If you’re in health care the tax man is coming
The latest HMRC Task Force has been named as ‘The Health and Wellbeing Tax Plan’.
If you work in a health and wellbeing profession such as:
- physical therapy – eg physiotherapist, chiropractor, chiropodist, osteopath, occupational therapist
- alternative medicine or therapy – eg homeopathy, acupuncture, nutritional therapy, reflexology, nutrition
- other therapy – eg psychology, speech therapy, arts therapy
You have until 31st December 2013 to notify HMRC and any unpaid tax has to be paid by 6th April 2014.
Health and wellbeing tax plan helpline
Telephone: 0845 600 4507
From outside the UK: +44 1792 657 324
Monday to Friday, 8am to 6:30pm
Marian Wilson, Head of HMRC Campaigns, said:
“I urge health and wellbeing professionals to take advantage of our quick and straightforward way of bringing their tax affairs up to date. Help, advice and support is available.
“After the opportunity closes on 6 April, HMRC will use information it holds from third parties and regulatory bodies to identify people who have not paid what they owe. Penalties – or even criminal prosecution – could follow.”
Do you have anything to declare? HMRC can go back 6 years
steve@bicknells.net
High Income Child Benefit Charge
The High Income Child Benefit Charge (HICBC) is a tax charge which repays part of the child benefit received by high earners earning over £50,000 to a 100% repayment for those earning over £60.000. It applies to child benefit received from 7th January 2013.
Who does it affect?
You may need to pay a tax charge if:
- you have an individual income over £50,000
- and either you or your partner receive Child Benefit or someone else gets Child Benefit for a child living with you and they contribute at least an equal amount towards the child’s upkeep.
It doesn’t matter if the child living with you is not your child.
What do you need to do?
If you are affected by the tax charge, you can:
- Stop receiving the Child Benefit (only recommended if you’re adjusted net income is over £60k). Follow this link for how to do this.
- Carry on receiving the benefit and pay any tax charge at the end of the tax year.
How to calculate adjusted net income?
It is important to realise that the income used to calculate the tax charge is your adjusted net income. You can use the calculator on Gov.uk to work out your adjusted income.
How to pay the tax charge
If the tax charge does apply to you, you will need to submit a self-assessment return to HMRC by 31st January following the end of the relevant tax year. Do not rely on HMRC writing to tell you that you need to submit a return as they may not realise you need to. Normal self-assessment penalties apply if returns are late or incorrect.
How much do you need to pay?
The charge is 1% of child benefit received for every £100 of income over £50,000 of adjusted net income. The charge will never be higher than the amount of child benefit received and if the income is over £60,000 the amount paid back to HMRC will be equal to the benefit received.
Rebecca Taylor ACMA
Fake email alerts from HMRC and Companies House
Fake email alerts from Companies House and HMRC have become increasingly sophisticated. There was a time when it was relatively easy to spot a fake email alert but even accountants have been caught out by recent fake email alerts. And it isn’t just Companies House and HMRC. Be careful of emails from banks, other institutions, postal services, voicemail services and even Skype. Previously harmful emails have tried to direct you to a fake website to steal your personal details but these recent emails have attachments which could harm your computer.
What to look for
These fake email alertss have an attachment which appears to support details in the email message. For example, it could claim to be a customer complaint from Companies House, a missed delivery or a bank transaction. The email address could give you a clue that it is a fake email alert but many now look like they have come from a genuine email address. Some fake emails have footers which have been obviously copied from another email. If you are not expecting an email from the sender, think twice before opening any attachments, particularly .zip files.
Why
These emails are all trying to get you to do one thing: open the attachment. The attachment invariably contains malware or a virus and will either damage your computer, steal your details or even demand a ransom (see an article from the National Crime Agency on Cryptolocker).
Advice
The National Crime Agency provides this advice:
This is a case where prevention is better than cure.
- The public should be aware not to click on any such attachment.
- Antivirus software should be updated, as should operating systems.
- User created files should be backed up routinely and preserved off the network.
- Where a computer becomes infected it should be disconnected from the network, and professional assistance should be sought to clean the computer.
- Various antivirus companies offer remedial software solutions (though they will not restore encrypted files).
Example of fake emails
Follow the links for some examples of fake emails:
Self Employed Tax Allowances
Basically when you are self employed you spend money on 3 types of expense:
1. Capital Expenditure – Equipment & Vehicles
2. Business Expenditure – stock, wages, premises
3. Private Expenditure – day to day living expenses – mostly not allowed but some types of cost may still count as business expenses
In general its types 1 and 3 where sole traders and partnerships miss out on tax allowances.
For example, you could claim capital allowances on your car, if you use your car partly for private and partly for business you simply disallow a % for private use.
On other assets there is an Annual Investment Allowance which is currently £250,000 per year from January 2013.
For most business that will cover all their capital expenditure, but there are further allowances available too.
With regard to private expenditure, there are tax reliefs available for working from home
http://www.hmrc.gov.uk/incometax/relief-household.htm
If you have to spend money on tools or specialist clothing for your job you may be entitled to either:
- tax relief for the actual amounts you spend
- a ‘flat rate deduction’
http://www.hmrc.gov.uk/manuals/eimanual/eim32712.htm
steve@bicknells.net
5 ways to reduce the risk of a tax investigation
THE TAX YIELD derived from HM Revenue & Customs investigations into the affairs of small- and medium-sized companies rose by 31% over the last 12 months, according to UHY Hacker Young.
Compliance investigations into SMEs generated £565m for HMRC in 2012/13, up from £434m in 2011/12, with the year ending March 31. Accountancy Age
Some investigations are random and some as a result of HMRC task forces, but many are triggered by risk profiling.
What can you do to reduce your chances of being selected:
1. File your tax returns on time and pay what you owe – If you file late or at the last minute HMRC will think you are disorganised and as such there are more likely to be errors in the return
2. Declare all your income – HMRC get details of bank interest and other sources of income, sometimes they test them and match them to returns
3. Use an accountant – Unrepresented taxpayers are more likely to be looked at, mainly because many of them don’t know what they are doing
4. Trends – if your business doesn’t match the profile of similar business in the same sector or your results suddenly fluctuate it could raise concerns at HMRC, for example, if you suddenly request a VAT refund
5. Tax Avoidance Schemes – if you are using a tax avoidance scheme I am sure HMRC will be looking closely, if they can find a way to challenge the scheme then at some point they will
steve@bicknells.net
Interim or final dividend – does it matter which?
Dividends are used by many business owners as a tax-efficient way to extract profit from a company. So it is important to understand the procedure for paying them. But does it matter whether the dividend is final or interim if the tax treatment is the same?
The Companies Act 2006
It isn’t HMRC that makes the distinction between the two dividend types, but company law. The Companies Act 2006 says “The company may by ordinary resolution declare dividends, and the directors may decide to pay interim dividends”
So one group of people, the directors, may pay interim dividends, but shareholder approval must be obtained before a final dividend is paid.
So why is HMRC interested?
HMRC doesn’t particularly care which type of dividend is paid. It is interested in whether the payment is really a dividend or whether it was salary a bonus or a loan payment. As higher taxes and NI may accrue with these payments HMRC will want to see proof that the payment was a genuine dividend.
And this is where the timing of the payment and the paperwork are important. Under new anti-avoidance rules it is no longer possible for a director to receive a loan from the company, repay it to avoid the 25% tax charge and then take out a fresh loan within 30 days. HMRC will want to be certain that the payment is indeed a dividend. If the correct procedure has been followed and the paperwork is complete then this should not be challenged.
10 tax allowances we fail to claim
In 2012 Unbiased.co.uk reported that £12.6 billion was unclaimed by UK tax payers, here is a list with some ideas:
- Income Related Tax Credits – Check and find out what you are entitled to – UK Benefits https://www.gov.uk/benefits-adviser
- Tax Relief on Pension Contributions – There are estimated to be over 4 million people not paying into a pension, auto enrolment should help to change that, this blogs explains the tax advantages http://stevejbicknell.com/2012/05/02/why-invest-in-a-pension-because-of-tax-relief/
- Tax Relief on Charity Donations – Are you using Gift Aid? are you a higher rate tax payer entitled to additional relief?
- Saving on Inheritance Tax – Many people don’t have a Will let alone any IHT planning!
- Making Use of ISA’s – Why get taxed on the interest on your savings if you could have an ISA? Its easy to get an ISA and you can still have access to your ISA savings if you need it, the current ISA allowance is £11,520 or £5,760 for cash ISA’s
- Child Benefit – Use the benefits adviser to check if you can claim – UK Benefits https://www.gov.uk/benefits-adviser
- Avoiding tax penalties and late filing – This just requires you to be organised, make sure you know the filing dates http://www.hmrc.gov.uk/sa/deadlines-penalties.htm and get the information needed in plenty of time
- Savings on Capital Gains – The current allowance for 2013/14 is £10,900 (previously £10,600) for an individual many people seem to forget they have this allowance
- Making Use of Employee Share Schemes – The government love employees to have shares and this year introduced a new share ownership option http://stevejbicknell.com/2013/08/03/employee-shareholders-will-your-employees-want-shares/
- Income Tax and Personal Allowances – Consider who should own assets (and get income from those investments) – you or your spouse – so that you can minimise your tax liability
Steve@bicknells.net
Book Billy!
Are you a business owner who works on their own or with just one other person?
Do you miss the traditional office Christmas party, where everyone let’s their hair down and has a fantastic laugh?
If so the Billy No Mates Christmas bash is for you – so if you haven’t already booked now is the time to do so!
The ‘Bash’ is on 20th December (so the Friday before Christmas) from 12pm onwards at Beah, Union Street, Wells, Somerset.
For just £22 for a three course meal with wine the ‘Bash’ is great value – and great fun.
But don’t just take my word for it:
Kim Robinson who is a Billy No Mates stallwart said: “The only thing missing is the photocopier!”
To book your place or simply to find out more go to:
http://billynomates.info/events/wells-christmas-bash-2/
Fiona 🙂
What fees does a barrister need to declare?
Special rules for barristers and advocates
Barristers are not permitted to provide their services through a limited company. All barristers have to register as self-employed and submit business accounts as a sole trader to HMRC. There are special provisions relating to cash accounting and the rules have changed in recent years meaning there are three different regimes that can apply. There are time limits for the cash accounting schemes so if you are in your first few years of practising you will need to make sure that you are reporting the correct figures to HMRC. Guidance is available from the Bar Council here.
A barrister on a mobile phone outside Southwark Crown Court.
(Photo credit: Wikipedia)
Cash Accounting
The Finance Act 2013 introduced the possibility of cash accounting for most unincorporated business including sole traders from 6th April 2013. Barristers already had a cash scheme available when they started their practice with permission to continue the same cash accounting principles for up to 7 years under the Finance Act 1998. This old cash scheme is no longer available to new barristers, but anyone who started preparing accounts under the old cash basis by 5th April 2013 can continue to do so until their seven years is up or they transfer voluntarily to another scheme. Once you have left the old cash scheme there is no turning back.
Barristers can join the new cash scheme where fee receipts do not exceed the VAT registration threshold (currently £79,000 per year). If receipts are more than twice the VAT registration threshold (currently £158,000) the barrister must leave the scheme.
The advantages of the cash schemes are that they are easier to administer so there is less need to engage an accountant to prepare your accounts. You only pay tax on fees received and you do not have make calculations at the year-end for work that is incomplete or invoiced and not yet paid by your clients. This means that your tax payments are delayed compared to the earnings basis below and will improve your cash flow. There are other aspects of the cash schemes which are explained in more detail here.
A barrister on the old cash scheme can elect to leave the scheme early, but the new cash scheme does not allow exit unless there is a “change in commercial circumstances”.
Earnings based accounting
UITF 40 requires that long term contracts are recognised in the year-end accounts to the extent that partly performed work is recognised as taxable income. This requires barristers to calculate the value of any Work In Progress (WIP) at the end of their financial year and include this in their total income.
Materiality is a key concept in accounting, but the materiality of the total WIP must be considered not just the materiality of each individual contract. It is not permitted to disregard a number of immaterial amounts if when considered together they are material to the accounts. In practice this means that almost all WIP is chargeable to tax under the earnings method. One of the few clear cut exceptions is a no fee no win case, where no WIP is to be recognised.
Transitional arrangements
When changing from either cash accounting scheme to the earnings based scheme a calculation of the WIP must be made which will increase the taxable income for the year. The old cash method allows the closing WIP at the time of the change to the earnings method to be recognised over a period of up to 10 years. The provisions under the new cash scheme have a reduced timeframe of 6 years. It is normally the case that anyone transferring from the old cash scheme to the new cash scheme would not need any adjustment to the annual accounts. There are corresponding adjustments for barristers transferring from the earnings scheme to the new cash scheme – explained in more detail here.
For more information on an accountancy firm that can set you up with online accounting and deal with all your business accounts and VAT – contact Alterledger or visit the website alterledger.com.
Useful links
| Bar Council Guidance | practice-updates-and-guidance/remuneration-guidance/ |
| Faculty of Advocates | http://www.advocates.org.uk/ |
| HMRC crackdown on barristers | http://www.bbc.co.uk/news/business-19635051 |
Are your businesses really separate for VAT purposes?
HMRC have been updating their manuals (21/10/13).
The purpose of VATDSAG01050 Single Entity and Disaggregation Manual is to help you to determine
- whether two (or more) apparently separate businesses are, in reality, a single entity
- whether, where two (or more) separate entities exist, they have been separated artificially.
Schedule 1,1A (2) of the VAT Act 1994 requires that, in determining whether any separation is artificial, due regard is had to the extent to which the different persons concerned are closely bound to one another by
- financial
- economic, and
- organisational links.
Schedule 1, 2(2) of the VAT Act 1994 lays down three conditions which must be met before we can issue a Notice of Direction to any person. These are:
- he is making or has made taxable supplies
- those taxable supplies form part of wider activities carried on concurrently or previously (or both) with one or more other persons
- the totality of the disaggregated activities gives rise to a liability to be VAT registered.
Here is a link to the updates http://www.hmrc.gov.uk/manuals/vatdsagmanual/index.htm
HMRC have some interesting cases, here is an example:
The case of Stephen and Angela Trippitt (MAN/00/0249) VTD 17340 addressed the question of whether a husband and wife could operate two businesses from the same premises.
In this case, the Tribunal decided that
- the traders had successfully separated the activities of public house and bed and breakfast into two separate entities
- we were incorrect in issuing a Notice of Direction.
The facts showed the extent of the commercial relationship between the entities, in addition to which Mrs Trippitt gave 35% of her takings to her husband.
The Tribunal was satisfied that this amount constituted a realistic, commercial, arm’s length contribution towards the value of the shared premises and telephone and utilities.
This decision means that where one entity argues that it pays a fixed percentage of its takings to the other, you need to establish:
- what would happen if there were no takings?
- would a minimal amount still have to be paid?
- if not, how does that entity see these arrangements as constituting a normal commercial relationship, given that it is at no financial risk?
- is there a real monetary transaction (as opposed to just the appearance of one in the books)? Can they provide evidence of this?
For more cases follow this link http://www.hmrc.gov.uk/manuals/vatdsagmanual/VATDSAG08100.htm
steve@bicknells.net
Business Accountant 