Submitted By: CGA of CGA -
Accountants in York Category Type: General Tax Article
Date Submitted: 05-03-2010 10:25:42
50% Income Tax from 6th April 2010
On the 6 April 2010 the 50% income tax rate comes into being - those with income over £150,000 beware.
There are options. If you are concerned about the impact of this new tax band on your taxed income please contact us as there may be planning opportunities we could discuss with you prior to the end of the current tax year.
High income earners are also facing two further, adverse tax changes.
· If your income exceeds £100,000 the basic personal allowance will be withdrawn at the rate of £1 for each £2 your income exceeds £100,000. If personal allowances stay at the present level £6,475, you will lose your allowance completely when your income exceeds £112,950. As you will be taxed at 40% on your income between £100,000 and £112,950, whilst progressively losing your personal allowance, the marginal tax rate in this banding can be up to 60%.
Planning note:
If you have a legitimate strategy to keep your taxable income below £100,000 in 2010-11 and so potentially save 60% tax this would be an opportunity not to miss.
· From 6 April 2011 higher rate pension relief is being withdrawn from individuals who earn in excess of £150,000 a year.
If you have any concerns or queries in respect of the above, then please call the office or e-mail chelle@cga-york.co.uk.
Time and Tax Saving Tools
We have recently developed an in-depth range of clever spreadsheets designed to help you with many aspects of your day to day tasks. The pack is continually growing but to date we have the following available:
Bookkeeping Buddy – Designed to help you record your day to day transactions over the course of a twelve month period. Once you enter your income and outgoings, the spreadsheet cleverly totals up everything for the year to give you an ‘at a glance’ view of your trading performance. Designed to for businesses with a low number of transactions and under or recently exceeding the VAT registration threshold and not currently using a computerised package.
Expense Buddy – You should distribute this spreadsheet to all your employees who reclaim expenses. If you are using an accounts package, such as Sage, you can enter the nominal codes for the relevant expense code and it will total up how much to post to each nominal code, making the expense claim process much quicker and easier for your business.
Mileage Buddy – Used mainly by sole traders and directors to record their annual mileage only, it there are other expenses then the Expense Buddy should be used.
Rental Property Buddy – This should be used by anybody with rental property. You can record all income and expenditure per property. The spreadsheet will then calculate total amounts to show ‘at a glance’ profits and losses for the year.
Home Office/Licence Fee Buddy – If you make use of your home for business purposes this spreadsheet is for you. It will record all your property running costs and allow us to calculate an appropriate allowance for using your home as an office.
Personal Finances Buddy – This spreadsheet really is for everybody. Enter your anticipated income and expenditure for the month then re-visit at the month end to enter actual amounts. This will allow you to keep a closer eye on what you are spending money on and identify any potential cost savings.
These tools are complimentary for all clients and prospects, if you would like a copy of any or all of the spreadsheets please contact the office to ensure they fulfil your requirements and to organise sending these to you.
Photocard Driving Licence Expiry
Thousands of motorists are at risk of being fined up to £1,000 because they are unwittingly driving without a valid licence.
They risk prosecution after failing to spot the extremely small print on their photocard licence which says it automatically expires after 10 years and has to be renewed - even though drivers are licensed to drive until the age of 70.
The fiasco has come to light a decade after the first batch of photo licences was issued in July 1998, just as they start to expire.
Motoring organisations blamed the Government for the fiasco and said ´most´ drivers believed their licences were for life.
A mock-up driving licence from 1998 when the photocards were launched shows the imminent expiry date as item ´4b´.
To rub salt into wounds, drivers will have to a pay £17.50 to renew their card - a charge which critics have condemned as a ´stealth tax´ and which will earn the Treasury an estimated £437million over 25 years.
Official DVLA figures reveal that while 16,136 expired this summer, so far only 11,566 drivers have renewed, leaving 4,570 outstanding.
With another 300,000 photocard licences due to expire over the coming year, experts fear the number of invalid licences will soar, putting thousands more drivers in breach of the law and at risk of a fine.
At the heart of the confusion is the small print on the tiny credit-card-size photo licence, which is used in conjunction with the paper version. Just below the driver name on the front of the photocard licence is a series of dates and details - each one numbered. Number 4b features a date in tiny writing, but no explicit explanation as to what it means.
The date´s significance is only explained if the driver turns over the card and reads the key on the back which states that ´4b´ means ´licence valid to´.
Even more confusingly, an adjacent table on the rear of the card sets out how long the driver is registered to hold a licence - that is until his or her 70th birthday.
A total of 25million new-style licences have been issued but - motoring experts say - drivers were never sufficiently warned they would expire after 10 years.
Motorists who fail to renew their licences in time are allowed to continue driving. But the DVLA says they could be charged with ´failing to surrender their licence´, an offence carrying a £1,000 fine.
CGA Website, Newsletter and Client Portals
By now you will all have been online to look at our new look website - if you have not yet had chance please check it out by clicking here.
The website has a comprehensive resource centre with a number of helpsheets and calculators and much much more and we will also be shortly launching our ´Client Portal´ facility.
As part of our paperless initiative we have recently set-up an e-signature facility to obtain approval for accounts, tax returns and many other forms and will be sending these out electronically, where possible, in the future. We would like to thank everyone who have already used this, not only are we saving paper and putting less reliance on the postal service but we are speeding up the process of sending items to you for signature. The e-signature system was a huge success in January as we approached the tax return deadline.
We will shortly be setting up our new e-newsletter system, this lets us see how many people have opened their newsletter and there will be questions on these when you least expect them.
As part of the above, we will be setting up the ´client area´ on our website and also the client portal facility, more information to follow shortly.
VAT Online from April 2010
From 1st April 2010 you will need to submit your VAT Returns online and pay any VAT due electronically if you have annual turnover in excess of £100,000 or you are newly VAT registered from 1st April 2010.
If your turnover is less than £100,000 then you can still submit your VAT returns manually, however, HMRC states that it is likely that you will have to submit your VAT Return online soon and you might want to switch to using the online service now.
You must make payment electronically when submitting your VAT return online, if you pay by bacs or a similar electronic method then payment must reach HMRC by the 7th of the month after your normal due date for submission and payment and by the 10th if paying by Direct Debit, i.e. a 31st December 2009 VAT return would mean that payment would need to reach HMRC by 7th February 2010 or it would be taken from you account on 10th February 2010 if paying by direct debit.
What is social media? What is its purpose, its usefulness and how could it help your business?
Sachedinas Solicitors and Barbara Jacobs & Co are hosting a seminar led by Ned Hoste of the Big Ideas Collective focussing on LinkedIn and Twitter.
They are going to be looking at how these tools are used to build up and extend ‘profile’ and ‘reach’, drive traffic to websites and make valuable connections.
There will be plenty of discussion, guidance and advice on offer, so if this is something you’d like to know more about they look forward to welcoming you.
Wednesday 17th March 2010, 5.30 for 6 pm at 3-4 Westfield House, Millfield Lane York YO26 6GA
If this is something you would like to attend, please contact Jane or Barbara:
Do you suffer from piles? Piles of paper, clogging up you desk and your drawers - an endless round of shuffling, stuffing, colour coding and cramming into bulging files; you know it will take a while to find exactly what you want and by then the information is already out of date…
We are experts in paperless electronic accounting systems that offer ‘touch of the button’ information, when you want it, how you need it:
· Saving yourself time and that of key staff
· Giving you instant access to your accounts
Plus accurate comparative data and relevant history for better forward planning and easier measurability of targets
SAGE® experts, we offer a range of flexible electronic packages tailored to suit your current and future business requirements; run in parallel to enhance and streamline your current paper processes or helping make the gradual change to fully electronic systems. Our training is not subcontracted out. Our team will train, guide and support you each step of the way to make your life easier, your accounting more accessible, your business run smoother and the planet breath easier. No more piles - it’s all good!
"I used to be scared of computers. If it wasn´t in black and white and I hadn’t written it down, it didn´t exist. I thought that if I hit a wrong button the lot would disappear but I was bogged down with paper and needed help. Claire guided me through my SAGE package and now, fully electronic I couldn´t go back. With my fears unfounded I´ve now got details at the touch of a button, I´m up to date, on time, clean and tidy - fantastic!"
Ann Ward Selby Garden Centre
CGA Staff Profile - Stacey McVeighty
Meet the team – get the low down on CGA’s talented bunch of numerically gifted grown ups, whose unsuspected talents extend far beyond the world of accountancy…
Stacey McVeighty FCCA Director
York born and bred, self confessed Kylie fan and Green Champion for CGA´s paperless office (if it moves she´ll attempt to recycle it), Stacey works across personal tax, sole trader and partnership accounts. Joining Chelle as co-partner at the firm in 2007, Stacey and Claire became York´s youngest female practice partners. Stacey is true ‘home grown talent´ joining CGA from college and loves the close team and supportive spirit fostered by the company for employees and clients.
A live music and comedy fan, Stacey also loves a good gig, which includes ‘glamping´ (read camping with clean sheets) with Chelle and Claire at Leeds Festival. Yet, when not ensuring her clients´ are well taken care of, Stacey is thinking about her feet. Stalking shoe shops the length and breadth of Europe, (city breaks are a favourite) Stacey´s guilty secret is an unquenchable love of shoes.
Working within the wider business community, Stacey is the President of the York ACCA members´ panel and sits on the regional HMRC Working Together Committee, formed to promote better relationships between accounting firms and HM Revenue & Customs. Stacey reports that it´s going very well to date, apart from some niggling concerns over outmoded footwear…
*FCCA – Fellow Chartered Certificate Accountants
Tax/VAT payment difficulties
If you are having problems paying your Tax and/or VAT, you must contact HM Revenue & Customs immediately. You can contact the Business Payment Support Service on 0845 302 1435, which is a HMRC service designed to meet the needs of businesses affected by the current economic conditions.
If you would like to see what we are up to both in work and outside of work (and watch the team Firewalk and arrowbreak) then please visit our facebook page and become a ´FAN´ of CGA by clicking here - please bear in mind you will need to be set-up on facebook to view this.
If you are on LinkedIn then please visit our page by clicking here.
CGA Payment Options
Due to the current climate we were thinking of ways to help our clients, so we now have a selection of ways to pay.
We are now able to accept credit or debit card payments (excluding American Express), if you would like to settle any outstanding invoices using this method of payment then please call Tor at the office with your Card details to hand.
We also have a Premium Credit Facility to allow you to spread your invoice over a period of 6 or 10 months, there is a small credit charge which is paid to Premium Credit. If you are interested in settling any outstanding invoices using this method please call or e-mail Claire (claire@cga-york.co.uk).
We still accept the traditional methods of cheque, bacs and standing order payments. Please refer to the payments options in your new Terms and Conditions for full details.
Bonuses or dividends v higher salary
If you run your own company and are considering an increase in your salary 2010-11 you might like to consider the following points:
1. From 6 April 2010 if your income is in excess of £100,000 you will start to lose your tax Personal allowance, initially this can create a marginal tax rate up to 60%.
2. From the same date if your income is over £150,000 you will be subject to the 50% rate of Income tax.
Consequently increasing your earnings in 2010-11 may not be a tax effective move if you are a high income earner. Instead you may like to consider paying yourself a bonus in March 2010? You must have a clear and commercially sound reason for a bonus payment. If you were to follow this strategy the bonus would be taxable at the current highest rate, 40% and would have no effect on your current year personal allowance.
There is a timing downside to this arrangement; any tax and NIC due on the bonus would become payable on 19 April 2010 (22 April if you pay electronically) instead of being spread over the year if you settled on a salary increase instead.
Of course, when practical to do so, extra dividends are usually a better option than bonuses. Dividends voted in March 2010 will mean extra higher rate tax due 31 January 2011.
If you are a high income earner and would like to discuss this and other strategies for minimising the impact of the changes coming in the next tax year please get in touch. There are still options we could look at before 6 April 2010.
Connected persons
If you are a connected person for tax purposes you will be required to substitute the market value of any asset you transfer or acquire when working out the gain or loss on disposal - not the amount you have actually agreed, unless of course this is the same as market value.
The most likely connection is that you are married or in a Civil Partnership. Fortunately if you and your spouse or civil partner are living together at any time in a tax year in which you make the transfer or sale, any gains are deferred until your spouse or civil partner sells the asset.
One consequence of being connected is that any company you control, either on your own or with other connected persons may be treated as associated companies and affect the amount of company profits that qualify for the small company’s rate.
The full list of connected persons for the purposes of transferring assets is set out below:
1. Your spouse or civil partner
2. Your brothers and sisters, and those of your spouse or civil partner.
3. Your parents, grandparents or other ancestors, and those of your spouse or civil partner.
4. Your children and other direct descendents, and those of your spouse or civil partner.
5. The spouses or civil partners of any of the above relatives.
6. Your business partners and their spouses or civil partners and relatives except for genuine commercial acquisitions or disposals of partnership assets.)
7. As mentioned above any company you control, on your own or with any of the people listed above, will be connected for tax purposes.
8. The trustees of any settlement where you or any person connected with you is a settlor.
The definition for the purposes of determining associated companies is more limited.
Clogged Losses
If for any reason you dispose of an asset to a connected person and make a loss on the transaction, the loss can only be used in the same year or carried forward and used against future gains, to the same connected person.
It will also be necessary to demonstrate that on the second or subsequent disposal you were still connected.
HMRC refers to these as Clogged Losses!
Negligible value claims
HMRC define an asset to be of negligible value if "it is worth next to nothing".
If you make a formal negligible value claim, the effect is to treat the asset as sold and immediately reacquired at a nil value, thereby creating a capital loss.
Interestingly you can specify a time in the previous two tax years at which the deemed disposal should be treated. Obviously you will need to prove that negligible value applied at the earlier date.
Accordingly any claim you make in 2009-10 could be treated as made in 2007-08 or 2008-09.
The claim creates a capital loss. However, if the asset is shares that you have subscribed for in a qualifying trading company, it is possible to claim to convert the capital loss into an income loss that can be set against any other income.
This is a useful way to recover some of your investment if a company in which you own subscriber shares becomes dormant for any reason and you have no prospect of recovering the cash you have tied up in share capital.
Subscriber shares are shares you acquire from the company and not shares transferred to you by previous shareholders.
Updates from HMRC
Online filing:
Payroll returns 2009-10
Just a reminder that whatever the scale of your payroll activity you will need to file the 2009-10 P35 and P14s online this year.
VAT returns filed after 1 April 2010
There are two categories of businesses that have no choice about online filing after 1 April 2010:
· newly registered businesses with a registration date of 1 April 2010 or later, and
· any business with annual turnover exceeding £100,000
D1 Tax Codes
The new D1 (50%) tax code will not be introduced until 2011-12. Any additional tax due in 2010-11 on second sources of income as deductions were made at 40% instead of 50%, will be collected through self assessment.
Email scams – phishing
You should never respond to emails purporting to come from H M Revenue & Customs. HMRC´s advice on this issue is set out below:
"HMRC would never contact you asking you to disclose personal information. If you have received an email requesting personal information, payment of tax or suggests you are due a tax rebate, please take the following action:
Link to this page (simply copy the text below into your website)
