The referendum has been and gone and we are now left with the outcome of our decision which would have to take its course. The following is a perspective from a friend and colleague, Jen Hinds, posted on FB on the morning after the event:
“Good morning folks. Yesterday I voted to remain in the EU. Today I wake up to see that more people voted a different way to me than the same way. That’s what living in a democracy is all about.
But I am still responsible for my own life , for my own destiny just as I was yesterday. I still live in a free country and I am still free to make my own choices. I’m curious to see what is going to happen now. But I’m not worried. I know lots of people who I love and respect who voted to leave. I still love and respect them (obviously!) and I know that they did so for the right reasons. I’m excited to see what those right reasons are. Because there’s no point being anything other as I can’t change the outcome of the vote. And at the end of the day, no one, as in no one, knows what the future will bring. Nor would they had the outcome of the referendum been different.
The reason the vote was so close is because there were pros and cons of both outcomes. Let’s all make the most of the pros of this outcome rather than focus on the cons. Because why would we want to focus on the cons? That’s just bonkers! And let’s work together to make sure the cons are minimised. Just as we would have had to had the decision been otherwise.
Have a great day everyone, because what kind of day we have is still down to us as individuals not any government or political outcome. Peace and love all round.”
Courtesy, Jen Hinds – www.jennyhinds.com
- The purpose of a Company Tax Return is to report the annual taxable income of a company and the amount of Corporation Tax it owes on its profits. It must be filed with HMRC every year.
- An annual return is a snapshot of a company’s key registered details at a certain date – registered office address, SAIL address, directors’ and secretaries details, location of company records, issued share capital and shareholders’ details. Annual returns must be filed with Companies House at least once every 12 months. Their purpose is to confirm the accuracy of information at Companies House and on public record.
How and when to pay Corporation Tax?
Corporation Tax must be paid electronically to HMRC before the corresponding tax return is due – the deadline for paying Corporation Tax is within 9 months and 1 day from the end of each accounting period.
Corporation Tax late filing penalties
Limited company directors are legally responsible for ensuring the company maintains all statutory filing obligations for HMRC. Failure to meet these requirements and adhere to the imposed deadlines will normally result in a penalty. In severe cases, directors can be personally fined or prosecuted and a company may face compulsory closure if the situation remains unresolved.
Late filing of Company Tax Return
Failure to deliver a Company Tax Return and full accounts by the statutory filing deadline will result in a flat-rate penalty of £100 being imposed. A further penalty of £100 will be charged if the return is more than 3 months late. If a company’s tax return is filed late for 3 or more consecutive accounting periods, the flat-rate penalty will rise to £500. An additional penalty of £500 will be applied if the return is then filed more than 3 months late.
Company Tax Returns filed between 18-24 months late will incur an fine of 10% of the unpaid Corporation Tax liability. Returns that are outstanding for more than 24 months will face an additional 10% charge on the unpaid Corporation Tax liability.
Late payment of Corporation Tax
Penalties for the late payment of Corporation Tax are determined by the amount of outstanding tax – this is referred to as the ‘potential lost revenue’ or ‘PLR’, which varies from 30% to 100% of the unpaid tax liability. However, HMRC will take into consideration any ‘reasonable excuse’ a company may have.
The following deadlines are for private limited companies:
|File annual accounts with Companies House||9 months after your company’s financial year ends|
|Pay Corporation Tax||9 months and 1 day after your company’s financial year ends|
|File a Company Tax Return||12 months after your company’s financial year ends|
Companies with director employees who are the only people on the payroll can potentially benefit from the new employment allowance unveiled by the government.
This new incentive, known as Employment Allowance (EA), was announced in the last budget and is available to businesses from this month, April 2014. The Government hopes that it will encourage employers to take on more staff because it will come in the form of a £2,000 credit against their employers national insurance bill.
The EA will be easy to claim. HMRC is working with payroll software providers to ensure their products include a simple one time “yes/no” box that can be ticked to confirm your company is entitled to claim the EA. The software should do the rest and knock off the credit from your employers NI liability. If you use HMRC Basic PAYE tools, don’t worry, this will be updated to take account of the EA.
Who can claim?
The EA can be claimed by employers that have fewer than 250 employees, including those where the only people on the payroll are directors. Our calculations show that if your company is operating at a profit in the current tax year, increasing the Director’s pay to qualify for the EA can be advantageous. However do be sure to take advice.
- Increase in personal allowance from £10,000 in 2014/15 to £10,500 in 2015/16 for those born after 5 April 1948
- Higher income tax rate threshold set at £41,865 for 2014/15 and £42,285 for 2015/16
- The current system of cash and stocks and shares ISAs is to be reformed from 1 July 2014 with the introduction of New ISAs (NISAs) with a tax free savings limit of £15,000 per year and no restriction on the amount that may be invested in cash.
- Starting rate of tax for savings income to be reduced from 10% to 0% from 2015/16. The 0% rate will apply to up to £5,000 of savings income. This will therefore be of use to those on low incomes with taxable savings, such as pensioners.
- From April 2015 pensioners can access pension pots without any restrictions thus removing the need to buy an annuity.
- Taxable element of pension pot to be taxed at marginal tax rate of 20% (rather than the current 55% tax rate) from April 2015.
- Amount that may be withdrawn from pension as a lump sum to be increased to £30,000 from 27 April 2014.
- Increase in age that people can access their pension pots from 55 to 57 in 2028
Business Taxes & Property
- Temporary increase in the Annual Investment Allowance (AIA) for capital allowances from to £500,000 until 31 December 2015 . The AIA should revert to £25,000 at the end of this period. Care will need to be taken where accounting periods straddle changes in the AIA.
- R&D Tax Relief – the rate of the payable tax credit for loss making companies is to increase to 14.5% from 1 April 2014.
- There would 15% stamp duty charges on the homes worth £500,000 or more which are bought by companies
Setting up in business as a limited company may not necessarily be the most
tax efficient business structure. It is important to firstly consider what is the
most tax efficient structure you want for your business. This may partly depend
on your answer to the following 2 important questions:
– How successful do you anticipate your business will be in the early stages?
– What is your eventual plan for disposal of your business ie what is your exit
The advantages of operating as a self-employed can be highlighted as follows:
- Administration – Being in business as a sole trader (or self employed) is the simplest way to get started in business. You will not need to notify Companies House nor deal with any administrative or accounting requirements which are required for limited companies. You only need to inform HM Revenue and Customs of your intentions to go self-employed and you can start trading right away. You should register the moment you start out as a sole trader to avoid incurring a financial penalty. Also you will only just need to submit your personal self assessment every year.
- Control – You have complete control over your assets and business decisions. As sole proprietorship is the least regulated form of business, it is easy to start and close the business.
- Lower Accountancy Costs – Accountancy costs will be lower because accounting is simpler.
- Carrying Losses Back And Claiming Tax Relief – In the early years of your business, if you make a loss, you can carry that loss back and claim tax relief against your income for previous years.
A poor or inconsistent business performance may not necessarily mean it is time to wind-up or close down your business. May be this could be the opportunity for proper soul searching eg what have you been doing that, in your view, could have been done better or maybe even stop implementing in the future? Let’s consider the following:
- Have you been able to assess the performance of your business based on existing facts in order to determine where you can do better?
- How efficient have you been with your use of time, other resources like contacts available to you etc?
- How consistent have you been with your record keeping – you could have been paying unnecessarily high taxes to HM Revenue and Customs because of inefficiencies in your record keeping. By maintaining an incomplete record of your bills ie loosing or misplacing some of the invoices and receipts you get from your purchases eg fuel receipts etc, you can be understating your expenses on your tax return and consequently paying higher taxes than you ought to.
- Have you been doing any promotion of your business say within the last six months eg attending networking events, using social media and/or advertising on a local news paper with the view to let people, including other business owners, know about what you do?
- Have you been making use of the tax saving opportunities available to you eg maintaining appropriate records in order to claim business mileage on your car or even your bicycle (eg when you cycle to the post office).
- Finally, have you been claiming tax relief in respect of the variable and fixed costs associated with your home, whether rented or mortgaged, if you work from home?
There is the saying that if you continue doing the same thing all the time, the same result is inevitable. But do you want to be getting the same result – especially if it is not a very good one?
We are all aware that the economic climate in recent times is not a rosy one but this is a common denominator to a very significant number of small and medium sized businesses in the UK. It could very well be that your business seemingly going down is a clear indication that there is room for improvement.
The good news here is that there is a great chance that its performance can be significantly improved!
The benefits that can be derive from operating your business efficiently are huge. Just some of them are:
– Make it possible to find important information and documents quickly
– Help you plan in advance for tax payments and other liabilities
– Helps you stay organised when dealing with customers and suppliers
– Enables you to manage your business and make it grow
– You can easily determine when you need that extra bank overdraft to support your working capital.
There is nothing wrong in doing your Self Assessment yourself if you think you can but if you realise that you are not performing as well as you should, maybe it is time to take on a good accountant.
As well as helping you do your self assessment and in the process save on your taxes, he or she can also act as your business adviser in helping you fine-tune your business ie make it possible to attain your optimum business performance. Best Wishes!
1. Start From Day One
As soon as you set up your business, start recording all your costs and sales you make. In fact, you may incur costs before you start up. These can still be deducted from your profits, which will reduce your tax liability.
Start recording everything from day one, keep up to date and make sure you know the dates your accounts, tax, VAT, PAYE, etc are due. Late payments and returns can incur heavy fines and penalties.
2. Get a system
Set up an accounting system from the start. This doesn’t have to be a sophisticated software package. In fact, you could start with a manual system, but it’s wiser to at least use a computer spread sheet or easy accounting system.
If you intend to use an accountant, agree the system with them before you start your business. You will be surprised how much this can save on fees if you use one with which your accountant is familiar or recommends.
3.Claim for all business expenses
The general rule is, you can claim for any cost incurred ‘wholly and exclusively for business’.
Remember to keep all receipts for your business purchases – even the smallest costs, such as stamps, stationery, bus and train tickets etc.
Record all your business trips and claim for these – even trip to the local post office in your car to send a business letter or parcel. In fact, you can claim for cycling to the post office. The allowed rate for cycling is 20p per mile – so get on your bike instead of using your car.
If you use your home as an office, you can claim for a proportion of your domestic bills – including lighting, heating, internet and telephone charges, even a percentage of your rent or proportion of your mortgage interest (although this can lead to you having to pay Capital Gains Tax if you sell your property).
Whilst there is no exhaustive list available of what you can claim, common sense should prevail when applying the ‘wholly and exclusively’ rule. If in doubt, please speak to me(Desmond).
The 2012/2013 tax year is nearly over, but there is still time to make the most of this year’s unused allowances.
Pension Planning Opportunities
Contributing to a personal pension can, at least for the time being, be an extremely tax efficient investment.
The annual allowance in the current tax year (2012/13) is £50,000 or 100% of earnings if less, which should provide sufficient scope in many cases. This will fall to £40,000 in 2014/15. However, with the facility to carry forward unused annual allowance from the previous three tax years, there is a window of opportunity to sweep up any unused allowance.
With tax relief available at an individual’s marginal rate, up to 50%, pension contributions should be an important part of anyone’s tax year end planning.
You should consider contributing as much as you can this year to get relief at 50% instead of 45% in 2013/14 if you pay tax at the additional rate.
The 5 April deadline is still relevant for using up ISA allowances for the current tax year. You can invest up to £5,640 in a cash individual saving account (ISA) and up to £11,280 in a stocks and shares ISA in 2012/13. The total investment is limited to £11,280 so if you invest, say, £3,000 in a cash ISA, you can only invest £8,280 in a stocks and shares ISA. The annual limits are increased in line with inflation each year.
The growth within ISAs is tax efficient and they can also provide a tax-free income when required. This is a valuable allowance and should be used as fully as possible each year.
Remember that 16 and 17- year olds can open a cash ISA, but the rules effectively prevent you from opening an ISA for your own children.
Parents and others can contribute to a junior ISA for children of any age who do not have a child trust fund. The payment limit is £3,600 in 2012/13. Funds are locked in until the child is 18.
Capital Gains Tax Exemption
We all have an allowance to offset against any capital gains. The exemption is currently £10,600 and should be used if possible to either help provide a tax-fee income each year or for wider planning and restructuring investments.
Gains above the annual exemption are taxed at 18% where taxable gains and income are less than the basic rate limit of £34,370 in 2012/13 and £32,010 in 2013/14. The rate is 28% on gains that exceed this limit. Depending on your level of income, timing your disposals either before or after the end of the tax year could result in more of your gains being taxed at 18% rather than at 28%.
Any crystallised losses from previous years can also be used, where these are available, which is worth bearing in mind.
You might be able to save CGT by transferring assets between married couples or civil partners before their disposal.
Child benefit is withdrawn where either partner has income of £50,000 or more. Withdrawal is total if income is over £60,000, and partial for income between £50,000 and £60,000. You may be able to keep your child benefit by switching income between you and your partner, or by taking other steps (for example, making pension payments), to bring your income below one of these limits.
You can get tax relief for any gifts to charity if you make a gift aid declaration. You can elect for donations made in 2012/13 to be treated for tax purposes as if you had made them in 2011/12. This will benefit you if you paid tax at a higher rate in 2011/12 rather than in 2012/13.
You can obtain both income tax and capital gains tax relief on gifts to charities of shares listed on the stock market and certain other investments.
Gifts to charity are free of IHT, so remembering a charity in your will can reduce the total amount of IHT that will be paid on your estate.