Ray Coman becomes an FCCA
Written by Ray Coman
The company director, Raphael Coman has been awarded the prestigious title of Fellow. This is demonstrates an extensive experience in the field of accountancy and proficiency within the profession.
UK Tax News
2012 Year end planning
Written by Ray Coman
Long term plans are not likely to be much affected by the nearness of the end of the tax year. Nevertheless, with 5 April 2012 approaching, consider the following tips which may be useful in saving tax before it is too late.
Make use of your ISA allowance. Up to £5,340 can be invested in cash and up to £10,680 overall. Both gains and income in the ISA are tax free. Any unused ISA allowance is not carried forward to the next year. If unused by the 6 April it will be wasted.
Use the capital gains tax allowance. Similarly, if unused the allowance would be wasted. Tax can be saved by disposing of an asset over different tax years than all at once. If you hope to repurchase the asset, however, you have to wait 30 days or the allowance could still effectively be wasted. Consider also that gains can be taxed much less in a year where income is lower. Gains can also be effectively transferred to spouse via the 'nil gain/ nil loss' rule, so potentially two lots of allowances are available to a couple.
Invest in a pension up to £50,000 per year. Once more, unused allowance cannot be rolled forward. Especially if you are anticipating retirement, spreading contributions to £50,000 per tax year will be more tax efficient.
If you own a company, consider taking dividends to use up the basic rate tax, or delay profit extraction to avoid higher rates. It may be a suitable time of year to contact your accountant for year-end tax planning.
If you are a business owner, review the opportunities to delay income, bring forward expenses and outlay on capital and write off stock, assets and bad debts. The tax will be effectively relieved a year sooner, where profits are reduced before the end of the accounting year. On the other hand, where your effective rate of tax for 2012/13 is less favourable, lower profits this year would be less favourable.
For inheritance tax, gifts of up to £3,000 per year are tax free, and the unused allowance for the previous year can be brought forward. A gift of up to £6,000, or potentially more on the occasion of a wedding, could escape any eventual inheritance tax at 40%.
Consider when to cash in investment bonds, as the profits will increase your overall income, potentially bringing you into higher rates of tax.
The advice in this article is of a general nature not intended to be acted upon. Please contact your accountant to discuss your particular circumstances and the opportunities for tax saving that may be available. Coman & Co. Chartered Tax Advisers would be pleased to assist with any queries.
2012 Budget
Written by Ray Coman
The 2012 budget has introduced tax measures and outlined proposals to advantage small and medium sized businesses, increase the taxation for the wealthiest homebuyers and reduce tax for people on the lowest incomes.
The decrease in the 50% rate to 45% on incomes over £150,000 will take effect after the 6 April 2013. There is a corresponding decrease in the top rate for dividends to 37.5%. Due to the tax credit, the effective rate of tax on dividends which take income over 150,000 will reduce from 36.5% to 31.25%.
For top earners the announcement presents an opportunity to defer income to April 2013 through planning, say, on pension contributions, extraction of business profits, remuneration and investment in income producing assets.
The personal allowance will increase from £7,475 to £8,105 on 6 April 2012 and to £9,205 on 6 April 2013. There will be a corresponding decrease in the basic rate band from £35,000 to £34,370 on 6 April 2012. However, the basic rate band will decrease to £32,245 from 6 April 2013. The outcome will be a reduction in the level of income before reaching higher rate tax for 2013/14. Currently, incomes are not taxed at the higher rate until they reach £42,475, however this will fall to £41,450 from 6 April 2013.
The raise in the personal allowance also lifts the income level at which it is withdrawn. The personal allowance reduces by £1 for every £2 of income over £100,000, so that the allowance would not be fully abated until income reaches £116,210 for 2012/3 and £118,410 for 2013/14.
The age related allowances will also be fixed at their current levels until they eventually align with the increasing personal allowance. Currently, people above 70 with higher incomes do not benefit from the extra allowance which is withdrawn by £1 for every £2 that the allowance exceeds £24,000. The new measures will therefore affect the lower income by freezing the allowance against inflation.
With effect from 22 March, the government has lifted the stamp duty land tax (SDLT) from 5% to 7% on properties with a value over £2 million. A SDLT rate of 15% will be applied to these expensive properties acquired through companies, including overseas companies, trusts and other structures. This is a method previously used by wealthy individuals to avoid stamp duty. The government also proposes to introduce an annual charge to existing structures used to purchase properties valued over £2 million.
The chancellor also intends to make non-UK companies subject to capital gains tax on the sale of UK residential properties.
The registration limit for VAT will be increased from £73,000 to £77,000 of turnover from 1 April 2012. The limit for simplified reporting of profits on Tax Returns, also known as three line accounts, will be aligned with the new VAT limits. Businesses which are not established in the UK currently trading below the registration limit may be required to register, as the turnover test for these businesses will be eliminated from 1 December 2012.
The government has opened a consultation on a cash basis for calculating tax which is expected to apply to unincorporated business with turnover below the VAT threshold. A similar scheme of cash accounting is already available to VAT registered businesses with a turnover under £1.6 million. Through the scheme businesses account for VAT based on cash paid and received rather than when income is accrued. The scheme prevents small businesses from being out of pocket to HMRC and gives immediate relief from bad debt. A similar measure for calculating other tax applicable to small businesses could offer similar benefits. The scheme also has the potential to significantly reduce the accounting burden for business owners.
The value of shares that can be granted under the Enterprise Management Incentive Scheme is set to increase to £250,000, up from £120,000. The measure, which allows employees to exercise shares in their company without any charge to income tax, will improve the incentive available to key staff in small and medium sized businesses. The government also intends to extend entrepreneur’s relief to gains on shares acquired through the Enterprise Management Incentive scheme. Both the above announcements aim to benefit unquoted companies that meet the requirements.
The full rate of corporation tax will fall from 1 April 2012 to 24%. This is 1% lower than previously announced. The small companies’ rate remains at 20%.
Coman & Co. Ltd. are chartered tax advisers and specialist accountants for individuals and business owners. Please contact us if you have any further enquiries.
HMRC may reverse penalties for late Tax Returns
Written by Ray Coman
HMRC workers held a one day strike on 31 January over the part-privatisation of some of their operations.
As a result HMRC has indicated that it may accept the inability to reach the helpline on 31 January 2012 as a 'reasonable excuse' for not filing on the deadline, provided the Tax Return is filed before midnight on 2 February.
Please contact us for if you have further queries relating to your tax affairs.
Tax Enquiries
Written by Ray Coman
Once they have received your Tax Return, HMRC may respond with queries. Typically, HMRC will request that you provide evidence and explanations to support the information on your Tax Return.
HMRC are permitted to enquire into your Tax Return anytime within one year of receiving it. The period can be slightly longer where you have filed the Tax Return late. You can amend your Tax Return within twelve months of the filing deadline. Similarly, HMRC can enquire into any such amendments within twelve months of receiving them.
HMRC do not need to give any reason for making an enquiry. Although the main purpose of an enquiry is to identify mistakes on your Tax Return, your Tax Return is not necessarily inaccurate just because an enquiry has been opened.
You must keep your records until HMRC can no longer raise an enquiry. If you have trading or rental income, you must keep your records for a further four years.
HMRC also have the power to make an assessment of your tax liability based on information they discover that was not made available through your Tax Return. The time limit for a discovery assessment is four years after the tax year end. The time limit is extended to 20 years for information deliberately concealed.
A tax investigation is unwelcome and we offer a specialised tax enquiry service to reduce the costs involved. Please contact us for a free, initial meeting to discuss your requirements.
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