal from a serviceman who was in Afghanistan at the time of the filing deadline.
It should also be remembered that there are relatively few servicemen who have to submit tax returns.
We are happy to submit an Appeal to HMRC for any serviceman, serving in Afghanistan at the time of the deadline, receiving a penalty for late submission of a tax return – and we will do this free of charge. Just contact us.
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