Latest news –
Article 1 – March tax tips
TWD Accountants tax tips & News, our newsletter designed to bring you tax tips and news to keep you one step ahead of the taxman.

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

Taxman Starts Business Records Check

The Taxman is concerned that many small businesses are not keeping adequate records to support the entries on their tax returns. To encourage better record keeping he is taking a carrot and stick approach.

The carrot encouragement comes in the form of a number of new HMRC leaflets, and an online tool www.businesslink.gov.uk/recordkeepingcheck designed to help small businesses decide what records they must keep. These tools and leaflets contain quite a lot of jargon words and phrases, so we would recommend discussing your requirements with us.

The stick is a letter he is about to send to 50,000 small businesses, advising that they may be subject to a detailed records check.

Only a minority of these businesses will actually receive a visit from the Tax Office compliance check unit, and those visits will normally be arranged in advance. However, if your business is visited and your records are found to be inadequate you may receive a penalty of up to £3,000, which cannot be suspended even if you promise to keep better records in future.

Taxman to Hassle Tax Cheats

In addition to the 50,000 letters being sent about keeping business records, the Taxman is writing to 12,000 self-employed people who claim Tax Credits, to check whether they have been under-stating their income.

As a self-employed person you can claim Child and Working Tax Credits just like an employee, but your self-employed income is likely to be more variable than a regular wage or salary. If the income from your self-employed business has fluctuated wildly during the past recession, you may well get one of those letters from the Taxman. You will be asked to supply evidence of your income, which will normally be your business accounts and possibly bank statements. We can help you compile the information requested.

The Taxman is also getting serious about tackling those who deliberately cheat the tax system, as opposed to those who make careless mistakes.

He is targeting individuals and businesses identified as deliberate tax cheats since April 2009, and will regularly monitor all aspects of that person’s tax affairs. This will involve asking for further information to support figures on tax returns, and possibly making unannounced visits to business premises.

The monitoring will continue for two to five years, or as long as the Taxman thinks the person is a tax risk. Initially, about 900 people will soon be informed they are included in this monitoring scheme but this number may well increase in time.

Traps with the Flat Rate VAT Scheme

The VAT flat rate scheme for small businesses is generally straight-forward to operate, but here are a few traps to watch out for.

Use the right rate
You will be aware that the standard rate of VAT increased to 20% on 4 January 2011. The flat rates used by traders in the flat rate scheme to calculate the VAT to pay to HMRC also changed from that date. Did you remember to apply the new rate for your business sector? Check whether you applied the correct flat rate from 1 January 2010 to 3 January 2011 when the standard rate of VAT was 17.5%, and from 1 December 2008 to 31 December 2009 when the standard rate was 15%.

Include all business income
You need to apply the flat rate for your business sector to all your business income, including income that is exempt from VAT such as rents. If you are self-employed and operate your VAT registered business in your own name, any income from property you let in your own name must also be subject to the flat rate scheme.

This applies whether or not you consider the lettings to be part of the VAT registered business. If you run your VAT registered business though a company and hold the let property in your own name, the flat rate scheme operated by the company will not include your rental income.

Bank interest
If you receive interest in your business as a core part of your business activities that interest should be included in the turnover to which you apply the flat rate. This could apply to businesses who handle large sums of money on behalf of clients and keep a share of the interest as part of the deal. However, where the interest is received as a passive activity, such as on a current or deposit account it is outside the scope of VAT and should not be included in the sum to which you apply the flat rate.

Leaving it to Charity
If you haven’t made a Will, you should do so without delay. If you don’t have any relatives you want to leave your estate to, consider making a Will that leaves most of your assets to specified charities. This avoids the potential problem of intestacy (dieing without a Will), and saves tax as gifts to charities are free of inheritance tax. However, there are two traps to avoid:

Identifying the charity
Many charities have merged or changed their names in the recent past, so when it comes to distributing the estate according to the Will, it may be difficult to work out exactly which charity you intended the funds to go to. To avoid this problem make sure your Will states the charity’s registered office and charity number. You can also include a clause in your Will specifying that the gift should be directed to any organisation that amalgamates with the original charity.

Residue of the estate
The second problem can occur where the charity has been left an undefined amount in your Will, such as the residue of your estate. This can lead the charity’s officers hassling the executors, querying deductions such as legal fees and in extreme cases challenging the distribution of your estate in Court. To avoid this problem leave specified amounts of cash or assets to your chosen charities rather than the amount left over after other gifts have been made and any tax paid.

March 2011 Question & Answer Section

Q. I’ve been told I will have to pay all my business taxes online very soon. How can I do this if I don’t have internet banking?

A. It will be compulsory to pay corporation tax electronically from 1 April 2011, and to pay all VAT due electronically from 2012. However, there are no plans to make all PAYE or CIS payments electronic, yet. Electronic payments include direct debits, debit and credit card payments. You don’t have to have internet banking, you can set up electronic payments with your bank by using telephone banking.

If you would rather pay your tax bills by cheque you can do so using a Bank Giro payslip at your own bank branch. This counts as an electronic payment, as do similar payments made at the Post Office counter by cheque, cash or debit card. You need to order the Bank Giro payslips specific to your business from HMRC.

Q. My rental property makes a profit of £2,400 a year. I checked the HMRC website and it says I don’t have to complete a tax return. Does that mean I don’t have to pay tax on my property profits?

A. Although the HMRC website says you don’t have to complete a tax return if your income from property is less than £2,500, you should scroll down and read the text under ‘Things to check if you don’t need a tax return’. This makes it clear that you must tell the Tax Office about any new sources of income. The deadline for reporting new income is 5 October following the tax year in which the new income first arose. If this date passed sometime ago you need to contact the Taxman as soon as possible and declare all your income and expenses relating to your let property. The Taxman may decide to charge you a penalty for failing to declare your income at the right time.

You do have to pay tax on your property profits, but if the amount owing is small compared to your salary, it may be deducted through your PAYE code. In this case you don’t need to complete a tax return each year, but without an annual tax return the Taxman will not know to vary your tax code if your rental profits increase or decrease.

Q. I try to run my business on green principles so all the company cars are hybrid petrol/electric models. But I’ve heard that the car benefit is going to increase for all these cars from April, how is this going to affect my employees?

A. The good news is where your hybrid cars have CO2 emissions levels of 120g/km or less, the taxable benefit will remain at 10% of the list price. The tax increase will only apply to cars with higher CO2 emissions. Hybrid petrol/electric cars in this category currently get a 3% reduction in the percentage of list price that forms the basis of the car benefit charge for employees. From 6 April 2011 that discount will be removed, and the regular 1% increase in list price percentage will apply to all cars. For example the taxable benefit for a hybrid car with CO2 emissions of 179g/km is currently 21% of the list price. From 6 April 2011 the benefit for this car will increase to 25% of its list price.

Article 2 – Tax evaders beware – HMRC has announced its new plan

Under the Managing Deliberate Defaulters (MDD) programme, individuals who deliberately dodge tax will be subject to detailed inspection for up to five years as part of a crackdown by HMRC.

The Revenue said it does not envisage that anyone will be released from the scheme within two years.
Letters are currently being sent to 900 known tax evaders, although the plan is supposedly aimed at deterring would-be tax dodgers as well.
Are you on the right tax code?

‘Tax cheat check-ups will involve continued and close scrutiny – it is a real deterrent,’ said Steve Hickman from HMRC. ‘If you are thinking about breaking the rules just remember, you could end up with HMRC on your back for five years.’

There are a variety of ways HMRC can monitor a deliberate defaulter’s tax affairs. These may include:
· Making announced or unannounced inspection visits to carry out pre-return checks of their books and records
· Asking for certain records and additional information to be sent in with the individual’s tax return so that they can be checked
· Conducting in-depth compliance checks into all or any part of the person’s tax affairs
· Observing and recording the person’s business activities and cross-checking details in their accounts
· Requiring more frequent VAT returns or withdrawing certain favourable VAT schemes such as cash accounting, annual accounting, flat-rate scheme and retail schemes

HMRC has also warned that it may start criminal proceedings if miscreants reoffend.
The move is the latest in a string of measures apparently designed to recoup lost tax revenue. From April 2011 harsher penalties will apply for offshore non-compliance, with offenders facing penalties of up to 200% of the tax owed.

In addition, those who have tried to dodge tax of more than £25,000 will start to be named in the coming tax year.
Tax content provided by
Click on the following link for information about our tax and accountancy services.
www.twdaccounts.co.uk

Budget Report 2010

TWD Accountants has summarised the main tax issues affecting our clients.

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.
Emergency Budget Report 2010 – 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.
Emergency Budget Report 2010 – 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.

Emergency Budget Report 2010 – 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.

Emergency Budget Report 2010 – 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.
Emergency Budget Report 2010 – Tax Aviodance
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.

Emergency Budget Report 2010 – 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%.

Additional Information
Ask a Question
Please contact us if we can help you with these or any other tax or accounts matters.
Call us on 0800 093 9433 or alternatively www.twdaccounts.co.uk to send us an email.

Tax content provided by

* Self Assessment
Below are the 11 database entries on the subject of Self Assessment.
Do I have to pay my tax bill in a lump sum?

If you owe less than £2,000, the amount may be included as an adjustment to your tax code for a future tax year.
To do this, if you submit a paper return it has to be in before 30 September. However, if you file your return online, it can be done up to 30 December. You should expect to pay any tax due by 31 January if it is not being collected through your tax code.

Does Self Assessment affect everyone?
No, however, self assessment rules state that, even if you have not been sent a return, you have a statutory duty to tell the Revenue of any untaxed income. If you haven’t had a return and have nothing to declare, you are not within Self Assessment.

I have not been sent a return, but should I complete one?

My only income is from my job which pays £20000 per year.
If you have not been sent a return and all of your income is taxed at source, you do not have to complete a return.

Does Self Assessment really mean that I have to calculate my own tax?

It seems very complicated.
No. You do not have to calculate your own tax under Self Assessment. However, if you require the tax office to calculate your tax liability in time to pay the correct amount on time (31st January), you will need to file your return by 31st October if filing by paper, or, 30th December if filing online. After this date, the tax office will still calculate your liability but they may not advise you of the amount to pay in time for the deadline and you will be charged interest on late payments.

What is the deadline for submitting my return?

31st October is the deadline for submitting a paper return. 30th December is the deadline for submitting an online return if you wish any underpayment of tax of less than £2000 to be included in your tax coding 31st January is the final deadline for submitting your return online.

What happens if I do not fill my return in on time?

You will be fined a £100 late filing penalty. A futher £100 penalty is charged six months after the deadline if your return is still not filed. The Revenue can also request daily penalties of up to £60 per day.

The £100 late filing penalty may be reduced if your tax liability for the year is less than £100. However, the daily penalties will remain due irrespective of your final liability.

Although my return was late, it was not my fault. Do I still have to pay the fine?
Not necessarily.

The law recognises that some things are out of our control. If you can prove that there was a “reasonable excuse” for the lateness of the return, you may well get the fine overturned. Unfortunately, there is no definitive guidance on what constitutes “reasonable”.
Some excuses will not be successful, such as not having information, your accountant letting you down or not having time because of work.

Some excuses should be accepted though, if genuine. These include not having received the return in the first place, serious illness or bereavement, losing all your financial records through fire flood or theft. You may even cite postal delay, but there must be a provable reason for this in the Post office, such as strike or fire in the sorting office.

I will owe a large amount of tax, and cannot get my return in on time. Is there any other way I can avoid the £100 fine?
Yes there is.

If you have a good idea how much you owe, you can pay the amount due before 31 January.
If you pay at least the amount due, you will not have to pay a penalty. As this cannot exceed the amount of tax owed, and as you do not actually owe anything at 31 January, you cannot be fined.
This method is not risk free, as you may owe more than you think, in which case you will be fined.
As always, we recommend that your return is submitted on time.

I owe tax, how will it be collected?

The most common method for the employed or pensioners is to have your tax code adjusted which can be done on amounts up to £2000. It is done by collecting additional tax on your salary or pension each week or month.

If you are going to send in a paper return, it will have to be in before 31 October to do this. If you send it electronically, you have until the 30 December. For self employed or those with large tax liabilities in excess of £2000 the amount is due for payment by 31 Jan following the end of the tax year. Payments on account may also arise for the following tax year.

If I do have to pay tax directly, when do I need to make payments by?
31 January.

This is the final date for making the final payment of tax for the year before. So, if you owe tax for the year to 5 April 2008, you need to make sure that all the tax due has been paid by 31 January 2009.
What if my return does not need to be submitted until 31 March? Do I still have to make the payment by 31 January?
If your return was issued late and you are required to file later than 31 January then the due date for payment is the same as the filing date for the return.
www.twdaccounts.co.uk

* Employment
Below are the 1 database entries on the subject of Employment.

Which is better, a company car or a car allowance?

This is one of the most common questions we are asked. Unfortunately, it is one of the most difficult to give a definitive answer to.
The problem is the number of factors involved, many of which have little to do with taxation.

The way to make your decision is to add up all the net cost to you of both options, throw in factors such as the convenience of a company car against the benefit of actually owning the car, and see which you prefer. This is something only an individual can answer.
However, have a look at the other questions here, as well as our calculators, and they should help you reach a conclusion.
Please see also our Mileage Expenses and Car Benefit calculators.
www.twdaccounts.co.uk

* General
Below are the 5 database entries on the subject of General.
What will my company car cost me?
The first thing to bear in mind is that the cost to you is not the actual car benefit. For example, if your highest rate of tax is 40%, a company car benefit of £5000 will actually cost you £2000.
Please see also our Car Benefit calculator.

If I choose to use my own car for work, what costs can I claim against my tax?

H M Revenue & Customs have approved standard pence per mile rates which are deemed to cover all business expenses incurred from using your own car. The rates are 40p per mile for the first 10000 miles and 25p per mile thereafter.
Please see our Mileage Expenses calculator for more details.
Am I required to keep records of business mileage?
Yes, you should keep an accurate record of your business mileage. Your log should include details of dates, destinations mileage and reasons for each business trip. If you are required to complete an expenses log for your employer this is usually acceptable.

What happens if my employer reimburses me more than I can claim under the Revenue approved rates?

In this case, you will be taxed on the excess. However, you should not have to work out the amount for yourself. Your employer must tell you the exact amount of all taxable income, including any taxable expenses payments such as these.

Now that my top rate of income tax is a whopping 50%, will I get tax relief at that rate if I make charitable donations in this tax year?

Yes. If you make donations to charities under the gift aid scheme you will get tax relief at the 50% rate. Your gift is treated as being made after 20% tax has been deducted. When you give £80 the gross amount of the gift is £100. Your personal thresholds for 40% tax and 50% tax are both extended by the gross amount of your donation. For your £80 gift you have an extra £100 of your income taxed at 20% rather than 40%, and an extra £100 of income taxed at 40% rather than 50%. In total you have gained tax relief of 50% (20% +20% +10%) on the £100 gross gift.
www.twdaccounts.co.uk

* Investments
Below are the 4 database entries on the subject of Investments.

Why does my tax return ask for details of my bank interest as I pay tax on the interest already?

Interest paid on bank accounts is taxed at 20% before it is credited to your account. However,if you pay tax at 40% or from 2010/11 the new additional rate of 50% you will be liable to pay an additional 20% or 30% respectively, on the gross interest received.

My income is really low, and I do not pay tax. It seems unfair that I have to pay tax on my bank interest just to claim it back at the end of the year.
You can register for the tax to be paid in full without the deduction of income tax. Just ask your bank or building society for form R85. 

I pay tax at a higher rate. What extra tax do I have to pay on my share dividends?

If you pay tax at the higher rate or from 2010/11 at the additional rate, you will be liable to tax at 32.5% or 42.5% respectively, on the gross dividend. However, each dividend carries a 10% notional tax credit which will be offset against the additional liability.

I recently sold my 60% share in a trading company that I’ve been a director of for over 20 years. The sale included ordinary shares that had full voting rights, and preference shares, which had no voting or conversion rights, just the right to a fixed dividend. Can I claim entrepreneurs’ relief on the gain arising on both types of shares or just in respect of the gain on the ordinary shares?

As you held at least 5% of the ordinary voting shares and were a director of the company for one year up to the date of sale, entrepreneurs’ relief should apply. Although the conditions for entrepreneurs’ relief refer to ordinary voting shares, the gains arising on both the ordinary shares and preference shares can be included in your claim for entrepreneurs’ relief. If the sale was concluded between 6 April 2010 and 22 June 2010 the maximum gain that can be covered by entrepreneurs’ relief is £2 million, for sales before this date the maximum gain that can be subject to an entrepreneurs’ relief claim was £1 million and for sales after this date the maximum gain that can be subject to an entrepreneurs’ relief claim has increased to £5 million.
www.twdaccounts.co.uk

* Self Employment
Below are the 1 database entries on the subject of Self Employment.

How are payments on account worked out?
You will be asked to make payments on account equal to your tax bill for the previous tax year. Of which 50% is payable by 31 January and 50% by 31 July.
www.twdaccounts.co.uk

* Enquiries
Below are the 1 database entries on the subject of Enquiries.
I have received a letter from my tax office saying that they intend to make an enquiry into my tax return. What does this mean?

For 2006/07 self assessment tax returns H M Revenue & Customs can enquire into the return within 12 months from 31 January 2008 (or if the return was issued late, within 12 months of the filing date).
From 2007/08 onwards H M Revenue & Customs can only enquire into the self assessment tax return up to 12 months after the date they received it, e.g. the enquiry window for a return filed on 1st May 2008 closes on 30 April 2009.

The enquiry may be into a specific item shown on the return or just a general query. You should always respond within 30 days and seek professional advice where you are unsure.
www.twdaccounts.co.uk
* Refunds
Below are the 1 database entries on the subject of Refunds.

If I think I have paid too much tax in the past, can I do anything about it?

If you are required to complete a self assessment tax return each year the time limit for making a claim for allowances or reliefs has been reduced to 4 years from April 2010. 
If you are not within the self assessment regime you may go claim tax back for up to six years for allowances or reliefs that you have not previously claimed. This will change in April 2012 when the time limit will also be reduced to 4 years.
www.twdaccounts.co.uk

* Tax Office
Below are the 2 database entries on the subject of Tax Office.

How can I find out which office deals with my tax?

Your employer should be able to provide you with this information. Alternatively, if you contact your local tax office and quote your national insurance number they should be able to advise you.

Can I ask a friend to deal with the tax office for me if I cannot do this myself?

Yes. However, you will need to ask your tax office to send you a form 64-8. This form allows you to authorise any individual to act on your behalf.
www.twdaccounts.co.uk

* Capital Gains
Below are the 1 database entries on the subject of Capital Gains.

What is Capital Gains Tax?

In essence, Capital Gains Tax is a tax on profits made when assets are disposed of, usually by selling them.
There are of course many rules and regulations. These are used to decide the cost of the asset, the amount you got it for, whether there are any other costs incurred, and how much of that profit needs to be taxed.
Tax content provided by
www.twdaccounts.co.uk

Do you have questions about self-assessment? Do you want to know what certain tax terms actually mean in plain English? Do you need to work out what your fuel benefit may be?
Then this is the section for you. Tax can be complicated, tax can be hard to understand and for many people tax is an headache that won’t go away.

TWD Accountants provides you with all the information you need to know to make tax simple, your most frequently asked questions are answered and we also provide a special online advice facility for those specialist questions.

Demystifying tax, this section includes top tax tips and tax saving moves on marriage and divorce, children, growing old & pensions, property and getting the best out of the tax office.
Tax content provided by

www.twdaccounts.co.uk

Key dates 2011
March
15/03
Any tax code amendments issued between today and 5 April, will not be operated by your employer.
April
05/04
Last day of the tax year
06/04
First day of the tax year
May
19/05
Deadline date for employers to submit P35 and P14s to tax office.
31/05
The deadline for employers to supply P60s to employees. Also applies to pension payers.
June
No key dates for June
July
06/07
Deadline for employers to submit P11Ds and P9Ds to the tax office and provide copies to employees’.
31/07
Deadline for late returns due previous 31/01, in order to avoid second £100 penalty.
31/07
Second 5% surcharge added to tax payable at previous 31/01 but still outstanding.
31/07
Deadline date to pay the second payment on account, if due, for the tax year just ended.
August
01/08
Second £100 penalty arising if return due to be filed by 31/01 still outstanding.
September
No key dates for September
October
05/10
Final date to tell your Tax Office about any undeclared income if you have not been sent a Tax Return.
31/10
Final date to manually submit your paper return if you wish to pay tax underpaid via your tax code. Only tax liabilities of £2000 or less can be collected this way. This deadline is extended to 30 December if you submit your return online.
31/10
Final deadline for submitting your return if you do not wish to calculate your own tax and want to guarantee that the Revenue notify you of your liability in time to pay on 31/01 next year.
November
01/11
Any Tax Returns issued after this date will not need to be submitted by 31 January. You have three months from the date of issue instead.
December
30/12
Final date for submitting returns via the internet if you wish to have a tax underpayment (up to £2000) collected through your tax code.
www.twdaccounts.co.uk

Tax Tips

Calling on years of experience, the TWD Accountants team brings you trade secrets to show exactly how our tax system works. Can you use our knowledge to save money?
* Charitable Payments
How donations to charities can qualify for tax relief.
We have 1 tip(s) under the heading Charitable Payments .
Tax relief – Is available at your top tax rate for payments made under the Gift Aid scheme. There is no minimum limit for gift aid payments
and they can be a one off donation or a series of payments. To qualify for relief donors are required to make a declaration.

If a higher rate taxpayer (40%) made a gift aid payment of £1000, the charity would benefit by £1282* and the net cost to the taxpayer would be £750 as relief pf £250 could be claimed on the £1000 grossed up payment of £1250.

If an additional rate taxpayer (50%) made a gift aid payment of £1000, the charity would benefit in the same way as above but the net cost to the taxpayer would be £625 as relief of £375 could be claimed on the £1000 grossed up payment of £1250.

*The charity benefits from 22% tax relief claimed back from the government but the individual`s payment is grossed up by 20% in line with basic rate tax. However, from 6th April 2011 charities will only be able to reclaim the 20% actually paid by the taxpayer.

* Children
Tax on their income, and yours
We have 2 tip(s) under the heading Children .

Personal Pensions – You can pay up to £3600 gross a year into a personal stakeholder pension plan for your children. You will still retain basic rate tax relief out of your contributions meaning the net cost to you would be £2880. You should remember that they cannot take the benefits until they are at least 50 years old.

Children`s Income – Children are entitled to full personal allowance and lower rate tax bands. The income of your children is their`s in their own right, no matter how young they are. There are certain exceptions where income comes directly, or indirectly from you, which may still be treated as your income.

* Growing Old
How to make sure you get all the tax advantages due to you when you turn 65
We have 3 tip(s) under the heading Growing Old .
Age Related Allowances – If you will be 65 or more during a tax year, you may qualify for increased allowances, over and above the standard amounts. However, these additional allowances are restricted where total taxable income exceeds the limits set for that tax year
Married Couples Allowance – If you are married or in a civil partnership, and you or your spouse / civil partner were born on or before 5th April 1935, the married couple`s allowance is still available. The amount will depend upon the income level of the highest earner.

State Retirement Pension – If you start to receive a state retirement pension, it is important to remember that this is taxable income. If you are liable to tax your tax code needs to be updated as soon as you start to receive the state pension. The tax office should send you a form about your retirement, which you should send back as quickly as possible as any delay could result in you paying an incorrect amount of tax.

* Low Income
When you should not be paying tax, and how to claim it back if you pay too much
We have 2 tip(s) under the heading Low Income .

Non Taxpayers – If you are a Non-Taxpayer and your total income is below the personal allowance, you may register to receive interest on banks or building society accounts without the deduction of tax. Even if most of your bank and building society interest will be covered by your allowances, you cannot register some accounts and not others. They must all be covered

Tax deducted at source – Tax on bank and building society interest is deducted at source at the rate of 20% (unless you have registered to receive the interest gross). A claim for all or part of the tax deducted may be made where the individual’s taxable income is below £8915 for the years ended 5th April 2010 and 2011.UK dividends carry a tax credit of 10% of the gross dividend. However, this credit cannot be reclaimed

* Marriage
How being married can reduce your tax bill even after the abolition of Married Couples allowance
We have 2 tip(s) under the heading Marriage .

Personal Allowances & Tax Bands – Ensure you make full use of allowances and lower rate bands, by transferring income producing assets between spouses / civil partners. This may reduce or eliminate a higher rate tax charge. This can also be beneficial where spouses / civil partners are over 65 and age related allowances are reduced due to level of income

Capital Gains Tax Exemption – Husband & wife and civil partners are each entitled to an annual exemption currently £10100 (2009/10 & 2010/11). It may be advantageous to distribute your share portfolio between you to benefit.

* Property
The tax and your own home. Also, how to reduce your tax if you get rental income from a property
We have 3 tip(s) under the heading Property .

Keeping Records – You must retain records relating to your property income for at least 5 years and 10 months after the end of the tax year to which they relate. Failure to do so may result in penalties of up to £3000 per tax year.
Rent-a-Room Relief – This relief is available to owner-occupiers and tenants who let furnished rooms in their only or main residence.

No tax is payable if the gross rents do not exceed £4250. The exemption is split if the letting is by a couple.
If the rents exceed £4250 you have the option to pay tax on the excess or on the rent less allowable expenses. A claim must be made to the tax office if you want to elect to pay tax on the excess.

Investing in Buy-to-Let Properties – Interest payable on loans used to buy land or property used in a rental business, or on loans to fund repairs, improvements or alterations, is deductible in computing the profits or losses of the rental business.

* Self Assessment
How the system really works, and ways to reduce the pain
We have 2 tip(s) under the heading Self Assessment .
30th September – H M Revenue & Customs advise that they will calculate your tax if you submit your tax return to them by 30 September. Remember, that the tax office will always calculate your tax liability regardless of when you submit your tax return. The importance of this date is that the Revenue will advise you of your tax liability in time for the due date of 31st January. Returns submitted by this date resulting in an underpayment of tax below £2000, allow you the option of having the tax collected by way of a restriction in a future years tax code

Self-Employed – If you are self-employed and your gross turnover is less than £30,000 per year, you only need to show your total turnover, less total expenses and net profit on the tax return. However, you should still keep detailed records should H M Revenue & Customs require them

* Self Employment
Making it pay if you work for yourself
We have 4 tip(s) under the heading Self Employment .

VAT Registration – You must check your requirement to register for VAT at the end of every month, to ensure that your annual turnover has not exceeded the registration limit currently £70,000 from 1 April 2010.
Self-Employed – If you are self-employed and your gross turnover is less than £15,000 per year, you only need to show your total turnover, less total expenses and net profit on the tax return. However, you should still keep detailed records should H M Revenue & Customs require them.

Keeping Records – You must retain records relating to your business for at least 5 years and 10 months after the end of the tax year to which they relate. Failure to do so may result in penalties of up to £3000 per tax year
New Business – You need to register with H M Revenue & Customs to notify them of your new business within 3 months of starting otherwise you will be liable to a penalty of £100. If you don`t get a tax return you are required to notify H M Revenue & Customs that you have taxable profits by 5th October following the tax year end of 5th April.

* Selling Assets
What to do to reduce capital gains tax if you sell things for a profit
We have 4 tip(s) under the heading Selling Assets .

Your home – The sale of your main home is usually exempt from capital gains tax. However, if you acquire a second home you have two years from the date you bought it to make an election as to which should be regarded as your main residence for capital gains tax exemptions. Once an election has been made it can be changed at any time. Failure to make an election within the required time means the decision is left to H M Revenue & Customs

Timing of sale – The rate of Captial Gains Tax you pay is dependant upon the level of your income. Therefore timing your disposals can be important where your income varies.
Share become worthless – If you have shares that have become virtually worthless you may make a claim for negligible value. Details of these shares must be shown on the list held with H M Revenue & Customs in order to qualify. This claim would reduce gains arising in the year but you should ensure this does not cause you to waste your annual exemption.

Annual Exemptions – There is an annual exemption which is £9200 for 2007/2008. Husband and wife and civil partners are both entitled to an annual exemption. Therefore it may be advantageous to distribute your share portfolio between you to benefit

* The Tax Return
What you need to put on your return, and what you may be able to leave off
We have 2 tip(s) under the heading The Tax Return .
Penalties – The penalties for late submission of a self assessment tax return are-

1. £100 if not filed by 31 October by paper or 31 January online or 3 months from date of issue whichever is later
2. Additional £100 if not filed 6 months after the filing date
3. H M Revenue & Customs can apply to impose further penalties of up to £60 per day, in certain cases.

The £100 fixed penalties cannot exceed the amount of tax that remains outstanding at the due date of the tax return. Additionally, no penalty applies if a repayment is due. This does not apply to the daily penalties.

The £100 fixed penalties cannot exceed the amount of tax that remains outstanding at the due date of the tax return. Additionally, no penalty applies if a repayment is due. This does not apply to the daily penalties.

Filing Dates – Where a tax return has been issued to you, you are required to complete the form and submit to H M Revenue & Customs before the filing deadline. The normal deadline is 31st October for paper returns or 31st January for those filed online, following the tax year end, but where tax returns are issued later than November, this is extended to 3 months from the date of issue.

* Working Abroad
How working abroad affects your tax.
We have 2 tip(s) under the heading Working Abroad .

Expenses – If you are employed and are required to work abroad, try to ensure that your employer meets the cost of overseas board and lodgings This way any taxable benefit can be offset by an expenses claim. If you bear the cost yourself you will not be able to claim tax relief.

Liability to UK tax – If you working full time abroad and all of your duties are performed abroad spanning at least a complete tax year you will not be liable to UK tax on this income providing your visits to the UK do not exceed 183 days in ANY tax year AND average less than 91 days a tax year over a period of 4 years.

* Your Investments
What tax you should pay on your investments, and how to reduce it
We have 4 tip(s) under the heading Your Investments .

Mileage Rates – If you use your own vehicle, motor cycle or bicycle for business trips your employer can pay you an allowance, based on the Inland Revenue approved rates,free of both tax and national insurance. If your employer does not pay any expenses or pays an amount below the approved rates, you can make a claim for the difference.

Accrued Income Scheme – This applies to interest bearing securities such as government stock. When you sell stock just before the next interest date you are taxed on the accrued interest to the settlement date and the buyer`s income is respectively reduced. If you sell after the interest date, your income is reduced and the buyer is taxed on the interest from the settlement date to the next interest payment date. This does not apply if the nominal value of all income scheme securities held is less than £5000 in the tax year that the next interest payment falls due or the previous year

Individual Savings Accounts (ISAs) – There are 2 types of ISA, a stocks and shares account and a cash account. Investors have an overall annual subscription limit of £7200 and of this you can invest up to £3600 in cash and any balance left over from the cash ISA can be invested in stocks and shares ISA. Investments under the scheme are free from income tax and capital gains tax and withdrawals may be made without loss of tax relief. You should be aware however, that if any amount is withdrawn, that part of the limit is not available for further investment in that tax year.

Non Taxpayers – If you are a Non-Taxpayer and your total income is below the personal allowance, you may register to receive interest on banks or building society accounts without the deduction of tax. Even if most of your bank and building society interest will be covered by your allowances, you cannot register some accounts and not others. They must all be covered

* Your Job
The low down on salary, perks and expenses. How to arrange things to suit you best
We have 4 tip(s) under the heading Your Job .

Your Tax Code – This represents the tax allowances you are entitled to such as personal allowances and job expenses, less deductions like pensions, benefits or underpayments. The code spreads your allowances evenly over the year, therefore if there is a change in circumstances it is important to notify the tax office of the changes to ensure the correct amount of tax continues to be deducted from your income

Loans – There is no charge to tax on an interest free loan provided to an employee, providing the loan does not exceed £5000 in the tax year
Employment Expenses – You may be able to make a claim for expenses incurred in the duties of employment. Some examples are travel & subsistence, professional subscriptions and use of home. There are also fixed rate expenses for most classes of industry for the upkeep of tools and special clothing that have been agreed with the Revenue and trade unions.

Mileage Rates – If you use your own vehicle, motor cycle or bicycle for business trips your employer can pay you an allowance, based on H M Revenue & Customs approved rates,free of both tax and national insurance. If your employer does not pay any expenses or pays an amount below the approved rates, you can make a claim for the difference.
Tax content provided by
www.twdaccounts.co.uk

Common Questions
Our Question and Answer database is divided into eleven topic areas. These are shown below. Click on one to bring up the most common questions we are asked on the subject.

* Tax Code
Below are the 6 database entries on the subject of Tax Code.
How is my tax code adjusted to collect the tax I owe?

Your tax code works by giving you a certain amount of tax free income each year. Reducing the tax free amount means you pay more tax. Doing this sufficiently and the extra tax you pay can be made to equal the tax you owe. However, the reduction in your code will not be the same as the tax you owe. For example, you might owe £440. If you pay tax at 20%, your code would go down by £2200. (At 20%, the tax on an extra £2200 is £440.) Your tax code should show both the amount you owe, and also the actual adjustment needed to collect it.

How does my tax code work? Something like “549L” does not tell me much.
Your tax code is made up of allowances and deductions. First of all you add up your allowances, then you take away all your deductions. Assuming the result is a positive number, it is taken away from your total taxable income before tax is calculated.

For instance, a code 549L may comprise Personal Allowance of £5435, plus business expenses of £740, giving a total of £6175. From this you may have medical insurance benefit of £680. Taking this away from your allowances gives a net amount of £5495.

This is the amount of your tax-free allowances. The code is simply this number with a letter substituting the final digit.
Each time you are paid, a proportion of that amount is taken away from your salary. For instance, if your salary is £1000 per month, you will only pay tax on £542. Each month £458 is paid to you tax free. (£5495 divided by twelve equals £458 approximately.)
How does my tax code work if it has a K in it? I’ve heard that this is different than usual.

A tax code including a ‘K’ indicates that your deductions exceed your personal allowances and reliefs available. Whereas a normal tax code gives you a tax free amount over the tax year, with a ‘K’ code you have no tax free amount and instead are charged additional tax to cover the shortfall.

My tax code has an explanation that it is done “on a special basis” and I will be taxed as though it is the first week of the tax year. I do not understand this.

Tax is usually collected on a cumulative basis throughout the tax year. However, where the tax code is amended part way through the tax year to reduce the tax free allowances available, the code is usually issued on a ‘week 1′ basis. This means that tax is now collected on a non-cumulative basis until the end of the tax year. This is to avoid any excessive amounts of tax being collected in one lump sum from one week’s / month’s salary. Any potential underpayment arising from the 6th April to the date the code was changed will be reviewed after the end of the tax year.

I have just had a new code that mentions a potential underpayment. Can you explain this?
Your tax free allowances have been reduced. As a result, you may not have paid enough tax from the 6th April to the date the code was amended. To avoid this being collected in one lump sum through your salary or pension, your code has been issued on a ‘week 1′ basis.

The potential underpayment is the amount the Revenue has estimated that you owe. It will be reviewed after the end of the tax year.
Can I question my Tax Code? I do not think it is right.
If you do not think that your tax code is correct, you should always query it. You can do this by contacting your professional advisor or contacting H M Revenue & Customs directly and providing them with up to date information
Tax content provided by
www.twdaccounts.co.uk

We offer a range of services all designed to make tax and accounts as straight forward as possible at one low-cost, fixed fee.

We have designed a number of packages, directed at different areas of your tax and accountancy needs.
Self Employed Tax – Not VAT Registered
TWD Accountants will sort your tax and accounts hassles for just £270 inc VAT
Our service is easy, reliable and guaranteed with no hidden extras.

Because we specialise in small business’s, use the latest software we can save you time and money compared to the traditional high street accountancy service.

For one fixed fee of only £225 + VAT (£270.00) , we will:
Complete your annual accounts and tax return

• Discuss your draft accounts by telephone
• Calculate your tax position
• Look for ways to reduce the tax you pay
• Submit your accounts to H M Revenue & Customs
• Deal with all correspondence and answer your taxation queries
• A years access to our online bookkeeping system
• provide year round access to our experts

For more details visit Tax content provided by
www.twdaccounts.co.uk

Self Assessment Tax Returns Service
£125.00 takes away the hassle and worry of self-assessment with our Tax Return service. If the thought of filling in your own tax return fills you with dread, you’re not alone.

Many people find it complicated and time-consuming so it’s no wonder that almost 1 million people a year are fined for failing to return it to H M Revenue & Customs.

Worse still errors by H M Revenue & Customs are regularly reported, one in four tax returns are calculated incorrectly.

For just £125.00, our self assessment tax return service will:

• deal with all your tax affairs no matter how complicated
• include employment income, pensions, benefits and expenses
• plus capital gains, investments and 1 rental property
• complete your tax return and all necessary schedules
• calculate your tax position
• send you a full copy and explanatory notes
• file your return online to H M Revenue & Customs
• deal with the Revenue on your behalf
• be available for all your tax queries and questions

Tax content provided by
For more details visit www.twdaccounts.co.uk

Tax Review Service
With our Tax Review Service, we provide you with peace of mind. For one low cost, fixed-fee of £70 per tax year, we will ensure that your tax affairs are in order and you are not liable for any fines or charges from H M Revenue & Customs.
For one small fixed fee, we will:

• undertake an annual review of your income tax liability
• prepare a full income tax calculation, together with schedules
• determine whether a tax return is needed and advise you accordingly
• submit any repayment claim to H M Revenue & Customs on your behalf

It is your responsibility to advise H M Revenue & Customs if you need to complete a tax return or if there is a change in your financial circumstances. Once we have undertaken this tax review service on your behalf, we can advise you if you are required to complete a tax return. H M Revenue & Customs can charge interest and penalties if this is left too late

For example, H M Revenue & Customs needs to know if:

• you sell or give away chargeable assets worth more than £38,400 (for the tax year 2008-2009)
• you have tax due at the end of the year that cannot be collected via your PAYE tax code for the following year
• you have income from property that is more than £2,500 per annum
• you become self-employed

Do any of these apply to you?

For more details talk to TWD Accountants and see how we can take away your tax headache.
www.twdaccounts.co.uk