EJBC Chartered Accountants

Christmas comes early for one lucky EJBC client.

 Emma Thomas was delighted to present Alison Buchanan with an iPad 2 (pictured) as the winner of our very succesful testimonial & referral promotion that ran until 30th November 2011.

The handover of the prize was delayed slightly due to Alison’s travels in the far east,  making her return to the UK that much sweeter!

Due to its popularity, we will be running another promotion throughout 2012.

With the ongoing challenging economic conditions, it is important that all businesses have access to quality advice and support, so please do remember us to any friends, colleagues or aquaintances who you think may benefit from EJBC’s professional tax, accounting and advisory services.

Do you sell lots of items through EBay or car boot sales? If so, this may be of interest.

More and more households are looking for extra ways to raise some extra tax in time for Christmas – EBay and car boot sales can be a good way to do this, but are there any tax implications?

The simple answer is, if you are only selling your unwanted possessions, you are unlikely to face a tax bill. If your pattern of selling suggests you are trading, or you are selling items which may attract capital gains, there may be some tax to pay.

So how do you know when you are trading?

You are trading if you:

• Sell goods you have bought for resale.
• Make items yourself and sell them to make profit.
• Sell or buy items on behalf of others for financial gain (e.g. for a commission).
• Provide a service and receive payment (whether in cash or kind).

If any of these statements are applicable to you, you should seek professional advice. If you are trading, you may have to pay income tax and National Insurance Contributions (NICs). You may also need to register for value added tax (VAT). Failure to comply on a timely basis can lead so some hefty fines.

You are not trading if you:

• Sell occasionally, unwanted personal items through internet auctions or classified advertisements.
• Attend a car boot sale once or twice a year to sell unwanted household items.

If you feel you are affected by this topic and would like to talk it through with a professional, please contact us for a free initial consultation.

From this year, the rule which reduced the tax return late filing penalty from £100 to nil provided that the individual had paid all their tax before 31 January, has gone. In the light of this, it is important for those with paper tax returns to meet the 31 October 2011 deadline.

These new penalties will apply to all self assessment tax returns from 2010/11 onwards. The fixed £100 penalty for failing to file a tax return on or before the filing date will therefore apply to:

• Paper returns received on or after 1 November 2011.
•  Online returns received on or after 1 February 2012.

Daily penalties of £10 per day will also take effect if the tax return is still outstanding three months after the filing date. So if your client files a paper return after 31 October 2011, they will be liable to a daily penalty on 1 February 2012, three months earlier than late online filers.

If you have a paper return to be completed and would like some assistance, please feel free to give us a call on 01635 46174 or 0300 303 8180

HMRC issued a news release on Friday 20 May 2011 announcing that it is to introduce a campaign targeted at VAT rule breakers.
The aim is to focus on individuals and businesses who are trading above the VAT threshold (currently £73,000), but who have not yet registered for VAT. It is not clear at the moment how HMRC will implement the scheme or how they will chose to investigate those individuals and businesses.
There are late filing penalties for not registering your business on time for vat, and there are also circumstances where individuals can exceed the vat threshold for a short period of time and avoid registration.

If you are at all concerned that this may affect you, please let us know and we can talk you through the process.

Emma Thomas
emma@ejbc.co.uk

HMRC are no longer sending out a paper Budget Pack, so as an employer, if you wish to keep informed of changes to payroll legislation, we recommend that you subscribe to the ‘employer email alert’. Details of how to register for this service can be found at:

http://www.hmrc.gov.uk/paye/forms-publications/register.htm

Emma Thomas emma@ejbc.co.uk

Earlier this year, HMRC launched what it has named the Plumbers Tax Safe Plan, full details of which can be found at http://www.hmrc.gov.uk/trades-disclosure/index.htm

Reports are suggesting that up to 50,000 plumbers, gas fitters and heating engineers will be receiving a letter from HMRC, giving them to the opportunity to declare untaxed income, which would incur a reduced rate penalty.

HMRC has stated that not everyone who receives a letter actually owes tax and they that they will not be in a position to send these letters to everyone who could be affected by the scheme.

Under the plan, plumbers, gas fitters, heating engineers and members of associated trades who owe tax, which they have not yet declared, can come forward anytime up to 31 May to tell HMRC they want to take part. If they make a full disclosure, most face a low penalty rate of 10%, with a maximum of 20%. Once they come forward, they have until 31 August to make their disclosure and arrange for payment.

After that date, using information pulled together from different sources, HMRC will investigate those who have failed to come forward. Substantial penalties or even criminal prosecution could follow.

If you receive one of these letters, or would like to take part in the plan we would be interested in hearing from you.

Emma Thomas emma@ejbc.co.uk

As with every new tax year, we are once again receiving reports of new repayment scams, so we are taking this opportunity to remind clients that HMRC will never send notifications of a tax rebate by email, nor ask them to disclose personal or payment information.

If you do receive one of these emails, please report the scam to HMRC at: phishing@hmrc.gsi.gov.uk as soon as possible to help identify fraudsters.

Further HMRC guidance is accessible at HM Revenue & Customs Security advice: http://www.hmrc.gov.uk/security/index.htm

The recently launched latest version of Sage Instant Accounts,  is even more straightforward and easy to use, so users can spend more time focusing on their customers.

Here are some of the new features, and the benefits they can bring to users:

• NEW Flat Rate VAT tools
  Helping customers set up and manage finances on both invoice and cash-based flat-rate VAT schemes. Customers can calculate the savings or losses of flat-rate compared to standard VAT to see what’s the best scheme for them. It’s simple to set up, easy to use and will save customers much-needed time.

• Improved Bank Reconciliation
  With a more flexible and efficient system, so customers can make adjustments without having to skip between different screens. Plus, a new report function will help save time reconciling accounts.

• NEW Web Store Integration
  Using Sage Pay*, our secure online payment service. Not only does this save money, as there’s no need for a third party, but invoices can now be automatically created from the information received from Sage Pay, saving time as well.

• NEW SageCover Services Toolbar
  This dynamically links to a customer’s SageCover account and displays available features of their SageCover contract. It’s simple, quick and very easy to use.

If you would like to purchase discounted Sage Instant Accounts, please visit our web shop: http://www.ejbc.co.uk/shop/sage-software-from-ejbc/instant-accounting

Are you in the process of being made redundant or negotiating a final settlement payment? If so, you need to be aware of proposed changes in the way your payment may be taxed, so please read on.

Under the current rules, if a final payment is made when you leave your employment, a basic rate tax code is applied to account for the tax on it.  Any additional tax is collected under self assessment and is payable by the end of January, 10 months after the end of the tax year in which the payment is made. This gives employees a cash flow advantage.

In December 2010, it was announced that this procedure is under review, and in future such payments could be taxed using a tax code OT.

To show the effect of this:-

Joe Blogs earns £48,000 salary and has just negogiated his final taxable termination payment of £25,000.  He does not have alternative employment to go to and is planning on taking some time off before looking. 
If he leaves before the 5 April 2011, the additional £25,000 will be taxed at 20%, however, due to his other income in the current tax year; there will be a further 20% tax due 31 January 2012.
As he does not plan to have much in the way of further earnings in the tax year to 5^th April 2012, he has been advised to try and delay his leaving date to the 7^th April 2011.  Under the current rules, if he did this, he would pay the 20% tax at source (£3500 with personal allowances) and any additional tax would be paid 31^st January 2013. 

However, under the proposal, Joe’s redundancy payment will be taxed using an OT tax code.  This new code requires the employer to tax the redundancy payment, on the basis that no personal allowance is available, at 20%, 40% or 50%.

If the OT code is to be operated on a monthly basis, any redundancy payment over £12500 is subject to tax at 50% (£150,000 / 12 = £12,500), so if his £25,000 redundancy payment is made after the 5^th April 2011, he will have £10,666.67 of tax taken at source. 

If Joe does not have any other earnings in this tax year, his tax bill should only be about £3,500, therefore he will have overpaid and will need to claim a refund, potentially putting him in a difficult cash flow position at a time when he potentially needs funds most. Interestingly, this new system will provide a very positive cash flow position for HMRC!

Guidance being offered at the moment does not confirm when a refund can be obtained if the position of this example arises. We should know more in February.  If this could apply to you we recommend that you seek some professional advice on this matter now.

Emma Thomas ACA FCCA CTA

We know the standard rate of VAT will increase on 4 January 2011 from 17.5% to 20%, but will your business be ready?