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VAT Opting to Tax on Buildings

Sep17

Buildings are generally exempt from VAT, but there are a lot of exceptions to this.

A person who holds an interest in a building (freehold or leasehold) can opt to tax the building, such that income from selling or letting the building is subject to VAT.

If you purchase a building and the purchase price includes VAT, you do not have to opt to tax that building.

Consider Ali who owns a VAT registered car repair business. He purchases a new commercial unit for £200,000 plus VAT of £40,000. The unit is used entirely for the car repair business, so Ali can reclaim the VAT of £40,000 in the same way he reclaims VAT on other purchases.

Ali does not have to opt to tax the unit to reclaim that VAT. In a few years Ali may want to sub-let the unit, in which case the rent will be exempt from VAT. This will make Ali’s business partially exempt, which may mean he cannot reclaim all the VAT charged on his purchases. In that situation Ali may choose to opt to tax the building so the rent must have VAT added.

If you would like any further information, please do not hesitate to contact Southside Accountants Wimbledon & London.

Tax Campaigns Update

Sep3

The Taxman is determined to target tax evaders, so has been running several campaigns to target particular business sectors, such as doctors, electricians and e-traders.

The latest campaign is aimed at individuals who should be paying tax at 40% or 50%, but who have not submitted a tax return when requested to do so. These people will be offered a reduced penalty if the missing tax return is submitted by 3rd October 2012, and all the outstanding tax is also paid by that date.

If you know someone who has put their head in the sand regarding their tax affairs, please ask them to get in touch with us as soon as possible, so we can help them complete their missing tax returns.

Later this year the Tax Office will be targeting door-to-door sellers who sell to customers in their own homes. These sellers are often paid on a commission basis for the goods they sell, and may be vague about their own tax status.

Another campaign will target all tradesmen who provide home maintenance, repair or home improvement services. This will cover all small builders and skilled craftsmen who are not subcontracted to larger building firms.

 

If you would like any further information, please do not hesitate to contact Southside Accountants Wimbledon & London.

RTI and PAYE

Aug27

Q. What’s all this about RTI? Do I have to do something by October? Is it going to cost me more?

A. Real Time Information (RTI) is a new way of submitting PAYE information to the tax office. All employers will have to use RTI by October 2013 (not this year), but some employers are starting to use RTI early in a test phase from April 2012. The aim is to add more employers to the RTI project at intervals, depending on how the first tests go. The tax office says your payroll software should cope with RTI when the time comes. We suggest you ask your software provider when their RTI update will be ready, and how much it will cost. We can help you prepare your payroll for RTI. This involves checking you have the full name, gender, date of birth and accurate NI number for every employee, including those who earn less than the NI threshold.

 

If you would like any further information, please do not hesitate to contact Southside Accountants Wimbledon & London.

Tax Return and Not Sure About Income

Aug20

Q. I don’t have the all the figures needed to complete the tax credits renewal form, and I’m worried I’ll lose my tax credits as the deadline is 31 July. The main problem is my income is as a musician as I don’t know what my total income is until I receive the royalty statements.

A. Don’t panic. You are required to return the tax credits renewals form by 31 July, or renew by phone, but you can submit estimated figures for 2011/12. When your self-employed accounts are ready you can submit the final figures and your tax credits award will be adjusted as necessary. As long as you submit final figures by 31 January 2013 you should not lose your tax credits.

 

If you would like any further information, please do not hesitate to contact Southside Accountants Wimbledon & London.

Government Department Contractors

Aug13

Q. I’m an IT contractor currently working for a government department through my own company, for £300 per day. I’ve heard that all contractors will have to go on the department payroll. I don’t want to be a wage-slave, so what should I do?

A. The government has announced that all senior appointments in government departments, such as executive positions, will have to be paid through payroll. This does not apply to other contractors. However, other government department contractors who are engaged for six months or more, and who are paid more than £220 per day, must when their contracts come up for renewal, or start afresh, include terms that allow the government department to seek formal assurance that income tax and NI obligations are being met.

 

If you would like any further information, please do not hesitate to contact Southside Accountants Wimbledon & London.

PAYE Reconciliations Starting

Aug6

Between now and October 2012 around 5.1 million taxpayers will receive notice of a tax under or over-payment, arising from the PAYE reconciliation exercise for 2011/12. These PAYE adjustments are the natural result of calculating whether each taxpayer has paid the right amount of tax through PAYE or not.

The PAYE system does not cope well when a person has several employments or pensions running concurrently, or changes the benefits in kind (such as a car or medical payments) part way through the tax year. As a result the amount of tax deducted from salary or pension is not perfect, although more problems are being overcome every year.

When the HMRC computer calculates that you have under or over-paid tax for the year it will send you a tax calculation on form P800. We will not get a copy of the P800 as your tax agent, so if you want us to check the figures for you please send us a copy.

If you are going to check the tax calculation yourself, start with the forms P60 or P45 you have received from your pension provider or employer for the tax year. First ensure you are comparing documents for the same tax year, the latest P800 form should be for 2011/12, but you may be sent calculations for earlier tax years. Is all the tax deducted as reported on the forms P60 also shown on the P800? There have been cases of HMRC mixing up the PAYE records of two taxpayers, so watch for any discrepancies in your taxed income figures.

You also need to check that your full personal allowance has been included, and the amounts for benefits or other income are accurate. These figures are often estimated at the beginning of the tax year, and may not have been amended to reflect the true amounts.

If you would like any further information, please do not hesitate to contact Southside Accountants Wimbledon & London.

Completing Forms P11D

Jul30

It’s time to complete forms P11D, to report expenses (which were not included in your dispensation agreement with the Tax Office) and benefits paid to your employees in 2011/12. The P11D details can be submitted online using the free HMRC software or using your own payroll software. Alternatively you can complete individual paper forms, or submit a schedule to the Tax Office containing details for all your employees. Whichever method you chose, the deadline is the same: 6 July 2012.

Be careful not to submit the same P11D details by two methods: say online and in paper form, as this will only confuse the HMRC computer!

Some other common mistakes made when completing forms P11D include:

  • Not ticking the ‘director’ box when required
  • Missing employee ID details such as date of birth, gender, and full name
  • Including expenses which have been covered by a dispensation
  • Incorrect calculation of benefits provided for part of the year, such as cars, vans and fuel. You should use number of days available/366 for 2011/12.
  • Restricting the list price value of a company car to £80,000. This cap has been abolished from 6 April 2011
  • Omitting the cost of accessories fitted to cars after delivery
  • Using the incorrect rate of interest for beneficial loans – it was 4% for the whole of 2011/12.

 

If you would like any further information, please do not hesitate to contact Southside Accountants Wimbledon & London.

Unwelcome Visitors

Jul23

The Taxman has wide powers to inspect your business, but he is supposed to give you at least seven days notice to check on your business property, computer or business records. He is permitted to turn up without warning, but only if tax is immediately at risk, such as where fraud is suspected.

In spite of these strict rules, tax inspectors do try to examine business records without a prior appointment, or where an appointment has been arranged, the officers may turn up hours early before the tax adviser has arrived. If the Taxman pitches up at your workplace and demands access to your business records, know your rights:

  • Ask to see the inspectors’ ID, which they must carry and check this ID is genuine by telephoning the HMRC office they claim to be from
  • You don’t have to let the tax officers into your building, and their rules say they must not gain entry by force
  • You and your staff are not obliged to answer the tax officers’ questions
  • You are required to provide access at any reasonable time to any computer you use for your business, and help the tax officer extract the computer records, but that’s where your responsibility ends
  • The tax officers are not supposed to rummage around in your stuff. They can examine materials and records brought to them but they do not have search powers.

 

If you would like any further information, please do not hesitate to contact Southside Accountants Wimbledon & London.

IR35 Business Tests Released

Jul16

If you provide services through your own personal service company you will be aware of the tax law known as IR35. This tax rule imposes an extra charge on your company, if you would be treated as an employee of your customer or customers, if you worked for the customer directly. It is very difficult to pin down when IR35 should apply, as it depends on the relationship between the contractor and the customer, which will be different in every case.

The Taxman thinks he can generalise about what makes some companies fall within IR35 and others escape it. He has drawn-up a set of business entity tests, complete with a scoring system, to help you judge whether your business would be at high, medium, or low risk of being investigated for falling under IR35.

These business entity tests are not derived from the tax law. They merely represent the Taxman’s view of the risk of a business falling within IR35.

The scoring attached to the tests is controversial, as it penalises businesses that have no bad debts, never pay to advertise and operate from the owner’s home. These IR35 business entity tests do not change the IR35 law one bit, and will probably be ignored by the Tax Tribunal.

If you choose to use the IR35 business entity tests, you don’t have to declare your score to the Taxman, the tests are merely for your own guidance. However, if you are concerned that the business entity tests produce a high risk score for your business, we should discuss why this is the case. Are there any changes which can be made to the way your business operates which would make it less likely to be caught by IR35?

If you would like any further information, please do not hesitate to contact Southside Accountants Wimbledon & London.