Arithmo Online Accounting

August Key Tax Dates

2011-07-29T03:06:00.003-07:00

2nd - Last day for car change notifications in the quarter to 5 July - Use P46 Car

19th/22nd - PAYE/NIC and CIS deductions due for month to 5/8/2011

August Question and Answer Section

2011-07-29T03:06:00.001-07:00

Q. I've heard I could reduce inheritance tax by leaving money to charities in my Will. How does this work? Do I have to leave a minimum amount?

A. Any bequests to charities in your Will are free of inheritance tax (IHT). This means the executors of your estate will only pay IHT at 40% on the value of your estate after deducting the following:

- gifts to charities,
- gifts to your UK domiciled spouse; and
- your available nil rate threshold.

For deaths after 5 April 2012 it is proposed that the rate of IHT paid will be reduced to 36%, if at least 10% of the net estate is left to charity. Your net estate is the amount on which IHT would be charged without considering the charitable gifts. You may need to redraft your Will to ensure your estate qualifies for this tax discount.

Q. I earn £30,000 p.a. taxed under PAYE, but also have a variable amount of rental income. I read that 40% tax applies above £35,000 but I've also been told I can earn £42,475 before paying 40% tax. How much rental income can I receive before paying 40% tax?

A. The 40% tax rate applies in the current tax year (2011/12) on taxable income above £35,000. This is your total income (earnings, rentals and any interest or dividends) less your tax free allowance of £7,475 and any other valid deductions, such as expenses relating to your rental income. So you can have gross income before deductions of £42,475 (£35,000 + £7475) before you have to pay 40% tax. However, you must declare any rental income you receive to HMRC.

Q. My employees are occasionally required to work late in the evening. If I pay for taxis to take them home is that cost tax allowable for the business and will the employees be charged tax on the taxi fare?

A. Where an employer pays for the travel costs of an employee for a journey between home and work (i.e. commuting), that cost would normally be a taxable benefit in kind for the employee. However, there is currently a particular tax exemption for late night taxis used when the employee is required to work past 9pm, and at the time the employee finishes work either public transport was unavailable or it would be unreasonable to ask the employee to use it, or car sharing arrangements have broken down. In this case the cost of the taxi is not taxable on the employee. But you can only use this tax exemption up to 60 times per year per employee. You need to keep accurate records of why each employee took a taxi to get home and the timing of those journeys.

This tax exemption for late night taxis is due to be abolished from April 2012, so you may need to reconsider your employees' travel arrangements in future. The cost of taxi journeys for employees on business or to or from work will always be tax allowable for the business.

Less Tax for Students

2011-07-29T03:05:00.004-07:00

If you are employing students over the summer months, don't forget to give them the HMRC form P38S (2011) to sign. This form allows the student to earn their full annual allowance of £7,475 from their holiday work before any tax is deducted.

The student must confirm they will return to full time study at a named college, school or university for a course that will continue until at least 5 April 2012. The student must also not have employment during term time.

The tax exemption does not cover NI contributions, so if the student's pay is at or above the earnings thresholds (£136 for employers contributions, £139 for employees contributions), you must deduct employees NICs and pay the appropriate employers NICs.

Remember the national minimum wage (NMW) rates do apply to students and part-time employees. For workers aged 18 to 20 inclusive the current NMW rate is £4.92 per hour. Only apprentices aged under 19 or apprentices in their first year can be paid the reduced NMW rate of £2.50 per hour.

Companies House Reminders

2011-07-29T03:05:00.002-07:00

You can now set up an email reminder service for your company or LLP at Companies House. Once you have registered you will receive timely emails to remind you of the due dates to submit the annual return and accounts for your business, and paper reminders will cease.

You can register up to four email addresses for each business. Each email address nominated will receive an activation email which must be acted upon within five days, so don't set up the email reminder service just before you go on holiday.

It will be possible to opt-out of the email reminder service and revert to paper reminders.

Of course if we look after these for you, we will remind you as well!

VAT Initiative Starts

2011-07-29T03:05:00.000-07:00

Last month we warned you the Taxman was planning a campaign to encourage businesses to register for VAT. The Taxman is calling this campaign the 'VAT Initiative'.

To launch the VAT initiative the Taxman is writing to about 40,000 businesses whose turnover has apparently already exceeded the compulsory VAT registration threshold. Those businesses will be invited to register for VAT and pay over all the VAT owed since the date they should have registered, plus a low penalty of only 10% of the VAT outstanding. Those businesses that first exceeded the VAT threshold within the last 12 months may get away with a nil penalty, but it will be up to the Taxman to decide what level of penalty applies.

The requirement to register for VAT is based on total turnover in a 12 month rolling period and needs to be reviewed each month to determine if the business needs to register immediately. The compulsory VAT registration thresholds of turnover in the past 12 months is...

From 1 April 2011: £73,000
1 April 2010 - 31 March 2011: £70,000
1 May 2009 - 31 March 2010: £68,000
1 April 2008 - 30 April 2009: £67,000
1 April 2007 - 31 March 2008: £64,000
1 April 2006 - 31 March 2007: £61,000

The VAT initiative is also open to any business who has not received a letter from the Taxman, but believes they should have registered for VAT at some point in the past. If you want to take up the offer of low penalties for late VAT registration you need to tell HMRC you want to be part of this VAT initiative by 30 September 2011. We can assist you in doing this.

Once your notification has been processed you will receive a notification reference number (NRN), which you must quote on your application form to register for VAT (form VAT1). Without this notification number you will not be able to take advantage of the nil or 10% penalties on offer. The VAT1 form must be completed in paper form, (NOT online) and posted to the VAT initiative section to arrive by 31 December 2011.

Please talk to us before notifying HMRC of your intention to register for VAT. We can help you calculate any VAT due and any other tax owing on undeclared sales.

New Workplace Pensions Cost

2011-07-29T03:04:00.001-07:00

Another set of regulations is set to fall on the shoulders of all employers. This time it's a compulsory pension scheme for all employees.

This new pensions law is due to be introduced over four years from October 2012. The largest employers (120,000 or more employees) will be forced to sign up first. Those who employ less than 50 workers will be required to take part in the scheme from a date sometime in 2014 to 2016. The exact date will depend on your PAYE reference number.

Only one-man companies will be exempt, otherwise every employer who has workers in the UK will be required to enrol those workers in a pension scheme. There will be exceptions for workers aged under 22, over state retirement age or paid less than £7,475. Employees will have to take an active decision to opt out and sign a form to do so. The employer will not be permitted to induce employees to opt out, or to screen out potential employees who do not wish to opt out of the pension scheme.

Employers and employees will be required to make contributions to the pension scheme totalling 8% of the workers earnings, including tax relief given on the employees contributions. The employer must contribute at least 3% of the workers' earnings. This level of compulsory contributions will be imposed gradually over five years to 2017.

Employers can use an existing pension scheme, set up a new one, or use the new low cost pension scheme established by the Government called NEST (National Employment Savings Trust). Where an existing scheme is used the employer will have to certify that it meets all the requirements for compulsory pension saving. Every employer will also be required to register with the pensions regulator.

To prepare for these new regulations talk to your pension scheme provider, if you have one. If you don't have a workplace pension scheme you need to plan to set one up as this can take sometime to implement, and to start budgeting for the costs!

Tax statements delay as HMRC fails to order enough paper

2011-07-28T02:56:00.001-07:00

Statements about self assessment balancing payments will be delayed this year for some 500,000 people after HMRC failed to order enough special paper.

Those in the self assessment system who pay taxes ‘on account’ – mainly sole traders, the self-employed, and partners in businesses or LLPs – make payments in January and July 2011 based on the tax they paid for the tax year 2009-10. A balancing payment, or refund, will paid in January 2012 to rectify any differences between the estimate and the actual amount.

However, this year HMRC underestimated the number of forms – similar to credit card statements - required by taxpayers and failed to order enough of the necessary paper for printing them.

The late statements will now go out in August and, so long as payments are made within 30 days, no interest will be charged. It will also still be possible for taxpayers to check their statements online and pay via the internet or by telephone.

A spokesman for the Revenue said: "The volumes on this occasion have risen out of all proportion to previous patterns. HMRC will now ensure that they understand the reasons for this and will be fully prepared for any future rises…This in no way prevents the accurate payment of tax and no one will be out of pocket as a result."

Cutting NICs ‘would boost small business employment’

2011-07-04T02:00:00.002-07:00

Reducing national insurance contributions (NICs) would encourage small firms to take on more staff, a leading business group has said.

In a new study by the Federation of Small Businesses (FSB), nearly a third (31%) of respondents said that cutting NIC payments for the first six months of employment would provide the incentive they need to boost their employee intake.

11% said that extending the NICs holiday scheme would also increase the likelihood of them hiring new members of staff.

The NICs holiday was launched on 6 September 2010 and provides new businesses in certain areas of the country with a break from paying employer NICs in respect of the first 10 employees that they take on in the first year of business.

However, the FSB claims that this does not go far enough and is calling on the Government to extend the NICs holiday to existing firms with up to four members of staff that take on up to three new employees.

Last month the Exchequer secretary revealed that fewer than 3,000 employers had taken up the scheme from 6 September 2010 to 28 March 2011.

Commenting, FSB National Chairman John Walker said: ‘We have been saying for some time that small businesses would be encouraged to take on staff if National Insurance Contributions were reduced.

‘Small businesses want to employ but have told us that they need incentives to do so. The Government must extend the National Insurance Contributions holiday to existing businesses if small firms are to take on new staff and so help tackle high unemployment’.

Money laundering changes ‘to reduce burden on business’

2011-07-04T02:00:00.000-07:00

The Treasury has published its recommendations for improving the Money Laundering Regulations and reducing the burden on British businesses.

It follows a Government review of the rules in which ministers found that the regulations and their implementation are ‘broadly effective and proportionate,’ although they conceded that there was scope for ‘improvement’.

Under the Treasury’s proposals for reform, businesses with turnover of less than £13,000 excluding VAT would be excluded from the regulations.

The Treasury also proposes removing more than two dozen criminal penalties for businesses which fail to have the appropriate systems and controls in place to combat money laundering.

It claims this would allow businesses to ‘implement a fully risk-based approach’, where businesses make their own assessment of the risks they face and implement appropriate systems and controls.

Civil penalties will remain and the Government will be consulting on whether regulators should have the power to impose additional penalties.

In a statement, James Sassoon, commercial secretary to the Treasury, said: ‘We believe that we can make the regulations more effective and proportionate by removing a range of criminal penalties on all businesses and by lifting the burdens on the smallest businesses.

‘This will modestly reduce the burden on business, without damaging the fight against money laundering’.

2011-07-04T01:58:00.001-07:00

London based accountancy firm happy in the clouds

Interview with GKPP partner Atul Sharma – http://www.gkpp.com

How was GKPP formed?

GKPP arose from a firm based in Ealing in the 1970's, Burbage & Co. in the mid 1990's. I formed a City based accounting firm and took over the Ealing firm, merging them into GKPP. Over the years we have grown from west London and beyond and now have a national and international client base, though the base is still in west London.

How did you come about cloud computing?

We researched the market place for a suitable online package to help us prepare client accounts and to be able to support clients. From a shortlist of three we evaluated and tested the available options and overall were most impressed with the support and knowledge base of Arithmo staff and their willingness to cater for our requirements and to train our staff in the software.

What are your thoughts on online accounting?

For an expanding firm online accounting has to be the way to reach a wider client base. In addition, the ability to service and work with clients without needing to travel means that service levels and resources are maintained to support a wider range of clients.

Do you see any benefits of the software for a small accountancy practice?

We are seeing an immediate improvement in the quality of the output from VAT returns and management accounts being worked on.

Being able to answer queries and review client input means that we can often prevent any mispostings and are able to ensure that the integrity and reliability of the information is protected.

We had a VAT inspection for one of the clients and the VAT man was pleased to see the schedules and it gave him considerable comfort and reassurance that the system being used was reliable and to be trusted.

In addition we have branded the product for our own use and this helps us in the marketplace as being seen as a proactive firm focused on client service.

What does the future holds for GKPP?

We intend to push our solution to as many clients as possible in order to improve the productivity of the practice. Our aim is to move away from the brown paper bags and shoe-boxes as much as possible and to educate and train our longer term clients in the most effective way to support their accounting effort. By improving their management accounting system they will be able to make better decisions and to seek advice from our practice as and when required.

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About Arithmo Accounting Solutions Arithmo is a quick, simple online bookkeeping system which can be used by all categories of businesses. Arithmo set out to create a solution to the problem that was not only simple to use, but incorporated many of the benefits of the more complex packages. The software has a comprehensive range of features normally found in the high end systems (e.g. Audit Trails, VAT reports, Balance Sheets etc).
For more information contact Mike Parkes 0161 968 7395 or email mike@arithmo.co.uk
Arithmo Accounting Solutions - www.arithmo.co.uk