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CC Accounting Associates Ltd

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David J. Cox, ACPA, Eastbourne

Certified Public Accountant & Tax Consultant  

1 Green Street, Eastbourne, BN21 1QN

SAT returns - VAT returns - Company returns - Company House filing - Accounts

Small businesses are my speciality - both accounts and tax

Calls to 01323 403080 will ring direct to me at my office or mobile for the cost of a local call. Otherwise please email me or send a text message.

 

We have moved back to Sussex as our main home

Eastbourne 01323403080 will reach David at all times

HMRC re-launches Business Records Checks

HMRC will be sending out letters to businesses that it believes may be at risk of keeping inadequate records, advising them that it will be in touch by phone. The call will take businesses through a set of questions designed to assess their record keeping affairs.

Depending on the outcome, HMRC will then decide whether they would benefit from “tailored educational support” and whether a visit is necessary.

If businesses are keeping inadequate records they will receive guidance on what to do. HMRC will then set up another visit after three months to check that the necessary improvements have been made.

Businesses that then fail to comply will be liable to a penalty.

HMRC director of local compliance, Richard Summersgill, said: “The visits offer benefits for businesses at risk of keeping inadequate records.

“Adequate records help businesses pay the right amount of tax at the right time, thereby avoiding interest and penalties for errors and late payment, whilst also giving HMRC greater assurance when a business submits its tax returns.”

Clients need to keep books up to date ready for the preparation of annual accounts.

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CHILD BENEFIT

From 7 January 2013, taxpayers earning more than £50,000 in a tax year who receive Child Benefit, or live or lived with a partner receiving Child Benefit are now liable to pay an income tax charge on that benefit. The charge payable depends on their ‘adjusted net income’ (ie, the total taxable income less certain tax reliefs, including pension contributions), and amount of Child Benefit the claimant is entitled to.

Child Benefit has been withdrawn for taxpayers earning over £60,000 per annum.

For those with income between £50,000 and £60,000, the tax charge will be less than the child benefit entitlement. They will pay 1% of the child benefit entitlement for every £100 of their income above £50,000. For those with income of over £60,000, the charge will effectively reduce the child benefit to £nil. The changes are expected to affect 1.2m families, 70% of which will lose the benefit in full.

However, anyone considering opting out should be aware of the impact on state pension rights.

Non-working individuals who receive child benefit for a child under 12 are entitled to receive national insurance (NICs) credits which build entitlement to the state pension. Where a decision is taken not to receive child benefit payments as a result of the introduction of the new charge, it is important that a child benefit claim form is still completed. The entitlement, rather than the payment, of child benefit will ensure that NI credits continue.

Those who received Child Benefit between 7 January and 5 April 2013 are advised to register for Self Assessment by 5 October to avoid paying penalties of up to 100% of the tax charge in relation to the HICB for 2012-13.

The HMRC briefing is available HERE

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Statutory Residence Test

 

Historically a person’s UK residency status has been determined based on an analysis of the number of days spent in the UK together with factors based on case law. 

However a new statutory residence test (SRT) was introduced from 6 April 2013, therefore a taxpayers residence status for the tax year 2013/14 onwards will be dictated by its new rules.

An Overview of the Relevant Principles

The basic rule is that, a person is UK resident in a tax year where either:

1. The ‘automatic residence test’ is met, or

2. The ‘sufficient ties test’ is met

Where neither of the tests is met, the taxpayer is non UK resident for that year.

The automatic residence test is met if the individual meets any of the four automatic UK tests and none of the automatic overseas tests.

Therefore if an individual meets one or more of the automatic UK tests, it is then necessary to consider whether any of the automatic overseas tests apply to prevent the individual being UK resident.

Alternatively, where none of the automatic UK tests are met, the next step will be to consider the sufficient ties tests.

The tests themselves are set out clearly in the legislation – however a complication is that key terms are often defined later in the statute and may themselves require the advisor to consider a number of different steps or conditions.

Specific ‘split year’ rules apply in relation to the years of arrival and departure.

Key Areas to Consider

A number of key areas to consider when applying the tests include:

bullet days in the UK at midnight - whilst days where the taxpayer is not in the UK at midnight are generally excluded from counting towards the day limits there are circumstances in which this basic provision is overridden and the day is deemed to be a day spent in the UK
bullet transit through the UK – there are specific rules to determine whether days in the UK at midnight where passengers are in transit count towards the day limit – care should be taken to consider whether any substantial activities unrelated to the travel are being undertaken
bullet exceptional circumstances – this term is now defined in statute but perhaps more interestingly the number of days that may be ignored due to exceptional circumstances has been capped at the lower figure of 60 days
bullet some of the tests require an assessment of the taxpayer’s residence status in the past 3 tax years.  The general rule is that the residence status for the years in question should be determined based on the rules applying at the time, however for the tax years 2013/14 to 2017/18 only, the statutory residency test may be used to establish a persons residence status in the pre-commencement years – however this will only be relevant to determining their residence status under the SRT and will not affect their tax position for those earlier yeas
bullet there are specific tests applicable to determine the residence status of deceased persons
bullet for those working overseas there are a number of conditions that must be met for the work to be treated as full time work overseas, care should be taken to consider when work begins and the impact of any breaks in work
bullet the definition of ‘home’ will not normally include holiday homes used occasionally however it is not necessary for the taxpayer to have an interest in the whole or part of the property for it to be treated as a home
bullet the potential impact that family living arrangements can have on a persons residency status

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Scaffolder jailed for tax fraud

A self-employed scaffolder from Sunderland who evaded payments of £56,000 in VAT and income tax has been jailed for nine months following an HMRC investigation.

Joseph Dellett was declared bankrupt in 2007 with debts of over £70,000. However, HMRC officers found that he continued to operate ‘below the radar’, without registering as self-employed or completing any income tax self assessments.

HMRC said Dellett worked as a sub-contractor for a number of companies in the Sunderland area, charging his customers VAT, but never submitted a VAT return. Officers calculated that over a four year period Dellett avoided paying more than £38,000 in VAT and £18,000 in income tax and national insurance contributions.

Jo Tyler, assistant director, criminal investigation, HMRC, said: ‘The vast majority of businesses play by the rules but Dellett chose to evade the taxes he should have been paying. People who attempt to run a business or work in the black economy should take notice, we can and will track you down.’

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HMRC to contact up to 5m over incorrect tax

 

HMRC estimates suggest up to 5m people may have paid an incorrect amount of tax in 2012/2013.

The department has begun its end of year reconciliation process (EoYR), two months earlier than usual, and expects to finish the adjustments by October. HMRC says it plans to process overpayments and underpayments together, rather than as separate phases, in order to speed up the process of making corrections to tax gathered under PAYE.

HMRC calculates that between 2.1m and 3.5m individuals have paid too much tax, while between 1.2m and 1.6m have paid too little. The average repayment to those who have overpaid is £379, while the average shortfall is £537.

Taxpayers who do not complete Self Assessment tax returns and owe less than £50 will not have to pay anything; those with more to pay will start to receive notifications four months earlier than last year, which HMRC says is designed to help them plan their finances further in advance. Most repayments will be handled via changes in the individual’s tax code, while those due a refund will start receiving payable orders from HMRC from next month.

HMRC says that 85% of people on PAYE pay the correct amount of tax, and that many of the adjustments are down to changes in an individual’s circumstances over the year. It also says it will be sympathetic to those who say they will have difficulty paying any additional tax due, with the option to spread over a maximum of three years if necessary.

 

After the rush to meet the 31 January deadline

I decided to email clients to encourage them to let me have their books earlier so that I could stagger the work more evenly and this has worked very well up to date but there are still 70 jobs to come in.  I have just issued further reminders extending the discount deadline and am hopeful this will bring in a large number of these. I cannot face the thought of 14 hour days in December and January again so come on guys !

Sometimes you get a pleasant surprise from HMRC

A company client of mine had filled in a form without telling me and HMRC had changed the annual accounts date from the normal date under company law.

I had completed accounts to 30th June which were accepted by Companies House but HMRC website would not accept these. 

Investigation showed that the tax return was expected to 16th August. 

I rang the tax inspector and was delighted to be told that HMRC would amend the return date to agree with the statutory accounts submitted to Companies House. 

A victory for common sense.

The saga of my broadband

I used to live in Broadstairs and I had a 5 year contract with BT for a business line which expired this year. 

As soon as it was out of contract I rang BT to ask them to cease it.

Two days later I received an email from BT saying that they were sorry that I was ceasing my broadband and it would be cancelled on 17th February 2012.

I immediately rang BT to explain that I had not requested that my broadband be cancelled. 

I was assured that the error had been noted and that my broadband would not be cancelled.

About three days later I received a letter saying much the same as the email.

Once again I rang BT and I again was assured that my broadband would not be cancelled.

On 14th February I went away for a few days rest and recuperation following the marathon hours worked in December and January completing self assessment returns.

When I returned from my break on 17th February I discovered that ........

my broadband had been cancelled.

I spent most of Friday morning on the phone to BT trying to get the service re-connected and was finally promised at 1.00 pm that it would be back online within 5 hours.

6.00 pm passed and a recorded announcement said BT business services were closed until Monday.

So on Monday I was back on the phone. 

The first person that I spoke to said that I was connected to broadband and the fault must be at my end.  To humour the employee I carried out various checks but of course nothing was wrong at my end.

I was then put through to a second person who told me that I did not have broadband and would I like it installed ! 

I told him that the previous person had told me it was connected and working and that the fault was at my end.  The BT employee said he would need to consult with somebody and I was put on hold and then cut off. 

I rang again and after speaking to two more people I was told my broadband would be re-connected within 5 days ! 

It would take longer but luckily the equipment had not been removed from the exchange !

Finally I was re-connected on Wednesday 22nd February at 8.00 pm.

I have now had a second line installed with Sky broadband in case I am cut off again.

Thank goodness this did not happen at the end of January.

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