I know I’ve mentioned this before, but it’s important to know that HMRC have introduced newpenalties for late filing of your personal Tax Return,

even if there is no tax liability.

Your 2010/11 Tax Return must be filed with HMRC by midnight on 31 January 2012.

The penalties for missing the deadline are as follows:

It’s more important than ever to ensure that your accounting records are up to standard. HMRC have completed their pilot scheme and found that 56% of businesses inspected had unsatisfactory or poor accounting records.

They have increased the number of full time staff from 30 to 120 in preparation of national roll-out in the new year.

HMRC have recently been successful in making round sum mileage expenses subject to NIC.

If you pay or claim a fixed amount per month for mileage, plus a small amount per mile, then you could be storing up a NIC liability, even if the total amount paid is less than the 45p per mile tax free allowance.

You should therefore ensure that future claims are based on “relevant motoring expenditure” and there must be a link between the payment and the number of miles actually driven.

It looks like calls to scrap IR35 will fall on deaf ears.

Many people have asked what is the point of keeping it where there have only been 322 cases examined in the last 5 years.

Well, the advantage to HMRC of the legislation is the deterrent effect. It has been calculated that there are millions of tax being paid by thousands of contractors who opt to stay on PAYE rather than go truly freelance. So it look to me that IR35 is sadly here to stay.

Set against a backdrop of sluggish economic growth, rising unemployment, and uncertainty in Europe, the Autumn Statement included a number of measures designed to strengthen the economy.

A series of announcements targeted small and medium-sized enterprises, in recognition that without such firms, economic growth would struggle further. The much anticipated credit easing, in the form of the National Loan Guarantee Scheme is designed to help small businesses secure cheaper finance, while £1 billion has been allocated to help medium-sized enterprises through the Business Finance Partnership.

Other significant announcements included the National Infrastructure Plan, which will see up to £30 billion of new capital investment pumped into energy, transport, telecommunications, waste and water. As well as the housing strategy, designed to kick start the housing market.

Click here to read our full report

No-one likes to complete a Tax Return, but have you ever wondered why HMRC have picked on you?

Well, below is a list of the main reasons people must submit a Tax Return every year:

You are self-employed;

You are a Member of Parliament!

You are a company director;

You have at least £10,000 gross investment or rental income;

You have at least £2,500 taxable investment or rental income;

You have untaxed overseas income;

You have Capital Gains Tax to pay;

You owe HMRC back taxes and don’t want to pay it through PAYE.

There are a few other reasons, but the chances are that if you “fail” one of the above tests, you’ll be getting the dreaded form landing in your inbox/letterbox in early April.

Your 2010/11 Tax Return must be filed with HMRC by midnight on 31 January 2012.

The penalties for missing the deadline are as follows:

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This story made me smile:

HMRC have released details of employee names appearing in PAYE records.

There were 507 A N Others during 2009/10 as well as

* 128 staff entered as Mr, Ms or Mrs “Dummy”

* 572 people whose surnames only included the letter X, ranging from Mr X to Mrs XXXXXX

* 75 staff with the surname “Casual”,

11 “Cleaners”, 9 “Workers” and 6 “Students”

* 824 employees with the surname “Unknown” and

* 40 people were apparently 200 years old or more after incorrect dates of birth were submitted.

What would you do if one of your major customers went under, owing you a substantial sum? Would you be able to recover the outstanding debt – or reclaim goods they had not paid for?

Unfortunately, experience suggests that if you are an unsecured creditor you would be fortunate to recover a few pence in the pound – and in most cases you would receive nothing at all.

Your best course of action is to take precautions now to limit your exposure and minimise the impact on your business of any customer insolvency.

Basic precautions
There are certain basic precautions every business should take. Though these are largely common sense, we are constantly surprised by how often they are overlooked:

• Maintain an honest and open relationship with your customers and encourage them to share information with you
• Establish clear credit control procedures, make sure your customers understand them, and be seen to implement them firmly and consistently
• Check credit references before offering credit terms
• Do not extend credit limits without good reason
• Monitor customer accounts regularly

One of the first signs of difficulty is that a customer’s payment period begins to lengthen. If this happens, you need to act swiftly. You might, for example, arrange a visit to them to discuss the matter. Ask if you can see their accounts and projections. If you are still concerned, you might suggest that they take smaller deliveries more frequently until the situation improves.

Faster payment
Another way to limit your exposure is to speed up the payment cycle. You might, for example, consider:

• Restricting terms, say to 20 or even 15 days, and extending to 30 days only where there is a basis for confidence
• Specifying terms as ‘payment received’ rather than ‘payment sent’
• Including a reminder of your terms on your invoice
• Sending out a letter before the invoice is due asking for confirmation that the order was received – this pre-empts the ‘I mislaid/don’t remember receiving your invoice’ excuse

Contractual precautions
Other possible precautions include:

• Include Retention of Title clauses in your contracts to increase your chances of repossessing any unused stocks of your products held by an insolvent customer
• Where possible, obtain guarantees from directors or other group companies
• Where substantial sums are involved, consider taking out insurance against a customer’s failure to pay

Tread carefully
If a customer does get in difficulty it is not always advisable to instigate proceedings too quickly lest you precipitate action by larger creditors who have a prior claim.
In general, you have much more chance of recovering monies owed if a rescue plan is put into place rather than the company going into liquidation.
We can help
As you can see, this is a complex area and professional advice is essential if you are to avoid taking unnecessary risks.

• We can advise you on:
• Establishing effective credit control procedures
• Minimising the impact of customer insolvency
• Dealing with insolvent customers

Contact us today if you would like to discuss this matter further.

National Insurance (NI) is often misunderstood and we thought we would spend a few minutes dispelling some of the myths and explaining what it is, who pays it and why, and how (legally) not to.

NI may seem like a tax, but it differs from income tax in two main ways. Firstly, not everyone needs to pay it. It is only payable on earnings by those employed or self-employed above the age of 16 and below the statutory retirement age, which from 2020 will be 66 for both men and women. The second main difference is that payment of NI gives rise to entitlement to certain state benefits, recorded through your National Insurance Number. All NI payers can build up an entitlement to State Pension and those who are employed can also build up a Jobseekers Allowance entitlement.

The amount you pay depends on whether you are self-employed or employed and how much you earn. Put simply, the self-employed pay Class 2 NI at £2.50 per week and also Class 4 on their profits at 9%. The employed pay Class 1 (primary) at 12% of “taxable” income up to £42,750 after deducting various allowances. Above £42,750 both Class 4 and Class 1 rates are reduced to 2% for income/profits above this amount. This 3% difference may not seem like a huge amount to pay in order to be entitled to Jobseekers Allowance, but if you are employed, then your employer also has to make an additional contribution of Class 1 (Secondary) at 13.8% on all of your taxable income.

If you trade through a Limited Company then you will be treated as an employee for NI purposes. Self-employed NI is only for those who trade in their own personal name and have registered with HMRC as such.

You will notice from my comments above that only employees and the self-employed pay NI. One of the advantages of owning your own Limited Company is that you can receive dividend income which, because it is treated as a return on your investment in the shares of the company, is not subject to NI. As the company is free to pay its directors whatever they want (directors’ income is not subject to minimum wage legislation), it makes sense to maximise the amount paid by dividend and therefore avoid paying employees and employers NI.

At this point, we are often asked, what about the benefits I can get by paying NI? If I don’t pay then will I get a state pension? Well, there is a specific wrinkle in the law that we can take advantage of. NI is not payable until employed earnings exceed £139 per week (the primary threshold), but the NI system starts for income above £102 per week (lower earning limit). Should you be paid between these two amounts, then you are given a credit for NI, without having to pay a NI contribution as either an employee or employer. This free credit was setup to help the low paid build benefits entitlements, but is available for contractors who have no problems sticking to the letter of the law, if not the spirit.

There are ways to avoid or minimise the NI liability. If you own or control all the shares in your company then dividends achieve this end, but for those of you not in this position, or who use an umbrella company, the dividend route is not open to you. You might also find that if you are part of an umbrella company then your employer will look to reduce their costs by passing on their NI liability to you.

The most common non-dividend way to legally avoid NI is by way of “non-cash remuneration”. You could use a specially designed “tax scheme” that needs to be registered with HMRC and may or may not work. Alternatively, you could maximise your expenses, which because they are not “earnings” are not subject to NI. I would urge caution here as some providers seem to suggest that they can allow special rules for expenses, but actually, every employer is subject to the same HMRC rules on expenses.