Welcome to September’s Tax Tips & News, our newsletter designed to bring you tax tips and news to keep you one step ahead of the taxman.
We have already filed many personal tax returns for 2011/12. If you haven’t sent in your information as yet, please send asap, as this helps you receive any tax rebate due quickly and also gives you a chance to save for any tax due.
Our next Networking Evening is at The Elephant in Pangbourne at 6pm on Wednesday 19th September, it is FREE and we would love to see you there, places are limited, so please book by emailing . We are exhibiting at the BMG Exhibition on 25th September, do pop by and say hello, Nicky is also presenting a Free Seminar so please contact BMG to book.
Please contact us for advice in your own specific circumstances. We’re here to help!
Table Of Contents
Child Benefit Clawback
This is because from 7 January 2013 the higher earner in the family (where that person has £50,000 or more of income) will be landed with a tax charge to clawback the child benefit claimed in respect of the children. The tax charge will equal 1% of the child benefit received by the family for every £100 of income over £50,000, so 100% of the child benefit will be clawed-back when the higher earner has net taxable income of £60,000 per year.
The tax charge only applies to child benefit paid from 7 January 2013 onwards, and will be calculated on your net taxable income for the current tax year: 2012/13. Net taxable income is income after deduction of losses, pension contributions and gift aid payments but before personal allowances. So there is some scope for reducing your net income below £50,000 by paying pension contributions, gift aid donations, or by taking a smaller dividend from your own company in the current tax year. But those strategies, and other ways to manage your income, need to continue until the children are no longer eligible for child benefit.
You will be given the option of declining to receive child benefit to avoid the tax charge, and this will be explained in the Taxman’s letter. However, this is not the same as not making a claim for child benefit. It is important to make a claim for child benefit (even if your decline to receive it) as the claim can help entitlements to the state pension for a non-working parent, and ensures the child receives a NI number at age 15.
Capital Gains Tax
You need to calculate this gain to see if it needs to be reported on your tax return. Where the gain from the gift, together with any other gains you make in the year, exceeds your annual exemption of £10,600, all those gains must be reported on your tax return.
To calculate the amount of the gain you need to know the market value of the items given, at the date of the gift, and the cost or value when you acquired the items. If you acquired the assets before 31 March 1982, the value at 31 March 1982 is taken as your cost value, so you need a value at that date as well. We can help you will the calculation of the gain, but it would be wise to engage a specialist valuer to determine the value of the assets (particularly property) at the date of the gift and at 31 March 1982 if required.
Stamp duty land tax generally applies to the transfer of land in the UK, but it will not apply if the recipient gives nothing in return for the property, i.e. it is a pure gift. However, if the recipient agrees to take on a mortgage attached to the property, the outstanding value of that mortgage will be treated as consideration for the property and stamp duty land tax will apply to that consideration.
Whose Fault is Underpaid Tax?
We can help you check any form P800 you receive, but we need to see the PAYE codes issued to you for the tax year, and payslips from your employer or pension provider to check what PAYE codes they have used. Where the employer/pension provider has not used the correct PAYE code and this causes any tax not to be collected, it remains their responsibility, not yours.
Unfortunately the Taxman is ignoring this piece of law and is demanding payment of the underpaid tax from employees and pensioners, where the error lies with the employer/pension provider. We can help you challenge the Taxman on this point.
Sometimes the fault lies with the Taxman who has ignored information you or your employer have provided on more than one occasion. The Tax Office may also have let tax arrears to build up over two or more years without telling you. If either of these situations apply, you can ask the Taxman to write-off the tax owing under Extra Statutory Concession A19. The Taxman is very reluctant to use this concession, but we can help argue your case.
However, there are significant disadvantages for the supplier who agrees to self-billing. The supplier losses control of when invoices are raised and may have no control over the amount billed and the amount of VAT shown on the invoice.
Although the VAT-man’s guidance on their website says that the recipient of the supply (i.e. the customer who raises the self-billed invoice) is responsible for ensuring the invoice carries the correct VAT amount, it is actually the supplier who remains responsible for the amount of VAT charged.
If you are signed-up to self-billing as a supplier don’t assume that the VAT shown on the invoices you receive from your customers is correct. You will remain responsible for any errors.
September Question & Answer Section
A. Yes, you can both claim the use of home expense allowance, which is now £4 per week as from 6 April 2012. It makes no difference whether you both work for the same company or for different companies.
Q. I own a number of rental properties but this year I’ve been sued over unpaid service charges. The dispute has been resolved, but I’ve been left with legal costs. Can I deduct those legal costs from the property rental income for the year?
A. In general any legal fees associated with acquiring or improving the property or defending the title to the property or extending a lease on a property cannot be deducted from the rental income, as they are capital expenditure. Other legal fees associated with annual bills or service charges should be allowable. You should keep all the paper work associated with the dispute just in case the Taxman asks about the legal fees in future.
Q. My business recently bought an e-book reader from an online retailer. It will be used for business purposes but the retailer is refusing to provide me with a VAT invoice, saying their products are not provided for business purposes, so VAT invoices are not provided to VAT registered customers. How can I get the VAT invoice I need to claim back the VAT charged to my business?
A. If the customer (you) asks for a VAT invoice the supplier must provide one, but in practice you can’t force the retailer to comply with the VAT law. As long as you have documentary evidence that VAT was charged – the amount and rate – and evidence that you have tried to obtain a VAT invoice, you can reclaim the VAT charged in your VAT return.
September Key Tax Dates
- PAYE/NIC and CIS deductions due for month to 5/9/2012
- Closing date to claim Small Business Rate Relief for 2011/12 in England
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