Welcome to April’s Tax Tips & News, our newsletter designed to bring you tax tips and news to keep you one step ahead of the taxman.
It is tax season once again. Please get your information together asap for your 2013 personal tax return, so that you can claim rebates early, or start planning your tax savings now.
We want to help our clients as much as possible, so please take advantage of our free business review meetings, call us now to book a review.
Please contact us for advice in your own specific circumstances. We’re here to help!
Table Of Contents
If you fall into that category, and you pay some employees more frequently than once a month, you can send your RTI report known as full payment submission (FPS), to HMRC when you run your monthly payroll. You would normally have to send in a FPS every time you pay an employee.
However, there are conditions:
- The payroll run must be made before the end of the tax month, i.e. by 5 May for employees paid in April; and
- The relaxation also only applies for RTI reports submitted up until 5 October 2013.
Remember, this is not a postponement of RTI, it is a small and temporary change to one reporting rule. You still need to use new or updated payroll software to report payroll data under RTI for all pay dates on or after 6 April 2013.
Loans to Participators Trap
Where a participator borrows from his company and repays the loan within nine months of the end of the accounting year in which the loan was taken, there is no tax charge for the company.
However, where the loan is outstanding for longer, the company must pay 25% of the loan balance as corporation tax to HMRC. This corporation tax charge is then repaid when the loan is fully repaid.
Four changes may affect when or if this corporation tax is payable:
1. Thirty day rule
2. Intention or arrangements in place
3. Using a third party
4. Conferring a benefit
SEIS Investment Extension
The legislation makes it clear that the CGT relief is to be extended for one year, for investments made in 2013/14.
Also the CGT relief for investments made in 2013/14 will be given at 50%, while investments made in 2012/13 are given CGT relief at 100% of the gain reinvested.
Cash Basis for Small Businesses
In an attempt to simplify accounting and tax reporting for the smallest businesses, from 6 April 2013 small businesses can choose to calculate profits/losses on the basis of the cash received and expenses paid out. This is known as the cash basis, and it ignores debts owed by the business and amounts owing to the business, until those amounts are paid. The normal accounting method is known as the accruals basis.
The cash basis will only be available to businesses which operate as sole-traders or partnerships, and whose turnover is under the VAT registration threshold (£79,000 from 1 April 2013). Some other businesses will be barred from using the cash basis and these include:
- All companies and LLPs;
- Farmers using the herd basis;
- Any business using profit averaging over several tax years;
- Businesses in a mineral extraction trade; and
- Lloyd’s underwriters.
Once a business is using the cash basis it can carry on doing so until its annual turnover is twice the VAT registration threshold (£158,000 from April 2013).
Although apparently simple, the cash basis will have some disadvantages:
- The deduction for loan interest paid will be limited to £500 per year; and
- Losses can only be carried forward to set against future profits, whereas under the accruals basis losses can be carried back in the first four years of the trade and set off against the trader’s other income.
In addition any unincorporated business, whether or not they are using the cash basis, will be able to use flat rate expenses to replace the calculation of actual costs incurred in these categories of expenses from 6 April 2013:
- Motoring costs (mileage at 45p per mile);
- Use of home for business purposes (based on number of hours used per month); and
- Private use of part of commercial premises, such as a public house (based on number of occupants who are business owners or their immediate family)
As these flat rates are completely optional, and will vary in effect in each business, we need to discuss whether these flat rates will be suitable for your business.
April Question and Answer Section
A. If you sell the business assets and goodwill together, so that the purchaser can pick up where you stop and carry on the business, it will be treated as being a transfer of a going concern and outside the scope of VAT. So you don’t have to charge VAT on the business sale or register for VAT. More information about transferring a business as a ‘going concern’ is given in the VAT leaflet no. 700/9: Transfer of a business as a going concern.
Q. If my company buys the rights to the intellectual property I create in the form of blogs, websites and online presentations, is that treated as the sale of a capital asset in my hands subject to capital gains tax? If so, can I sell such intellectual property every year for £10,000, so the gain is covered by my annual exemption and I pay no tax?
A. There are two reasons why your plan won’t work:
i. You and your company are connected parties. Any transactions between you and the company must be valued at open market value. Is your blog etc. really worth £10,000 on the open market?
ii. The Taxman’s view is that transactions involving copyright will generally fall to be taxed as income receipts, not capital gains.
Q. Our son is now old enough to attend nursery. Can my company, as my employer, help out with the nursery fees?
A. Your company can provide you with childcare vouchers to be redeemed at registered child care providers, and the first £55 per week of vouchers will be tax and NI free. If both parents work for the company they can each get £55 worth of child care vouchers per week. However, if you pay tax at 40%, you can only receive £28 per week of vouchers tax fee. Those that pay tax at the new highest rate of 45% (from 6 April 2013) can only receive up to £25 per week of tax free vouchers.
The company must offer childcare vouchers to all it’s employees who work at the same site, it cannot exclude any employees, but employees can opt out. However, only parents with children aged under 16 can qualify for childcare vouchers. There are a number of other rules which are set out in the HMRC booklet E18: How you can help your employees with childcare.
April Key Tax Dates
- 5 – End of 2012/13 tax year. Last day to use up your annual exemptions for capital gains tax, inheritance tax and ISA’s
- 14 – Return and payment of CT61 tax due for quarter to 31 March 2013
- 19/22 – PAYE/NIC and CIS deductions due for month to 5/4/2013 or quarter 4 of 2012/13 for small employers. Interest will run on any unpaid PAYE/NIC for the tax year 2012/13
- 30 – Additional daily penalties of £10 per day up to a maximum of £900 for failing to file self assessment tax return due on 31 January 2013