Read More

Read More

click here to view our Pay As You Earn (PAYE) update

Click here to read the full repot

Click here to read the full repot

The penalties being issued from today will be for a minimum £1,200, comprising:
the maximum £900 in daily penalties for non-filing
a further late-filing penalty of £300 or five per cent of the tax due (whichever is higher)
If you receive a late-filing penalty, you can appeal against it if you think you have a reasonable excuse for not sending their tax return; for example, a family illness or bereavement. Where someone has a reasonable excuse for not sending a return on time, the penalty will be waived.
If you have received a late-filing penalty and have not sent in a return, but think you don’t need to be in Self-Assessment, you can still potentially apply to be taken out of Self-Assessment.
If you need help with this please get in touch with us.

Things then went extremely quiet until Budget 2012 and, as part of the reforms to the welfare system it was confirmed that Child Benefit will be withdrawn from households that include certain higher earners.

Although the change applies from January 2013 the calculation to decide whether or not a household is affected by the reform includes the full income for 2012/13. So those households that include higher earners need to be aware of the rules now so they can plan to ensure they don’t miss out unnecessarily.

Who will the rules apply to?

Legislation will impose a new charge (the High Income Child Benefit charge) on a taxpayer who has adjusted net income over £50,000 in a tax year where either they or their partner, if they have one, are in receipt of Child Benefit for the year. Where there is a partner and both partners have adjusted net income in excess of £50,000 the charge will apply to the partner with the higher income.

Weekly woes

As the charge is by reference to weeks, the charge will only apply to those weeks of the tax year for which the partnership exists. If the couple break up, the partner with the highest income will only be liable for the period from 6 April to the week in which the break up occurs. Conversely, if a couple come together and Child Benefit is already being paid, the partner with the highest income will only be liable to the charge for those weeks from the date the couple start living together until the end of the tax year.

Very strange

So an inequity arises! One couple with £60,000 of adjusted net income will lose all of the Child Benefit, whilst a couple with adjusted net income of £49,999 each will retain it all. Therefore, equalising income for those who are able becomes important.

What is the £50,000 made up of?

It can be seen that the rules revolve around ‘adjusted net income’, broadly:

• net income (total income subject to income tax less specified deductions e.g. trading losses and payments made gross to pension schemes),

• reduced by grossed up Gift Aid donations and pension contributions which have received tax relief at source.

It may be that a couple would want to donate more to charity, for example, to reduce or avoid the charge.

Who is a partner?

A person is a partner of another person at any time if any of the following conditions are met at that time; the persons:

• are a man and a woman who are married to each other and not separated; or
• are a man and a woman who are not married to each other but are living together as husband and wife.

Similar rules apply to same sex couples.

The charge

An income tax charge will apply at a rate of 1% of the full Child Benefit award for each £100 of income between £50,000 and £60,000, rounded down to the nearest pound. The charge on taxpayers with income above £60,000 will be equal to the amount of Child Benefit paid.

Example

The Child Benefit for two children amounts to £1,752 per annum.
The taxpayer’s adjusted net income is £54,000.
The income tax charge will be £700.80.
This is calculated as £17.52 for every £100 above £50,000.
In this example the effective tax rate on the income exceeding £50,000 is 17.52%.

For those with more than two children the effective tax rate could be much higher.

Administration

Interestingly, the requirement to notify liability to income tax and capital gains tax by 6 October following the tax year is amended to include situations where the person is liable to this charge. In addition, the charge is included in PAYE regulations so that it can be collected through PAYE, using a reduced tax code, unless the taxpayer objects.

Continue claiming?

Child Benefit itself is not being made liable to tax and the amount that can be claimed is unaffected by the new charge. It can continue to be paid in full to the claimant even if they or their partner have a liability to the new charge.
Child Benefit claimants will be able to elect not to receive the Child Benefit to which they are entitled if they or their partner do not wish to pay the new charge. However, this will not affect the credit available (for state pension purposes) to certain people who stay at home to look after children.

An election can be revoked if a person’s circumstances change.

When does the new charge apply?

This charge will have effect for any week beginning on or after 7 January 2013 and for 2012/13 will apply to the Child Benefit paid from that date to the end of the tax year. The income taken into account will be the full income for 2012/13.

It may well be that neither you and/or your partner do not currently receive a tax return but this may well change for 2012/13. Remember the need to tell HMRC by 6 October 2013 if you think a charge may be due.

HMRC will contact people earning over £50,000 about the new charge from autumn 2012.

How many are affected?

To quote the government:

‘The new tax charge in relation to Child Benefit will affect approximately 1.2 million families. Approximately 70 per cent of these households will lose all of their Child Benefit, and 30 per cent will only lose a portion. The average loss for those that lose will be roughly £1,300 per year. Ninety per cent of families in the Child Benefit population will continue to benefit from some or all of their Child Benefit.’

Further help

HMRC have released a series of FAQs at www.hmrc.gov.uk/budget2012/cb-income-tax.htm to explain the change, essential reading for many families.

However, if you are unsure about anything to do with this new charge or would like to discuss things further including how we might be able to minimise the tax charge which will apply to your family, please do not hesitate to get in touch.

In the last couple of years however HMRC have been showing considerable interest in the tax status of locums i.e. whether they are self employed or are in fact employees of the practices they’re working at.

The issue of whether somebody is self employed or employed is one that HMRC have taken up in many industries and it is unlikely that this will ever cease. When tested in the Courts it boils down to what the relationship is between the “employer” and “employee” and how they are engaged. Essentially the Courts look at the way that one person acts for the other person and what is written in the contract, if indeed one exists.

HMRC look for signs of employment and would ask the following types of questions:-

• Does the locum chose the day/times that he or she works?
• Is the locum able to take time off when he or she likes?
• Does the locum have to have professional indemnity insurance?
• Does the locum provide major items of equipment?
• Does the locum work at his or her own premises (unlikley)?
• Does the locum engage his or her own staff?
• Does the locum keep any new patients who are referred to him or her?
• Could the locum engage a substitute?

Anyone engaging a locum should consider the above questions and generally consider the relationship they have with them. At the end of the day if HMRC come after somebody it will be the person they consider to be the employer and not the employee as it would have been their responsibility to have deducted tax.

In order to get things in place you should consider some of the following actions:-

• Ensure that at some point work is offered to the locum which they reject in writing.
• Try to vary the days that are worked.
• Don’t include the locum on the practice’s PI policy.
• Limit the amount of control exerted over the locum.
• Ensure that the locum is responsible for finding a substitute should they be unable to work.
• Consider a substitute retainer.

If you’re concerned about the situation with your locum and would like to discuss this please contact us to discuss this with us on a confidential basis.

This means that stylists whose turnover is below the VAT threshold and who are not registered for VAT cannot reclaim the VAT charged and will have to pass it on the their clients through higher prices or take the hit and make less money.

It has further implications depending on the size of the salon. The income must now be taken into account when considering if a salon needs to register for VAT i.e. is it above the threshold.

The clarification is written into law from 1 October but HMRC still take the view that VAT is applicable now.

The thrust of their argument is that what the stylist receives is a supply of services not a licence to occupy land.

If a salon rents out an exclusive area to say a beautician and provides little in the way of services it is still arguable that it is rent and no VAT needs to be charged although each case must be looked at on its own merits.

If this affects you and you would like to discuss it please contact us.

This 2012 budget breakdown report, which was written immediately after the Chancellor of the Exchequer delivered his Budget Speech, is intended to provide an overview of the latest announcements and recent measures most likely to affect you or your business.

Throughout this guide we have included tips and ideas for effective tax and financial planning, but it is important to remember that this planning should be an ongoing, year-round process, not something that is left until the last minute.

We can help you to reassess your plans regularly, and adapt them as your personal and business circumstances change. With our help, you can plan for a rewarding and financially secure future.

Please note: while most taxation changes take effect from the start of the financial year, or tax year, some may not take effect until 2013, or later. Where relevant, details of these changes have been included in this Report. Throughout the Report, ‘HMRC’ refers to HM Revenue & Customs.

Click here to read our 2012 Budget Report

As a result, the HMRC are now chasing traders who hadn’t thought to declare or pay their online trading taxes accumulated in this manner, and consequently it would be advantageous to the tax man if they made themselves known, rather than having to pull information together from a variety of data sources to start a pursuit.

With this in mind the HMRC are to conduct a Q&A session on Twitter next week, where individuals concerned about their tax liabilities can find out exactly where they stand. Furthermore, should they subsequently find that they do owe tax then if they volunteer this information (and of course, pay the outstanding amount) then penalties will be reduced and in some cases even waived.

Following on from the trialling of “nudge” tactics, the HMRC are clearly trying to appear more customer friendly, and this campaign follows hot on the heels of similar activities targeted at medical professionals, plumbers and VAT defaulters.

As Marian Wilson, Head of HMRC’s Campaigns, explains: ““We want to help people trading online to understand when they need to pay tax, and how to do that. This Twitter Q&A will try to answer their questions and clear up any grey areas.”

The HMRC’s venture into social media doesn’t just stop at Twitter, however. They have also recently released a YouTube video that outlines most of the issues related to online traders and this can be viewed at http://www.youtube.com/watch?v=uptdjVD2LgI. Such activities display a greater willingness by the HMRC to interact with their customers, making them more approachable at last.

If you have been trading online and the HMRC has confirmed that you have tax to pay, it is often worthwhile sitting down with a qualified accountant to find out exactly what your position is in order to avoid being liable for further penalties.