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Tip of the day

CO2 Emissions – The Tax Goalposts Have Moved

As of the new tax year, the old magic numbers of 110 and 160 g/km have magically shrunk. You can now get a 100% first year capital allowance only if the car is < 95 g/km and you fall into the 8% capital allowance pool for cars > 130 g/km.  That …

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New Cap on Income Tax Relief

From 6th April, there is a cap on relief claimed against income tax.  The cap is set at £50000, or 25% of income if higher. The cap does not apply to reliefs that are given by increasing your basic rate band ie pension contributions and charitable donations. This will change …

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The New Cash Basis – Avoid if You Invoice Upfront

Outside of the new cash basis, deferred income is your friend. If you invoice at the beginning of a service, you are able to push part of the sale back for the part that falls into the following financial year.  The principle under accruals accounting is that you match the sale with …

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The New Cash Basis – Avoid If You Want to Carry a Loss Sideways or Backwards

There are 3 directions you can relieve a trading loss: forwards, backwards and sideways. Well, that is if you are outside of the new cash basis.  Put yourself inside and there is only one way you can move: forwards. This does not apply to a loss in the final year of business, …

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The New Cash Basis – Avoid if You Still Have a Car That You Got a 100% First Year Allowance For

Once again, a nasty little trap with this new cash basis. If you are still driving one of these eco green cars, while you would have felt very smug at the time with a 100% first year allowance, upon entry to the new cash basis you will have to pay …

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The New Cash Basis – Avoid if You are About to Sell an Asset

It may seem like your best friend, the new cash basis.  Only pay tax when paid by your customers.  Sounds great, doesn't it? But how good does paying tax on selling an asset? Outside of the cash basis, you would only pay tax on the bit that is more than …

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The New Cash Basis – Avoid if Your Borrowing Costs Exceed £500

At first, HMRC were to deny tax relief for interest from the new cash basis.  After consultation, they conceded that they would allow up to £500.  In pursuit of simplicity, they are suggesting they will ask few questions if you claim up to £500.  Ordinarily, they are not keen on …

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The New Cash Basis – Avoid if You Buy on Credit but Sell on Cash

Tips on what not to do are somehow less fun than tips on what you should do.  They are just as relevant, though.  If you don't know what you're doing with tax it can get very unfair and very expensive. If your business sells for 'cash' at the point of …

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The New Cash Basis and the Facility to Reduce a Tax Bill by Accelerating Payments

The new cash basis affords tax relief on payments made, not costs incurred. So, as your year-end approaches, you should be looking at bringing forward any payments that you were always going to have made over the coming months.  These could be payments to suppliers for goods already invoiced, payments …

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The New Cash Basis – Tick the Box if You Want Full Tax Relief on Your Capital Allowances Pool

The new cash basis allows tax relief in full on (paid for) capital assets. This is nothing very exciting while we still have the £250000 annual investment allowance. What is of interest is the transitional provision that allows for tax relief in your first cash year for any unrelieved capital …

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The New Cash Basis – Tick the Box if You Carry Stock, WIP or Accrued Income

The new cash basis works on receipts and payments. Stock, work in progress and accrued income are the pernicious results of accruals accounting where HMRC will insist that you cannot have tax relief for expenditure which relates to a sale that is yet to take place and that you should be paying …

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The New Cash Basis – Tick the Box if Your Credit Sales Exceed Credit Purchases

The new cash basis of computing profits for those with a turnover beneath the VAT registration threshold is going to give a one-off cash flow advantage to those with more debtors than creditors. Your taxable profit is going to be worked out by what you have received in and paid …

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New Cash Basis Could See Wild Fluctuations In Taxable Income – Why This Can Be and Why This Can Be Good

There are many times when it is good to have taxable income that rises and falls.  There are many times that it is good to be able to time the falls to say that you have a lower income in a year that really matters. This might be applicable to …

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The New Cash Basis – Enjoy Full Benefits Going In : Take Time to Pay Coming Out

If your decision one year is to embrace accruals accounting and ditch the cash basis, it is worth bringing into your thinking that any additional tax you might have to pay upon exit will be staggered over 6 years.

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The New Cash Basis – the Losers

As always in business and football, there are winners and losers. Yesterday's tip gave some pointers to look for to see if you might win from the cash basis.  Today's highlights a number who need to steer well clear. Those that I expect to decide against the cash basis are: …

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The New Cash Basis – Winners

As I have previously stated, those lucky enough to have a choice should be computing taxable profits on both the accruals and cash bases before making their choice. Generally, I expect the following will be more suited to the cash basis: Those with a greater value of credit sales than …

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The New Cash Basis – Flexible Year-ends

As I said yesterday, this new cash basis of computing taxable profits is going to be great fun. You will have to be patient, but all those currently with 31st March / 5th April year-ends will (from 2014) now be able to pick any date between 31st March and 30th …

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The New Cash Basis is Here

From 2013/14 tax year, unincorporated businesses with turnover beneath the VAT threshold (currently £79000) have got a choice between preparing accounts on an accruals and on a cash basis. This is going to be great fun. As a starting point, accounts should from here be prepared on both bases and …

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2013-14’s Magic Number

The wage that shareholder-directors should pay themselves in 2013-14 is £148 a week = £641.33 a month = £7696 a year. That is the optimum wage that affords the maximum corporation tax relief without any personal tax cost.

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New Tax Year, New Tax Rates

2013-14, eh?  How it comes around so quickly, how just writing it down looks wrong.  It'll take until a couple of months into next footy season for it to look okay. So, changes in tax rates that you might be interested in / should be aware of: Personal allowance up …

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Welcome to a New Tax Year

For us accountants, out with the old and in with the new tax year is as exciting as it gets. 2013/14 is a tax year in which we will see a 45% top rate of income tax, cash accounting for the small self-employed, the end of a national insurance holiday for new employers, …

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1 Day to Go Till Tax Year-end – There’s Still Just About Time To…

... make a pension contribution to take you into a more favourable tax bracket. The most important thing to consider at such a late stage is what sort of tax relief you'll get. Little excitement if you pay at 20%. More interesting if you pay at any of the following …

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Get Your Feb VAT Return in Today

HMRC's online filing service is planned to be offline from 6am Thursday 4th April till 6am Saturday the 6th April. This could not have come at a worse time for filing 02 13 VAT returns, whose deadline is Sunday the 7th April. I will be working Sunday, but unless you or …

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3 Days To Go Till Tax Year-end – There’s Still Just About Time For…

... checking where you're taxable income is up to and measuring it against the various thresholds eg tax credits, personal allowance, higher rate band, upper rate band, band between £100k and £116,200 where your marginal rate of tax is 60%. Yes, you should have done this a while back and …

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Budget 2013 – Yet More Anti-Avoidance Initiatives

On top of the usual budget announcements that close loopholes, recent budgets have seen a more proactive attitude to protecting the public purse from those who seek to deny their fair share. Budget 2013 featured another new source of HMRC knowing what income you should be declaring before you declare it. This …

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Budget 2013 – New anti-avoidance provisions on Directors Loans

One or two of last week's budget announcements have fun written all over them. This one wears "killjoy" on its forehead. I guess it only serves to confirm what we feared would get challenged, anyway, but from now any directors loan > £5k repaid and then re-loaned back out again within …

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Budget 2013 – The £2,000 Employers National Insurance Allowance

This is one of the flagship announcements of last week's budget. And rather a fine flag-bearing ship it is, too. From April 2014, every employer will be excused the first £2,000 of their employers national insurance bill. Neither here nor there for the larger employers, but it will mean no employers …

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Budget 2013 – Child Care Support Set to Change

Last week's budget confirmed the earlier 'leaked' announcement that the current childcare vouchers scheme is to be replaced. Anyone who is in the old scheme when it closes, can stay in it.  It will just be shut for new entrants. This is great fun for tax advisors as there is a …

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Budget 2013 – A Loosening of the Terms of the Requirement for Government Suppliers to Prove Their Tax Compliance

I think the changes announced in last week's budget are good news.  Not sure, though. Understandably, the government is sensitive to what its stakeholders think about the quality of the suppliers it awards contracts to. It therefore wants to put measures in place to bar non-tax-compliant suppliers from its ledgers. The …

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Budget 2013 – Directors loans just got a little easier

One of the toughest jobs we poor tax accountants have is managing our clients' current accounts with their personal companies. There are both corporate and personal tax consequences of being overdrawn on the current account you have with your company. The personal tax consequence kicks in when the balance owed by you …

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Budget 2013 – the path to 20% corporation tax

One of the budget announcements cheered by the Smiths was that the 'main' rate of corporation tax is being reduced to 20% from April 2015. Not only is this great news for all of us as it will encourage multinationals to make the UK their home, it is great news …

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Budget 2013

I couln't post, yestaerday.  If I had, I was going to predict that we would hear much rhetoric and little substance in budget 2013.  To be honest, that is usually a safe prediction for any budget, and indeed any time a politician opens that mendacious hole between the chin and …

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Capital Gains Tax Year-end Planning 2

The previous post looked at how to avoid capital gains tax.  If you are stuck with your gain, the next thing to consider is the rate at which you will pay CGT. Basic rate taxpayers pay 18%. All others pay 28%. CGT adds on top of your other income and …

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Capital Gains Tax Year-end Planning 1

With 5th April on the horizon, now is the time to assess your capital gains tax situation. If you have 2012-13 gains in excess of the £10,600 annual tax-free allowance and you have no losses brought forward, you need to look at your likely CGT bill and what can be done …

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Tax Credits Planning

In advance of the tax year-end, everyone in the tax credits system should now be looking at their household income for 2012-13 and what sort of award they are going to get. The self-employed can be clever with their accounts to boost an award, but that cleverness will need to …

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Reason to Hire a Qualified Accountant

A recent tax tribunal case has endorsed the use of a qualified accountant as a sign that a taxpayer is making reasonable attempts to be compliant. In the Testa case, HMRC were ordered by the tribunal to suspend penalties as the taxpayer had sorted himself out with a qualified accountant …

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Tax Year-end Pension Planning

There is a bit of a lead-time involved with getting a contribution recognised by your pension company. If you want to use pensions to reduce your 2012-13 taxable income, you will need to act soon. Everyone is entitled to 20% tax relief. You will only be interested in a pension …

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Owner Managed Companies PAYE Month 12

Now that we are into the final month of the tax year, attention turns to tidying up PAYE records. Company directors can have the luxury of leaving everything till the last minute. Not too sure how much to put through as a wage? Not sure how much the company can …

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CO2 Emissions – A Cost to the Planet and to Your Pocket

If the CO2 emissions are between 95 and 110 g/km or 130 and 160 g/km on a new car that you are after, you need to be doing the deal before 1st April if you are a company and 6th April if a sole trader or partnership. Beneath the lower …

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HMRC Ruled Wrong to Ignore Effect on Business or Removal of Gross Payment CIS Status

A Tribunal has just reprimanded HMRC for not considering the effect that a withdrawal of CIS gross payment status would have on the ability of a business to continue to trade. I fear that HMRC may take this one further, but if the decision is allowed to stand, it is potentially great news for …

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Isle of Man Opens Its Books To HMRC

Following on from similar agreements with Switzerland and Liechtenstein, the UK Treasury has brokered a deal with the Manx state to share data on the financial affairs of UK taxapayers. HMRC have announced an amnesty of sorts to those of you who have previously undeclared income arising in the Isle …

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4 New HMRC Task Forces Added

Now numbering 35, HMRC have just announced the creation of the latest 4 task forces to focus on investigating the tax affairs of fast food outlets in East Anglia, jewellers in the Midlands, anyone claiming a tax repayment in the South-East and absolutely everyone from Northern Ireland! A big sigh …

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New Case on Home to Work Travel Goes in HMRC’s Favour

HMRC case wins are always bad for a couple of reasons. Not only does this show us a scenario in which we are unlikely to get tax relief, it also means we have another area that HMRC will be attacking with gusto as they like nothing better than a fight in …

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Get VAT Up to Date by End February

HMRC have announced a clampdown on businesses who have outstanding VAT returns, saying they are going to start taking action after 28th February 2013. It is always a mistake to avoid sending in returns, but if this applies to you, make sure you get yourselves up to date before this …

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Don’t Waste Your Annual Investment Allowance

The allowance for a full tax deduction on capital expenditure has risen to £250,000 with effect from 1st January 2013. You need to be very aware, though that this allowance is pro rata'd for any financial period that ends before 31st December 2013. If you have already got your cheque …

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Don’t Panic Over Unpaid Self Assessment Tax … Yet

3% is the rate of interest on unpaid tax. So, if you've been unable or unmotivated to meet the recent 31st January payment deadline, no need to panic. 3% a year will cost you around £1 a day for every £10,000 tax owed. Not a big cost and a lot …

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Autumn Statement – Increase in Personal Allowance

This one is for those earning at or around the personal allowance. You have the Lib Dems to thank for a generous increase in the personal allowance (the threshold only above which you pay income tax) from £8,105 in 2012-13 to £9,440 in 2013-14. If you have the luxury of …

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The Autumn Statement – Big News on Income Drawdown

This one only put back what had previously been removed, but for me this is big news. Income drawdown refers to a facility to extract amounts from your pension before you have to formally 'retire' and entrust 75% of your pot to an insurance company by way of an annuity. …

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The New Cash Basis – Tax Credits

Yesterday, I introduced why you should be excited by the new cash basis if you are just inside or just outside of tax credits.  111% tax relief is why. Problem with tax credits is that by the time you realise you can use them, it may be too late to …

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The New Cash Basis – Why Use It?

Yesterday was all about how.  Today is asking why. The ability to load up on payments made just before your year-end will create a one-off cash flow advantage on your tax payments.  You will get a lower tax bill, but you are only advancing a payment that you would have …

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