Tax Credits – do you claim what you’re entitled to?

One area of tax often overlooked is tax credits, yet for small business owners it can, depending on your circumstances, add up to a substantial amount of money. Tax credits are not a tax saving, they are actual cash paid into your bank account.

Too often, the wrong amount is paid: many don’t claim what they are entitled to, others are overpaid and suffer considerable financial difficulty when HM Revenue and Customs seek to claim the money back. Tax credits can pose particular problems for small business households because they don’t have a simple P60 showing their earnings for the year to include on the claim form and are more likely to experience significant fluctuations in their earnings.

We have compiled a “Myths and Realities” sheet with further information on this. If you’d like a copy or want to check that you’re receiving what you’re entitled to, please email me at nigel.herring@cheapaccounting.co.uk

Year End Tax Planning

Our last newsletter pointed out that the 2009-2010 tax year was coming to a close and it was a good time to review your tax position to see if any action needs to be taken before 5^th April. There are significant changes to tax rates for higher earners next year and not all the planning opportunities available to small businesses will be around after the next election.

For example, there are reports that an incoming Conservative government would abolish the Annual Investment Allowance – which means you can claim 100% tax relief on assets purchased up to £50,000, and is a key planning tool for small businesses – to pay for a cut in corporation tax.

If you would like a copy of our “Tax Planning Checklist”, please email me at nigel.herring@CheapAccounting.co.uk

Payroll – Filing and Penalties

The end of the tax year also means that all payroll year-end filing will soon need looking at. The filing deadline is 19^th May, after which monthly penalties will be charged. This year all employees must file online.

From May onwards a new penalty regime starts for late payment of PAYE / NI, and will apply to all employers. The penalty will start at 1% of the late amount and will increase to 4% depending on how many times you are late. You are allowed one late payment in any tax year, providing it is not more than 6 months late. 5% penalties may be charged on payments more than 6 months late.

Tax doesn’t have to be taxing?? – ask Weight Watchers

HM Revenue & Customs often uses the “Tax doesn’t have to be taxing” phrase in their publicity, but most small businesses know tax can be very taxing. One reason is that the law is often not clear and this is true of an area known as “Employment status” – where you have to decide whether someone who does work for you is a self employed subcontractor or should be treated as an employee. Often it is obvious, but sometimes it is not, and the cost of getting it wrong can be devastating because of all the tax and national insurance payable on employees.

Weight Watchers have discovered this to their cost. It considered its regional meeting leaders to be self employed, but HM Revenue & Customs have recently won a case to classify them as employees. The resulting tax bill for Weight Watchers is reported to be £23,000,000!

Companies House and the Colour of Ink

Our last newsletter carried details of the penalties for late submission of company accounts. Now we can reveal that Companies House may reject accounts if they are signed in any colour other than black. This raises the possibility of substantial penalties for signing accounts in, say, blue! Do they understand what it is like to run a small business?

Channel 5 – The Business Inspector

Perhaps this will help. Channel 5 will be broadcasting a four part weekly programme called “The Business Inspector”, starting at 8pm on 10^th March. The series is sponsored by HM Revenue & Customs who “... want small businesses to realise the benefits to them – such as improved cashflow – of taking better care of their records and paperwork.”

The presenter, Hilary Devey, has built up a multimillion pound business and wants to teach people how to improve their all round business knowledge, cashflow and marketing strategy.

 Directors’ salary

One of the reasons to operate your business as a limited company is to reduce the amount of tax you pay. An essential part of this is deciding on the level of directors’ salary to help maximise the tax saving available. We have a factsheet on this so if you would like a copy, please email me at nigel.herring@CheapAccounting.co.uk.

Deadlines

It is essential that you are aware of the deadlines which affect both you and your business. If you are in any doubt about those which apply to you, please email me at nigel.herring@CheapAccounting.co.uk .