Pretty well all businesses need to file their yearend payroll returns for 2010-11 online.
The Employer Annual Return comprises:
. a form P14 for every employee
. a form P35 that summarises the end of year payroll totals.
These returns for 2010-11 must reach HMRC by 19 May 2011. Returns filed after this date may incur a penalty.

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There are a few excepted employers, those that can still send in paper returns. They are:
. employers using a simplified scheme for personal or domestic employees,
. members of religious societies or orders whose beliefs are incompatible with the use of computers,
. employers who employ persons to provide care or support services at or from their home – subject to certain conditions,
. limited companies that need to file solely to confirm CIS deductions suffered, Box 28 on form P35.
Employers should be aware that if they file paper returns for 2010-11, when online filing was required, HMRC may charge a penalty even if the paper filing is within the required filing deadlines.
What if you have no returns to make this year?
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The recent press coverage of taxpayers who may be receiving unexpected tax refunds or tax demands has created yet further anxieties about the integrity of our tax system. The refunds and demands are due to HMRC errors in tax codings and other issues for the two tax years ending 5 April 2009 and 5 April 2010. In the main, tax payers who are not required to complete a self-assessment tax return will be affected, although not all tax payers in this category will be included.

If you complete a self-assessment tax return your annual tax position is reconciled as part of the filing process.

Certainly, if you do receive an unexpected demand you should check HMRC’s calculations – if you have multiple employments or other complicated matters that affect your tax position you could well benefit from a consultation with a tax professional. Please call if you would like our help.

If you don’t presently complete a tax return we have included a list below of tax payers who should be submitting a return. Again, if you would like our help in organising registration, please call.

Who needs to complete a tax return?

The most common reasons for needing to fill in a tax return are listed below.

•You’re self-employed
•Company directors, ministers, Lloyd’s names or members
•Income above a certain level from savings, investment or property – income from savings and investments of £10,000 or more; income from untaxed savings and investments of £2,500 or more; income from property (before deducting allowable expenses) of £10,000 or more; income from property (after deducting allowable expenses) of £2,500 or more; annual trust or settlement income on which tax is still due (even if you’re only treated as receiving this income); income from the estate of a deceased person on which tax is still due
•If you receive a reduced age-related allowance because you’re 65 but your income is over a certain level (£22,900 for the 2010-11 tax year), you’ll need to complete a tax return. But there are exceptions, for example if your tax affairs are very straightforward.
•Income from overseas
•Your annual income is £100,000 or more
•You need to claim certain expenses or reliefs
•You owe tax and HMRC can’t collect it through your tax code, or you prefer to pay direct
•You have Capital Gains Tax to pay
•You’ve lived or worked abroad or aren’t domiciled in the UK
•You’re a trustee

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• Tax can be taxing: what to do if you receive a repayment letter (independent.co.uk)
• Taxpayers receive letters after HMRC blunder (channel4.com)
• Tax return delays expected as HMRC cuts costs (guardian.co.uk)
• PAYE – the system can no longer be trusted, says ACCA (your-story.org)

We provide insurance for our clients to cover the cost of professional fees in the event of a tax investigation. The company which provides this cover has revealed that their data shows HMRC has started twice as many tax enquiries last month as they did in June 2009. It seems HMRC have been instructed to ‘dash for cash’.

The full text follows;

Our Consultants deal with hundreds of HMRC enquiries at any given time and as a result speak with Inspectors across the whole of the UK on a day to day basis. In the last couple of weeks, we have identified a new initiative within HMRC which appears to be known as the ‘Dash for Cash’.

The Inspectors we have spoken to have told us they are being tasked to bring in as much money as possible, as quickly as possible, which is not really surprising given the current economic environment.  We understand there will be pressure to settle long running full enquiry cases and Inspectors will be encouraged to take up aspect cases which are likely to be settled more quickly to optimise the tax yield in the current fiscal year.

We have also heard from several regions that HMRC will be going back to ‘single’ case working as the new ‘Cross Tax’ enquiry framework is not working as they envisaged and is slowing up the enquiry process so it is likely that they will be reverting back to ‘where we were’!

Finally, our Claims Team received twice as many claims in June 2010 as they did in June 2009, confirming that HMRC are ‘on the move’ again and we are expecting that enquiry levels will continue to increase over the coming months.

If a company makes a loan or loans to an employee or director and the combined outstanding value to an individual never exceeds £5,000 there is no personal tax or National Insurance contributions to pay. However, beware; loans to employees who are also shareholders and directors may create a corporation tax charge for the company even if the loan does not exceed £5,000.

If the combined amount exceeds £5,000 a potential benefit in kind charge may arise if no interest is charged to the loan account or interest is charged at a lower rate than the official rate published by H M Revenue & Customs.

The official interest rates for the last three years are:

From 6 April 2007 to 28 Feb 2009 – 6.25%

From 1 March 2009 to 5 April 2010 – 4.75%

From 6 April 2010 – 4%

As we are now approaching the deadline for filing forms P11D, the forms that declare employees’ and directors’ benefit in kind, it is essential that loans are examined to reveal any benefits due. Overdrawn directors’ loans can create difficulties where the amount of loans fluctuates during a tax year.

If you would like clarification on the amount of benefit in kind you may have to pay please contact us as soon as you can. P11Ds have to be filed by 6 July 2010.

As the name suggests, tax free long service awards are tax efficient. If you provide an employee with a non-cash award to reward long service, the payment can be made without deduction of tax or National Insurance contributions, as long as the following criteria are observed:

1. As this is a reward to employees it is not available to self-employed sole traders or partners. It is available to directors who receive a salary for their services.
2. The award has to mark at least 20 years of service.
3. You must not have made a previous long service award within the last ten years.
4. The value of the reward cannot exceed £50 per year of service – so the maximum value of an award to an employee with 20 years of service is £1,000.
5. As pointed out in the opening paragraph of this article the award has to be made in a non-cash form. Cash awards are taxable as earnings in the usual way. You should also be wary about awards that can quickly be converted into cash, for example marketable stocks or shares or precious metals – these do not fulfil the non-cash criteria.

There are a number of complicated rules to abide by if your payment falls outside the above five points – for instance if you exceed the £50 per year or if the employee has less than 20 years of service.

If you are thinking of making use of this potential tax-free perk it is best to check with us before making the award.

You might have received a letter from the VATman that officially notifies your company or business to file its VAT return online, or face penalties.

If your business had a turnover of £100,000 or more in the year ending 31 December 2009 you are legally required to file your VAT returns online, rather than as a paper form, for all periods beginning on or after 1 April 2010. So you can file your VAT return for the quarter to 31 March 2010 on paper, but VAT returns for later periods must be submitted online.

Our online accounting software makes online filing of your VAT return very easy.

If you don’t agree that your turnover was £100,000 or more in the year to 31 December 2009, you need appeal against the VATman’s decision within 30 days of the date of his letter. The VATman has not sent a copy of his letter to us, so please forward it on if you have concerns about this turnover threshold. If you want us to submit your VAT returns online on your behalf we will need that letter as it contains some key details for the registration process.

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

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

We can assist with online filing of VAT returns.  From simply submitting the return to a full outsourced bookkeeping function.  Please contact us for more details.

There has been a lot of publicity lately about the tax advantages of running cars with low CO2 ratings. There are a number of benefits:

• possible 100% first year tax deduction for the cost of the vehicle,

• much reduced benefit in kind charges,

• lower road fund tax and so on.

But not all of us want to run such vehicles even if there are tax, VAT and running cost advantages.

Double cab pickups, sometimes described as crew cab pickups, are an anomaly!

For business users, especially the self

-employed, they present an unusual tax opportunity.

The HMRC web site describes double cab pickups as:

“… a front passenger cab that contains a second row of seats and is capable of seating about 4 passengers, plus the driver with four doors capable of being opened independently (two door versions are normally accepted to be vans, even those with rear doors that can only be opened after the front doors and that must be closed before the front doors) and an uncovered pick-up area behind the passenger cab.”

From the tax year 2002 -03 onwards a double cab pickup is classified as a van for both VAT and benefits purposes if it has a payload of 1 tonne (1,000kg) or more.

If your double cab pickup meets this definition:

You can reclaim any VAT added to the purchase price, and

The net capital cost (after VAT has been reclaimed) could be available for a 100% first year tax allowance as part of your Annual Investment Allowance up to a maximum of £50,000 each tax year.

If you are a director or employee, any significant private use of the double cab pickup will trigger a standard benefit in kind charge of tax on £3,000 per year. In addition if your firm/employer provides fuel to cover private use of the vehicle there will be an extra benefit charge of tax on £500 per year at current rates. The best way to minimise any risk of these benefits being applied is to restrict the use of the pickup to business use only, or make sure that any private use meets the HMRC definition of “insignificant private use”.

If you would like more information regarding this article, or any advice regarding tax effective strategies for running your business vehicles please call.

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Changes have been announced to the company car advisory fuel rates with effect from 1 July 2009.

Unless you do a huge amount of private milage, you probably shouldn’t be provided with fuel for ‘private use’ because the tax charge on this is now very high. The rates below you can use to calculate the petrol cost of your private motoring, if you pay this back to your employer to avoid the fuel based benefit in kind charge.

Employers can also use the figure to isolate the petrol cost of car mileage claims in order to recover an appropriate amount of VAT – businesses still need to retain fuel receipts.

Some of the rates have been reduced in light of slightly lower fuel prices at the pumps.

Engine size: Petrol, Diesel, LPG

1400cc or less: 10p, 10p, 7p

1401cc to 2000cc: 12p, 10p, 8p

Over 2000cc: 18p, 13p, 12p

Petrol hybrid cars are treated as petrol cars for this purpose.

The fuel rates are usually reviewed twice a year effective 1 January and 1 July although may change more often where there is significant fluctuation in fuel prices. The rates are ‘advisory’ so if you have justification, you may use a different rate.

New tax rates – you have choices!

We all know the story. Banks not properly regulated by the Government, and bailed out to the tune of billions and billions of pounds. The figure given in the budget was £175 billion deficit up from an expected £38 billion expected deficit just one year ago. I think most people agree the increased figure is also going to be an under-estimate. Now we have to pay for it.

From 6th April 2010 personal allowances are gradually withdrawn for those earning over £100,000. For every £2 of income earned above £100,000 personal allowances will be reduced by £1. This makes the effective rate of tax for those with earnings over £100,000 of 60%. There is national insurance of 1% also, so the true rate is 61%.

The rate will go back to 40% (really41%) for earningas over £112,500.

Then from £150,000 the new rate of 50% plus 1%NI ie 51%will apply.

If you dont like the idea of paying 40%, 51% or even 61% tax rates, you do have choices.

Perhaps one of the most straightforward options is to organise your affairs so that some or all of your income goes into a limited company. A company will pay 21% tax on profits up to £300,000. Clearly a big saving on 61%.

There is much more detail to discuss than we would wish to include here and indeed other tax planning options. Please contact us to discuss the details.

HM Revenue & Customs have announced they will spend £1 billion on enforcement and compliance this year, in the hope that they will cut tax avoidance and evasion by £2.4 billion.see Times article

That is a huge quarter of its £4 billion budget to be spent on catching tax-dodgers. The clampdown comes after a  “litigation and settlement review” the Revenue promised to take more people to court to recover tax instead of cutting deals in out-of-court settlements. Beware the cost of   defending yourself or your company in court if the need arises can be frighteningly expensive. That is why we recommend all clients take up our professional fees insurance. This enables your fees to be paid in the event of HMRC enquiry.

Lesley Strathie, who took over as the HMRC’s chief executive and permanent secretary five months ago, said that the organisation would relentlessly pursue those who bent or broke the rules.

Last month on the ITV Tonight programme an HMRC employee claimed that HMRC staff routinely bin letters and ignore tax errors in order to meet performance targets.

He said “Staff have actually been told that when someone rings in with a tax enquiry and you spot a mistake on a person’s record, you have to ignore itunless they have actually asked you to look at the mistake. Its all about the Government target of answering so many calls a day. And if you write in, the post often goes missing. It just disappears, just gets binned, some letters simply aren’t seen by anyone.”

HMRC’s official comment was that anyone found to be binning correpondence would be subject to disciplinary action.