Birmingham Accountants - James & Co

Buy-to-Let Investors warned

2012-01-26T10:19:00.000Z

BUY-TO-LET investors have been warned to keep their rental income records up-to-date in the face of a new tax clampdown.

HM Revenue & Customs (HMRC) is looking to recoup revenue lost through tax avoidance and evasion in rental income and has intensified the spotlight on landlords.While it already requests details of rental income and property sale revenue from local authorities, its Stamp Office and letting agents, that information will now be data matched to draw out those who don't appear to have made the appropriate tax returns.

Where evidence is uncovered of untaxed rental income and gains, HMRC officers will have the power to inspect records at the business premises, which in the case of some landlords can include private residences. HMRC is taking the buy-to-let market seriously in its clampdown on tax evaders.
It's crucial to notify HMRC of any new source of taxable income, including rental income, as soon as possible.

If landlords do realise they have made a mistake they should take tax advice immediately and contact HMRC. The voluntary disclosure of any omission is looked upon favourably by HMRC and a better tax position can be frequently be obtained.

The home as a Business base

2011-12-31T22:30:00.000Z

Is it a base for the business?

This has long been a problematic issue in a number of situations where it may be difficult to properly establish that the business base of a self-employed person is his home. The issue is not just relating to the running costs of the business base, but of often greater significance is the need to establish the home as the business base if a claim for travel costs is to be valid in respect of travel to and from the home and where the individual is visiting in the course of the business.

A recent case was determined for the taxpayer and may well provide the chance to make claims for motor expenses in circumstances that previously were doubtful. This is not simply because of the taxpayer’s victory but more due to the thinking behind the decision.

Subject to any HMRC appeal the position can now be summarised below as the basis for possible claims for the self employed who use their home as the business base but travel to actually do the core work:

1. A self employed electrician, acting mainly for contractors rather than for domestic clients travelled from home to client sites. He claimed tax relief on motor costs to/from home and each site, on the grounds that his home was his business base.

2. HMRC claimed that although some work connected with his business may be done at home, that was not the location where he exercised his trade. They instead argued that that his trade did not start until he reached the client’s premises where he was to undertake the work.

3. The use of the home for the business involved the following:

• Preparing quotes and Preparatory work (although sometimes a site visit was also made before the contract started)

• Preparing the contract

• Telephone queries

• Keeping his tools and equipment

• Location of his business records

• Address used for correspondence and for PII cover

4. HMRC argued that the taxpayer was not a team leader and did not hold any meetings at his home. Basically, the use made of his home did not make it an office.

5. The tribunal concluded that a sub-contractor such as the taxpayer must have a base for his business. His work on plans and quotes at home must be a part of his trading activity which did not therefore cease when he arrived at home to deal with these. Accordingly his base for the business was his home.

What running costs of the home can be claimed?

If it can be established that the business base is the home there is plenty of scope for claiming tax relief on the running costs by reference to the usual requirement that the expense must be wholly and exclusively incurred for the purposes of the business.

Indeed there is even more scope for being able to apportion the use and cost of a home on a time basis and to allow the expenses of the room during the hours in which it is used exclusively for business purposes.

Also there can be a valid claim for apportioned mortgage interest; telecommunications (including the line rental); insurance (including a household policy); repairs and maintenance.

New penalties for late tax returns

2011-07-22T13:09:00.000+01:00

Up to a million taxpayers could be caught by new penalties for late tax returns.

From the end of October, anyone who is even one day late in filing their paper self-assessment tax form will be hit with an instant £100 fine.

After another three months an additional fine of £10 a day is added for each day overdue, up to a maximum of £900.
Tougher fines are added if passing the six month or one year mark which equate to the larger of £300 or 5% of the tax due.

From the 31 January 2012 the same rules will apply to those who file their tax returns online. This means that a tax return due by the end of January 2012 but not filed until 5 August 2012 would attract £1,300 or higher in fines.

Since self-assessment was introduced in 1997, nearly one million people each year have been late in filing their personal tax returns, and many taxpayers delay submitting their return for longer than 12 months. Until now, as long as the person had paid all the tax due no penalty could be charged by HMRC.

Some taxpayers could end up losing out on tax rebates from HMRC. This is particularly relevant for those self- employed in the construction sector, where tax is often deducted initially by the contractors. Individuals are then due repayments after calculation once they submit a return. However, under the new rules, if the return is late the repayment owed will be a lot less because it has been used up by penalties.

Most people will not be aware of these new penalties as they have not been widely communicated by HMRC.

Starting a business; Do I setup as a sole trader/partnership or as a Limited Company?

2011-05-04T21:42:00.000+01:00

This is one of the most important questions a new business owner should ask when setting up a new business.

It’s all so easy to get carried away with the excitement of setting up a new business whether as a sole trader or in partnership with a long time best friend, but when it all goes bad, that’s when things start hitting the fan.

The following is some pointers that may help a new business start-up, or even provoke the thought process for some existing businesses.

1. Although there are various considerations before forming a limited company of which taxation is one, I believe one of the most important is risk of business failure.

2. What is the risk that if things go wrong and you are made bankrupt and lose your home.

3. What is the risk that if your partner runs off with the money and you are left to try and pay the VAT bill or the HMRC PAYE bill. Believe it or not, this is a very common occurrence.

4. What is the risk of your business failing and what do you stand to lose? For example, if you have signed up for a leased premises and your business does not do well, the landlord will most likely come after you for the rent for the remainder of the term of the lease. That could be 5 – 10 years depending on the lease. If you don’t pay then the landlord will make you bankrupt, especially if you have a personal property such as a house.

5. It’s surprising how many business owners signup for leases without proper legal advice.

6. I have come across many business owners who don’t give this proper consideration before it is too late.

7. Another point is that if you do not pay HMRC the PAYE deductions for your employees or the VAT due, you will be made bankrupt by HMRC. This is becoming more common.

8. Saving of taxes is just one consideration, protecting yourself from bankruptcy is a huge consideration.

9. Many people will say there are many additional costs of running a limited company. Well, what are these costs and let’s put them into prospective.

10. Whether you are a sole trader or operate as a limited company you still have to file a personal tax return.

11. Whether you are a sole trader or a limited company you still have to file VAT returns and pay paye for your employees (assuming you are vat registered and have employees).

12. Whether you are a sole trader or a limited company you still have to prepare accounts.

13. Whether you are a partnership or a limited company you still have to prepare accounts.

14. A good accountant will not charge you much more than the cost of a sole trader accounts.

15. The only real additional costs are forming a limited company, about £75. Filing an annual return at Companies House, £14 per year and filing an annual corporation tax return, at the most costing £100 for a small company.

16. Some people say if you file accounts at Companies House, everyone will know about your affairs. Well, filing accounts at Companies House, as a small business (sales less than £6.5m) you only need to file an abbreviated balance sheet with some supporting notes. That’s hardly going to tell anyone very much about your trading affairs.

17. So this is a small price to pay for peace of mind and protecting yourself from bankruptcy.

There is a big mis-conception out there, (even with professionals) that in a bankruptcy a person’s home is protected. THAT IS NOT THE CASE; THE WHOLE POINT OF SOMEONE MAKING YOU BANKRUPT IS TO GET AT THE EQUITY IN YOUR PROPERTY.

HMRC Penalties

2011-04-18T11:00:00.000+01:00

HMRC are changing the way penalties are charged for late filing of tax returns and payment of tax.

From April 2011, if you don't file your Self Assessment Tax Return or pay your tax on time, the penalties you will have to pay are changing. The more you delay the greater the penalty.

Penalties for late filing of tax return:

• One day late and you will be charged an initial penalty of £100 (even if you have no tax to pay or you have already paid all the tax you owe).
• Three months late and you will be charged an automatic daily penalty of £10 per day, up to a maximum of £900.
• Six months late and you will be charged further penalties, which are the greater of 5% of tax due or £300
• Twelve months late and you will be charged yet more penalties, which are the greater of 5% of tax due or £300. In more serious cases you face a higher penalty of up to 100% of the tax due.

Penalties for paying tax late are:

• Thirty days late and you will be charged an initial penalty of 5% of the tax unpaid at that late.
• Six months late and you will be charged a further penalty of 5% of the tax that is still unpaid.
• Twelve months late and you will be charged a further penalty of 5% of the tax that is still unpaid.

These penalties are additional to the interest you will be charged on all outstanding amounts, including unpaid penalties, until full payment is received.

Are your business records kept properly?

2011-01-20T11:39:00.000Z

HM Revenue & Customs (HMRC) plans to investigate small and medium businesses (SMEs) who fail to keep trading records properly. This could bring in £600m in fines. Given the new compulsory requirement for businesses to file their accounts online, HMRC seems to be reallocating its processing resources into revenue raising.

HMRC is planning to visit 50,000 businesses per year and will be inspecting records going back six years to see if they are ‘adequate’ and ‘accurate’. The penalty for poor record keeping can be up to £3,000. This could raise £600m over the next four years.

Each visit could take up to half a day and inspectors will be asking to see a number of records in addition to a full set of accounts, such as till rolls, cheque stubs, paying-in slips, a record of all sales and takings, including cash receipts, and bank and credit card statements.

If records are ‘adequate’ and ‘accurate’ some businesses may face formal tax enquiries in addition to fines. So be warned.

Capital Gains Tax and Entrepreneurs’ Relief

2010-12-02T21:28:00.000Z

As is now well known, the CGT rate stayed at 18% for 2010/11 following the Budget on 24 March 2010, with the annual CGT exemption unchanged at £10,100. It had been widely predicted that Alistair Darling would be forced to close the 32% gap between the top income tax rate for 2010/11 and the CGT rate, but this did not initially materialise.

Another unexpected announcement was the doubling of the entrepreneurs’ relief limit for qualifying disposals made on or after 6 April 2010 (S4 FA 2010). Subject to certain conditions being satisfied, individuals can claim this relief in respect of gains on the disposal of trading businesses which they run, either alone or in partnership, or of shares in a trading company (or the holding company of a trading group). Where shares are involved, there is a proviso that the individual is an officer or employee of the company (or group) with at least 5% or the ordinary share capital and voting rights. Gains qualifying for relief were originally charged to tax at an effective rate of 10% through the simple expedient of reducing the gain by a factor of 4/9ths and then applying the 18% charge.

Following FA 2010, the increase to a new limit of £2,000,000 applied to gains arising on or after 6 April 2010. Thus, if a taxpayer made qualifying gains before that date of, say, £1,400,000, the amendment did not give relief for the £400,000 which fell outside the old limit. However, if the same individual then made another business gain of £750,000 on 1 June 2010, that gain would be fully eligible for relief and a further tax break of £250,000 would still have been available.

However, in the Coalition Government’s first Budget on 22 June 2010, significant changes to the CGT system were announced by the new Chancellor. These comprised:
• an increase in the CGT rate to 28% with effect from 23 June 2010 in certain circumstances;
• a further rise in the limit for entrepreneurs’ relief to £5,000,000, also from 23 June 2010 onwards; and
• a modification in the way in which the new entrepreneurs’ relief is given.

These amendments have been legislated in S2 and Sch 1 F(No2)A 2010.

Save up to £50,000 in NICs

2010-09-30T17:12:00.006+01:00

From 6 September 2010 new business set up outside London, the South East and East of England will be eligible for a holiday worth up to £5,000 for each of the first ten employees they hire in their first year of business (that is up to £50,000 in total).

The Holiday operates by allowing a deduction against the amount of Class 1 NICs that an employer is required to pay to HMRC each month or each quarter. With two main modifications, new businesses that were started between 22 June 2010 (the date of the Chancellor’s Emergency Budget) and the 5 September 2010 will benefit to the same extent as a new businesses started on or after 6 September 2010 provided they satisfy the eligibility tests.

For the first ten qualifying employees that a new business employs in its first year of business, following start up, it will be entitled to an individual Holiday for each of those employees.
The Holiday period for each employee will last for the shorter of the employee’s first year of employment or the time left until the Holiday scheme ends on 5 September 2013.
The Holiday will apply to all relevant earnings paid to a qualifying employee during the first year of the employee’s employment but there will be a maximum saving of £5,000 in employer NICs in respect of each employee.
The Holiday will be administered as a de minimis State Aid. New businesses wishing to enjoy a Holiday will need to make an application to HMRC when they engage their first employee. Full guidance will be available on the Business Link website for those interested in applying.
The Holiday will be entirely voluntary and will enable qualifying new businesses that choose to participate to reduce the amount of secondary (employer) NICs liability that they would otherwise have to pay over to HMRC.
The scheme will run for three years.

If you would like a complete guide please email me and I will send you one.

EU VAT Refunds

2010-08-01T11:00:00.000+01:00

A UK VAT registered business is entitled to reclaim much of the VAT it pays in other EU countries. So if you pay VAT on exhibition space you hire in France, you can normally reclaim this VAT from the French tax authorities.

The new system from 1 January 2010 is based on electronic procedures:

• An electronic claim is submitted in the country where you are VAT registered, so for a UK company that is submitted to HMRC.
• HMRC will then forward the claim (also by electronic means) to the country where the VAT was paid. The tax authority in that country then has four months to process it and a further ten days to make a repayment.
• The return is mainly based on numbers, so language issues are no longer a major problem.

Before submitting a claim, it is important to check that the country in question does not have any block on claiming for certain categories of expenditure. For example, many countries do not allow claims to be made for travel or hotel related costs.

Retiring abroad – the tax consequences

2010-07-29T15:46:00.002+01:00

If you are thinking of retiring abroad to enjoy a better climate and escape the UK tax system, you might find it harder than you expect, especially after a recent well publicised tax case in the Court of Appeal concerning a man who went to live in the Seychelles.

The man in question was a certain Mr Robert Gaines-Cooper who had made a considerable fortune in business and wanted to enjoy it as someone whom the UK tax authorities would treat as non-resident, and so broadly free from tax on all his income and gains outside the UK.

There are two main ways of becoming non-resident. If you leave the UK and work under a full-time contract of employment that will last for at least one complete tax year, you can become non-resident from the day after departure, provided your return visits are limited to fewer than 91 days per tax year.

But if you retire abroad or you are leaving for some other purpose, there must be a demonstrable change in your normal pattern of living which clearly shows that there is a break from UK residence. In future, would-be non-residents should ensure that they can demonstrate that they have cut meaningful ties with the UK. In particular, such emigrants should:

• Sever all business, social and family ties with the UK. For example, resign from employment, close bank accounts, take their family with them, cancel membership of clubs etc.
• Sell any accommodation, or at the very least let it out on a long lease (even then, HM Revenue & Customs will want a good explanation as to why the property is being retained).
• Create meaningful ties with the new country of residence – for example, buy a property, register to vote, make a will there or have children educated there.

If you are going to live abroad, but not under a full-time contract of employment, you will need to take care to sever your ties with the UK. Even if you manage to achieve non-resident status, remember that when you are counting days in the UK, any day in which you are here at midnight is normally considered to be a day spent in the UK, unless your presence here is due to circumstances beyond your control.

What is Redundancy

2010-06-20T11:11:00.001+01:00

Redundancy was introduced in the 1970s and provides a separate reason for a contract to be terminated. It is governed by the Employment Rights Act 1996. Redundancy is a form of dismissal, but the conduct or competence of the employee is irrelevant. The dismissal has taken place for economic reasons which mean that the employee’s post is redundant.
It is essential to ensure that, where a redundancy dismissal takes place, the situation is one of genuine redundancy. Claims have successfully been brought against companies who declared someone redundant where the employment should have been terminated in some other way.

The definition of redundancy is as follows:
An employee is taken to be dismissed for redundancy if the dismissal is wholly or mainly attributable to the fact that:
• The employer has ceased or intends to cease to carry on the business for the purposes of which the employee was employed, or has ceased, or intends to cease, to carry on that business in the place where the employee was so employed, or
• The requirements of that business for employees to carry out work of a particular kind in the place where they were so employed have ceased or diminished or are expected to cease or diminish.

Qualification for redundancy pay
Only employees have a right to redundancy pay, if they otherwise qualify. Workers such as agency staff and casuals cannot claim a statutory payment.
A person who has been made genuinely redundant will not be able to successfully claim unfair dismissal, providing the employer has gone through a proper selection and consultation process, and they will be restricted to redundancy only.
All employees who have worked for their employer for at least two years continuously will qualify to claim statutory redundancy pay, in addition to their contractual or statutory notice.
A redundant employee must be given a written statement showing how his or her redundancy pay has been calculated - failure to do so is a criminal offence.

The amount of redundancy pay will be calculated as –
• 0.5 week’s pay for each full year of service where age during year is less than 22
• 1 week’s pay for each full year of service where age during year is 22 or above, but less than 41
• 1.5 weeks’ pay for each full year of service where age during year is 41+

The redundancy payment is capped in that only 20 years of service is taken into account and the maximum on a week’s pay is currently £380. The maximum redundancy payment is therefore currently £11,400.
Some employers pay according to their own redundancy payment policy in excess of the statutory entitlement. It is advisable for such policies to mirror the statutory scheme to prevent any claim of age discrimination as most redundancy payments will increase with length of service and therefore age is a significant factor.

A permitted enhancement is one or more of the following:
• not applying the cap on a week’s pay (e.g. calculating it using the employee’s actual weekly pay) or using a higher cap
• multiplying the number of weeks’ pay for each year of service by a factor (e.g. applying a scheme of 1-2-3 weeks’ pay for each year of service under the statutory age bandings, instead of the statutory ½-1-1½)
• multiplying the total amount produced by the statutory calculation or by these variations by a factor (e.g. twice the amount of statutory redundancy pay).

Offer of suitable alternative employment
If alternative work is available and the employer fails to offer it, this may convert a redundancy into an unfair dismissal. If a redundant employee is offered a suitable alternative, and refuses it, then s/he will lose their right to redundancy pay. Therefore the statutory scheme encourages redeployment.
Where the employee has been made redundant, the employer must make an offer of re-employment before the old employment ends. The new job must start, or be due to start either immediately the old job comes to an end or after an interval of not more than four weeks. If the employee accepts the offer, s/he is treated as not having been dismissed and no redundancy payment will be made. If the employee unreasonably refuses an offer of suitable employment, then the employee will lose the right to a redundancy payment, although s/he will still be dismissed for redundancy.

What is suitable employment?
The question of whether the offer is a suitable one is always a question of fact for the tribunal. This is both objective and subjective. The first issue will be the objective one, ie whether the nature of the job on offer in terms of content, status and terms and conditions, and to what extent they are equivalent to the redundant position. The next issue is subjective suitability, and the extent to which the employee perceives the position as being suitable. This will determine whether the employee was reasonable to refuse it. There are a number of cases where tribunals have found that the new position being offered is suitable objectively, but because of the employee’s perception that it involved considerable loss in status, it was not suitable for this employee and s/he was reasonable to refuse it.

Trial period
In any situation where an employee has accepted an alternative job, statute provides for a ‘trial period’ in which s/he can try out the job for its suitability. The statutory trial period is mandatory. The trial period begins when the employee’s employment under the old contract ends and it ends four weeks after the date on which the employee starts work under the new contract.
If the employee terminates the contract during the trial period, or gives notice during the trial period to terminate it, and the contract does then end, s/he is treated as having been dismissed for redundancy when the original contract came to an end.
The employee is also treated as having refused the new offer of a job. If it is concluded that the alternative job was suitable, then the employee will lose his/her right to a redundancy payment. It is possible, in limited circumstances, for the trial period to be extended by mutual agreement. The only acceptable purpose for this is that a period of retraining is needed by the employee in order to perform the new job.

Fair redundancy procedure
The information in this article is aimed at businesses making less than 20 people redundant at one time. There is a statutory consultation process which must be completed in the context of larger redundancy exercises details of which can be found

First stage
The employer should
• Consider ways of avoiding redundancies – it may be possible to negotiate some kind of flexible working or job share arrangements, and it may be possible to second staff to other businesses or clients, have a recruitment
freeze, reduce agency working etc in order to stave off the need for a redundancy programme.
• Consider a general economic reorganisation of the workforce eg reducing hours, overtime payments etc. Employees may prefer to agree to such a change in order to try to keep their jobs. This means vital staff are not lost.
• Ask for volunteers for redundancy, but reserving the right to veto any applications where staff are to valuable to lose.
• Take legal advice to ensure that any redundancies are carried out in accordance with the law, if they do become inevitable.

Ensure that it is a genuine redundancy
The definition of redundancy is laid out above, and it is essential that any dismissal falls under that definition. If a replacement is quickly recruited to work in the same or a similar role in the establishment then the requirement for the employee has not ceased or diminished.

Women on maternity leave
If there are women on maternity leave within the pool at risk of redundancy, they are a particular danger to the employer. A redundancy in this situation may not only be an unfair dismissal but also sex discrimination.
• The woman is entitled to be offered any suitable alternative vacancy, before it is offered to anyone else who has been made redundant. This may involve using temporary workers until she returns from her maternity leave and starts her new job
• Women on maternity leave need to be fully involved in the consultation process laid out below, and the employer should be flexible about this eg holding meetings at the woman’s home

Where there is more than one role at risk
• It may be necessary to make more than one person in a particular role or department redundant
• The employer must select the staff on a fair and objective basis
• Criteria that are used must be as objective and relevant as possible and based on skills and knowledge
• Employees may be disadvantaged by discriminatory criteria – be careful of absence criteria that discriminate against disabled people, or women who have been on maternity leave.
• The selection procedure should place everyone in the same or similar role being considered for redundancy into a selection matrix. Factors or criteria can be chosen and given marks, which, say, add up to 100, with a time frame of eg the last 12 months
• Any claim for unfair dismissal will be less likely to succeed if two people do the marking and their mark is averaged
• Before the employer actually applies the selection criteria and does the marking, it should undertake the individual consultation process laid out below
• Everyone who is at risk of redundancy should have an opportunity to have input on the planned selection process before it is carried out, so the employer should hold individual meetings at which the employees at risk have a chance to see the matrix, take it away and comment on it.
• The law does not specify a particular period for consultation, but it is likely to take between two and four weeks in practice, although it could be longer depending on the size of the employer, the number of redundancies etc.

Individual consultation
The employer must
• Carry out a proper consultation to give individual employees an opportunity to comment on the process and to provide time for the employer to decide whether alternative employment is available.
• Carry out the consultation before serving notice to terminate the contract
• Ideally, write to the employee before holding the first consultation meeting setting out the fact that s/he is at risk of dismissal for redundancy.
• And inform the employee that s/he has a right to a companion at any meeting.

At the first meeting, the employee should be told of the reasons for the redundancy, discussing what options have been explored with a view to minimising redundancies. If there is no selection process, there will be a first ‘at risk’ meeting and then a second meeting at which the employee is made redundant, if that is the decision. If there is a selection process, the employer will have an additional meeting at which the matrix is shown to the employee and s/he is given a chance to comment.
Only after consultation has been concluded should the employer give notice of termination. The notice must be in writing and should include a right of appeal.
.
If the employee exercises his or her right of appeal, then an appeal hearing must be arranged (a consideration of the employee's appeal without a meeting is not sufficient to comply with the SDDP) at which the employee is given the right to be accompanied. The employee must be informed after the meeting (preferably in writing) of the outcome of the appeal.

Before any dismissal takes place, the employer must satisfy itself that there is not alternative employment available and must fully consult with the employee about anything that might be suitable. The law relating to alternative employment and trial periods is laid out above.

How do I get a grant for my business?

2010-04-01T22:54:00.006+01:00

Getting a Grant for your Business

Securing grant funding could really help your business develop and grow. But even experts can find it difficult to keep track of the hundreds of different grant schemes which keep appearing and then disappearing.

Ask me for a free guide that outlines the kind of grants available to small and medium-sized businesses. It explains the criteria a project must meet to qualify for a grant, and the potential benefits and pitfalls involved in applying.

The guide covers:
1. Which business activities are most likely to qualify.
2. Factors that could affect your eligibility.
3. How to identify grants you may be entitled to.
4. How to apply.

If you would like a copy of this free guide, please send me an email at: info@taxandaccounts.info

How do I determine if I am self-employed

2010-03-21T18:20:00.007Z

One of the questions a person who is setting up in business must ask is am I truly self-employed or am I an employee. As the wrong interpretation can prove to be very costly for the 'employer' and the individual.

You are probably self-employed if you:

1. run your own business and take responsibility for its success or failure

2. have several customers at the same time

3. can decide how, when and where you do your work

4. are free to hire other people to do the work for you or help you at your own expense

5. provide the main items of equipment to do your work

You are probably employed if you:

1. have to do the work yourself

2. work for one person at a time, who is in charge of what you do and takes on the risks of the business

3. can be told how, when and where you do your work

4. have to work a set amount of hours

5. are paid a regular amount according to the hours you work, and get paid for working overtime - even if you do casual or part-time work, you can still be employed

You can also be employed and self-employed at the same time, perhaps by working for an employer during the day and running your own business in the evenings. Think about each contract separately - you may find that you are self-employed for one but employed for another.

Fortunately, HMRC has developed an online tool that can be used to indicate whether a person is employed or self-employed. This can be found at:

https://esi2calculator.hmrc.gov.uk/esi/app/index.html

New Cross-border VAT rules

2010-01-13T10:05:00.003Z

Do you supply services to or receive services from overseas businesses?
Do you supply goods to other EU countries?
Do you reclaim VAT incurred in another EU country?
If so, you need to know about the changes below, which took effect from 1 January 2010:

• The place of supply for cross-border services to business customers will now be (under the new general rule) in the country of the customer. When these supplies are made within the EU, the customer will account for VAT under the reverse charge mechanism
• The time at which a customer accounts for VAT under the reverse charge mechanism has also changed
• There is a new requirement to file EC Sales Lists (ESLs) for supplies of services that are taxable in the customer's country. These must be filed every calendar quarter, within 14 days for paper and 21 days for on line
• The same deadlines will apply to ESLs for goods. ESLs for goods must be filed monthly if the value of the goods exceeds £70,000 (VAT exclusive) in the current or any of the previous four quarters
• A new online service will be introduced for reclaiming VAT incurred in other EU states instead of the current paper- based claims. You will need, first of all, to register and enrol for VAT Online services at http://online.hmrc.gov.uk/registration

Online Filing Of Corporation Tax Returns

2009-12-06T13:45:00.000Z

HMRC have written to half a million companies and their tax agents, to advise them of important changes to Corporation Tax (CT) return filing. The mail-shot contained a new HMRC leaflet on the changes, which will require all company tax returns delivered after 31 March 2011 to be filed online, for accounting periods ending after 31 March 2010. The leaflet explains how, after 31 March 2011, CT returns must be filed online in a specified data format (known as Inline XBRL or iXBRL).

Companies House has also announced that it will accept company accounts in XBRL, the same format as the CT returns. Companies House will introduce their XBRL service for unaudited full accounts by the summer of 2010, and then continue to develop their XBRL capability for all the main types of accounts they receive.

HMRC’s new XBRL service will be available from November 2009.

Extension of Trading Loss Carry Back

2009-12-03T22:02:00.004Z

In order to help businesses weather the current economic conditions the government has extended the period over which trading losses can be carried back.

Who is likely to be affected?

1. All companies and unincorporated businesses making losses from carrying on trades, professions or vocations (referred to below as trading losses).

General description of the measure

2. Legislation will be introduced in Finance Bill 2009 to extend the ability of businesses to carry trading losses back against profits of earlier years to get a repayment of tax.

Operative date

3. The measure will have effect on and after 22 April 2009 for company accounting periods ending in the period 24 November 2008 to 23 November 2010 and for tax years 2008-09 and 2009-10 for unincorporated businesses.

Current law and proposed revisions

4. Under current rules, businesses already have a number of mechanisms to ensure tax from profitable years is repaid through set-off against losses that arise in subsequent periods.

5. Firstly, businesses can offset unlimited trading losses against profits in the preceding year and reclaim tax previously paid. Secondly, start-up unincorporated businesses in the early years of operation can carry trading losses back for three years. Thirdly, any business ceasing to trade
can also carry trading losses back for three years. Lastly, ongoing trading losses can be offset against profits in future years.

6. Finance Bill 2009 will extend the period for which trading losses can be carried back against previous profits. This extension will apply to trading losses made by companies in accounting periods ending between 24 November 2008 and 23 November 2010 and to trading losses made in tax years 2008-09 and 2009-10 by unincorporated businesses.

7. Trade loss carry back will be extended from the current one year entitlement to a period of three years, with losses being carried back against later years first.

8. The amount of trading losses that can be carried back to the preceding year remains unlimited. After carry back to the preceding year, a maximum of £50,000 of unused losses will be available for carry back to the earlier two years. This £50,000 limit applies separately to the unused losses of each 12 month period or tax year within the duration of the extension. For companies this means a cap of £50,000 on the extended carry back of losses incurred in accounting periods ending in the 12 months to 23 November 2009 and a separate £50,000 cap on the extended carry-back of losses incurred in accounting periods ending in the 12 months to 23 November 2010. For unincorporated businesses, a separate £50,000 cap will apply to the extended carry-back of losses made in each of the tax years 2008-09 and 2009-10.

VAT Returns To Be Online

2009-12-03T21:40:00.000Z

The following businesses will have to file their VAT Returns online and pay any VAT due electronically, for periods that start on or after 1 April 2010:
• VAT registered businesses with a VAT exclusive turnover of £100,000 or more
• All businesses newly registering for VAT on or after 1 April 2010, irrespective of turnover

HMRC will calculate the turnover based on the VAT Returns filed in the 12 months prior to 2010.

VAT rate changes back to 17.5% on 1 January 2010

2009-12-03T20:57:00.002Z

In November 2008 the Chancellor announced a temporary reduction in the standard rate of VAT to 15 per cent between 1 December 2008 and 31 December 2009. This time period is shortly coming to an end. From 1 January 2010, the standard rate of VAT reverts to 17.5 per cent for:
• supplies of goods and services made on or after 1 January 2010
• imports on or after 1 January 2010, and
• acquisitions of goods from other Member States on or after 1 January 2010.

Other rates of VAT are not affected. Businesses must ensure they make the modifications necessary to deal with the change in the standard rate.