Archive for October, 2016

Why is 30 December an important filing date

Thursday, October 27th, 2016

If you are obliged to file a self-assessment tax return for 2015-16, and if you have underpaid tax for this year, and if some of your income (including private pension receipts) is taxed under PAYE, then you can apply to have your tax code number adjusted downwards in a future tax year to repay this underpayment by instalments. In effect, your future income tax deductions will be increased.

Many tax payers will find this a palatable option as HMRC would be collecting the underpaid tax sometime in the future. For example, if you had an underpayment for 2015-16 of £2,400 HMRC would adjust your code number for 2017-18. Consequently, instead of paying the underpayment in one amount, on or before 31 January 2017, your income tax deductions from April 2017 would be increased by £200 a month until March 2018.

There are certain conditions that must be met in order to secure this deferred repayment option. HMRC will not allow the coded out payment process if this would unduly reduce your take home pay. There are also graduated limits on the amount of tax that can be recovered in this way.

What is certain, is that you must file your 2015-16 self-assessment tax return, online, before 30 December 2016 otherwise HMRC will not accept a claim to settle income arrears using this method.

Tax payers who have not yet filed their 2015-16 returns have the best part of two months, if they anticipate tax underpaid for the year, and want to spread the repayment cash flow over the tax year 2017-18.

10% corporation tax

Tuesday, October 25th, 2016

The UK already has plans in place to reduce corporation tax to 17%. Many small businesses will be intrigued by widespread publicity today that discloses the possibility of a reduction in the UK corporation tax rate to 10% if the EU does take a hard line in Brexit negotiations.

According to Reuters news agency:

The tax cut would be used to try and persuade the EU to grant "passporting" rights for financial services firms to continue operating across the EU…

If the government does act on this “threat” what are the likely consequences for small businesses?

Initially, we may see more self-employed business persons drawn into an incorporated structure, to take advantage of the lower tax rates (a 10% corporation tax rate would be half the present basic income tax rate) although many of these smaller business owners will need to withdraw all of their company profits to cover living expenses, in which case there would be no benefit. A lower corporation tax rate will likely benefit larger concerns who will be able to retain profits in their company at the lower 10% rate.

As far as the Treasury is concerned, a 10% rate would mean a direct loss of £20bn in corporation tax receipts. How will this be made up? More austerity, more quantitative easing, increases in other tax rates or fewer allowances?

The 10% rate may be no more than posturing, an attempt to influence the forthcoming Brexit negotiations. Whatever the outcome, it is larger, and possibly financial service firms who will be the major beneficiaries.

The halving of corporation tax rates will possibly lead to more legislative complexity if HMRC are instructed to minimise the loss of tax revenues to the Exchequer. If past experience is a guide to future expectation it will be smaller businesses that feel the pinch.

Business rates revalued

Thursday, October 20th, 2016

From 30 September 2016, anyone in England and Wales that pays business rates go online to check their new draft rateable value. From this they can estimate what their business rates will be from April 2017.

It only takes a couple of minutes to click, find and review a rateable value. If a ratepayer thinks the information held about their property is incorrect, they can ask us to update our records. To do this visit the Gov.uk website at https://www.gov.uk/correct-your-business-rates.

All you need to do is enter your postcode or street address.

All 1.96 million non-domestic properties in England and Wales have recently been revalued. These new rateable values are based on the rental value of properties on 1 April 2015, and will be used to calculate business rate bills from 1 April 2017.

Please note that various business rates relief are still available, but they are handled differently in all the regions of the UK.

If you qualify for:

·         Small business rate relief

·         Rural rate relief

·         Charitable rate relief, or

·         Enterprise zone relief.

You will need to apply to your local council.

The exempted buildings and empty buildings relief is automatically applied by your local council and some councils give extra discounts. For example, you may be able to get hardship relief or transitional rate relief if your business meets certain criteria.

If your premises are affected by local disruption, you may get a temporary reduction in your business rates (e.g. flooding, building or road works).

Contact the Valuation Office Agency (or your local assessor in Scotland) to find out if you can claim.

Dividend tax reminder

Tuesday, October 18th, 2016

From 6 April 2016, any dividends you receive up to £5,000 are tax-free. Dividends received in excess of this amount will be taxed as follows. If they form part of your:

·         Basic rate tax band – taxed at 7.5%

·         Higher rate tax band – taxed at 32.5%

·         Additional rate – taxed at 38.1%

Last year, up to 5 April 2016, dividends received that fell into your basic rate tax band were covered by a tax credit. Accordingly, tax payers with dividend income in excess of the new £5,000 limit will be paying more tax on their dividend income 2016-17.

Readers should also note that for 2016-17:

·         Dividends that fall within your personal tax allowance do not count towards the £5,000 dividend allowance.

·         If your dividends fall under the £5,000 allowance, there is no need to tell HMRC unless you are registered for self-assessment.

·         If your dividends received are between £5,000 and £10,000 you should tell HMRC by ringing their helpline, ask them to adjust your tax code, or enter the details on your tax return if you are required to file.

·         If your dividends are over £10,000 you should be registered for self-assessment. For the tax year 2016-17, you have until 5 October 2017 to register with HMRC.

There are still advantages to maintaining a high dividend, lower salary strategy if you are a director/shareholder of a small limited company. However, it is worth revisiting the calculations on an annual basis to ensure you are optimising the various allowances available.

Companies House filing deadlines and penalties

Friday, October 14th, 2016

A reminder that you will have to pay penalties if you don’t file your accounts with Companies House by the appropriate filing deadline. Generally speaking, accounts will need to be filed nine months after a company’s financial year end.

The penalties for private limited companies are set out below. The penalties apply after the expiry of the various periods listed (after the filing deadline has expired).

 

 

Up to 1 month

£150

1 to 3 months

£375

3 to 6 months

£750

More than 6 months

£1,500

Penalties for public limited companies are different.

The penalty is doubled if your accounts are late two years in a row.

You can be fined and your company struck off the register if you don’t send Companies House your accounts or annual return.

Appeal against a late filing penalty

If you want to appeal a penalty you must give a reason why you couldn’t file your accounts on time.

You must prove the circumstances were both out of your control and made it impossible for you to meet the deadline, if, for example, a fire destroyed your records a few days before your accounts were due.

According to Companies House you can’t appeal by claiming:

  • your company is dormant
  • you can’t afford to pay
  • it was your accountant’s (or anybody else’s) fault
  • you didn’t know when or how to file your accounts
  • your accounts were delayed or lost in the post
  • the directors live or were travelling overseas

You can send a letter to the address on the front page of the penalty invoice that Companies House send you, or send an email including the penalty reference to enquiries@companies-house.gov.uk. You should get a response within ten working days and the penalty will not be collected while your appeal is being considered.

Switch to our mobile site