Welcome...

To August's Tax Tips & News, our newsletter designed to bring you tax tips and news to keep you one step ahead of the taxman.

If you need further assistance just let us know or you can send us a question for our Question and Answer Section.

We are committed to ensuring all our clients don't pay a penny more in tax than is necessary.

Please contact us for advice in your own specific circumstances. We're here to help!

Withdrawal of CIS Gross Payment Status

Every month the Taxman's computer reviews the tax records for a number of contractors in the Construction Industry Scheme (CIS) who qualify for gross payment status. This means that tax does not have to be deducted from payments made by customers. Every contractor's tax record should be reviewed about once a year, but it is not possible to predict exactly when any particular firm will be reviewed.

If the tax compliance record is regarded as unsatisfactory, taking into account the acceptable minor breaches, the computer automatically issues a letter to the contractor informing them that their gross payment status will be withdrawn in 90 days. This is serious stuff as the withdrawal of gross payment status can mean the loss of large contracts, as well as cash-flow difficulties.

If you have recently had problems paying your tax on time, you may have agreed a time to pay arrangement with the Tax Office. Where the tax payments are made as per the agreed schedule, the Taxman should not issue penalties for late paid tax. Unfortunately the computer that performs the CIS review of tax records knows nothing about your time to pay arrangement, so any late payment of tax within the review period is marked as a failure. This can cause a notice of withdrawal of gross payment status.

You need to appeal in writing against that notice within 30 days of it being issued. Include in your appeal the following details:

- the date you or your firm requested time to pay from the Tax Office;
- which tax debts are included in the arrangement; and
- the agreed payment amounts and dates.

Your gross payment status should be restored if there are no other late tax payments or late tax forms delivered in the review period.

Business Assurance Visits

If the Taxman suggests he should visit your business as part of their Business Assurance programme, should you agree? The answer is, almost certainly not!

The Business Assurance programme involves Tax Officers offering to visit new businesses to help them understand what sort of business records they should be keeping. During the visit the Tax Officer will ask the business owner how they record sales, purchases and expenses, how they handle cash, and how they calculate and record drawings or remuneration.

These questions amount to a tax compliance check and any answers you give will be recorded by the Tax Officer. What may not be recorded is any advice given by the Tax Officer in answer to your own questions. For example, you may ask: 'Is this expense tax allowable?' If the tax officer gives the wrong answer, and you act on it, you could be penalised in the future for getting it wrong.

Penalties for errors in tax returns are now dependent on your behaviour, so it is crucial that the Taxman does not form the impression that you have a careless approach to keeping business records. If you are offered a business assurance visit, either politely decline, or ask us to be present to ensure you are not tricked into saying something that may incriminate you in a future tax investigation. For any advice you need, you should talk to us, not the Taxman!

VAT of Google Adwords?

Google Adwords is a popular form of marketing for getting your website onto the Google search results page. It is an international service for VAT purposes as it is sold to UK businesses by Google Ireland Ltd from Dublin.

If you are a UK business you should not be charged VAT on the cost of the adwords service, as it subject to the reverse charge regulations. This means, if you are VAT registered you need to add VAT at the standard rate applying in the UK to the adwords cost and add the gross cost to both your purchases and sales for the period. You pay the VAT due as if you had made the sale, and you reclaim the VAT due on your purchase of the same service. The net effect for a VAT registered business should be zero, unless it makes VAT exempt sales.

Certain accounting software programmes need some tweaks to cope with the reverse charge mechanism. Make sure you check your system if you are not confident that it is processing the VAT on adwords costs correctly.

If you have been charged Irish VAT at 21% on your Google adwords, this may be because Google Ireland Ltd has recorded you as being a personal customer, not a business. If you are a UK business, not necessarily VAT registered, you can reclaim this erroneously charged VAT from Google Ireland Ltd. You cannot reclaim this VAT through the international VAT refunds service operated by HMRC as the VAT should not have been charged by Google in the first place. You should not include the Irish VAT on your UK VAT return as it is not correctly charged VAT.

Deferring a Capital Gain and EIS

We are now in a new regime for Capital Gains Tax where the total of your gains and your taxable income for the year influences the rate of Capital Gains Tax (CGT) you pay. This means you could pay CGT at 28% in tax years where your income and gains are high, but only 18% on gains in years where your income is low.

If you have made a gain in this year that will be taxed at 28% you could defer it to a later tax year when you might pay tax at 18%. Alternatively the deferred gain may be taxed at 0% as it may be covered by your annual exemption in the future period.

One way to defer any capital gain is by subscribing for Enterprise Investment Scheme (EIS) shares. The shares must be subscribed for in the period that starts one year before the date you made the gain and ending three years after making the gain.

You only need to reinvest the amount of the gain you want to defer, not the full net proceeds from your disposal, or the full amount of the gain. You can leave some of the gain in charge in the current tax year if that part carries CGT at 18%, or it is covered by your annual exemption.

The deferred gain comes back into charge to CGT when you dispose of the EIS shares, and this may be done gradually over many tax years. This spreads out the gain, so only small parts are taxed in each year, and you can therefore avoid the 28% rate of CGT.

One drawback is that you must pay any CGT due for 2010/11 by 31 January 2012, which is well within the period in which you can to subscribe for EIS shares. You may need to pay the 2010/11 CGT on time, then reclaim the tax once you have received your EIS shares and your deferral claim has been processed.

Do be aware that EIS shares are risky investments and they can only be issued by unquoted companies.

August Question and Answer Section

Q. I work as a self-employed decorator. If I transfer my business to a new company will I be able to take advantage of the NIC holiday announced in the last Budget?

A. The full details of how the NIC holiday scheme will operate have not yet been released, but we do know it won't apply to businesses established in London, the South East or East regions of England. However, even if you are based outside of those areas, we also know the scheme will only apply to new businesses set up after 21 June 2010. 'New' will be defined as a new economic activity, so where an existing sole-trader business such as yours, is transferred to a new company the business is unlikely to qualify as 'new' for the NIC holiday scheme.

Q. My brother and sister in law each lent my company £10,000 some years ago. The company is still trading, but it is unlikely to ever be able to repay those loans. If I write-off the debt in the company accounts will my relatives be able to claim tax relief for the irrecoverable loans?

A. Lenders in this position can sometimes treat the irrecoverable loan as a capital loss, which can be set against capital gains, but not against income. However, the Taxman will only grant this tax relief if the loan really is irrecoverable. This is taken as read where the business has gone broke. While the company is still trading there is a possibility that the money could be repaid, even if the amounts have been written off in the company accounts. The Taxman will need some considerable evidence from the company's bankers and other sources, such as Court judgements, to be convinced that the loans cannot be repaid by a trading company.

Q. I have volunteered for redundancy at the age of 59 and expect to receive a pay-off worth £60,000. The first £30,000 will be paid free of tax, but is there anything I can do to reduce the 40% tax I will be charged on the balance?

A. You could ask your employer to divert some of the redundancy payment into a registered personal pension scheme for you. You will not be taxed on this pension contribution as long as your total income for this tax year is not more than £130,000. You also need to have income below this level in the previous two tax years. If your employer is not willing to make the pension contribution, you could make the contribution yourself, but be sure to make the payment in the same tax year in which you receive the redundancy payment. Your pension contribution will be treated as being made net of 20% tax and you can reclaim a further 20% tax relief through your tax return. In both cases, as you are already over 55, you can withdraw 25% of the pension fund value as a tax free lump sum immediately. You should take advice from a pensions expert before embarking on any investment in pensions.

August Key Tax Dates

2 Last day for car change notifications in the quarter to 5 July - Use P46 Car

19/22 PAYE/NIC, student loan and CIS deductions due for month to 5/8/2010

Much More from Mr P...

Every month our very own Mr P gives you information about the little things that will make your business life easier.  Well, this month he's a got a real treat for you!

As you know, at Mazuma we're big fans of spending your time running your business and not doing the time consuming admin tasks, after all, that's where our innovative Purpleforce service came from!  So imagine our joy when we stumbled across a fabulous company called ReceiptAngel.  ReceiptAngel share the same ethos as Mazuma.  In their own words they describe organising your receipts as "a hateful chore"!

 "Asking around there is a tiny, very select, breed who actually seem to enjoy this stuff. The rest of us would rather be doing something more productive, or relaxing. For many small business people from plumbers to solicitors and business consultants it's a hateful chore that gets left to the last possible moment and then consumes a Saturday afternoon when we'd rather be kicking a ball around in the park with the kids or a Friday evening when we'd rather be unwinding in front of a glass of something suitably medicinal."

We've been so impressed with Receipt Angel that Mazuma are looking at the possibility of being able to link ReceiptAngel to Mazuma and we'd love to know if you'd be interested.

You can check out ReceiptAngel for yourself here and if you use offer code MAZUMA you'll get a 30 day free trial!

Disclaimer
The information contained in this newsletter is of a general nature and no assurance of accuracy can be given. It is not a substitute for specific professional advice in your own circumstances. No action should be taken without consulting the detailed legislation or seeking professional advice. Therefore no responsibility for loss occasioned by any person acting or refraining from action as a consequence of the material can be accepted by the authors or the firm.

Welcome...
To our Emergency Budget newsletter.

This newsletter aims to summarise the main measures that affect our clients. If you need further assistance just let us know

We are committed to ensuring all our clients don't pay a penny more in tax than is necessary.

Please contact us for advice in your own specific circumstances. We're here to help!

Summary

We all knew that Chancellor George Osborne was going to announce an increase in Capital Gains Tax (CGT) today, but we didn't expect the rate to rise immediately. Other surprises included reductions in the rates of corporation tax for both small and large companies and in the rates of capital allowances for all businesses.

A rise in the standard rate of VAT to 20% was widely expected, but this increase has been delayed until 4 January 2011, which is the first working day after the Christmas break.

The 1% point increase in NI rates from 6 April 2011 is already planned, but we are assured by George that through some manipulation of thresholds this increase will not be felt by most people. However, we won't know the exact starting points for employers and employees NI until the Autumn Budget statement on 20 October 2010.

Basic rate taxpayers aged under 65 will benefit from a £1,000 increase in their personal allowance from 6 April 2011. Those aged over 65 already receive a higher personal allowance, if their total income is below £28,930.

Individuals

Capital Gains Tax
The rate of CGT is to increase from 18% to 28% from 23 June 2010, but taxpayers with taxable income and gains below £37,400 will continue to pay CGT at 18%.

All trustees and personal representatives with any level of income and gains will also rise to 28% from 23 June 2010.

We thought the Government would not increase the rate of CGT in the middle of a tax year, as that would cause so many complications when calculating the tax due for 2010/11. However, that is exactly what George plans to do. The increase in CGT is not as high as many feared, as it is still well below the highest income tax rates of 40% and 50%. Although trusts are particularly badly hit as they will pay the higher rate of CGT on all gains and only have half the annual exemption of individuals. There are special rules for trusts for the disabled.

The annual exemption remains at £10,100 for individuals and £5,050 for most trusts.

All gains that qualify for entrepreneur's relief will continue to be taxed at 10%, whether the disposal is made before or after the changes on 23 June. There will be an increase from £2 million to £5 million in the lifetime limit on gains that can qualify for entrepreneurs' relief from 23 June 2010 and this is very welcome, but many gains will never qualify for that relief. For example, the sale of a commercial property, which is not associated with the disposal of a trading business, will not qualify for the relief. Letting of commercial property does not count as a trading business for entrepreneurs' relief.

If you are in the middle of arranging a large sale, you could escape the CGT rise if you have already exchanged contracts. This is because the disposal date for CGT is the date that unconditional contracts are exchanged, not the completion date for the deal. If the contract is conditional, the disposal date is the date those conditions are satisfied. The disposal date for a gift is the date the beneficial ownership passes.

Income Tax
The personal allowance for those under 65 will rise by £1,000 to £7,475 for 2011/12. However, this generous increase in tax free income will be limited to those who pay income tax at 20%, as the threshold at which 40% tax starts will be reduced to take into account the increased allowance. We won't know the exact tax thresholds until the Autumn Budget statement, as the increases in threshold for 2011/12 will be based on the RPI to September 2010.

Child Benefit and Tax Credits
Child benefit is available to all parents of children under 16, and is not means tested. This benefit will be frozen at current levels until April 2014, and the money saved will be transferred to child tax credits.

Working and Child Tax Credits are to be withdrawn gradually from families with total income of £40,000 or more from April 2011. The special baby rate will be withdrawn at the same time, but the child element for less well-off families will increase by £150. There are a number of other changes planned for later years including a reduction in the period for which claims can be back-dated.

Child Trust Fund
Child Trust funds are special tax free savings accounts that are set up with Government funds for children born after 31 August 2002. Additional savings of up to £1,200 per year can be contributed to each account by anyone. Reductions in the funding for these accounts will be made from August 2010 and no further funding will be provided for new accounts from 1 January 2011. The accounts that are already open will remain in place until the child reaches age 18.

Retirement and Pensions
The state pension age (SPA), from which individuals can receive the state pension, is currently 65 for men and is rising to 65 for women. Legislation is already in place to increase the SPA to age 66 for everyone from 2026, but the Government wishes to bring this date forward.

From April 2011 the state pension will be increased by the greater of: the annual increase in earnings or prices, or 2.5%. The standard minimum income guarantee given under the Pension Credit will be increased by the same amount as the state pension.

When a member of a money purchase pension scheme reaches age 75 they are required to purchase an annuity to provide their future pension, or heavy charges can apply. This requirement to purchase annuity at age 75 is to be scrapped from April 2011. In the meantime if the scheme member has not reached age 75 by 22 June 2010, they can defer purchasing an annuity until age 77.

Tax relief for pension contributions is expected to be limited to around £35,000 per year per person from April 2011. This cap will replace the complex tapering of tax relief that was due to apply to individuals with total income of £180,000 or more.

Currently employees can be required to retire when they reach the default retirement age of 65. The Government is going to consult on how to remove this default retirement age.

Furnished Holiday Lettings
The changes that were announced by the previous Government will not be taking effect, although new measures will be considered to ensure the rules apply equally to properties in the EEA as well as increasing the number of days that properties have to be available for let and actually let as commercial holiday lets.

Businesses

Corporation Tax
The small profits rate of corporation tax will be cut from 21% to 20% from 1 April 2011, when it was previously expected to increase to 22%. The small profits rate applies to profits of up to £300,000 if there are no associated companies. The corporation tax rates for large companies will reduce from 28% to 27% from next April and then fall by 1% per year eventually down to 24%.

Capital Allowances
The previous Government was always messing with capital allowances in an attempt to incentivise businesses to invest in this or that type of equipment. The new policy is to cut back on capital allowances with effect from 1 April 2012.

The main pool rate is reducing from 20% to 18% from that date and the special pool rate from 10% to 8%. The Annual Investment Allowance (AIA) Limit is also reducing from £100,000 to £25,000 from 1 April 2012.

Small businesses will not be affected if all of their expenditure on equipment is within the annual investment allowance, which gives 100% deduction for costs in the year of purchase. Unfortunately expenditure on cars cannot be covered by the AIA. However, expenditure on new (not second-hand) low emissions cars and vans can be covered by a separate 100% allowance.

NIC
2011/12
Although we know the rates of NI that will apply from 6 April 2011, (2010/11 rates + 1%), we don't know the new thresholds, so we cannot construct a meaningful table for 2011/12. We know the employer's secondary threshold for class 1 NICs will increase by £21 per week above the RPI increase. The RPI increase is based on the RPI to September 2010. We will provide a full NIC rates and thresholds table when we have the full details in October.

NIC Holiday
The Treasury are feeling guilty about cutting loads of public sector jobs in the less prosperous regions of the UK, so they have come up with the idea of an 'NICs holiday'. A business will be exempt from paying the employer's class 1 NICs for 12 months for up to 10 employees, capped at £5,000 per employee.

This scheme will start in September 2010 but will apply to new businesses set up on and after 22 June 2010. It will only apply in Scotland, Wales, Northern Ireland, the North of England, Yorkshire, the Midlands and the South West regions. Certain businesses are excluded, such as those under the IR35 or Managed Service Company rules, and businesses in grant-supported sectors such as agriculture, fisheries and coal. More details are expected to be made available shortly.

VAT

Change of Standard Rate
The standard rate of VAT will increase from 17.5% to 20% from 4 January 2011. Goods and services that are currently exempt from VAT or are subject to VAT at the zero, or 5% rates will not be affected by this change.

If you are planning to invoice or pay in advance to avoid the VAT rise, think again. There will be a special 2.5% VAT charge on such advance sales where the customer cannot recover all the VAT on the supply, and one or more of the following applies:

- the supplier and customer are connected,
- the supplier funds the purchase,
- the payment is not due for at least six months;
- the value of the supply is £100,000 or more, unless the prepayment or advance invoice is normal commercial practice.

Flat Rate Scheme
Small businesses can start to use the flat rate scheme if their VAT exclusive turnover is no more than £150,000, but must leave the scheme if their VAT inclusive turnover exceeds £225,000. This exit turnover figure will rise to £230,000 on 4 January 2011.

The flat rates that are applied to gross sales under the flat rate scheme will increase on 4 January 2011 to reflect the increase in the standard rate of VAT. If your business will no longer benefit from using the flat rate scheme you can leave scheme at any time.

Payments on Account
Businesses who have annual VAT due of £2 million or more must make monthly VAT payments on account. This threshold will be increased in 2011.

Tax Avoidance

A corporate tax avoidance schemes has been blocked from 22 June 2010 that uses financial instruments to remove profits from UK tax or is used to create an artificial tax credit.

The Government is to consider whether a General Anti-Avoidance Rule would be effective in reducing tax avoidance. It will also examine the following anti-avoidance measures:

- Expand the disclosure of tax avoidance schemes regime to include schemes involving IHT on trusts.
- Block the manipulation of consortium relief.
- Restrict the use of employee trusts, including employer finance retirement benefit schemes (EFRBS).
- Amend Stamp Duty Land Tax due on high value property transactions.

Other Duties

- Landline duty of £6 per year will not go ahead from 1 October 2010.
- Alcoholic duties rates on strong cider will reduce from 30 June 2010, back to the levels which were in place before the March 2010 Budget.
- A bank levy on bank's balance sheet values will be introduced from 1 January 2011 at 0.04% , which will rise to 0.07%.

Disclaimer
The information contained in this newsletter is of a general nature and no assurance of accuracy can be given. It is not a substitute for specific professional advice in your own circumstances. No action should be taken without consulting the detailed legislation or seeking professional advice. Therefore no responsibility for loss occasioned by any person acting or refraining from action as a consequence of the material can be accepted by the authors or the firm.

It's all well and good saying you'll provide this and that as a business, but where are the solid promises? Lots of Accountants can't even tie themselves down to how long it will take them to do your bookkeeping and Accounts, let alone make any promises over and above that!


Well, fear not! As always, Mr P has had a word with our Accountants and seeing as customer service is at the heart of our business, we have made a set of promises to our customers.

The Mazuma Promise...

We promise to keep our fees fixed, fair and affordable. We would never charge you based on how much you earned in a year or send you an unexpected invoice.


If you email, text or call us through our dedicated help lines, we promise to respond to you within one business day.


We promise that all our staff are qualified to do the work they do. Whether it is bookkeeping, accountancy or tax advice, our staff range from qualified bookkeepers through to Accounting Technicians and Chartered Accountants, so you'll always have the right person doing the right job for you.


We structure our business so that you get the best possible customer service. This means that if your usual point of contact is away on holiday, that you'll still be able to get an answer to your question.


We promise to speak in Plain English! We don't believe in blinding our clients with jargon.


Finally, we promise to always remember that our clients are the most important part of our business. Without our clients we wouldn't be here and we promise never to forget that!


Now, you can't say fairer than that can you?
 

Things that sound too good to be true usually are and lots of companies make claims about their services, their prices and how unique they are!

We know that our services are second to none, but here are a handful of testimonials from our clients so that you don’t just have to take our word for it!!

"If you enjoy preparing returns for your accountant (wading through order books and invoices and all those fiddly receipts) then trust me, the last thing you should ever do is switch to Mazuma. They'll take it all off your hands in a funky purple envelope and you'll have to find a new hobby like Scottish country dancing or basket weaving. On the other hand, if your accounts are just one gigantic hassle, give them a call. I did 3 years ago, and life has been much, much easier since."
James Daniel
Copywriter, EarthMonkey

“I signed up with Mazuma after hearing about them nearly 2 years ago. Personally I couldn't recommend them highly enough. They combine professionalism with a sense of personality, dealing with queries & issues quickly in a friendly manner. Having been a sole trader for 2 years the business went limited in January and Mazuma have helped enormously in making that transfer as smooth as possible. They've really given us a level of service we didn't expect, and we see our relationship with them as a long lasting one...”Ben Smith
Gingenious

"For people who work in TV time is too precious to be taken up with paperwork. All my team use Mazuma's services for the same reason I do... Mazuma's Purpleforce scheme is efficient, low cost and hassle-free."
Mark Hutchings
Gaffer (Dr Who, Torchwood, Sarah Jane Adventures)

Still not sure if Mazuma is quite right for you?

Why not give us a call on 0845 310 5654?

Or get a quote online

Welcome...

To June's Tax Tips & News, our newsletter designed to bring you tax tips and news to keep you one step ahead of the taxman.

If you need further assistance just let us know or you can send us a question for our Question and Answer Corner,

We are committed to ensuring all our clients don't pay a penny more in tax than is necessary.

Please contact us for advice in your own specific circumstances. We're here to help

Changes in Capital Gains Tax

The Coalition Programme for Government, published on 20 May 2010 contains this pledge:

We will seek ways of taxing non-business capital gains at rates similar or close to those applied to income, with generous exemptions for entrepreneurial business activities.

This strongly hints at an increase in the rate of Capital Gains Tax (CGT) due on gains arising from non-business assets. The easiest way to do this would be to increase the rate of CGT for all assets and provide tax relief to reduce the effective rate of CGT for selected business assets, or for assets used for 'entrepreneurial activities'. This could mean increasing the scope of existing tax reliefs such as entrepreneurs' relief, or roll-over relief on business assets.

We do not expect the rate of CGT to change before 6 April 2011, however some commentators think a change could be introduced from the next Budget on 22 June. It would be very complicated for the Taxman to programme his computers to calculate CGT at two different rates for the same taxpayer within one tax year. It is also extremely unlikely that a rise in CGT would be imposed retrospectively back to 6 April 2010. Between 6 April 1988 and 5 April 2008 CGT was charged at the taxpayer's marginal income tax rate, and this seems to be the solution the Government is leaning towards.

So what should you do before 6 April 2011 (or 22 June 2010 if ultra cautious), to avoid paying more tax? If the asset you plan to sell cannot be regarded as a business asset - for example a holiday cottage that does not qualify for furnished holiday lettings, then we should discuss the implications of making a disposal now rather than later. Remember a disposal need not be an outright sale, a transfer to a trust would give rise to CGT, but possibly also inheritance tax. If you make the disposal before 6 April 2011 rather than afterwards, the payment date for CGT is brought forward one year, and this needs to be balanced with the apparent tax saving.

It is not clear how far the 'generous exemptions' for business activities will stretch. If you currently qualify for entrepreneurs' relief as you have been a business partner, sole trader, or shareholder and employee holding 5% or more of the voting shares, for at least a year, it is probably reasonable to assume the assets connected with your business will continue to qualify for that tax relief. If you don't fall into any of those categories, you should talk to us about the risk of increased CGT, bearing in mind the level of the expected gain.

You also need to look at your projected total income for 2011/12, and the likelihood that the gain will be covered by your annual exemption for CGT. This exemption is currently £10,100 per person for 2010/11, but this could be cut back to perhaps half that amount!

The CGT changes discussed above are currently all speculation so please talk to us if you are concerned at all. We expect some definite changes to be announced in the Budget Statement on 22 June 2010. Look out for our Budget newsletter when we will explain the Budget announcements relevant to small businesses and individuals.

Other Tax Changes Ahead

The Coalition Programme for Government also contains a number of other proposed tax and law changes that may impact on you or your business if they come to pass.

The business-focused proposals include:

- Review of the IR35 rules as part of a review of all small business taxation.

- Refocus R&D tax credits on hi-tech companies, small firms and new businesses.

- Review the taxation of furnished holiday lettings so UK businesses are not penalised.

- Encourage farmers to convert existing buildings into affordable housing.

- Increase the threshold from which employer's NI is payable by £21 per week, to £6,812 a year from 6 April 2011. The employees' NI thresholds will not rise, so employees and the self-employed will bear the full brunt of the 1% increase in all NI rates.

- Provide those out of work with business mentors and start-up loans to help them start their own businesses.

The proposals affecting individuals include:

- No reduction in the imposition of Inheritance Tax in the foreseeable future.

- No reduction in Income Tax rates until the Budget deficit has been reduced.

- Increase the personal allowance significantly from 6 April 2011, but reduce the benefit of this allowance for those with high incomes. The personal allowance is currently tapered away for those with total income over £100,000, so this threshold may be lowered.

- Introduce a transferable married couples allowance, but only for basic rate taxpayers.

- Review of the taxation of individuals who are not domiciled in the UK, but who have a connection to the UK so they have some UK tax obligations.

- End Government funding of Child Trust Funds from 1 January 2011, and reduce the value of vouchers given for new-borns from 1 August 2010.

- Reform the administration of Working and Child Tax Credits to reduce fraud and overpayments.

- Reduce the penalty for living as a couple in the Working and Child Tax Credits system.

- Review the effectiveness of raising the Stamp Duty threshold for first-time purchasers.

- Remove the requirement to purchase a pension annuity at age 75.

- Phase out the default retirement age of 65.

- Bring forward the increase in the State Pension Age (SPA), which is the age from which you can draw the State Pension. This will be 66 years for men from 2016 and 66 years for women from 2020. The SPA has already increased beyond 60 for women, and is set to rise gradually to 68 for everyone by 2046.

We expect more detail on these proposals to be announced in the Budget on 22 June.

Post Credibility Team  

This is the new name for the VAT investigations unit! This new unit is sending out computer-generated letters to businesses who have claimed a refund for the last VAT period or periods. The letters are very poorly worded and may well be confusing on first reading. However, what the VATman is trying to say is that he wants an explanation of the refund claim. He is not accusing you of doing anything wrong.

If you receive a letter from the Post Credibility Team please deal with it or send it on to us ASAP. If you ignore it you will start to receive annoying phone-calls from the VAT office. 

PAYE Codes for 2010/11  

We have heard that the Taxman has almost finished sorting out the mess his new computer made out of the 2010/11 PAYE codes. If you have not received a P2 form for your employees that gives their PAYE code for 2010/11, carry on using the PAYE code issued for 2009/10. You should shortly receive the updated P2 forms for 2010/11.

One of the problems with the PAYE codes occurs where an individual starts to receive an occupational pension, or that pension is paid by a different pension provider, perhaps due to a restructuring of companies.

In such cases the pension provider should send a form P46(pen) to the Tax Office. However, the Taxman has said that many of these P46 (pen) forms contain mistakes, and this is causing the PAYE computer to churn out crazy codes, or send out unnecessary forms P161 to the pensioner. If you need to tell the Tax Office that you have started paying a pension to a former employee, please ask us to check the P46(pen) form first.

June Question and Answer Corner

Q. My UK based company has bought additional bandwidth from an internet provider based in the USA. How do I treat this purchase for VAT purposes in the UK?

A. The supply of bandwidth as part of your internet service is an international service for VAT purposes, as the supplier is based outside the UK. As your company is VAT registered you must apply the reverse charge rules to this purchase. This means for VAT purposes you treat the transaction as if you were both the purchaser and the supplier. You charge yourself standard rate VAT on the invoiced cost and claim that VAT back as part of your input VAT for the quarter. The VAT added appears twice in the calculations for your VAT return; as input VAT on purchases and as output VAT on the reverse charge as if the purchase was one of your own sales.

Q. My sales force all need to connect to the internet while they are out on the road, so we provide them each with a mobile phone dongle to provide the internet where and when they need it. Are there any tax implications for my company or the employees?

A. A mobile phone dongle is treated as a piece of computer equipment and not as a mobile phone. Where the company purchases the dongle and pays the subscription charge directly there should be no benefit in kind charge on the employee. This applies if the associated computer has no significant private use, and the private use does not affect the cost of providing the equipment.

Where the employee purchases the dongle and pays the connection charge, which he claims back from the company, the tax situation is more complicated. The employer needs to include the expense paid on the form P11D, and the employee needs to claim a deduction for the costs on his tax return, as reasonable additional costs relating to work. To circumvent this paper chase, the company should apply for the costs of the dongles to be included in a P11D dispensation.

Q. On 1 Feb 2010 I started a self-employed consultancy business, which has generated profits of about £40,000 in the first four months. I also run my own company and let a few properties. The income from my company and the rents has been much lower in 2009/10 compared to the previous year. Do I have to take into account the income from my new consultancy business when I make my payment on account for 2009/10 due on 31 July 2010?

A. You do need to take into account the income from your new consultancy business when making your next payment on account for income tax. However, the opening year rules for self-employment will apply, so only two months of your first period of the consultancy business profits are taxed in 2009/10. You can apply to reduce the 2009/10 payment on account if your total taxable income for the 2009/10 tax year, including the two months of consultancy profits, has dropped below the total taxable income for 2008/09. It doesn't matter if your income for 2010/11 rises again.

June Key Tax Dates

19/22 PAYE/NIC, student loan and CIS deductions due for month to 5/6/2010.

22 New Coalition Government first Budget.

30 Deadline for UK businesses to reclaim EC VAT chargeable in 2009.

Much More from Mr P!

Well, can you believe that it's June already?  The months just seem to fly by nowadays!  Those of you who are current clients may have recently received a letter regarding your self assessment tax return.  We'll have had most of the information on this already if you've been using our Purpleforce service, but just in case you've missed anything out, it's an opportunity to let us know.  If you've been super organised all year and haven't forgotten anything then you can happily ignore the letter!

I want to thank all of our clients for continuing to spread the word about Mazuma.  We've had record numbers of client referrals in the last month.  To make it even easier to refer your friends to us we have put a Refer A Friend section on the website.  Don't forget that for every friend refer who signs up, you'll get £25 of retail vouchers as a thank you!

Finally, if you are referring someone to us, or thinking about moving to Mazuma yourself then why not try us our for free?  We know that changing your Accountant or getting one for the first time can be a difficult decision, so why not try us out so you can see exactly how good our service is!  All you have to do is get a quote onlineusing the promo code FREE, or email sales@mazumamoney with the subject of the email as FREE and give us your name and address and we'll get your trial pack out to you, simple!

Disclaimer
The information contained in this newsletter is of a general nature and no assurance of accuracy can be given. It is not a substitute for specific professional advice in your own circumstances. No action should be taken without consulting the detailed legislation or seeking professional advice. Therefore no responsibility for loss occasioned by any person acting or refraining from action as a consequence of the material can be accepted by the authors or the firm.

Exciting News from Mr P!

As a savvy little envelope I know that the words "free" and "accountant" usually mix together about as well I mix with a shredder! Once again, I have put my foot (well ok, flap) down and told Mazuma that they are so blooming brilliant that people should get the chance to meet one of my purple envelope colleagues for free!

Guess what? They listened! Now you can try out Mazuma's Purpleforce service without having to hand over a single penny!

We know that changing your Accountant, or even hiring one for the first time can be a bit scary.

We know that because we work so differently from standard Accountants, that you might be a little bit nervous about signing your accounts over to us. Isn’t it better the devil you know?!

No! Because we also know that our services are second to none!

So, why not try us out for free?

The taster pack will give you an idea of how our services work and you’ll see the quality of service and speed at which your accounts are processed and your documents are returned to you.

All you have to do is fill out the form, pop your documents in the Freepost envelope provided and send it off to us. In about 5 working days you’ll get your accounts back, simple!

There is absolutely no commitment, no ulterior motive and no catches! We just want you to see what a life of hassle-free accounting would look like for you with Mazuma!

So, go and Get A Quote , putting the word "FREE" into the promo code, or email your name and address to sales@mazumamoney.co.uk with "FREE" in the subject line and I will personally instruct one of my envelope buddies to go and see you!

Regards,

Mr P
Chief Purple Envelope

At Mazuma we are famed for our Purple Envelopes and the relief that they bring to small businesses.

Our Purple Envelopes are responsible for the relaxed demeanours and timely accounts of many small businesses across the UK!

With this in mind we thought that it was about time we introduced you to Mr P, our chief Purple Envelope!

Mr P has been with Mazuma from day one and if you ever asked him he’d tell you he’s the real brains behind the operation (although we know he’s just an envelope!).  

He has, however, been instrumental in shaking up the accountancy industry and forcing less forthcoming accountancy practices to focus on customer service, just like Mazuma do.  It’s made him very popular with Mazuma and our clients, but a little less popular with some more traditional accountants, which is why he’s hidden his light under a bushel until now!

Mr P will be introducing lots of snazzy new features like the online Refer A Friend scheme which you can see here. (Don’t forget if you refer a friend and they sign up, you’ll get £25 of retail vouchers!)

You can also follow him on Twitter here or read his blog here.

Mr P will be making a regular appearance in newsletters, on the website and across the UK over the coming months so look out for him.  He might just have a rather fantastic competition in the pipeline too, so watch this space!

You may have recently received a letter from the VATman that officially notifies your company or business to file its VAT return online, or face penalties. If your business had a turnover of £100,000 or more in the year ending 31 December 2009 you are legally required to file your VAT returns online, rather than as a paper form, for all periods beginning on or after 1 April 2010. So you can file your VAT return for the quarter to 31 March 2010 on paper, but VAT returns for later periods must be submitted online.

If you don't agree that your turnover was £100,000 or more in the year to 31 December 2009, you need appeal against the VATman's decision within 30 days of the date of his letter. The VATman has not sent a copy of his letter to us, so please forward it on if you have concerns about this turnover threshold.

Even if you have already filed several of your VAT returns online, and your turnover is over £100,000, you will still receive the notification letter from the VATman, including the expensive glossy brochure. If your turnover is currently less than £100,000 per year, you will not have to file your VAT returns online until 2011. The Government has announced that all VAT registered businesses will be required to file their VAT returns online from April 2011, but that requirement is not law yet.

If your business first registers for VAT on or after 1 April 2010 you will be required to file all your VAT returns online from your first VAT return, even if your turnover is way below the £100,000 threshold.

The Taxman is very keen for all businesses and individuals who need to submit a tax return, to keep complete and accurate records. He has recently issued a new leaflet that summarises all the records different types of businesses should keep, and those they are required to keep by law. See:

http://www.hmrc.gov.uk/factsheet/record-keeping.pdf

If you do not keep complete and accurate records of all your income, sales, gains, expenses, and business costs, you will not be able to prove the figures reported on your tax return are correct. If the Taxman challenges the entries on your tax return, and you cannot produce the evidence to back up those figures, he will assume they are incorrect. The Taxman will then think up a more reasonable figure (in his eyes), and look to tax you on that. You may then have to pay the additional tax, interest for late paid tax, and a penalty of up to 100% of the underpaid tax.

You can avoid such a nightmare if you keep accurate and complete records which is exactly why we designed our Purpleforce service. Signing up for our Purpleforce service will guarantee that your records will be tax-man ready at all times.

If you’re not already a client then you can get a quote here.

For more tax tips like this, see our website here!

Follow us on Twitter! http://twitter.com/MazumaGB

Mazuma are delighted to announce that they are finalists in not one but two categories at this year's Welsh Women Mean Business Awards!  Sophie Hughes and Lucy Cohen are one of three finalists in the 'Best Woman in a Legal or Accountancy Business' category and in the 'Best Small Business Leader' Category.

The awards are specifically targeted at women owner-managers running small and medium enterprises and highly successful women entrepreneurs who have turned a great business idea into a reality or developed an existing business into a thriving enterprise.  The Welsh Women Mean Business Awards are sponsored by Go Compare.com with Principal Partners including Sony UK Technology Centre.

The awards will be held on March 11th 2010 at Holland House Hotel in Cardiff, and attended by the management team of Mazuma.  Lowri Williams, General Manager of Mazuma, comments:  "I am delighted that Mazuma are finalists in the WWMB Awards, I am very proud of the team at Mazuma, and this is a great way of celebrating their hard work.  I am looking forward to finding out the result!".

Errors in your tax code?

Welcome...

To February's Tax Tips & News, our newsletter designed to bring you tax tips and news to keep you one step ahead of the taxman.

If you need further assistance just let us know or you can send us a question for our Question and Answer Corner.

We are committed to ensuring all our clients don't pay a penny more in tax than is necessary.

Please contact us for advice in your own specific circumstances. We're here to help!

And if you're not yet a client of ours, then why on earth not? We're ideal for people who have better things to do with their life than do their own accounts and tax!






Errors in New PAYE Codes

The Taxman has started to issue the 2010/11 PAYE codes, for the tax year that starts on 6 April 2010. This code arrives in the form of a P2 notice, and a copy should go to your employer (on a form P9). If you have received your 2010/11 PAYE code already please study it carefully, as any corrections need to be made in the next few weeks.
Since the Taxman fired up a new PAYE computer last summer there have been a number of faults appearing in PAYE codes. In some cases the age allowance or married couples allowance disappeared, in other cases the state pension amount was understated. Now many of the 2010/11 codes have excluded some of the basic personal allowance, which should be £6,475 for those aged under 65.

This fault occurs if you have changed jobs in the last few years, or started to receive a pension.

The Taxman's computer thinks you are still receiving a wage from your old job, so has split your personal allowance over your current employment or pension and your old job. If you do not have your full personal allowance of £6,475 shown on your 2010/11 PAYE code, ring the Tax Office to ask why, or speak to us.

Doctors and Dentists Asked to Confess

In our January newsletter we told you about the Taxman's crackdown on undeclared commissions. On 11 January 2010 he launched a scheme to encourage medical professionals to disclose all their undeclared income, including commissions and any other income that hasn't been shown on their tax returns. This scheme is called the Tax Health Plan, but at present it is only open to medical doctors who are registered with the General Medical Council (GMC), and to qualified dentists.
If you are a doctor or dentist, and you want to come clean to the Taxman you need to register your intention to make a disclosure under the Tax Health Plan by 31 March 2010. You will then have to present the full disclosure report and pay all the tax, interest and penalties due by 30 June 2010. We can help you calculate what is due and to complete the disclosure forms necessary. The main advantage of using this scheme is the penalties due will be nil if the unpaid tax is less than £1,000, and will be limited to 10% of the unpaid tax in other cases.

If you fail to make a full disclosure under the Tax Health Plan and the Taxman then investigates your tax affairs, the penalties charged are likely to range from 30% to 100% of the tax due. You cannot take advantage of the low penalties under the Tax Health Plan if you could have made a full disclosure under one of the off-shore disclosure schemes in 2007 or 2009/10. In that case you have missed the boat, and any disclosure you make now will be subject to higher penalties on the tax due.

If you are a medical professional with undeclared income, but not a registered doctor or dentist, wait a few weeks to see if the Taxman will widen the Tax Health Plan to include you. Other professionals should probably also wait a while before approaching the Taxman about any undeclared income, as he said the Tax Health Plan would be the first of a number of schemes aimed at different professional groups. In the meantime if you have doubts about whether you have correctly declared all of your taxable income, please speak to us as soon as possible.

Adding Overseas Purchases to Sales

If your business is not VAT registered you need to keep a 12-month rolling total of your sales ('taxable supplies' in VAT-speak), to check this total does not exceed the VAT registration threshold (currently £68,000). Taxable supplies are those sales which would be subject to VAT (at 0%, 5% or 17.5%), if your business was VAT registered. Once your 12-month taxable supplies total exceeds the VAT registration threshold you must register your business for VAT within 30 days.

Unfortunately you now also need to keep track of the value of the services you purchase from any overseas businesses. Since 1 January 2010 most overseas services supplied to a business from another business (B2B) are subject to the reverse charge. This means you as the customer need to act as both the supplier and customer for the transaction for VAT purposes.

You must add the value of the overseas services acquired to your total purchases, and add the same value to your taxable supplies total, for VAT purposes only. The addition of the overseas services to your taxable supplies total may push this figure over the compulsory VAT registration threshold, in which case you must register your business for VAT in the UK.

It doesn't matter whether the business you are purchasing the service from is registered for VAT or not. You still have to apply the reverse charge treatment to the value of the service acquired. There are some exceptions for services relating to land and transport. Please ask us if you are uncertain about when you should apply the reverse charge or register for VAT.

When is Your PAYE Due?

This is an easy question - all PAYE and NIC deductions, including student loan repayments, and CIS deductions for the tax period ending on 5th of the month must be paid to HMRC by 19th of that same month. This means your cheque must reach the Taxman's accounts office by the last working day before the 19th. If you pay electronically the payment must reach the Taxman's account by 22nd of each month. In most cases you will need to set-up the payment to leave your bank account on or before 19th as the Taxman's bank does not accept 'faster payments', which arrive the same day as they leave.

If all your average monthly PAYE deductions for the tax year are less than £1,500 you can pay those deductions to the Taxman each quarter instead of monthly. In this case the deductions must reach the Taxman's accounts office by 19th July, 19th October, 19th January and 19th April. If you pay electronically the payment must arrive by 22nd of the relevant months.

These deadlines are particularly important for sub-contractors in the construction industry who currently have 'gross payment' status.

Gross payment status allows those firms to be paid without deduction of tax. But the Taxman will withdraw gross payment status if you are up to 14 days late with more than three PAYE payments. If you are more than 14 days late for just one payment gross payment status will be withdrawn. You can appeal against the withdrawal of gross payment status, but you need a good excuse for making the late payments!
From May 2010 all employers will be subject to late payment penalties if they are late with more than one PAYE payment in the tax year. If you regularly pay your PAYE late we should discuss how to improve your systems before the new penalties start.

February Question and Answer Corner

Q. Next tax year I will lose £1 of my personal allowance for every £2 of my taxable income that exceeds £100,000. To avoid this loss of allowance, can my wife and I elect for the interest on our joint bank accounts to be treated as belonging entirely to her for tax purposes?

A. The income from jointly held bank accounts must always be split equally between the account holders for tax purposes, you cannot elect otherwise. To move the interest into your wife's name for 2010/11 you need to take your name off the account before 6 April 2010. To achieve this you may have to close the account and open a new account in her sole name. If you have any fixed interest accounts that are due to mature and pay rolled-up interest on after 6 April 2010, you may want to close those accounts before that date. This will ensure the interest arises in the tax year 2009/10 and is taxed at 40% rather than at a marginal rate of 60% if it arises in 2010/11. Check the penalty clauses for closing the account early before you take action.

Q. My company has paid interest on late paid corporation tax. Is that interest tax allowable?

A. Yes. Interest paid to the Tax Office on late paid corporation tax is tax allowable for the company for the period in which the interest was paid. Likewise interest paid by the Taxman because corporation tax has been paid early, or in excess of the amount due, is taxable.

Q. A friend told me I could purchase a van or motorcycle through my company and not pay any tax on it. Is that true?

A. There is a grain of truth in this myth, but there will still be some tax to pay if you use the vehicle for personal journeys. When your company purchases a van or motorcycle for business purposes it will reduce the taxable profits by 100% of the cost of the vehicle. This only applies where the purchase is covered by your company's annual investment allowance (AIA) of £50,000. The AIA cannot be claimed for the cost of cars.

However, when you use the vehicle for non-business journeys there will be a benefit in kind tax charge for you and a NI charge for your company. If you want to transfer the van or motorcycle into your own hands from the company's ownership, this must be done at the market value and again there will be a benefit in kind charge unless you pay the full value to the company. What's more, the disposal by the company will claw-back the AIA given and increase the company's taxable profit for the period in which the transfer is made.

February Key Tax Dates

2 Last day for car change notifications in the quarter to 5 January - Use P46 Car
19/22 PAYE/NIC and CIS deductions due for month to 5/2/2010
28 Talk to us about year end and pre-budget planning
First 5% penalty surcharge on any 2008/09 outstanding tax due on 31 January 2010 still unpaid.

Do you know someone who'd like to use Mazuma? Forward this blog to them or ask them to get a quote

Make sure that you tell us you passed our name on because....
 

Mazuma is expanding by recruiting six new members of staff at their new Head Office, The Hub, in Bridgend.

Mazuma is an accountancy practice that serves the needs of small businesses and sole traders whilst providing excellent customer service since it's inception in Cardiff in 2006. The Hub opened in December 2009 and Lowri Williams has been appointed as General Manager to ensure the continued success of Mazuma during their rapid expansion plans. Samantha Davies joins Mazuma as a Chartered Accountant, heading up a team of ten.

Sophie Hughes, Operations Director of Mazuma comments: "We recently expanded into large premises to serve our national expansion to provide low-cost accountancy services to small businesses across the country. We have recruited six new members of staff including Lowri Williams, who we feel will be a valuable asset to future growth of Mazuma". Lucy Cohen, Commercial Director of Mazuma comments on the appointment of Samantha Davies: "I have been impressed with the excellent experience that Samantha has had within the accountancy field, and we are thrilled to have found a member of staff with the vivacious attitude that matches our brand".

The Hub is also the Head Office for the Mazuma Associate scheme, and the eighth Associate will operating in Newport from January 2010.

Welcome...

To January's Tax Tips & News, our newsletter designed to bring you tax tips and news to keep you one step ahead of the taxman.

If you need further assistance just let us know or you can send us a question for our Question and Answer Corner.

We are committed to ensuring all our clients don't pay a penny more in tax than is necessary.

Please contact us for advice in your own specific circumstances. We're here to help!

Time to Pay Your Tax!

 January is the month when those big bills become due for payment, and that includes your tax bills...

- The balancing payment of income tax for 2008/09 is due by 31 January 2010 together with any Capital Gains Tax due for that year.

- The first instalment of income tax for 2009/10 is also due on that date.

- VAT for the quarter to 31 December 2009 must also be paid by 31 January, unless you file and pay your VAT return online, in which case you have another seven days to pay (ten if paying by direct debit).

- PAYE and NIC deductions for the month or quarter to 5 January 2010 must also be paid by 19th January, or by 22nd if you pay electronically.

If you do not have the funds to pay all the tax you owe in January, you should contact the HMRC Business Payment Support Service as soon as possible to arrange a payment plan. Their number is 0845 302 1435, they are open every day apart from bank holidays – Mon to Fri 8am to 8pm, Sat and Sun 8am to 4pm.

The tax officers that man this helpline can agree to spread the tax you owe over a period of up to six months, and suspend any surcharges for late payment that become due within that period, although interest will continue to be payable. However, you must set up a direct debit to pay regular instalments of the total debt. If you miss one of those instalments you will have to pay the surcharges due for late payment, and the balance of the debt will become payable immediately.

If you have a temporary funding difficulty in January you can pay a tax bill of up to £100,000 by debit or credit card through this website: https://www.billpayment.co.uk/hmrc/scripts/help1.asp.This page is part of the HMRC website, but the billpay facility is run by Alliance and Leicester. Please note you will be charged a transaction fee of 1.25% when you pay your tax by this method, and you will also be charged interest by your credit card company at a much higher rate until you pay off the full amount owing. 

 The Capital Gains Dilemma

 The Government needs to raise more revenue to pay off the massive national debt, but it seems reluctant to announce higher tax rates. One tax that looks ripe for an increase is Capital Gains Tax (CGT). The current rate of CGT is just 18%, compared to a top rate of 40% for income tax.

An additional income tax rate of 50% will be imposed on income over £150,000 from 6 April 2010, and there are strong rumours that the rate of Capital Gains Tax (CGT) will also be increased from that date. Nothing has been announced on this issue yet. Some say this silence is deliberate to avoid people rushing to make gains that will be taxed in the current tax year at 18% (or 10% with tax reliefs), rather than pay CGT at a much higher rate in 2010/11.

If you have assets you are planning to dispose of, consider whether you should make that disposal before 6 April 2010 and pay CGT at 18%, or delay and risk paying tax at a potentially higher rate. Discuss this with us before you decide. 

Reclaiming Overseas VAT is Now Easier

 At last a solution has been found to the problems businesses face when trying to reclaim overseas VAT. From 1 January 2010, to claim a refund of VAT you have paid in another EU county you must complete an online claim in the UK. You don't have to battle with lots of incomprehensible forms in other languages, as the claim will be done entirely in English. The UK tax office will forward your claim to the relevant country, which will process the refund within four months of receipt. You should then receive the payment due within a further 10 days.

To make VAT refund claims in respect of VAT paid in other EU countries you need to first register to use the Tax Office VAT EU refunds system, which is part of the VAT online service. Alternatively we can register on your behalf and submit refund claims for you.

Claims made from 1 January 2010 can cover VAT incurred on expenses in 2009. The deadline for 2009 invoices is 30 September 2010. Unfortunately claims for VAT paid on 2008 invoices are now out of time. Up to five refund claims can be made for each country for each calendar year: one for each quarter and a sweep-up claim for the whole year. The minimum amount of the VAT to be included in each claim has been standardised at €400 euros per quarter, or €50 euros for the sweep-up claim for the full year.

There are a lot of different rules that block the refund of VAT for certain purchases, such as VAT on the purchase of cars in the UK. These blocking rules vary widely across the EU countries but they are summarised in new VAT notice number 723A: Refunds of VAT in the European Community. 

Are You Declaring Commissions?

 Insurance companies often pay commissions to professionals who recommend certain insurance policies to their clients. For example; hospital consultants may recommend health insurance, vehicle dealers may propose car insurance, and lawyers may put forward accident and legal cover. The professionals in these situations should report any commissions they receive on their tax returns, but sometimes they forget to do this.

The Taxman now has wide powers to ask for information about a person's tax affairs from third parties. He can issue a notice to an insurance company asking for a list of all persons who receive commissions in a certain period, and the amounts paid to each individual.

We understand that HMRC has recently issued several such notices to a number of large insurance companies. When the information requested in these notices is received, the Taxman is likely to open enquiries into the tax affairs of a number of professionals.

If you have received some commission, however small, and you failed to disclose that amount on your tax return, now would be a good time to come clean. If you make a voluntarily disclosure to HMRC, you could benefit from a reduction in the penalty due from 30% of the tax due, down to nil. However, this penalty range (from 0% to 30%) will only apply if the Tax Inspector judges the omission from your tax return to be careless. In most cases the Taxman will view the under-declaration of commission to be a deliberate error, in which case the minimum penalty will be 20%, and the maximum 70% of the understated tax.

If you think this applies to you and you are already a client then please speak to us before you contact the tax office about any under-declaration of income, as the way in which you present the information to the Taxman can influence the amount of penalty charged. 

Question and Answer Corner

Q. About three years ago I converted a barn into two attractive cottages, which I have since let as furnished holiday lets. Much of the expenditure qualified for capital allowances, and there is large balance in the capital allowance pool carried forward into the current tax year. Will I get tax relief for the balance in the capital allowances pool when the rules for treatment of furnished holiday lettings are changed in April 2010?

A. If you continue to let the cottages after 5 April 2010 you can claim the annual 20% capital allowance generated by your capital allowances pool, but you cannot add expenditure to that pool for equipment or furnishings used within the buildings. The Taxman has confirmed that you can also claim a wear and tear allowance for each tax year from 2010/11 onwards in which you let fully furnished property. The wear and tear allowance is 10% of the net rents received after deduction of council tax, water rates and other charges you pay.

Q. I paid off my company's overdraft with my own money, to allow the company to be closed down using the informal extra statutory C16 procedure. Can I get any tax relief for the money that was used to repay the overdraft?

A. It is possible to get tax relief for a loan made to a trading business, which is not repaid. However, the conditions are strict. The money lent must be used by the borrower wholly for the purposes of a trade it carries on. In this case the company had already ceased trading and funds were used to pay off a bank overdraft before the company was struck-off. In this situation you cannot argue that the money was used for the company's trade as that had already ceased, so you cannot get tax relief for the lost funds. Even if all the conditions for the loan were met, the loss of the funds would be treated as a capital loss in your hands, and not relievable against income tax.

Q. There are 53 Mondays in this current tax year. Does that mean I will be taxed on 53 times the weekly amount of my state pension for 2009/10?

A. Monday is the payment date for most state pensions, and there are 53 Mondays in 2009/10 as 6 April 2009 was a Monday. However, the state pension is taxed on the amount accruing in the tax year, not the amount actually received in the year. The Tax Office always work on the basis that 52 weeks of state pension accrues for each tax year. When it comes to completing your tax return for 2009/10 you should include just 52 times the weekly amount of your pension, excluding any non-taxable benefits such as Attendance Allowance. 

New Clients Welcome!

If you are not already a client and are interested in becoming one, we would love 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.

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.

Key Tax Dates for January 2010

 1 Due date for payment of Corporation Tax for the year ended 31 March 2009

14 Return and payment of CT61 tax due for quarter to 31 December 2009

19/22 PAYE/NIC and CIS deductions due for month to 5/1/2010 or quarter 3 of 2009/10 for small employers

31 Deadline for filing 2009 Self Assessment personal, partnership and trust Tax Returns.

Balancing self assessment payment due for 2008/09.

Capital gains tax payment due for 2008/09.

First self assessment payment on account due for 2009/10.

Interest accrues on all late payments.

Last time for HMRC to inform you if it intends to start an enquiry into your 2007/08 Tax Return.

It's that time of year again!

The kids are back in school...

Halloween is over...

Summer is but a distant memory...

And Christmas is looming!

Well, to help out with the inevitable burden of Christmas shopping Mazuma is running a special offer. 

If you successfully introduce a friend (or even sign up yourself!) to Mazuma and our Purpleforce package before 18th December 2009, then we'll give you £20 worth of Love2shop vouchers which are accepted at 85 leading retailers!

Better still, if you successfully introduce more people than anyone else, not only will you get £20 of Love2shop vouchers for each one, but you'll be in with a chance of winning a bonus £100 worth of Love2shop vouchers!  Just imagine how much that would help with the Christmas shopping!

So thinking caps on folks! 

• Do you work in a serviced office with other small businesses?
• Are you based on a building site with tradespeople in need of a tax return?
• Is your customer base brimming with sole traders and small Ltd companies?

Why not recommend Mazuma to them?

Don't forget, Mazuma operates Nationwide so there's no need to be close to one of our offices to take advantage of our award winning Purpleforce service!

Think you could recommend us to someone and get your £20 Love2shop voucher right now? Just forward this email to them and ask them to fill out the Get a Quote form here using promo code L2S<yourname> (so we know who to send the vouchers to!).

Once they've signed up we'll pop your voucher in the post to you and you can enjoy a stress free Christmas!

We look forward to hearing from you!

Please note: This offer is not available in conjunction with any other offers or referral schemes. Mazuma GB Ltd reserves the right to offer a different retail voucher of the same value in replacement for the stated Love2shop voucher. Vouchers will only be awarded where the person(s) introduced to Mazuma GB Ltd enters into a contract for Mazuma's Purpleforce service under the terms and conditions described in their letter of engagement. Bonus £100 voucher competition is for individuals who have successfully introduced more than 5 new clients to Mazuma under the conditions previosuly described and who have introduced more clients than any other participant.  In the event of a tie a draw will take place.

Mazuma are pleased to announce the launch of Mazuma's 7th office in Preston.

Mazuma is an accountancy practice serving the needs of small businesses and sole traders that has steadily grown into a national business since its formation in Cardiff in 2006. The franchise, The Mazuma Associate Scheme, was launched in October 2008 and seven Associates are now in operation across the UK.

Mubin Mohammed operates from Preston and is delighted to be the first Mazuma franchise operating in the North of England. Mubin comments "Mazuma is a fantastic accountancy practice to join. It is a company which understands and can fulfil the high expectations of fast paced modern society. As Mazuma associates our aim is to provide a stress free service which is great value for money."

Mubin joins after the successful trial of the first Associate that took place over two years, based in the North of Cardiff.

Sophie Hughes, Operations Director of Mazuma GB who operates the franchise, comments: "We have been overwhelmed with the interest that we have received since the launch of our exciting franchise. It is a unique offering and provides people with the opportunity to operate their own business under the vibrant and nationally recognised brand of Mazuma. With the launch of the seventh franchisee and more due to launch early 2010, we aim to reach and better our targets of launching 12 franchisees by the end of 2010. Despite the recession, franchising is set to boom and the Mazuma franchise is a terrific opportunity to take up at this time. We are thrilled to have an Associate based further North".

Various areas of the UK are still available and separated by postal regions and population in the areas. You must be a qualified accountant and hold (or be able to apply for) a practising licence through your accountancy body before you commence trading as a Mazuma Associate. We hold extensive training courses on how to build, manage and grow your business and market yourself when you become an Associate so you are not "thrown in at the deep end", and we are on hand for you once you are an Associate to help you along the way with tips and guidance.

If you, or someone you know are interested in this exciting opportunity please call us on 0845 310 5654 or email us at info@mazumamoney.co.uk to request a prospectus and application form.

The First Minister for Wales, Rhodri Morgan, has helped accountancy firm Mazuma officially open its new Cardiff office.

Mazuma, a Cardiff based accountancy firm, which serves the needs of small businesses and sole traders, has opened a larger office in Rhiwbina in order to expand its offering to the Welsh business community.

Established in 2006 by Lucy Cohen and Sophie Hughes, the opening of the new shop front premises marks the next stage in their ambitious growth plans as they continue to franchise the company across the UK under the Mazuma Associate Scheme.

The business, which has witnessed a rapid growth in recent months, will double its number of Cardiff based staff and use the new location as a model office for potential franchisees to visit. 

Said Sophie Hughes, Operations director of Mazuma: “Since launching Mazuma the business has grown rapidly over the last three years. We franchised the business in 2008 and currently have six offices throughout the UK with two based in South Wales. The move will be beneficial to all involved, allowing us to build on the range of services we can offer.

“As our business undergoes dynamic development in the months ahead, it is important for us to not only offer a wide variety of services but also become more easily available to our clients, allowing us in turn to conveniently service our growing customer base.”

On officially opening the new office, First Minister Rhodri Morgan said: “It is a pleasure to see a local Welsh business defy the recent economic downturn and expand its offering within the capital. The company has an outstanding reputation and I wish them well.”

Danielle Lewis has been appointed branch manager of the new Mazuma office.  With over two year’s experience Danielle will head up the five strong team as she looks to grow the number of clients by a third over the next year.

Mazuma specialises in accountancy, bookkeeping, payroll. For more information visit www.mazumamoney.co.uk

Welcome...

To September's Tax Tips & News, our newsletter designed to bring you tax tips and news to keep you one step ahead of the taxman.

If you need further assistance just let us know or you can send us a question for our Question and Answer Corner.

We are committed to ensuring all our clients don't pay a penny more in tax than is necessary.

Clients - please contact us for advice in your own specific circumstances. We're here to help! 

2nd Offshore Tax Amnesty Announced

If you live in the UK you should declare on your UK tax return all of the interest you receive from investments and deposit accounts situated anywhere in the world. This applies even if you don't transfer that income into the UK. Individuals who have non-domicile status (normally not born in the UK), can apply to use what is called the 'remittance basis', and in those few cases the off-shore interest does not have to be included on their UK tax returns if it remains outside of the UK.

The Taxman has a campaign to track down everyone who has held an offshore bank account or investment, and who has not reported the income as they were required to do so. A larger number of foreign banks, including the most secretive banks in Liechtenstein, have been forced to provide lists of account holders to the UK Tax Office. The accounts on this list include trustee accounts, bond accounts and all types of current and investment accounts.

The bank is required to provide the dates for which the account was open, the name and date of birth of the account holder, the balance at 31 March each year, and detailed transactional information for certain periods.

If you had an offshore bank account at some point in the past, which you forgot to include on your tax return, you can now come clean. From 1 September 2009 you can tell the Taxman you want to declare your offshore interest.

You can do this through the HMRC website, or by phone. Once you have made this initial approach you will be given a reference number, which you need to include on a detailed declaration. HMRC will also be looking for tax on the underlying capital where that came from an undeclared taxable source.

We can help you with this, but the full declaration must be submitted by 12 March 2010.

If you use this time to come clean to the Taxman, you still have to pay all of the tax and interest due, but the penalty for failure to disclose in earlier years will be limited to 10%. Although where the bank was a branch of one of the main UK banks the penalty may be 20%, as you could have disclosed this interest two years ago, under a similar scheme that ran in 2007. In normal circumstances the penalty can be up to 100%!

When is Paying a Dividend 'illegal'?

A dividend may be 'illegal', in that it is contrary to Company Law, when the proper procedures are not followed. If the Taxman examines the paperwork and decides the payment from your company was not a legal dividend he may treat the amount paid as a loan, or even as a bonus payment.

In both cases additional tax may be due from the company and sometimes from you.

To pay a legal dividend it is not sufficient just to write 'dividend' on the cheque stub or against the entry in director's loan account.

We recommend following these steps when paying dividends...

1. The directors should first review the profits available for interim dividends. This is not the same thing as funds in the bank account, as you have to take account of other assets and liabilities. Those deliberations should be recorded as a formal board minute, so if the Taxman ever asks, you can prove the profits were there when the decision to pay an interim dividend was made.  If you are signed up for our Purpleforce service your monthly management accounts will assist you in making this decision!

2. If the final accounts for the year are complete and show the accumulated profit and loss account is positive, the directors can recommend the profits, which are not required for investment, can be paid out as a final dividend to the shareholders. The shareholders can either accept the directors' recommendation or suggest a lower figure of dividend. Both these decisions also need to be properly recorded at the time they are made.

3. Dividend vouchers need to be prepared when either a final or interim dividend is paid, for each shareholder showing the total due, the tax credit attached to the dividend and the date of payment.

4. The dividend should be paid. The payment can be transferred from the company's account by cheque or bank transfer into the shareholder's own bank account. If the shareholder is a director his account in the company books may be credited with the dividend due to him or her, but this needs to be done as soon as possible after the decision to pay a dividend is taken.

We can help you with all this paperwork, but it is important that the decision to pay a dividend is made in advance of any payment being paid out of the company.

Correcting VAT Errors

Where you find an error in your VAT records, which has already been included in the figures reported on a VAT return, don't panic. You can correct that error on your next VAT return, as long as the net error amounts to VAT due of less than £10,000, or less than 1% of your quarterly turnover (subject to a £50,000 cap). If the net error is larger than this you need to write to the Tax Office setting out what went wrong and how you have corrected the problem. We can help you with this.

Correction on the VAT return is the best and quickest option for most small errors. If the Tax Inspector looks in detail at your VAT return you may have to pay interest on the delayed VAT payment and a small penalty.

However, the interest rate currently used by HMRC is only 2.5%, due to rise to 3% in September. The penalty for an error that has been correctly voluntarily is a maximum of 30% of a nominal interest figure set at 5% of the delayed VAT payment.

For example: If you correct an error of VAT underpaid of £9000 after six months, the maximum penalty will be £67.50: £9,000 x 5% x 30% x 6/12 = £67.50.

Giving Shares to Employees

Dividends do not carry a NI charge for the paying company or for the recipient. Paying a dividend can thus be more tax efficient than paying a salary, but this can only happen if the employee is also a shareholder in the company. However, it is not that easy to transfer shares into an employee's name without incurring a tax charge.

Where an employee or director receives shares in the company they work for, the value of those shares and any dividends paid on those shares will normally be taxed as part of their salary, unless a number of very strict conditions are met. One exception is where the employee receives shares as part of a family or domestic arrangement, such as a gift between father and son, or between spouses.

This is a very complex piece of law and it has not been fully tested in court. However, the bottom line is HMRC do have the power to tax dividends as salary where tax avoidance has been involved.

If you would like your employees to own a slice of your company, even a very small slice, the best way to award shares in the company is through an approved share scheme, or an approved share option scheme. There are a number of types of approved share schemes, but some are quite complex to set up and administer.

The Enterprise Management Incentive share option scheme is designed for small companies with a balance sheet value of less than £30 million. This scheme allows the company to grant employees options to acquire shares at a particular value, within a set time period. It does not need prior approval from the Tax Office, but you do need to agree a value for the share options. Once the options are granted to the employees the company must tell the Tax Office within 92 days.

If you want to give shares to your employees please discuss this with us first.

Question and Answer Corner

Q. I operate my own company from a room in my own home, and charge the company a small amount of rent for the space it uses. Can I claim rent-a-room relief for that income on my personal tax return?

A. The law says this tax relief can only apply where rent is received from letting 'furnished accommodation in a residence', where that residence is the taxpayer's own home. Although the law doesn't say that the let room itself must be used purely for residential purposes, that is how the Taxman interprets the law. The Taxman says that letting a room as an office does not qualify for the rent-a-room relief, and he will not budge from that view until a taxpayer wins a case on those grounds. So although the law is silent on the matter of what the let room must be used for, the Taxman is clear that he will not agree to rent-a-room relief for office space.

Q. I am a self-employed fitness instructor and I teach classes at a number of locations. What records do I need to keep regarding my motoring expenses?

A. If your turnover does not exceed the VAT registration threshold (currently £68,000), you have a choice as to how to record your motoring expenses. When you use your own car for business journeys you need to note down exactly the number of miles driven. The choice is then whether to charge those journeys to your business at the standard rate set by the Taxman: 40p per mile for the first 10,000 miles per year, and 25p per mile for additional miles, or at the actual cost of using your car. For the actual cost method you need to record the total cost of all costs related to your car from fuel to servicing and any loan interest costs. This total cost is then split between business and non-business parts based on the total business miles driven in the entire year. You should also record any additional costs such as parking or tolls.

Q. My company is likely to fold soon leaving a number of debts including PAYE and VAT owing. Can HMRC demand that I pay those taxes personally after the company closes?

A. Anyone who was a director, manager or company secretary of the company, can be landed with a personal liability notice (PLN) for unpaid NI that was due from the company. The Taxman does not issue a PLN very often, but he will do so if he believes the company intentionally avoided paying NI. A similar power can be used to collect PAYE tax payable by the company, from the directors. If the Taxman believes the company has fraudulently avoided paying VAT he can transfer any VAT penalties to the directors or managing officers of the company.

New Clients Welcome

If you are not already a client and are interested in becoming one why not get a quote online at http://www.mazumamoney.co.uk/get-a-quote/

New Contact Details

To get in touch with your branch of Mazuma directly please use the following email addresses:

Cardiff North                                          cardiffnorth@mazumamoney.co.uk

Cardiff South & The Vale                         cardiffsouth@mazumamoney.co.uk

Milton Keynes                                       miltonkeynes@mazumamoney.co.uk

Basingstoke                                          basingstoke@mazumamoney.co.uk

East London                                          eastlondon@mazumamoney.co.uk

Key Tax Dates for September 2009

19/22 PAYE/NIC and CIS deductions due for month to 5/9/2009

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Disclaimer
The information contained in this newsletter is of a general nature and no assurance of accuracy can be given. It is not a substitute for specific professional advice in your own circumstances. No action should be taken without consulting the detailed legislation or seeking professional advice. Therefore no responsibility for loss occasioned by any person acting or refraining from action as a consequence of the material can be accepted by the authors or the firm.

Welcome!

To Augusts' Tax Tips & News, our newsletter designed to bring you tax tips and news to keep you one step ahead of the taxman.

If you need further assistance just let us know or you can send us a question for our Question and Answer Corner

We are committed to ensuring all our clients don't pay a penny more in tax than is necessary.

Flipping Houses

If you own and occupy more than one property as your home you can elect, within a set time period, for one of those properties to be your main home for tax purposes. You can change this election at any time so another property qualifies as your main home, hence the term 'flipping'. When you sell your main home the increase in value that has built up while it was your main home, and for the last three years of ownership, is free of capital gains tax.

Three years of the ownership period will be free of tax, even if the property has only been designated as your main home for a very short period, perhaps only a week. This is the tax rule many MPs used to avoid paying tax on the home that had been largely funded by their expense claims.

You can flip your properties just like an MP, if you make the first election within two years of acquiring another residence, or within two years of marrying (or civil partnership). If you have missed this deadline on your current properties it may be worth acquiring a very small third property to give you the option to make the election again.

However, beware that the law in this area could be changed with little advance notice following the MP's scandal. If you want to take advantage of this flipping rule, talk to us without delay.

Budget for Your Tax Bill

If you are self-employed it can be a struggle to have enough money to pay the two instalments of your tax bill for the year due on 31 July and 31 January. HMRC has realised these two large six-monthly bills can be difficult to manage, so they have set up a budget payment plan to help individuals pay their tax bill in smaller chunks.

It works like this:

- You register on the HMRC website to use the HMRC online service for self-assessment. You don't have to use this service to send in your tax returns, we can still do this for you, but you can review your tax statements online, which is useful.
- Next, set up a direct debit online to pay your self-assessed tax to HMRC. You chose exactly what to pay and whether to pay weekly or monthly.
- About 5 days later the direct debit will be 'live' and it will start to take the amount you have authorised from your bank account at the intervals you specified. These amounts will be set against your next tax bill. You can change the amounts or the intervals at any time, and even cancel the payment plan if you wish.
- Your bank statements will show the payments to HMRC as: 'HMRC NDDS'.

There are some disadvantages to using this budget payment plan:

- HMRC will not pay you any interest on the amounts you have paid in advance towards your tax bill. A deposit account with a bank would pay a very small amount of interest.
- You can only make payments under the budget payment plan by direct debit.
- You cannot get the money back from HMRC to use for another purpose, unless you are due a tax repayment.
- You must be up to date with your self-assessment tax payments before you can join the budget payment plan.

Currently this budget payment plan can only be used by individuals. There is no similar payment plan in place for companies.

Beware Tax Email Scams

Many people are currently waiting for a tax rebate from the Tax Office, as they have claimed for losses to be set against an earlier year's income. If you are expecting such a tax refund, or even if you are not, take care not to be drawn in by emails that claim to have a tax rebate ready for you. These emails tend to ask for details of your bank account to pay the refund into, but they are scams.

The UK tax office HMRC does not send emails to taxpayers informing them of tax rebates. All such emails are fraudulent, and potentially very dangerous. You should not respond to the email. Do not click on any link embedded in the email as this may allow the scammers to get to your computer through a virus included in the link.

Fraudulent emails normally stand out as they are not correctly addressed to you personally. The email may have missing address details or say 'Dear Subscriber' or 'Dear Taxpayer'. Some scam emails include what looks like a tax refund form including a fax back number. You should never complete such a form sent to you by email supposedly from HMRC. To complete genuine HMRC forms yourself you need to log into the HMRC secure website using the login details which will have been sent to you in the post.

If you have doubts about an email supposedly from HMRC, forward it on to the HMRC at: phishing@hmrc.gsi.gov.uk then delete it.

When is a Pick-up a Van?

Certain pick-up trucks and other commercial-type vehicles are built to very high comfort standards these days, so a pick-up or 'van' can easily be used as the main family vehicle. In which case does the company owned van become a company car?

The distinction is important because the benefit in kind tax charges are far higher for a car than a van (see example). Also vans, but not cars, qualify for the annual investment allowance (AIA), which allows the full cost of the vehicle to be set against profits in the year of acquisition, subject to the AIA cap of £50,000.

Example

The Mazda BT-50 2.5 TD double cab pick-up has a list price of £15,063 and a CO2 emissions rating of 244g/km. Below shows the difference in the taxable benefit for 2009/10 should this vehicle be classed as a car or van.

Taxable benefit of personal use: Car:£5,272, Van:£3,000
Fuel provided for personal journeys: Car:£5,915,  Van:£500
Total taxable benefit: Car:£11,187,  Van:£3,500

In tax law a van is a goods vehicle that has a design weight not exceeding 3,500kg. In addition the HMRC guidance specifies that a pick-up truck is a goods vehicle if it has a payload of least 1 tonne. Payload is the difference between the kerb weight and the gross weight as stated in the vehicle's specifications. So if the pick-up is primarily designed to carry goods rather than people and can safely carry 1 tonne in weight, it falls squarely into the van category.

However, this statement about the 1 tonne payload is not law, it is only HMRC guidance. If you have a pick-up that carries less than 1 tonne it will be a van for tax purpose if you can show that it is either:

- a goods vehicle; or
- a vehicle of a type not commonly used as a personal vehicle and unsuitable to be so used.

It doesn't matter what the vehicle is actually used for, it's what it was designed to be used for that counts. The Taxman says in his own internal manuals: "Actual use of a particular vehicle is irrelevant: the statutory test is a test of construction, not use."

For advice on choosing the right vehicle to qualify as a van please contact us.

Question and Answer Corner

Q. The interest rates available on personal deposit accounts are much higher than those for business deposit accounts. Can I withdraw money from my company's account and deposit it in an account in my name, on the understanding that I hold the funds as an agent for the company? All the interest would be declared as the company's income rather than my own.

A. The Taxman accepts this plan works if there is a trust deed in place which gives the company a legal right to the funds. However, will you be completely open with the bank when opening the deposit account in your name? If you declare you hold the funds as agent for the company you may not get the higher interest rate you seek, as the bank will view the account as a commercial rather than a personal account.

Q. My company requires certain employees to attend trade shows in other countries. The company pays for all the costs including any visa where necessary, and the employee's passport, if one is not already held. Can the company claim the cost of the passport as well as the cost any visa as a business expense?

A. Where the visa can specifically be linked to the requirement to attend the trade show it is a valid business expense for your company. If the employee makes no other personal trip in the country where the trade show is held there is no significant personal element for the employee, so there is no benefit in kind tax charge for the employee. The employee's passport will last for 10 years, so the business element of the trip to the trade show will be tiny. Where the company pays for the passport it will be a benefit in kind for the employee that needs to be reported on the form P11D. However, if the terms of the employment require the employee to hold a passport the company can claim the cost of obtaining the passport as a business expense.

Q. I recently formed a new company which will take over the business I run in my sole name. The formation agent charged VAT on their invoice. Can my new company reclaim that VAT?

A. Yes, the company can reclaim the VAT in its first VAT return as long as it becomes VAT registered within six months of the formation of the company.

Key Tax Dates for August 2009

2 - Last day for car change notifications in the quarter to 5 July - Use P46 Car.

19/22 - PAYE/NIC and CIS deductions due for month to 5/8/2009.

New Clients Welcome!

If you are not already a client and are interested in becoming one why not get a quote for our services online at http://www.mazumamoney.co.uk/get-a-quote/

Don't forget to put SHELL1 in the promo code box for your first month absolutely free!

Disclaimer
The information contained in this newsletter is of a general nature and no assurance of accuracy can be given. It is not a substitute for specific professional advice in your own circumstances. No action should be taken without consulting the detailed legislation or seeking professional advice. Therefore no responsibility for loss occasioned by any person acting or refraining from action as a consequence of the material can be accepted by the authors or the firm.

Welcome...

To July's Tax Tips & News, our newsletter designed to bring you tax tips and news to keep you one step ahead of the taxman.

If you need further assistance just let us know or you can send us a question for our Question and Answer Corner.

We are committed to ensuring all our clients don't pay a penny more in tax than is necessary.

Please contact us for advice in your own specific circumstances. We're here to help!

Tax Savings on Incorporation

You can still save tax by operating your business through a company rather than as a sole trader or partnership, but the level of tax savings will depend on the range of salary, dividends and benefits that you want to take out of the company.

If you take a salary equal to the personal allowance of £6,475, and extract the rest of the profits as dividends, you could make the following tax savings in the current tax year. This salary level involves paying some NICs as the NIC threshold is £5,715, but a lower salary would waste part of the dividend tax credit. Salary is also tax allowable for the company whereas dividends are not.

For 2009/10 the following shows for different profit levels the tax payable as a sole trader, by incorporating as a company and the total saving...

Profits £15,000: Sole trader: £2,573 - Company £1,951 - Total saving: £622
Profits £30,000: Sole trader: £6,773 - Company £5,101 - Total saving: £1,672
Profits £50,000: Sole trader: £13,169 - Company £9,463 - Total saving: £3,706
Profits £100,000: Sole trader: £33,669 - Company £29,838 - Total saving: £3,831
Profits £150,000: Sole trader: £54,169 - Company £50,213 - Total saving: £3,956

There are other tax factors to consider. For example...

- If the company owns a car that is used privately by the business owner, this can seriously reduce the tax savings. However, the answer is not straight forward as it depends on the cost, age, and CO2 emissions of the car (see below).
- The amount of profits left within the company for future use. If dividends are only taken to take your income up to the level of basic rate tax, substantial further savings of many thousands are possible!
- The availability of tax-free benefits such as childcare vouchers.

Tax rates are due to increase from 2010/11. Individuals will pay a top rate of 50% on income over £150,000 and the personal allowance will be withdrawn for those with income over £100,000. The tax rate paid by a small company will also rise to 22%. These changes will reduce the tax savings to be made by operating through a company. The calculations summarised as follows for 2010/11 assume a salary equal to a personal allowance of £6,635, which is reduced to nil when profits exceed £113,000.

Profits £15,000: Sole trader: £2,530 - Company £2,004 - Total saving: £526
Profits £30,000: Sole trader: £6,730 - Company £5,304 - Total saving: £1,426
Profits £50,000: Sole trader: £12,998 - Company £9,704 - Total saving: £3,284
Profits £100,000: Sole trader: £33,448 - Company £30,273 - Total saving: £3,215
Profits £150,000: Sole trader: £56,642 - Company £53,633 - Total saving: £3,009

Please talk to us about the savings possible for you. We can provide a calculation specific to your circumstances and outline the many other factors you will need to consider when incorporating.

Are you Trading in Properties?

Low property prices are tempting some people to acquire residential properties to develop and sell when the market improves. If you intend to do this, the Tax Inspector may argue that you are actively trading in properties, rather than just investing and letting.

If you are considered to be trading in properties it will have the following tax consequences:

- All the gains you make on selling the properties will be subject to income tax at 20%, 40% or 50% rather than capital gains tax at 18%.
- NI will also be due on top of these income tax rates.
- You will not be able to set your annual capital gains exemption (£10,100 for 2009/10) against the gains made from selling properties.
- If you run the property business through a limited company the difference in tax rates will be far less.
- You may need to register for VAT.
- Any rents received may be taxed as incidental trading income.
- The value of your business should attract a 100% exemption from inheritance tax as business property.
- You can get tax relief for indirect or abortive expenses connected with buying and selling properties.
- Any losses you make by trading in your own name can be set against your other income.
- You may qualify for entrepreneurs' relief if you sell your whole property business.

Please talk to us about your plans so we can advise you on the tax strategies which will fit your business.

Tips for Quick VAT Registration

There are a number of reasons why you would want to, or need to, register for VAT quite quickly. Once your turnover for the last 12 months exceeds £68,000 you must register for VAT within 30 days. If you start a new business, incorporate your current business (see above) or buy an existing business you may also need to register for VAT immediately.

The VAT office aims to issue a VAT number to 70% of businesses within 13 working days of receiving the application for VAT registration. However, the remaining 30% of businesses may suffer delays, which can endanger the viability of the business. If you need to register for VAT follow these tips to speed up the process:

- Use the correct form: VAT 1 - this form was revised about a year ago so make sure you use a new version.
- Include the bank account number for the business that is registering for VAT. Do not include a bank account number for a different business. No bank account will delay the registration.
- Show a contact telephone number for the business. Although it is not a legal requirement to have a telephone number, the VAT registration will be delayed if you don't include one.
- If the business is a company you must include the date of incorporation and the company number.
- The business address must be a UK address where the business will be carried on. A 'care of' or PO box address is not acceptable.
- The business activity description must be clear and not generalised. Consultancy businesses need to state their area of expertise, such as 'business management' or 'information systems'.
- You must include an estimate of the annual turnover. This gives the VAT office an idea of the risk profile of the business.
- If any of the business owners have been involved in any other businesses in the last two years the full names of those businesses, including VAT numbers, must be given.
- If you are registering for VAT on a voluntary basis complete box 13 and specify the date you require to be VAT registered from.
- The VAT 1 form must be signed by an appropriate person, such as partner or director. Remember to state in what capacity that person is signing.

Company Cars Getting more Expensive

If you drive a company car you need to keep an eye on the tax you pay for using the vehicle, as this is likely to increase year on year.

The tax charge is related to the car's CO2 emissions and its price. An average car has CO2 emissions of around 160g/km, which means for a petrol car the driver is taxed on 20% of the vehicle's list price every year. This percentage will increase to 21% from 6 April 2010, and will be 22% from 6 April 2011.

The list price is the show-room price for the car, not what your employer actually paid including discounts. Currently the list price used for the tax calculation is capped at £80,000, but from 6 April 2011 this cap is removed. This will hit drivers who get their own companies to pay for top range cars.

Say you drive an Aston Martin DB6 costing around £160,000, which has CO2 emissions off the scale. In 2009/10 you are taxed on £28,000 (35% x £80,000). At the 40% tax rate this amounts to a tax bill of £11,200. From April 2011 you will be taxed on £56,000 (35% x £160,000). At the top tax rate of 50% that will apply in 2011/12, this will produce a tax bill of £28,000.

If you are drive an alternative fuel car, such as a hybrid, bio-fuel, or E85 fuel, you currently get a reduction in the tax charge compared to normal cars. This discount will be removed from 6 April 2011 for all alternative fuel cars, except for pure electric cars, which will still be taxed on 9% of their list price.

So the message is: get that expensive car out of your company ASAP, and if you must drive a company car, may be it's time to start thinking electric, or at least very low CO2 emissions.

Question and Answer Corner

Q. My company submitted a claim for a tax refund for £15,000 in January, but it still hasn't materialised. We really need those funds now. I've chased the Tax Office but get some excuse about security checks. How long will I have to wait for this money?

A. HMRC have imposed extra security checks on many tax refunds in an attempt to block fraudulent claims that have been flooding the system. These extra checks are slowing up refunds to genuine businesses. A six month delay is quite exceptional. Try writing to your Tax Office suggesting you will take the matter to your local MP if you do not receive the tax refund within 10 days.

Q. In the last two years I have lent my company in excess of £40,000, but now the company is insolvent and I will not receive any of that money back. Can I claim any tax relief for that loss?

A. Assuming your company was a trading company, as opposed to a company that just holds investments; you can claim a capital loss for your loan. The Tax Inspector may ask you to show the funds were used for the company's trade, rather than simply use to pay dividends, so be prepared to supply the company's accounts if requested.

Q. I was made redundant on 27 February 2009 from where I was paid £16,000 a year. Almost immediately I found a part time position that pays about £9,400 a year. I made a claim for Tax Credits as I am working 30 hours a week now, but I've received a Nil award. What should I do?

A. Your initial Tax Credits award is based on your income for 2008/09, which was too high for you to qualify for Tax Credits, assuming you are a single person with no children. However, on your current wage you should qualify for about £1,200 a year in Tax Credits. Just ring the Tax Credits Office and tell them your current wage rate. They should revise your tax credits award within weeks.

Key Tax dates for July 2009

5 - Deadline for PAYE settlement agreement for 2008/09.

6 - Deadline for 2008/09 forms P11Db, P11D and P9D to be submitted and copies of P11D and P9D to be issued to relevant employees.
Deadline for employers to report share incentives for 2008/09 - form 42.

14 - Return and Payment of CT61 tax due for quarter to 30 June 2009.

19/22 - PAYE/NIC and CIS deductions due for month to 5/7/2009 or quarter 1 of 2009/10 for small employers.

19 - Class 1A NIC due in respect of the tax year 2008/09.

31 - Second self assessment payment on account due for 2008/09.
Second 5% penalty surcharge on any 2007/08 outstanding tax due on 31 January 2009 still unpaid.
Second £100 penalty if 2007/08 tax return due for filing on 31 January 2009 is still outstanding.
Deadline for Tax Credits to finalise claims for 2008/09 and renew claims for 2009/10.

Disclaimer
The information contained in this newsletter is of a general nature and no assurance of accuracy can be given. It is not a substitute for specific professional advice in your own circumstances. No action should be taken without consulting the detailed legislation or seeking professional advice. Therefore no responsibility for loss occasioned by any person acting or refraining from action as a consequence of the material can be accepted by the authors or the firm.

Welcome...
To June's Tax Tips & News, our newsletter designed to bring you tax tips and news to keep you one step ahead of the taxman.

If you need further assistance just let us know or you can send us a question for our Question and Answer Corner

We are committed to ensuring all our clients don't pay a penny more in tax than is necessary.

Please contact us for advice in your own specific circumstances. We're here to help! 

Car Scrappage Scheme Implications 

The car scrappage scheme, which was launched on 18 May 2009, also applies to small vans that weigh up to 3,500kg. So if you are thinking of trading in your 10 year old van for a new one, this could be a good time.

Capital Allowances
The scrappage scheme gives you a £2,000 discount off the list price, and it is this net cost which will go into your capital allowances pool. A van will qualify for the Annual Investment Allowance (AIA), which allows 100% of the cost to be set against your business profits in the year of purchase. The AIA is limited to purchases with a total of £50,000 per year, so you should plan to spread out any large purchases. Any excess cost above the AIA cap will qualify for capital allowances of 40% if the purchase is made before 1 April 2010, otherwise the excess will qualify for 20% capital allowances per year.

VAT
If you are VAT registered you will be able to reclaim the VAT charged on the purchase of a new van, although not all of it where it is for an unincorporated businesses with private use. However, you must reduce your VAT claim by £130.43, which is 15% of the manufacturer's gross discount of £1,000. The Government contribution to the scrappage scheme of £1,000 per vehicle does not affect the VAT.

Car Benefits
If your company is purchasing a car through the scrappage scheme, which will have some private use, the driver will be taxed on a percentage of the vehicle's list price. The percentage depends on the car's CO2 emissions, but the list price is fixed. It is not reduced by the £2,000 discount given under the scrappage scheme. 

Claiming Tax Relief on Overseas Properties 

In our Budget newsletter we mentioned that UK residents could now make claims for tax reliefs associated with furnished holiday let property situated in other EEA countries. The EEA countries are the 27 EU countries plus Iceland, Liechtenstein and Norway. The tax reliefs that could be claimed include:

- Setting losses on the let property against other UK income;
- Capital allowances on equipment used in the property;
- Capital gains relief on selling the property;
- Entrepreneurs' relief for disposals made after 5 April 2008;
- Business asset taper relief for disposals made before 6 April 2008; and
- Business property relief for inheritance tax.

These tax reliefs could apply for a number of PAST tax years, but to qualify you need to prove all of the following applied for the relevant year:

- The letting business was carried on commercially with a view to a profit;
- The property was available to let as furnished short-term holiday accommodation for at least 140 days per year;
- It was actually let for these short-term periods for at least 70 days per year; and
- Longer-term lettings, which exceed 31 consecutive days let to the same person, did not take up more than 155 days per year.

If this applies to you we can help you make a claim for tax relief which may be due. 

Credit Crunch Tax Credit Protective Claims 

You know the tax system is crazy when the Taxman encourages you to claim a benefit, which you don't currently qualify for, just in case you do start to qualify for the payment later in the tax year. That's exactly the position the Taxman is taking for Working and Child Tax Credits.

Working Tax Credit is paid to single people who work at least 30 hours a week, and to parents and disabled workers who work at least 16 hours per week, but in both cases the total family income must be below a qualifying threshold. For a single childless person aged at least 25, the qualifying income threshold is currently £13,250 per year. For a family with children the qualifying threshold is considerably higher, up to around £80,000 in certain extreme cases, although the exact amount would depend on the family's circumstances. Child Tax Credit is paid alongside Working Tax Credit and is assessed on the same claim form.

The income that counts towards the qualifying threshold is the family's income spread out over the full tax year. If the family income suddenly drops part way through the tax year, due to redundancy or business failure, which is far more likely in the credit crunch, the family's average income for the tax year may well be below the qualifying threshold.

This is where the system gets really crazy. The family or individual must make a Tax Credit claim before 6 July 2009 to allow the claim to be back-dated to the beginning of the current tax year (2009/10). Although the claim may initially give rise to a nil payment based on income received in 2008/09, the claim for 2009/10 can be amended later to take account of the reduced income for 2009/10. At that point payments will be made based on the total family income averaged out over the tax year.

If you feel your family income may be at risk in the current unstable economic climate, it may make sense to submit a protective Tax Credit claim before 6 July 2009. Do be careful if you are making a claim as a single person, when you later become part of a couple, as you must tell the Taxman when this happens. The Taxman requires couples (mixed or single sex) to make Tax Credit claims as a couple, and will demand repayment of Tax Credits paid to individuals who make an invalid single-person claim 

Beware the VAT Threshold 

Even if your business is not registered for VAT, you need to be aware of the point where your total sales require you to become VAT registered. This threshold is currently total sales of £68,000 for any 12 month period ending on or after 1 May 2009.

If your annual sales are near this limit you need to calculate your total turnover for the last 12 months, every month, adding the latest month and subtracting the earliest month each time, to check you haven't breached the threshold. Alternatively, if you believe your sales for the next 30 days will exceed £68,000 you must register for VAT immediately.

There are several advantages of keeping your sales below the VAT threshold:

- You don't have to register for VAT, but you can if you wish to.
- If you are not registered for VAT, your customers do not pay VAT on top of your basic prices. This makes your goods and services appear to be better value for money for non-business customers or other small non vat registered businesses.
- On your 2009/10 self-assessment tax return, which will be issued in April 2010, you will only have to complete three lines to report your business profits.
- You do not have to submit your VAT returns online.

Currently a small percentage of VAT-registered businesses submit their VAT returns online each quarter. But for periods starting after 31 March 2010 all VAT-registered businesses with a turnover of £100,000 or more will be compelled to submit their VAT returns online. Also any business that becomes VAT registered after 31 March 2010 will also have to submit all their VAT returns online, whatever its turnover.

If you become VAT registered before 1 April 2010 you will not be forced into online filing straight away, as you will be able to continue with paper VAT returns until your turnover exceeds £100,000, or the law is changed.

There are of course penalties for failing to register on time so please contact us if you need any help with the decision to register for VAT. 

Mazuma – Cardiff North Branch 

Please remember that if your local branch is Mazuma Cardiff North, they have re-located to a shop front in Rhiwbina, Cardiff! 

Question and Answer Corner 

Q. My business requires me to have up to 100 days a year away from home speaking at conferences. I always travel first class rail, to allow me to prepare notes on the way, and stay in four-star accommodation. The Tax Inspector has said my expenses are excessive and I should only get a tax deduction for the cost of second class travel and two-star accommodation. Is he correct? 

A. The Tax Inspector is not correct. His own Employment Income Manual at paragraph EIM 31835 says: "The tests that apply to travel expense relate to the nature of the expense and not to the amount." It goes on to say: "You should not refuse a deduction for first class rail travel, if that has been incurred, on the basis that the same journey could have been made more cheaply in standard class". As long as the travel and accommodation costs were incurred wholly and exclusive for your business of lecturing the full cost can be claimed.

Q. I pay income tax at 40%, but my wife and child have no income at all. If I purchase fixed income bonds in their names will the interest be effectively tax free, as it will be covered by their personal allowances?

A. When you purchase the bonds in the names of your relatives you will be giving them the capital you invest, as they will have complete control of the bonds. There is no limit on the amount you can give to your spouse, although there could be inheritance tax implications. Your wife will be taxed on the interest from her bond, but if this does not exceed her personal allowance of £6,475, there will be no tax to pay. If your child is aged under 18, the interest from his bond will be taxed as part of your income if it exceeds £100 per year.

Q. If I start earning money from a website I have setup in my spare time, will I have to pay tax and NI on that income? I am also employed full time on a salary of £25,000 a year.

A. You should register your new web business with the tax office as a self-employed business. We can help you do this if you wish. Your self-employment will not affect your employment, and your employer need not know about your website business. However, you will have to complete a tax return each year to declare all of your income; from your business, employment and any investments. By registering as self-employed you will also be automatically registered to pay class 2 NI in respect of your self-employed profits. If these profits are expected to be less than £5,075 for the current year, you should complete form CF10 which is a request for exemption from paying class 2 NI. 

Key Tax Dates for June 

19/22 - PAYE/NIC and CIS deductions due for month to 5/6/2009.

30 - Deadline for UK businesses to reclaim EC VAT chargeable in 2008. Need Help? 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. 

New Clients Welcome 

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.     

Disclaimer
The information contained in this newsletter is of a general nature and no assurance of accuracy can be given. It is not a substitute for specific professional advice in your own circumstances. No action should be taken without consulting the detailed legislation or seeking professional advice. Therefore no responsibility for loss occasioned by any person acting or refraining from action as a consequence of the material can be accepted by the authors or the firm.

Mazuma would like to extend a special offer to all Shell Livewire members.

If you sign up for our Purpleforce or Platinumforce service on a 12 month minimum contract we will give you your first month free!

To take advantage of this offer make sure you put the phrase SHELL1 into the Promo code field of our quote form.

You can get a quote from Mazuma at the link below.

http://www.mazumamoney.co.uk/get-a-quote/

We know how hard it is to be a new business so we hope that this offer will help!

Mazuma Launch in Basingstoke

Mazuma are pleased to announce the launch of Mazuma in Basingstoke.

Mazuma is an accountancy practice serving the needs of small businesses and sole traders that has steadily grown into a national business since its formation in Cardiff in 2006.  The franchise, The Mazuma Associate Scheme, was launched in October 2008 and the fifth new Associate began operating in May 2009 in Basingstoke.

Peter Ferguson operates from Basingstoke and is delighted to be running a Mazuma franchise.  Peter comments:  “I feel particularly excited and inspired at launching Mazuma Basingstoke and being affiliated to this dynamic and very professionally marketed service network. What particularly attracted me to Mazuma was a refreshingly new approach to providing an all round bookkeeping and accounting service.  I firmly believe that the Mazuma branded concept is unique in its simplicity and will be well received by local small business owners.  This packaged product offers an accounting and bookkeeping service which is surprisingly easy, convenient and very affordable. In its niche market this service allows the business owner to get on with running his business free from the pains of having to worry about the accounting headache, this goes a long way to satisfying a very definitive need".

Peter joins after the successful trial of the first Associate that took place over two years, based in the North of Cardiff.  He is the latest to join the Mazuma team after three other Associates offices opened in February 2009.

Sophie Hughes, Director of Mazuma GB who operates the franchise, comments: “We have been overwhelmed with the interest that we have received since the launch of our exciting franchise.  It is a unique offering and provides people with the opportunity to operate their own business under the vibrant and nationally recognised brand of Mazuma”.  Lucy Cohen, Director of Mazuma GB adds: “With the launch of our fifth new franchisee and more due to launch later in 2009, we aim to reach and better our targets of launching 12 franchisees in 2009.  Despite the recession, franchising is set to boom and the Mazuma franchise is a terrific opportunity to take up at this time”.

Various areas of the UK are still available and separated by postal regions and population in the areas. You must be a qualified accountant and hold (or be able to apply for) a practising licence through your accountancy body before you commence trading as a Mazuma Associate. We hold extensive training courses on how to build, manage and grow your business and market yourself when you become an Associate so you are not “thrown in at the deep end”, and we are on hand for you once you are an Associate to help you along the way with tips and guidance.

If you, or someone you know are interested in this exciting opportunity please call us on 0845 310 5654 or email us at info@mazumamoney.co.uk to request a prospectus and application form.

Mazuma is an exciting accountancy firm bringing accountancy back to the high street.  Here at Mazuma we talk to our clients in plain English and great customer service is our top priority, helping Mazuma to win national awards.  We focus on providing services to sole traders, the self employed and small businesses.  Often larger practices do not want the ‘hassle' of dealing with a small company, or charge extravagant fees, therefore there is a niche in the market to service these clients.  Would you like to be a part of this refreshing and dynamic company?

Across the UK, we are looking for Associates to join us and grow their own business under the Mazuma brand name, offering the Mazuma services.  This is a franchise, and Associates would be responsible for growing and managing their own accountancy practice but using the national brand of Mazuma, so you do not need to worry about growing your own brand.  You will have a network of colleagues available to you from the moment you start your business.

You get the freedom and enjoyment of running your own business, whilst having the help and support from Mazuma.  The initial fee is very low in comparison to other similar schemes at £4950 plus VAT, and we believe in a reasonable fixed monthly fee starting from £360 plus VAT (pcm) rather than a percentage of your sales or profits (you do not need to pay this fee until you have been operating for 3 months, to allow you time to build your client base).  We provide you with all the marketing know-how and materials you need so you can concentrate on growing your business.  We don't ask you to adhere to fixed targets or follow our timeline; you can be a small owner managed business or grow it into having several branches, whichever suits you best.   This opportunity from Mazuma is an environment in which you can concentrate your experience, professional qualifications, hard work and enthusiasm into running your own successful business.

Most areas of the UK are available, and separated by postal regions and population in the areas. You must be a qualified accountant and hold (or be able to apply for) a practicing licence through your accountancy body before you commence trading as a Mazuma Associate.  As you will already have the technical knowledge, included in your fee is a two day training course on how to build and grow your business when you become an Associate so you are not "thrown in at the deep end" and we are on hand for you once you are an Associate to help you along the way with tips and guidance. 

If you are interested in joining Mazuma please contact us on info@mazumamoney.co.uk or call us on 0845 3105654 for a prospectus and application form, or to enquire further about this fantastic opportunity.

There is hardly a day that goes by without hearing about the struggling economy and you may be concerned about how your business will cope in the "credit crunch". Good business and financial planning is always important, but especially so in an economic downturn.

If your business is feeling the pinch, it's more important than ever to look at what you can do to help your business. Here are some ideas to get you started...

1. Debtor Management. Encourage your customers to pay more promptly, by giving small discounts or just by chasing them as soon as the invoice becomes due. Send out invoices for completed work as soon as possible, and for long term projects ask for stage payments on account. Be vigilant with your customer's payment trends. You may be able to spot potential problems before they develop into something more damaging. If customers are becoming increasingly difficult to contact or cheques are suspiciously delayed it may be beneficial to investigate further.

2. Shout about best value! If you have a range of products or services, look at emphasising best value items in your marketing. People will be looking for best and added value in products they buy at this time, make sure that they know you have them available!

3. Talk to your bank. Keep your bank in the loop, particularly if you are going to have a need to secure extra funding or renew existing arrangements such as overdrafts. If fees are being increased it may pay to look elsewhere, many banks offer good deals to customers who have switched to them.

4. Got cash? If you are cash positive, turn the crunch to your advantage. Some businesses may be keener to make a sale so those with cash may be able to negotiate some great bargains, particularly for early payment!

5. Employees. While some job cuts may be necessary you should try to maintain your key employees: their strengths will help you through an economic downturn and you will need them when business picks up. You should use any dips in the market as an opportunity for key staff to develop new skills and coach newer members. Keep employee motivation up and maintain a good communication with your staff to prevent a decline in morale. If you do have to make cuts consider asking staff to change their working hours to part-time or flexi-time, with an appropriate drop in total pay. Or to take their holidays now if business is slow. If a skilled member of staff is about to retire ask them to stay on part time, as this may be cheaper than recruiting a new employee.

6. Do you rent an office? If you rent an office you could ask your landlord if you can change the rent from quarterly in advance to monthly. Or with improvements in technology perhaps now is the time to consider runing your business from home to lose the office rent altogether!

7. Keep on marketing. Whilst cutting back on costs can be necessary in a recession and the marketing budget is often the first casualty, but it may prove a false economy if sales suffer. Whilst others cut back on their marketing, you may be able to use this to your advantage and keep on marketing to get a larger share of the present market. If you do not have a strategic marketing plan, now is the time to do one!

8. Negotiate with your suppliers. Look at the agreements you have with suppliers for continuing services, such as energy or cleaning. Can you renegotiate any of these contracts to get a better deal?

9. Reduce tax payments on account if you are a sole trader. Review the projected tax payments for your business. Payments on account for unincorporated businesses can be reduced and reclaimed if you are confident of the taxable profit figure. This is a good reason for getting the accounts completed quickly after the year end and for getting your purple envelopes in to Mazuma quickly!

10. Beware of cutting prices. If receipts being to taper off it can be tempting to cut your prices to try and attract more business. But beware! This can be a mistake. In a recession your costs may inflate and as a result you may have to raise prices to cover this expenditure. Cutting your prices can also have the negative effect of devaluing your image in the marketplace. Remember that your suppliers may raise their prices as well, so try to negotiate a long term discount with them.

Don't forget that if you use our Purpleforce monthly service you will have monthly management accounts that will help you make decisions about your business and help you to plan ahead.

If you are not already a client why not email us to see what we can do for you and your business?

info@mazumamoney.co.uk

DISCLAIMER - PLEASE NOTE: The ideas shared with you in this newsletter are intended to inform rather than advise. Circumstances do vary and if you feel that strategies we have outlined may be beneficial it is important that you contact us before implementation. If you do or do not take action as a result of reading this newsletter, before receiving our written endorsement, we will accept no responsibility for any financial loss incurred.

If you have decided you wish to close down your limited company, firstly think about whether you will need to use it again.  It is inefficient to open and close limited companies as and when you need them, so consider making the company dormant instead.

This is simple to do, it is a case of filing dormant company accounts with Companies House, and completing the Annual Return once a year.  Please contact Mazuma if you would like us to prepare your dormant accounts for you.

If however you are certain you will not use your limited company again, these are the steps your need to follow:

Prepare the Final Accounts

Final trading accounts must be prepared covering the period from the last annual accounts to the final date of trading.  These must be submitted to HMRC, together with the corporation tax computation and Company Tax Return (form CT600) as normal.

HMRC should be advised at time of submission that these are the final trading accounts and that the company will shortly be dissolved.  They will issue their final assessment, and the final balance of corporation tax should be paid without delay, in order to avoid HMRC objecting to the striking off.

Close Down Company With HMRC Departments

Following the settlement of the final corporation tax liability, HMRC should be asked to close down the corporation tax scheme they have for the company.

The payroll Inspector of Taxes should be advised that the company has ceased trading and will shortly be dissolved.  They will issue a final Employer's Annual Return (form P35), which should be completed without delay.  Any final balance of PAYE/NIC should be paid, following which HMRC should be requested to close down the payroll scheme.

The VAT department at HMRC should be advised that the company has ceased trading and should be deregistered for VAT (if applicable).   A Form VAT 7 will need to be completed.

Application To Companies House

After the company has ceased trading for three months, a Companies House form 652a should be completed and forwarded to Companies House, together with a cheque for £10 for their dissolution fee. 

Companies House will then advertise the company in the London Gazette, and following a period of up to nine months, the company will be dissolved, following which it ceases to exist.  Care should be taken to ensure that on the date of dissolution, there is no money in the company bank account or other assets held in the company's name, since bank accounts may be frozen and the sums transferred to the Treasury Solicitor acting for the Crown (if there are creditors).

Final Payment

A final dividend/capital distribution should be calculated for final distribution to the shareholders, which should be paid after all other transactions have been completed, e.g. final payments of corporation tax, VAT, PAYE, etc., but prior to the date of dissolution by Companies House.

With the internet and online company formations being readily accessible it is very easy to incorporate your company online. However, many people do this without fully realising the responsibilities that accompany that simple online form! Much of what is discussed below may have been covered by your incorporation agent if you used an online or outsourced company, however, it is vital that company Directors have knowledge of the points discussed.

After forming a company in the UK the directors have a number of immediate responsibilities in regard to the newly registered company. Share certificates should be issued, statutory registers implemented and updated, affixing the company name and noting critical dates to avoid penalty fines and the implementation of a financial control system.

After the UK limited liability company formation documents have been submitted to Companies House to register the new company Companies House will then send notification to the new registered office that the new company has been incorporated with the Certificate of Incorporation. Following confirmation that the new company has been formed the directors need to take a number of actions to start the new company on the correct footing.

Statutory Books and Registers

Following the company formation the directors have a legal responsibility to keep a set of statutory registers on behalf of the limited liability company, known as the statutory books. The statutory books to be kept include a statutory register of the appointed directors and their interests, a statutory register of members and a statutory register of charges on the company assets. The majority of company formation agents provide templates for the statutory registers

The statutory register of directors should include the full names and addresses of the directors which can be entered from the Companies House form 10 details originally submitted to Companies House when the new limited liability company details were submitted for registration. In addition the director interests should be included such as other directorships and specific interests in any company assets.

The statutory register of members is a list of the company shareholders which will include the original subscribers to the memorandum of association. This statutory register of shareholders should state the name and address of the shareholder, the number of shares issued stating the class of share if different classes are issued and the date when those shares were issued. The date the shares were issued to the subscribers to the memorandum of association would be the date the company was incorporated.

It is a legal requirement to keep a statutory register of any charges, mortgages and debentures that have been contracted by the company. The company statutory books should also include the details of any assets which are the subject of those charges.

Share Certificates

After the company has been incorporated the newly formed company should issue to its shareholders a share certificate is prima facia evidence of the ownership of those shares. There is no prescribed convention for the design of the share certificate which is an internal corporate affair. The details entered on a share certificate would be the company name, shareholder name, registered office of the company, class and number of shares with the share certificate normally signed by the issuing authority such as the company secretary.

Disclosure of the Limited Company and Name

Under the Companies Act 1985 each company must paint or affix the company name conspicuously on the outside of every office and place of business even if this is the home of the director. The company must also state its name legibly on all company business letters, order forms, official publications, cheques, orders, invoices, monetary notes and receipts and on all websites.

In addition companies must also state its place of registration e.g. registered in England and Wales or registered in Scotland and the company registration number on all business letters, order forms and websites. A company does not have to show its directors names on business letters but if it chooses to do so then all the director names must be shown. A business letter must show every directors name or none.

Annual Return

Every year Companies House will send an annual return to the company registered office with the corporate details pre-printed. This annual return is known as the shuttle form and should be signed and returned to Companies House within 28 days confirming the details are correct also enclosing the annual filing fee of thirty pounds. In recent years Companies House will automatically send an online authorisation code instead of the usual paper form.  This code can be used to file the annual return online.  Filing the return online is quick and simple and costs £15 instead of the £30 that it costs to file by paper.

Any new details or changes to the information contained on the form should be advised to Companies House on the appropriate document such as changes in registered office or directors. In many cases particularly for small limited companies there are no changes and the form can simply be signed and returned or submitted online. It is important that the annual return is returned as failing to do so can and does trigger a process that would lead to the Company being listed in the London Gazette and eventually dissolved with various penalties to the directors who failed in their responsibilities. If you are unsure of how to do this you could use a company secretarial service such as the one that Mazuma offers to take care of this submission for you.

Company Accounts

A company must both keep company accounts which start on the day of incorporation, the initial shares having been issued and paid on that day and also maintain a satisfactory system of financial control. This is where getting an accountant become a good idea! Unless the accounting reference date is changed and notified to Companies House the first financial year end will be what is termed the accounting reference date which is the last day of the month 12 months after the date of incorporation or within 7 days of this date and the company accounts have to be made up to this date.

The company accounts year end date can be changed by the company only if application is made to notify that change before the notified filing date for the accounts. To notify a change of accounting reference date applicants use Companies House form 225 which is available free of charge from the website.

HMRC

You will be sent a CT41G form by HMRC requesting new company details.  This must be returned promptly, or you must advise HMRC if the company is to remain dormant.

Mazuma offer a variety of services to relieve the burden of bookkeeping, accounts and company secretarial duties. Please take a look around our website or get a quote to see how we can help you.

If you have a car provided for you by your company, you can still claim back mileage for your business travel, however it is not at the same rate as if you were using your personal vehicle.  This is because on a company car, the company will pay for wear and tear and maintainence of the vehicle, whereas you would be paying this if you owned the car personally.

The amount per mile that you can claim is therefore not 40p, and is as follows:

Engine Size

The next thing you need to decide is how is fuel going to be paid for.  

The options are:

• Pay for all fuel yourself and then claim a mileage allowance for travel on company business (note that this is not at the same rate as for use of a personal car - see above for rates);
• The company pays for all fuel and then you pay the company a mileage allowance for personal use;
• The company pays for all fuel (including personal travel) and you pay additional income tax and national insurance for this employee benefit (this is a good option if you do a lot of personal travel).

If you are paying for fuel personally and claiming a mileage allowance for business use of the car or if the company is paying for all fuel and charging you mileage for personal use of the car then you again have some options; you can either use a set rate published by HMRC or calculate the actual fuel cost/mile and use that.

You should note that if you are using the actual fuel cost/mile instead of the figures from the table, it is up to you to keep records and prove that the figures you use are accurate for your car (fuel receipts and mileage records over a period of months).

Welcome...
To May's Tax Tips & News, our newsletter designed to bring you tax tips and news to keep you one step ahead of the taxman.

How to Avoid the new 60% and 50% Tax Rates

The 60% tax rate will apply to the portion of taxable income falling between £100,000 and approximately £113,000, due to the gradual reduction in the basic personal allowance between these thresholds from 6 April 2010.

The 50% rate of tax will apply to the portion of taxable income over £150,000, also from 6 April 2010. This adds up to a top rate of 51% including the additional rate of NI paid by both employees and the self-employed. It's worth noting that the 1% NI rate will become 1.5% from 6 April 2011, and all the other rates of NI will also increase by 0.5 percentage points from the same date.

Where your accounts year ends on 30 April, as many long-established partnerships do, the profits made in the year starting 1 May 2009 are taxed in 2010/11, when the combined 51% rate kicks in above £150,000. Therefore, if you are self-employed the profits you make from 1 May 2009 onwards could be subject to tax and NI at 51%.

A useful way to reduce higher rate tax at the margins has been to make pension contributions, which have attracted tax relief at the taxpayer's highest margin rate, as long as the annual allowance (£245,000 for 2009/10) was not exceeded. The bad news is this tax relief will be gradually decreased down for those with income over £150,000 from 6 April 2011. There are also anti-avoidance provisions which mean any attempt to change the pattern of pension contributions from 22 April 2009 will in ineffective for those earning £150,000 or more. However, there is no mention in the Budget Notes of any restriction for those with income between £100,000 and £113,000.

If you are likely to be in this income range for 2010/11 you could use the following strategies to reduce your total taxable income:

- Pay personal pension contributions into a registered pension scheme.
- Get your employer to pay pension contributions into your pension scheme and reduce your gross salary proportionately.
- If your spouse has a lower marginal tax rate, transfer income generating assets such as shares, let property or bank deposits into your spouse's sole name.
- Make gift-aided charity contributions.

The last two bullet points will also work for those with total income over £150,000.

If you run your business through your own company you can restrict your taxable income to below the £100,000 or £150,000 thresholds, by reducing your salary and dividends and leaving any surplus funds in the company. A self-employed person is taxed on the total profits the business makes whether or not the funds are extracted from the business. If you are self-employed, incorporating your business at this time will allow you to control your marginal tax rate more effectively in the future. Talk to us to find out how this could work for you.

New NI Threshold to Record

We are now into the new tax year and you may be recording the first salary payments for 2009/10. When you calculate the amount of NI due don't forget to record how much pay for each employee falls above the new Upper Accruals Point (UAP). This is set at £3,337 per month, just below the Upper Earnings Limit (UEL) of £3,656 per month.

For employees who are not in a contracted-out pension scheme, the UAP makes no difference to the amount of NICs they pay. The reduced rate of NICs paid by contracted-out employees now stops at the UAP rather than at the higher UEL, so these employees who earn more than £3337 per month will pay more NICs in 2009/10 than in 2008/09.

There is also a hidden penalty for all employees. Previously earnings above the UEL did not count towards state benefit entitlements, now all earnings above the UAP will not count for state benefits. The UAP has been frozen at £3337 per month (£770 per week) and will not be increased by inflation, so the amount of contributions that is counted for state benefits is capped from now on.

P11D Forms and Dispensations

It's time to start work on those tiresome forms P11D to report expenses and benefits paid to employees and directors in the year to 5 April 2009. The deadline for submitting the forms to the Tax Office, and for giving copies to your employees, is 6 July 2009.

If you have a dispensation for business expenses in place with your local Tax Office your life is made easier, as expenses falling in the categories specified in the dispensation can be left off the P11D forms. However, taxable benefits such as company cars must be reported and the taxable benefit calculated.

Most reportable business expenses consist of travel and subsistence costs. In the past the Taxman has been happy to include the cost of tickets in a dispensation, but he would rarely agree to a flat allowance to cover meals. Now the Taxman has proposed a scale rate of tax free payments for meals taken while travelling in the UK after 6 April 2009 with the following conditions:

- Breakfast - £5 - Starting earlier than usual and leaves home early before 6am.
- One meal - £5 - Away from home or office for 5 hours or more.
- Two meals - £10 - Away from home or office for 10 hours or more.
- Evening meal - £15 - Working later than usual and finish after 8pm.

These rates only apply where the employer has agreed to stick to the scale rates within his dispensation agreement with the Tax Office. This is another good reason for getting a dispensation in place, or updating the one you have.

Please contact us if you need help with P11D's or dispensation claims.

HMRC Change Bank Accounts

HMRC has changed some of the bank accounts it uses to receive tax payments and repayments of overpaid tax credits. The bank accounts used for receiving VAT payments and for paying in NICs for class 2 (self-employed) and class 3 (voluntary contributions) have not changed yet, but most other taxes include PAYE and Corporation Tax are affected.

If your bank account remembers the regular payments you make, check that the bank sort-code and account number agree with the details shown on the your latest PAYE payslip or self-assessment tax demand before your press the 'pay' button. You can check the bank account details for the type of tax you are paying on the Taxman's website here: http://www.hmrc.gov.uk/payinghmrc/bank-account-checker.htm

If you pay your tax by direct debit you don't have to make any changes.

Question and Answer Corner

Q. I recently started a graphic-design business and I have applied for a VAT number but it hasn't come through yet. Should I be adding VAT to my invoices or not?

A. The application for a VAT registration can sometimes take many weeks to be processed. If you haven't received your VAT number you can't issue a full VAT invoice that shows the separate VAT due and the VAT number. However, you will be required to pay over VAT on all sales made after the effective date of VAT registration that you put on the registration form. So you can't show VAT on your invoices, but you will need to charge your customers a sufficient amount to include the VAT due. When your VAT number arrives you will need to issue full VAT invoices to all those customers you have invoiced since the effective date of VAT registration. Please contact us if you need more practical help on how to do this.

Q. The only income I have is about £10,000 from letting rooms in my own home. As this amount is covered by the rent-a-room relief of £4,250 plus my personal allowance of £6,475 I should have no tax to pay. But do I have to inform the Tax Office about this income?

A. Yes you do have to tell the Tax Office, and they should issue you with a self-assessment form to complete. Even if you have no tax to pay you need to declare the taxable income to the Tax Office. If you haven't declared this rental income for some years you should make it clear to the Tax Office that you want to declare this income for the past years.

Q. I am under retirement age but not in employment. All my income comes from investments and a let property. Do I have to register to pay NI on any of my income?

A. You don't have to pay NI on your savings or rental income, but you will have to complete a tax return to report your rental income to the Tax Office (see previous question). However, you should consider whether you have paid NI for enough complete tax years throughout your working life so far to qualify for the full state pension. If you will reach state pension age after 6 April 2010 you will only need 30 qualifying years in which you paid sufficient NI, to get the full state pension. You will also get NI credits for periods you were not in work such as a carer for a young child or disabled person. You may want to pay voluntary class 3 NI to top up your number of qualifying years to 30.

Key Tax Dates for May 2009

1 - New VAT Scale charges for fuel used in private journeys on company cars.

2 - Last day for car change notifications in the quarter to 5 April - Use P46 Car.

19 - Deadline for Employers' 2008/09 end of year PAYE Returns (P35, P14, P38 & P38A). Penalties for non submission.

19/22 - PAYE/NIC and CIS deductions due for month to 5/5/2009.

31 - Deadline for copies of P60 to be issued to employees for 2008/09.

Disclaimer
The information contained in this newsletter is of a general nature and no assurance of accuracy can be given. It is not a substitute for specific professional advice in your own circumstances. No action should be taken without consulting the detailed legislation or seeking professional advice. Therefore no responsibility for loss occasioned by any person acting or refraining from action as a consequence of the material can be accepted by the authors or the firm.