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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SHRINKING ECONOMY By: Gordon
ACTION PLAN REQUIRED
Latest reports indicate that the economy may have shrunk over the past quarter.
Many of the City economists are reducing growth forecasts amid fears that economy is falling a long way behind the Government’s official growth expectations.
The Treasury have stressed that the recovery was never going to be easy because of the imbalances in the economy, the continuing turbulence in the eurozone and the steep rise in commodity prices over the past year.
This is very relevant to all of us as we need to be aware of any potential dip in the economy and be ready to protect our profits as much as possible
We will look at action points in a series of blogs
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INITIAL RESULTS By: Caroline
Initial results from the HMRC “test and learn” phase of its Business Records Check (BRC) initiative are being monitored, as businesses receive letters after the BRC visit. It would appear that HMRC has a template letter and recommends improvement in common areas across the board, such as sales invoices with consecutive numbers, maintained cash book, mileage logs, drawings records etc, all written up at least weekly.
Get the bookkeeping basics right and you should have nothing to fear from the visit.
If you would like Haxton to help assess your records and recommend areas for improvement please contact Haxton Chartered Accountants West London.
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VAT CHEATS By: Clare
Following on from the HM Revenue & Customs (HMRC) investigation into the plumbing trade, HMRC have announced an initiative to crack down on VAT rule breakers. The new campaign will focus on businesses who are trading above the VAT threshold but who have not yet registered for VAT. The VAT threshold is currently £73,000 turnover on a rolling annual basis.
Each HMRC campaign is aimed at reducing the tax gap by focusing on areas where a significant underpayment has been identified, and they have raised over £500m from voluntary disclosures and a further £100m so far from follow-up activity.
Other previous campaigns have targeted offshore investments and medical professionals. For each, HMRC has used new technology and legislation to gather and analyse data, from internal and external sources, to identify people who should come forward. This has provided thousands more investigations, now being worked through, including a number of criminal investigations.
For additional help with your VAT registration and returns contact Haxton Chartered Accountants West London.
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ENTREPRENEURS’ RELIEF By: Clare
There have been substantial increases in the life time gains limit for entrepreneurs relief, up to £5 million from 23 June 2010 and then to £10 million from 6 April 2011. The qualifying rules remain unchanged :-
• Shares have to have been held for at least one year
• Holding of shares must represent greater than 5% of the voting share capital
• Must be a director or employee of the company, there is no requirement to be full time.
For further guidance please call Haxton Chartered Accountants West London.
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