CREASEYS' NEWS
CREASEYS’ NEWS – OCTOBER 10
PENSIONS – MORE CHANGE – SIMPLE IS BEST?
As anticipated in the June Budget, the Government has now made a further announcement regarding changes to the pension system which will take effect from 6 April 2011. Simplicity is the key with individuals being able to contribute up to £50,000 annually into their Pension Scheme without a tax charge from 6 April 2011. Full top rate tax relief will be available even to 50% taxpayers. The upper threshold for lifetime tax free contributions (the lifetime allowance) will, however, be cut from £1.8m to £1.5m and is not expected to rise with inflation.For individuals with income above £130,000, the changes are very good news as they permit top rate tax relief to be available for payments of up to £50,000 whereas previously there might have been no higher rate relief at all. Those on lower incomes, however, may well wish to accelerate contributions prior to 6 April 2011.
One surprise is the re-introduction of an old rule which allows the carrying forward of unused reliefs from the previous 3 years. This will potentially allow high earners to shelter significant sums next tax year as a one-off contribution.
We are aware that for many clients pension planning is an important area, so please contact us if you would like a review of your own situation.
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AVOID THE NEW LATE PAYMENT PENALTIES
From the start of the 2010-2011 tax year, HM Revenue & Customs (HMRC) has introduced penalties for late payment of monthly and quarterly PAYE/NIC liabilities. These are the payments that are due to be with HMRC from May 2010 onwards and include Income Tax, Student Loan deductions, National Insurance contributions and Construction Industry Scheme deductions.
HMRC has been issuing late payment penalty warning letters to employers once their first payment is late. The letter does not show which period's payment was late, but it does explain that you may be liable for a penalty if you are late paying more than once in a tax year, or if your payments are late by six months or more.
Remember to check which day of the week the due dates for payment fall on - because if it is a weekend or Bank Holiday, the funds need to be with HMRC on the previous working day.
If you make payments by cheque sent through the post, remember the cleared funds have to be in the HMRC bank account by the 19th of the month at the latest. To allow for the post and bank clearing, you should send your cheque at least seven working days before the due date.
If you make payments electronically via BACS, CHAPS, Direct Debit or over the counter at the bank, the cleared funds have to be in the HMRC bank account by the 22nd of the month at the latest.
Check with your bank how long these payments will take to clear because the banks have different timescales. Just because the funds have left your bank, does not mean they have arrived with HMRC. Please be aware that HMRC is unable to accept payments made using the 'Faster Payment Method'.
If you don't have any payments to make to HMRC, don't forget to submit a nil payslip either online or using your HMRC payslip. This will avoid unnecessary letters from HMRC.
MAKING THE P11D PROCESS EASIER
As the P11Ds for 2009/10 should now have all been filed and Class 1A NIC paid, now is the time to consider whether this onerous task can be made easier and cheaper for next year. Here are a few ideas that you may like to consider:
• Seek a dispensation from HMRC, or update an existing one. A dispensation enables employers to exclude certain expenses from P11Ds and thus save time in having to collate the necessary information from expenses claim forms.
• You may wish to review the process for gathering/providing P11D information to see if it can be streamlined (so saving time/costs). This might include revising your expenses claim forms so that they use the same headings as the forms P11D.
• There are a range of tax free benefits which you may wish to provide to your employees and, as they are tax free, there will be no need to declare them on the forms P11D. An example is a company mobile phone.
We are able to assist in all of these ideas, so please give us a call if you would like any assistance.
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HAVE YOU UNDER-PAID OR OVER-PAID?
Recent articles in the press reported a House of Commons statement that millions of taxpayers are being told that they have under-paid or over-paid tax. Most employed taxpayers assume that their tax is being correctly collected through PAYE, but, in fact, HMRC normally carries out a reconciliation each year and, unless there are significant differences, any underpayments are collected through the following year's tax code.
Unfortunately, because of a change in IT systems, no reconciliation was carried out last year and so now two years are being done together. In some cases, this means that underpayments are too large to collect through PAYE and demands for payment will be issued.
Our personal tax clients should not be affected by these problems as we do our own reconciliation as part of the annual tax return process and advise of any further payments to be made or obtain repayments at the time the tax return is submitted. If you are concerned about your situation, please get in touch.
For employers, the possibility of PAYE underpayments may mean additional questions from staff members and if you are getting enquiries such as these and would like help in resolving them, please let us know and we will provide you with the support you need.
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BE PREPARED IF AN INSPECTOR CALLS
Business owners should be prepared for a possible 'tax grab' from the Government. Having been told to collect more money to fill the 'black hole' in the economy, HM Revenue & Customs (HMRC) is thought to be actively targeting small businesses. The number of insurance claims lodged by accountants as a result of a client receiving an inquiry on its tax affairs has risen significantly this year, indicating that HMRC is already on the prowl.
HMRC is under pressure to make up the difference between the tax raised and what is thought to be owed in an attempt to help repair the £158 billion hole in the public finances. This has involved measures including a crackdown on offshore bank accounts.
HMRC is getting tough and the best advice is to be prepared, just in case you are among the businesses which receive a letter from the inspector. One of the best things you can do is to get your financial data into us as early as possible. This will allow us to give advice on the presentation of information and ensure returns are filed on time. This may not prevent an enquiry, but should mean you will have nothing to fear.
Please also let us know when circumstances change or a large transaction or event is anticipated. This way we can help you plan so that, if possible tax can be minimised.
As a firm, we are experienced in dealing with HMRC and are here to help our clients by taking the pressure off and helping to resolve any disputes. If you do get a letter, please let us know immediately.
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10 WAYS OF NOT PAYING 10% CAPITAL GAINS TAX
Entrepreneur Relief (ER) gives a potential 10% CGT rate on the first £5m of qualifying gains made by an individual during their lifetime. The normal rate is 28%, so Entrepreneur Relief may save an individual £900,000 of CGT provided planning is done properly – some traps are set out below:-
1. Only interests in trading companies qualify – watch investment activities and surplus cash which may prevent ER applying.
2. Shareholders must have 5% plus of shares and these must carry full voting rights.
3. Shares must be held for one year before a disposal and thus certain share option plans (e.g. EMI exercised only on a sale) may need reconsideration.
4. Recent changes may mean that Loan Notes acquired on a takeover will not qualify for ER on redemption.
5. In the absence of planning, Earn Out arrangements may give rise to 28% CGT or even 50% income tax in some cases.
6. Shareholders must have an office or employment in the one year before a sale.
7. There can be problems if the business premises are held outside the business and a rent is charged.
8. Only certain types of trust will qualify for ER so transfers out of trusts or changes in their nature may be highly beneficial.
9. Selling a company to another company under common control to crystallise ER may actually crystallise 50% income tax liabilities, not 10% CGT.
10. Watch passive or ‘hobby’ activities on valuable land which may prevent ER applying.
We are always happy to conduct a review to ensure Entrepreneur Relief is available or could be made available with planning. If large gains are contemplated, careful spreading of business ownership around the family may extend the availability of the 10% rate as well as permit tax effective distribution of profits.
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DRAG 'N' BOAT
On Saturday 11th September 2010 fourteen employees and four friends of Creaseys abandoned their comfortable Saturday routines to take part in the Bewl Water Dragon Boat Race on behalf of the firm's Charity of the Year, The Pickering Cancer Drop-in Centre.
Not wishing to lose out on the chance for an additional monetary prize for Pickering, the team also entered the competition to win the best dressed boat. Soon after arriving on the day, the Creaseys team were transformed into the most questionable looking ladies and gentlemen Kent has ever seen. Creaseys had arrived!
The team were called to their boat for their first race shortly after 9am. Securing their wigs and straightening their dresses they took hold of their oars and tried to ignore the heckling from the ‘Sailors’ of the competing boat. Needless to say after the whistle blew they were off, fighting the wind and rain and reaching the finish line in an impressive 1.58 minutes. After two further races, including a comfortable win in their last race of the day, the competition was over.
The team had a great day at the Dragon Boat Race, despite soggy wigs and at least one moustache lost to the cold murky waters of Bewl. This was made even better with the knowledge that the team had not only reached their sponsorship target, but had exceeded it. This is thanks to the many clients, staff and friends who sponsored the team. Thank you for your support!
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