10% TAX BREAK TO END By: Gordon
If you are thinking of winding up your company and qualify for Entrepreneurs’ Relief then you have until 28 February 2012 to act to obtain the 10% CGT tax break under ESC 16
This is only viable if you have retained reserves over £25,000 as the new rules allow this sum to be classified as capital
Please contact Haxton, Chartered Accountants for a review as soon as possible
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5% INFLATION By: Clare
The Consumer Prices Index (CPI) fell to 5% in October. This is down from a rate of 5.2% in September, and is as a result of drops in the prices of food, fuel and air transport.
The Retail Prices Index (RPI), which includes mortgage interest, also fell from 5.6% to 5.4%.
The Bank of England’s target is 2% for CPI, and they are still hopeful that the rate of inflation will drop to below this level in 2012.
The prolonged period of high inflation has made it difficult for savers to keep up with rising prices. At the moment there are no standard savings accounts which allow savers to ensure that savings keep up with inflation according to Moneyfacts.
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MORTGAGE DIFFICULTIES By: Clare
Whilst the banks are battling with each other to sell mortgages of £1m plus, the self employed borrowers, who have their own limited companies are struggling to secure mortgages.
Many directors of owner managed limited companies will choose to take a small salary and retain profits in the company, but they are finding that they are being refused loans by high street banks. Mortgage brokers have found that most banks and building societies only recognise income that is withdrawn from the business, with retained profit being ignored. This is mainly due to the process becoming much more automated and there is not the opportunity to supply figures for retained profits.
For help and advice please contact Haxton Chartered Accountants.
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JUNIOR ISA By: Clare
The new Junior ISA launched on the 1st November, allowing an investment of up to £3600 per year on behalf of a child under the age of 18. They will be available to any child resident in the UK born on or after the 3rd January 2011 and replace the Child Trust Fund scheme. Funds put into this investment will not be accessible until the child is 18 and could prove an ideal method of saving for the growing cost of higher education.
The benefit from a parent’s point of view is that the parents will not face any personal tax charges which apply in respect of standard savings for minor children.
For help and advice please call Haxton Chartered Accountants.
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VAT PENALTIES By: Clare
The updating of the H M Revenue & Customs penalty regime is shortly to include late filing and late payment of VAT. The changes are dependent on HMRC’s amendments to their computer systems and therefore the exact date is unknown as yet. The new penalties will replace the current default surcharge regime, which can result in no penalty if no further returns are late within a year.
Late Filing Penalty
The new penalty for the first late VAT return is £100 even if the subsequent filing of the return results in a repayment. At the point of the first late return the penalty period starts. This is initially one year, but each further late return will extend the penalty period to the anniversary of the most recent penalty period.
The penalty for a second late return is £200, third is £300, fourth is £300 and fifth and subsequent returns are £400.
Returns that are more than 6 months late will also attract an additional penalty of 5% of the VAT due and an additional 5% will be charged if a return is more than 12 months late.
Late payment penalty
Late payment penalties of 2% – 5% are also due on the second and subsequent late payments with in a penalty period.
This new structure will greatly increase the amount of penalties that small businesses pay when they are late with their VAT returns and payments. The message from HMRC is if you don’t want to pay then submit returns and payment by the due date.
We will keep you updated with developments and dates when they are known, but in the meantime, if you require any further explanation, please contact Haxton Chartered Accountants.
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UNFAIR TAX SYSTEM By: Clare
The Institute for Fiscal Studies has been carrying out a review of our tax system and has concluded that it is “overly complex and frequently unfair”
The IFS has proposed an extension of VAT to nearly all spending, including food, saying that the zero rating of certain products was an inefficient means of redistribution and causes an overly complex system.
Other proposals are :-
• The removal of taxation on standard bank and building society accounts,
• The abolition of stamp duty,
• the taxation of petrol and diesel being replaced by congestion charging
• More consistent carbon emission taxation.
• They have also, again, called for a merger of national insurance and income tax.
They have made it clear that this is an aspiration for the tax system over the next 10 to 20 years, with a gradual move towards the new system.
For help and guidance on all areas of taxation call Haxton Chartered Accountants West London.
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50% TAX RATE By: Clare
Treasury figures show that the 50% top rate of tax will raise an additional £12.6bn over five years.
The government has always claimed that this is a temporary tax, but a final decision regarding its future is not now expected until after the self assessment deadline in January 2012.
A letter from 20 leading economists to the Financial Times called for the 50% top rate to be scrapped as it was harming economic growth.
For more details or to check your tax position, please call Haxton Chartered Accountants West London.
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HMRC RUNS OUT OF PAPER! By: Gordon
Some 500,000 taxpayers will not receive reminders to pay their second instalment of tax under Self Assessment in time for the 31 July 2011 deadline.
HMRC says “Sorry” and admits that it has run out of paper. Blaming its “forecasting arrangements… the volumes on this occasion have risen out of all proportion to previous patterns.”
This is slightly curious, because one might think that having sent out reminders for the first payment on account in January 2011 HMRC would know exact numbers for the second payment.
What to do now?
• If your Unique Taxpayer Reference (your ten digit reference number) ends with digits from 70 to 99 then you may be affected.
• HMRC will send your statement as soon as possible.
• If you receive your statement in August, you should still pay the tax due as soon as you can.
• You’ll only be asked to pay interest on the tax due on the second payment on account if you still haven’t paid it more than 30 days after you receive your statement.
• Taxpayers can go online to view their statements instead
If you still need help please contact us at haxton@haxton.co.uk
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DISINCORPORATION RELIEF By: Clare
The Treasury has been looking into ways of helping thousands of sole traders that are trapped running companies.
Huge numbers of self employed traders incorporated their ventures during the 2000s when tax breaks were offered to encourage them to do so. These tax breaks were then scrapped in favour of tax allowances for investment.
Accountants now report that many small business owners want to disincorporate to avoid the bureaucracy of running companies with no outside shareholders. But the only option for incorporated companies is liquidation, with the assets sold to the previous owners. This triggers a personal capital gains tax liability.
The Association of Chartered Certified Accountants has said firms should be allowed to roll over these liabilities so that if they continued trading the tax due would diminish.
The Treasury and the Office for Tax Simplification will assess the case for a flat rate tax scheme for the 1.8m sole trading firms that generate an income of less than £20,000 a year, with the report to be delivered before the 2012 Budget.
Haxton Chartered Accountants will monitor and report back on the upcoming changes.
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BANKS SAY NO MORE OFTEN By: Gordon
Banks have adopted a ‘take it or leave it’ approach to small business loans with outright rejection rates rocketing sevenfold since before the financial crisis, a key survey shows.
The bank-funded Business Monitor – which is being used by the Business Department to benchbank the treatment of small businesses by the banks – found that 28pc of firms were turned down when applying for a loan last year.
A similar proportion failed to secure a loan at the end of the lending process, even after some revised their applications.
In contrast, just 4pc of firms said they were met with a flat rejection when applying for a loan or mortgage in 2007.
The independent survey of 5,000 small and medium-sized businesses (SMEs) also found that confidence in the banks is weakening, with just 40pc of the SMEs planning to secure new or to renew existing finance in the next 12 months saying they were confident of succeeding compared with 70pc of those who had applied in the last year.
If you are having issues with your bank in raising funds please contact Haxton Chartered Accountants who may be able to assist
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