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Numerous clients have reported getting letters from the HMRC regarding PAYE filing obligations for their company. The letter is usually addressed to the Payroll Manager, and its title is Reminder to file online – keep this reminder.

If you have received this letter, there is nothing you need to do, just keep it in a safe place. As part of our accounting service we will be filing your company PAYE returns for 2010/11 after 05 April 2011. We monitor the PAYE filing status of all our clients, and will be tracking yours to ensure this gets done on time. As such, April/May of each tax year is very busy for us.

However, if you have any questions about this please feel free to get in touch – we would be happy to help.

Part 2 of 2

The UK housing market may not be in the best shape in the world, and this may present an opportunity for you to get in while prices are not stratospheric. We often get asked whether it’s a good idea for our clients own limited company to buy a house.

The answer is almost always no, but here are here is a good way to get around the problem of having a decent sum of money sitting in your business account earning sub 1% in interest.

Taking a Loan

There are usually two ways to extract money from your company, either as salary, or a dividend. If you are a higher rate taxpayer (earning above £43,875 gross for 2010/11) then you should know that any dividends you take from your company attract a personal tax rate of 25% on the net dividend amount taken above that threshold.

If you have surplus funds in your business account, and would prefer not to pay the 25% dividend tax, then one option is to loan yourself the money from your business. There are two implications here;

(1) To avoid a benefit-in-kind charge, you need to pay interest to your company for the loan, at the HMRC prescribed rates. The current rate is 4%. Keep in mind you are paying this interest back to your business (so effectively back to yourself) – you only lose the corporation tax payable on the interest income received by the company, at the corporation tax rate of 21%. So the overall ‘cost’ of the loan is 21% of 4% = 0.84% – a very low cost loan;

(2) If the loan is not repaid within 9 months of the accounting year end of the company, the company must pay a 25% tax charge based on the outstanding loan balance. This tax charge however can be recovered in later years when the loan is repaid, or when the company is closed. We can provide you with specific advice on this;

Taking a loan from your business can prove to a good way of putting surplus company funds to work in a tax-efficient manner. As with all things there are traps to watch out for, and specific rules you need to abide by, however we can help you negotiate these – its what we’re here for.

Part 1 of 2

The UK housing market may not be in the best shape in the world, and this may present an opportunity for you to get in while prices are not stratospheric. We often get asked whether it’s a good idea for our clients own limited company to buy a house.

The answer is almost always no, but here are some things to think about, and ways to get around the problem of having a large sum of money sitting in your business account earning sub 1% in interest.

Reasons not to have your company buy a house

(1) In its current form your ltd company is a trading company – if its primary activity starts to become an investment company, you may lose your ability to close down your ltd company using ESC C16 (a tax effective route to closing down your ltd company and extracting retained funds). It’s best to keep your trading company as a trading company – do not try and morph it into an investment company;

(2) If you were to have any action taken against you in relation to your contracting work (like a negligence claim heaven forbid!), your property would be at risk of being taken in any settlement;

(3) You have no opportunity to claim Principal Private Residence capital gains tax relief on your property if purchased using a limited company;

(4) Any capital gain in the property value (realised on sale) would be taxed completely at the company tax rate of 21% – if owned personally you get the first £10,100 of the gain tax free through your annual tax free allowance;

(5) If you needed to close down the company for any reason, the investment properties would need to be sold into another company, or sold to your personally – this would attract stamp duty charges, and solicitors fees;

Next week we will cover how you can put excess funds held in your business bank account to good use for something like buying a property, in a tax efficient manner.

If you are paying for child care, then could be claiming the first £55 a week (or £243 a month) as a fully deductible company expense if the qualifying conditions are met.

Qualifying Conditions:

The qualifying conditions are that:
(1) Your company can only use the childcare vouchers to pay for childcare that has been registered or approved;

(2) The child:

* is a child or stepchild of the employee at whose expense, either in full or in part, the child is maintained; or

* is resident with the employee and for whom the employee has parental responsibility;

* qualifies up to 1 September after their 15th birthday (or 1st September after their 16th birthday if they are disabled);

(3) Your childcare voucher scheme is generally available to all of your employees where the scheme operates;

The £55 a week (or £243 per month) exemption applies to each individual employee, not per household or number of children. If the qualifying childcare support costs exceed £55 a week, the excess will be need to be paid for personally.

What counts as registered or approved childcare?

Registered and approved childcare includes:
(1) Registered childminders, nurseries and play schemes;

(2) Out-of-hours clubs on school premises run by a school or local authority;

(3) Childcare schemes run by approved providers, for example, an out-of-school hours scheme or a provider approved under a Ministry of Defence accreditation scheme;

(4) Childcare given in the child’s home that has been approved under a Government scheme (except where the care is provided by a relative of the child);

(5) Accredited childcare for 8s and over by an approved organization;

What records does your limited company need to keep?
You will need to keep records that the qualifying conditions have been met. These records should include:
(1) Evidence that the scheme is offered to all staff where appropriate;

(2) Details of the child using the childcare, for example their name and date of birth;

(3) Details of the child carer(s) used including their registration or approval numbers and, if appropriate, when their approval expires; and

(4) Evidence that your employees participating in childcare voucher schemes are required to inform you of any changes in the registration or approval status or their child carer;

Please contact your account manager for further details on how to operate your childcare scheme and how to claim these expenses.

If your company is VAT registered, you must submit your VAT Return and ensure that payment of the VAT due has cleared to HM Revenue & Custom’s (HMRC) account by the due date.

Your VAT return and VAT payments must be submitted by the due date. If the HMRC receives your return or VAT payment late, you may be fined a percentage of your unpaid VAT in addition to the VAT you owe. If you continue to submit or pay late you will be charged a higher percentage of the unpaid VAT.

As director it is up to you to make sure your VAT returns and payments are made on time. The Event Calendar within your online account shows when your VAT returns are due, and the due date for payment.

How surcharges are calculated:
1st Late return or Payment – If your company turnover is more than £150,000 you will be ‘in default’ and the HMRC will send you a ‘Surcharge Liability Notice’ explaining what will happen if you miss another deadline during the following 12 months – this is called your ‘surcharge period’. If you miss another deadline within 12 months you will face surcharge payments.

1st Late return or Payment – If your company turnover is less than £150,000 you will be ‘in default’. If you then miss another deadline within 12 months the HMRC will send you a ‘Surcharge Liability Notice’ explaining what will happen if you miss another deadline during the following 12 months – this is called your ‘surcharge period’. Then if you miss another deadline within 12 months you will face surcharge payments. Essentially if you miss two deadlines within 12 months of each other, and miss another deadline within the next twelve months, you will face surcharge payments.

Note, if a return has not been submitted, HMRC will estimate the amount of VAT owing and base your surcharge on that amount (known as an assessment).

Your first surcharge will be 2% of your unpaid VAT. Each time you do not submit or pay your VAT on time, your surcharge period will be extended for a further 12 months. If you continue to make late payments you will be charged increasing penalties of 5%, 10% and 15% of the unpaid VAT.

Late registration penalties:
You may incur a penalty if you fail to notify the HMRC at the correct time that you should have registered for VAT.

The amount of the penalty is a percentage of the net VAT due to Customs and Excise, from the date when you should have registered.

We monitor your online account regularly and will endeavour to inform you once you are close to reaching the compulsory VAT registration threshold (which for 2010 is £70,000 in turnover based on a rolling 12 month period). However this is ultimately your responsibility and you must ensure your company is registered for VAT before exceeding the VAT registration threshold.

Please contact us if you would like more information on registering your company for VAT.

Just a quick note to say we are all out of the office from 1.30pm today, for a bit of team building on a south London go kart track.

If you need to speak to someone about a particular issue, please call and leave a message, or else email us.

We will be back in the office at the usual time tomorrow morning.

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.”