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If you were a Director of a UK limited company between 06 April 2009 and 05 April 2010 (regardless of whether you traded through it or not) you need to complete a personal tax return for the HMRC. NOTE, there are also other situations where you may be required to file a personal tax return – read more about these situations here.

Next time you login to your No Worries online account, look for a link to register for our personal tax return service under your Reminders and Notices section. If you do not want to use our service please click the ‘No Thanks’ link to remove the reminder from your homepage.

The 2009/10 tax year finished on the 05 April 2010. If you are required to submit a tax return this needs to be done by 31 January 2011 (the online filing deadline). Any tax due must also be paid by this date.

Our Cost

We operate a two tier fee structure for personal tax returns. Our base fee is £75 + VAT. If you have sole trader/partnership income, non-domicile related income, or rental property income, an additional charge of £35 + VAT will apply.

Really important: We want to encourage all clients to get their personal tax return submitted early, to avoid a last minute rush. If we are unable to submit your personal tax return before 31 Oct 2010 (because for example you sign up for our service late, or you take a while to get your personal tax UTR, or you are held up getting your earnings details to us) then our fee will increase by £40 + VAT.

By: Candice Louw

Whether you simply have a cause which you are passionate about, or you have friends attempting some form of physical exertion in the name of charity… there is a benefit, besides the obvious one, to giving your money to a charity.

There are two ways our clients can give to charity.

(1) As an individual

The first thing to do is make sure you are making a gift aid donation. In order to make a Gift Aid donation you’ll need to make a Gift Aid declaration. The charity will normally ask you to complete a simple form – one form can cover every gift made to the same charity or CASC for whatever period you choose, and can cover gifts you have already made and/or gifts you may make in the future.

A Gift Aid declaration must include:

- your full name
- your home address
- the name of the charity
- details of your donation, and it should say that it’s a Gift Aid donation

If you make a donation from your personal bank account, you have the benefit of increasing the higher earnings threshold value, which means that you can pay yourself over the higher rate earnings threshold, by the amount of the donation, without having to incur any additional personal tax.

(2) Your limited company

If you make a donation through your limited company, the donation needs to come directly from the company bank account. You can then claim the amount of the donation as a deductible company expense, and reduce the amount of corporation tax for the period. Gift Aid does not apply to this option, and the donation must be made to a UK registered charity.

So remember to keep the proof of the charity donation, remember to claim this in your personal tax return (for individuals) or record as a company expense (for companies), and everyone wins!

By: Candice Louw

We are all after a good deal in life, and what could be better than a discount? It doesn’t get easier than this – all you need to do to reduce your monthly accounting fee is refer a friend to No Worries, and be sure that they mention your name when signing up to our service.

Once your friend starts trading through their limited company, and is paying a full monthly fee, you will get our ever so popular 10% referral discount.

Just remember – you only get the discount for as long as your friend is actively using our services and paying their monthly accounting fee. So if they decide to leave the UK, best to find another friend to refer….

Chancellor George Osborne announced his budget yesterday at 12:30pm. The Budget sets out a five-year plan to rebuild the British economy targeting (a) deficit reduction, (b) enterprise, and (c) fairness.

Although we expect this Budget will cause some pain for the economy, the effect it has on our clients will be minimal from a tax planning perspective. The highlights are below;

Corporation tax

The tax rate for small companies will reduce from 21% to 20% for our clients effective from 01 April 2011 – a good result! The tax rate for large companies will also reduce from the current 28%, to 24%, over a four year period, in line with the Governments aim to create the most competitive corporate tax system in the G20.

VAT

The main standard rate for VAT increases from 17.5% to 20%. For our VAT registered clients the effect of this will largely be neutral. For our non-VAT registered clients you will see a increases in your business expenses (such as our accounting fee). The VAT rate increase takes effect from 04 January 2011.

Capital Gains Tax

This was a very controversial issue for small business owners, and for the most part Capital Gains tax for business owners is unchanged. For individuals with earnings up to the higher rate earnings threshold (£43,875), the capital gains tax rate remains unchanged at 18%.  Higher rate tax payers will pay 28% from midnight on 22 June 2010. Entrepreneurs relief is still available however for business owners looking to sell or  wind up their company (using ESC C16) and the chargeable capital gains tax is capped at 10%, which is very good news.

Annual Investment Allowance

The purchase costs of company assets can be written off in the year of purchase under the Annual Investment Allowance – this scheme was introduced in 2008, and currently the annual allowance is capped at £100,000 (our clients never reach this threshold). From 2012, this allowance will be reduced to £25,000 per year – still more than enough for our clients to ensure they get a get tax deduction for the full purchase cost of any assets, in the year the asset was purchased.

IR35

The Conservatives have always stated they wanted to revisit the IR35 legislation with a view to modifying it, or eliminating it. Paragraph 1.69 of the Budget states “The Government remains committed to a review of IR35 and small business tax and will release further details shortly.”

By: Claire Turner

The cost of your mobile phone and calls made can be a tax deductible expense for your limited company, the extent of what you can claim depends on the following two scenarios.

1.     Company Contract

The cost of the mobile phone and all calls made from it can be fully tax deductible for your limited company and exempt from any personal tax charge to you providing that the contract and invoice for the phone purchase is in the company name.  You also need to ensure that the monthly tariff is paid for directly out of the company bank account. To set this contract up, the network provider may request some company documents; all of which you will find in your online tool box.

2.     Personal Contract

You can still claim the cost of business calls if you are unable to set a contract up in your company name or have an existing contract in your personal name which you are unable to change.  To do this you will need to request itemised billing from your network provider to work out the value of calls made solely for business purposes.  This option clearly isn’t as tax efficient as the first and involves slightly more admin but any tax deduction is worth considering.

Remember: The payment advice email sent when you raise an invoice using our online bookkeeping system only factors in your corporation tax liability and our accounting fee.  You need to pay yourself the amount advised less the value of any company paid expenses (such as a company paid mobile phone).

By: Kelly Weetman

If you are not particularly impressed with the service your current accountants are providing for your limited company, it is very easy to move over to the No Worries accounting service.

The first step is to sign up through the ‘sign me up’ link on our website. Once we receive your application, we will post you a number of documents to welcome you to No Worries service and help with the switching process. We also will set you up with access to our online bookkeeping system.

With our online bookkeeping system, you will be able to generate company invoices and e-mail them to your agency. You will also be able to enter your expenses, and payments to yourself. And while you trade as usual, we will gather the required information on your company from your previous accountants in the background.

In our experience, any help you can give us would definitely speed up the process! Key items which are useful include:
- Copies of company bank statements
- PAYE reference numbers
- Corporation tax reference numbers
- A copy of your VAT Certificate (if VAT registered)

You will be assigned your own accountant, who will run your company through our own health check system, to understand the ins and outs, quirks and issues of your company. They will also be able to answer any questions you may have.

We do not charge a fee for switching your company accounting work across to our service. However, if your company yearend falls within 3 months of you moving to our service, there may be a one-off fee for No Worries to complete your annual accounts and corporation tax return. We will always advise you of any additional fees before progressing.

If you have any further questions, please feel free to call our office on 020 7731 1117.

By: Kelly Weetman

If you or your partner are having a baby, you may be entitled to Statutory Maternity Pay (SMP) or Statutory Paternity Pay (SPP). Your eligibility for SMP and SPP from your employer (ie your company) is based on your length of employment and your salary.

Statutory Maternity/Paternity Pay

SMP is paid for a maximum of 39 weeks, while SPP is paid for a maximum of 2 weeks. If your company pays you the statutory minimum SMP or SPP, this can be recovered from the HMRC. So, your company can pay you while you are on maternity/paternity leave but it is not ‘out of pocket’.

Some key documents or information you will require are:
• Due date
• Medical evidence of pregnancy (MAT B1 Certificate)
• Intended start date maternity leave
• Date you intended to return to work (if less than 39 weeks or if not at all)

Maternity Allowance

If you are not eligible for SMP, you may be entitled to the Maternity Allowance. No Worries can help determine your eligibility and how much you are entitled to. For further details please get in touch.

By: Sarah Thornton

Reaching the higher earnings threshold before the end of the personal tax year (05 April 2011) is a tax planning opportunity which affects a number of our clients.

The higher earnings threshold for 2010/11 is £43,875. If your total earnings from all sources is below this, you pay an effective rate of tax of 0% on any dividend income received. When your earnings exceed the threshold you will pay an effective rate of tax of 25% on any dividends received above £43,875.

To avoid paying the 25% higher rate dividend tax once you reach the higher earnings threshold, your best option is usually to stop paying yourself. Below are all the options available to you.

1. Continue to pay dividends: There are personal tax implications in doing this, with the net effect being you will have to pay the dividend tax of 25% on any dividends you receive over the higher earnings threshold. This is payable through your personal tax return, and will be payable by 31 January 2012 on any dividends paid over the threshold in the 2010/11 tax year.

It is your responsibility to keep this tax amount aside as you will have to pay the tax from your personal bank account, not the company account.

Providing you keep your ‘My Earnings’ page up to date online, you will be able to accurately track your personal earnings and view the approximate amount of personal tax you are liable for in section 1 “Summary of your 2010/11 personal earnings” of your online account.

2. Take a Loan from you ltd company: You can take a total Directors Loan of up to £5,000 without having to pay your company interest on the loan balance. But, a penny over £5,000 and you are required to pay your company interest on the entire loan balance, at 4.00%, to avoid a benefit in kind charge.

The good news is, you are effectively paying interest to a company owned by you. The interest income received by your company is taxed 21% – so the net cost of borrowing is 0.8% – (4.00% x 21%) = 0.8% – much better than 25% dividend tax. NOTE: If the loan is outstanding nine months following your company year end, the company will have to pay 25% of the outstanding loan balance as a tax to the HMRC. This is a ‘temporary tax’, and is repaid to the business by the HMRC once the loan itself is repaid.

Please contact us if you would like more information on this.

3. Stop paying yourself from your ltd company: Once you reach the threshold you can stop paying yourself until the new tax year starts on 06 April. Obviously this means if you have living costs that need to be met, you will need to find funds from other sources, or live off savings. This may not be an ideal scenario for some clients.

The Construction Industry Scheme (CIS) sets out the rules for how payments to subcontractors for construction work must be handled by contractors in the construction industry.

CIS covers construction operations carried out in the UK. The rules of the scheme define the types of work that are classed construction operations. But as a general rule, the scheme includes almost any work that’s done to a permanent building, temporary structure, or civil engineering work or installation (such as roading / bridge building etc).

Some examples of the types of construction work that are covered by the scheme include jobs like:
• site preparation
• general construction – bricklaying, roofing, plastering and so on
• alterations and extensions
• repairs and refurbishment
• decorating
• dismantling work
• demolition

There are two forms of the CIS Scheme, CIS for Contractors, and CIS for Sub Contractors.

CIS for Contractors

Very few of our clients fall into this category. It applies if you run a business that engages subcontractors for construction operations – a ‘mainstream’ contractor.

Under CIS the contractor is required to do the following;
• Register with the HMRC as a contractor
• verifying your subcontractors with HMRC
• paying your subcontractors in the right way – making deductions if necessary
• paying over deductions to HMRC
• giving subcontractors deduction statements
• sending monthly returns to HMRC
• keeping proper records

CIS for Sub-Contractors

Most of our clients who are impacted by CIS will fall under this category. You are a subcontractor if they agree to do construction work for a contractor, and don’t have any sub-contractors working for you.

Under CIS the sub-contractor is required to do the following;
• Register with the HMRC as a sub-contractor;
• Collect a deduction statement from their contractor each month;

How a CIS registered Sub-Contractor gets tax deducted

When a CIS registered sub-contractor is paid, they will receive 80% of their invoiced amount. The main contractor holds onto 20%, and pays it over to the HMRC on behalf of the sub-contractor every month.

Ensure the contractor has deducted the correct amount when paying the sub-contractor. A contractor will deduct 20% from the total gross invoice less;
• any VAT they’ve charged
• materials
• consumable stores
• fuel used – except for travelling
• plant hire
• manufacturing or prefabricating materials

Dealing with Taxation

When a sub-contractor is paid, the contractor deducts 20% and then pays 80% to the sub-contractor. The contractor then pays this tax deduction across to the HMRC every month. The system essentially means the contractor is acting as a tax collector on behalf of the HMRC.

When the sub-contractor works through their own limited company, the total deductions suffered by the sub-contractor are reported in the end of year PAYE return.

You can offset during the tax year all CIS deductions taken from payments made to the company against any PAYE and Class 1 NICs due or CIS deductions the company has made from its own subcontractors.

HMRC will repay any deductions that the company is not able to set off against its PAYE liabilities during the tax year when the company sends in its Employer Annual Return (form P35) at the end of the tax year.

More Information

HMRC guidance titled Construction Industry Scheme – Guide for contractors and subcontractors – CIS340

Early in April 2010 the Home Office announced significant changes to the Tier 1 visa requirements.

The changes mean that individuals with a Bachelor degree are once again eligible and those who have earned £150,000 or more will automatically qualify even if they hold no formal qualifications.

Note that the minimum threshold for points awarded for previous earnings has increased from £20,000 to £25,000.

Also, the threshold for the age category has been extended to allow points to be claimed for those up to the age of 39.

The initial grant of the Tier 1 visa is now reduced from three to two years, with a three year extension subject to meeting the requirements.

Note that the above does not apply to those currently in the UK under -

• Tier 1 (General) with leave granted before 06 April 2010
• The Highly Skilled Migrant Programme (HSMP)
• Writers, Composers and Artists
• Self-employed Lawyers

For further information, or if you would like to speak to an experienced UK visa advisor for free initial advice, please call Richard on 0207 731 1117 or email richard@no-worries.co.uk