Macario Lewin's Blog

Budget 2011

There was a collective shudder amongst all owner-managed company directors upon the mention of the possible integration of income tax and national insurance contributions.  The aim is to remove distortions, reduce burdens on business and improve fairness.   The Government will consult this year on the options, stages and timing of reform.  Is this the moment we have all feared?  Is there going to be a national insurance charge on dividends and inflict the killer blow on small company owners.

However, the Government have stated in the Budget Report that they will not extend NIC’s to other forms of income such as pensions, savings and dividends.   This is indeed a huge relief.

In fact, and at this point I had to check on-line whether George Osborne himself is not actually George Osborne Limited, as he confirmed that from 6 April 2011 the amount at which an employee, including a director, can earn before being liable to NIC increases from £5,715 to £7,225.  As long as earnings exceed £5,304 (2010/11 £5,044) these earnings count towards the employee’s basic state pension.

The personal allowance (for income tax purposes) increases to £7,475 from 6 April 2011 with a further increase to £8,105 in April 2012.

The not so good news is that, as announced last year, from 6 April 2011 the basic rate band reduces from £37,400 to £35,000.  This will again reduce by £630 to £34,370 in April 2012. 

The measures regarding fuel prices have been well reported and in addition, the tax-free mileage rate for use of an employee’s own vehicle has increased to 45p (or 50p if with a passenger) for the first 10,000 business miles.  It remains 25p thereafter.

Other highlights included:

• The reduction in the main rate of corporation tax to 26% from April 2011 and by 1% a year thereafter to 23% in 2014.
• An increase in the rate of tax relief on enterprise investment scheme (EIS) investments from 20% to 30%, and a doubling of the EIS investment ceiling.
• The increase to £50,000 in the annual charge for non-UK domiciled individuals from April 2012 for those who have been resident for 12 years or more and who wish to benefit from the remittance basis of taxation.
• The Government will consult on the introduction of a statutory definition of residence to provide greater certainty for taxpayers.
• The increase in the lifetime limit for entrepreneurs’ relief from £5m to £10m.
• The increase in the rate of Research and Development tax credit for SMEs to 200%.
• The Government commits to making clear improvements in the way IR35 is administered.
• The VAT Registration Limit increase to £73,000 and deregistration level to £71,000.
• CGT Annual Exemption increase to £10,600

If you would like to discuss your tax affairs please get in touch, or if you would like to receive a Macario Lewin 2011/12 Tax Tables booklet please request this via our contacts page on www.macariolewin.com.

 

Martin Macario is director of Macario Lewin Ltd. The views expressed are his own.

 

Our offices will be closed on Friday 11th November for staff training. We will be open as usual on Monday 14th.

If you need to speak to someone urgently please email info@macariolewin.com

Are you ready for iXBRL?

From 1 April 2011 all companies will be required to file the following documents online to HMRC:

• a corporation tax return CT600
• a corporation tax computation
• a full set of company financial statements

This is mandatory for all return periods ending after 31 March 2010.

 

What is iXBRL?

iXBRL stands for extensible Business Reporting Language.  It is a way of “tagging” data within a set of accounts or computation, eg profits after tax.  There are over 4,000 possible tags.  Once tagged each figure can be moved and read between different software packages.  Unfortunately while being a fantastic way for computers to share this information it is not readable by humans! 

 

How can you file online?

Firstly companies are required to register with HMRC for online filing services.    

If you are already using tax compliant software you may need to do some work but tagging your documents and online filing should be manageable.  If you are using other software such as Excel or Word to produce your accounts then creating the required electronic documents will be a challenge and extremely burdensome.

 

How can Macario Lewin help?

Here at Macario Lewin we have invested in the best software so you don’t have to.  Our staff are trained to address the demands of the additional work required ensuring that all documents filed meet the new HMRC standard.

You can rest assured that your compliance will be in the hands of an established firm of Chartered Accountants and Chartered Tax Advisers.  Contact us today to discuss how we can help you. 

Chepstow 01291 621588 / Swansea 01792 473992 / info@macariolewin.com

 

Out with the Old and in with the New

Another eventful tax year draws to a close on 5 April and we enter the 2011/12 year. 

After a bleak winter, the increase in VAT to 20%, higher petrol prices and the Governments spending cuts already taking their toll the forthcoming tax changes are likely to cause further concern.

The personal allowance, for those under the age of 65, will be increased by £1,000 from £6,475 to £7,475.  However, the basic rate limit i.e. the amount of taxable income that is charged to income tax at 20% is reduced from £37,400 to £35,000.  Therefore, an individual will now pay tax at 40% rather than 20% when their total taxable income exceeds £42,475 instead of the 2010/11 limit of £43,875.

An effective rate of income of 60% continues to apply for those with earnings between £100,000 and £114,950 (2010/11 £112,950) and taxable income in excess of £150,000 is taxed at 50%. 

National Insurance contributions are also increased for employees, employers and the self employed.

Owner Managed Companies however could see a reduction in their tax liabilities as the corporation tax rate for small companies is to reduce by 1%.  With careful planning it is possible for small company owner managers to save a significant amount of tax compared to what they would have to pay had they continued to trade a sole trader or partnership.  Other advantages of incorporation also apply.

Given the current economic climate it is essential that businesses have a thorough understanding of their accounting and tax obligations and consider a commercial and relevant strategy for the future.

Whether you are a new business or have been trading for many years an independent review by an experienced firm of chartered accountants and chartered tax advisers is good management.

If you would be interested in a review please contact us at info@macariolewin.com, on 01291 621588 or 01792 473992.

www.macariolewin.com

 

 

 

Compliance Checks

Last year HMRC significantly changed the way it can check the accuracy of taxpayer's affairs.  More recently additional taxes and levys have been included under this regime.  HMRC can now carry out authorised investigations, called Compliance Checks, across these taxes:

From 1 April 2009

• Capital Gains Tax
• Construction Industry Scheme
• Corporation Tax
• Income Tax
• PAYE
• VAT

From 1 April 2010

• Aggregates Levy
• Climate Change Tax
• Inheritance Tax
• Insurance Premium Tax
• Landfill Tax
• Petroleum Revenue Tax
• Stamp Duty Land Tax
• Stamp Duty Reserve Tax

Although HMRC will contact a certain percentage of taxpayers for enquiry through random selection, most will be targetedwhere HMRC believe they have identified a potential failing.

You will be notified when HMRC are starting a Compliance Check but they may not inform your adviser so it is important that you do so immediately.  HMRC will have the power to visit your business premises and they should give you at least 7 days notice but they can make unannounced visits if they believe it to be appropriate.  They will not have the right to enter your home unless this is where you operate your business and then will be restricted to the areas used for business purposes.

We would advise that whether during a visit to your business premises or over the telephone you are careful with verbal replies and , if possible, have your adviser present.

If the Compliance Check shows that nothing is wrong HMRC will bring the matter quickly to an end.  If HMRC discover a failure you should cooperate as quickly and efficiently as possible as this could reduce any resulting penalty.

The penalty be as much as 100% of the tax, VAT or duty you did not pay as a result of the failure.  The penalty charged will depend on the offence, whether disclosure was prompted or unprompted and the quality of the actual disclosure.  No penalty is charged at all if you have exercised reasonable care, however, HMRC have not defined what it considers to be reasonable care and acknowledge that it will differ from taxpayer to taxpayer. 

Any business or individual subject to a HMRC Compliance Check should obtain qualified professional help immediately.  In most cases your regular accountant will be happy to deal with this for you but if you or your accountant believes you would benefit from additional support we would be happy to help.

www.macariolewin.com

 

 

A favourable Budget for enterprise or should we prepare for a storm?

Small company owners can breathe a sigh of relief.  The main talking points coming out of the Emergency Budget were the increase in VAT to 20% from 4 January 2011, the increase in capital gains tax for higher rate tax payers to 28%, with immediate effect, and confirmation of the so called “jobs tax” by increasing all national insurance contribution rates by 1% from 6 April 2011.

Given that most businesses (with some notable exceptions e.g. those in the health sector) are VAT registered, the increase in entrepreneurs’ relief from £2m to £5m and the fact that most director-shareholders remunerate themselves with dividends rather than salary it appears that at face value there is not too much to worry about.   Further, the standard personal allowance is to increase by £1,000 to £7,475, the level at which national insurance contributions becomes due increases and the small company corporation rate reduces from 21% to 20%, all from April 2011.  This is all good news for small company owners and given the income tax rates already applicable to sole-traders it is clear that incorporation is favourable.

However, behind the scenes in the corridors of Parliament there is plenty of activity and the Government intend to shortly deliver a clear direction for small business tax policy, the backbone of British enterprise.  The Government remains committed to a review of so called one-man band single client companies (IR35) as well as small business tax in general and will release further details shortly.  Further, the Government will explore whether there is a case for developing a General Anti-Avoidance Rule and have also announced further restrictions on pension tax relief.  We can expect to receive more information on these policies this autumn.

Nevertheless, with an effective rate of 60% income tax on a sole-trader’s taxable income between £100,000 and £112,750, notwithstanding a 40% rate on taxable income above £37,400 and a 50% rate above £150,000 the benefits of trading through a company vehicle are significant even when taking into account the significant compliance issues to deal with, in particular the Companies Act 2006 filing and disclosure requirements.  

It is essential, more than ever, that owner-managed businesses have a tax strategy for the next couple of years so as to maximise wealth and not to get caught by any forthcoming legislative changes.

If you would like to discuss your tax affairs or receive a Macario Lewin budget summary booklet please contact us via our contacts page.

Impending dates to note: ·       6 July 2010                        Forms P11D for 2009/10 to be filed with HMRC ·       19 July 2010                      Class 1A National Insurance Contributions to be paid

 

Less than 50 days to go and penalties expected...

No it’s not the World Cup but a new budget and new PAYE rules  

Britain’s new coalition Government will deliver its first budget this summer and in accordance with their pledge to hold this within 50 days of coming to power this date has now been set for 22 June 2010, notably during the World Cup.  The sceptics amongst us might feel this is timed so as to bury any bad news such as tax increases whilst we are all enjoying a barbeque summer and the events in South Africa.

The coalition negotiations Agreement issued on 11 May 2010 covers the full range of policy matters such as deficit reduction, public spending, immigration, political reform etc, however it is clear that tax measures are high on the agenda as tax comes in at third place in the Agreement and therefore  taxpayers can probably expect some dramatic changes.

The personal income tax allowance (currently £6,475) is expected to increase gradually from 2011/12 with the longer term objective of rising to £10,000 in future years.  Unfortunately for employees and the self-employed, the Labour planned increase in national insurance contributions will be implemented by the new Government.  The standard rate for employees will rise by 1% to 12% and the higher rate will actually double from 1% to 2%.  The employer rate will increase from 12.8% to 13.8%.  However, the threshold at which an individual becomes liable to national insurance is expected to rise. 

The largest tax increase appears to be geared towards investors with the capital gains tax rates anticipated to mirror that of income tax.  The implications of this are that taxpayers may see their capital gains tax liabilities rise to 40% or even 50%.  It follows that investors may decide to cash in their investments before any increases come into effect and look at alternative investment vehicles for the future.  An Increase in the threshold at which inheritance tax becomes due has also been put on hold.

What is also worth pointing out is that the coalition Agreement states very clearly that tackling tax avoidance is essential for the new government, and that all efforts will be made to do so.

PAYE Penalties

With effect from 6 April 2010 any employer or contractor who does not pay PAYE on time and in full may have to pay a penalty. The penalty is not automatic and will not be levied when a payment is late rather it will be levied from April 2011.  In other words, you may find you have to pay a penalty even if you have not been notified of this during the year by HMRC.  This is potentially a huge source of revenue for HMRC as ensuring payments are received on time whether by post or electronically is often overlooked by employers, especially as there are actually seven different deadlines depending on what day the 22^nd of the month falls on. 

Perhaps before getting out the barbeques and switching on the football it may be worthwhile reviewing your tax affairs and considering any planning opportunities before the first coalition Budget.  

A few impending dates to note:

19 May 2010 Forms P35 & P14 for 2009/10 to be filed with HMRC

31 May 2010 Form P60 for 2009/10 to be given to each employee

6 July 2010 Forms P11D for 2009/10 to be filed with HMRC

19 July 2010 Class 1A National Insurance Contributions to be paid

The 2010 Budget and Small Businesses – Martin Macario picks a few highlights

As expected there were no real surprises in todays Budget. The usual increases in fuel, cigarettes and alcohol duties, especially cider, were announced however the Chancellor is staggering some of these increases by up to 4 years. 

One of the highlights, but not unexpected, was that stamp duty will no longer apply for house purchases below £250,000 for first-time buyers, but only for two years.  However stamp duty on residential property sales over £1m increases to 5% from April 2011.

So what about help for small businesses?  Whilst some allowances and thresholds e.g. VAT registration, have been increased there does not appear to be any immediate savings and of course the increases in income tax and national insurance, as previously announced, apply from April 2010.  Whilst there is a £2.5bn package for small businesses to boost skills and innovation and a one year business rate cut from October to help 500,000 companies I think the two key points to mention are:

1.     The Annual Investment Allowance i.e. purchases of plant and machinery that attracts 100% tax relief, has been doubled to £100,000. This increase could save small companies an extra £11,000 in tax or for sole traders potentially up to £25,000 per year.  The stumbling block though is whilst small businesses wish to make suitable investments in plant etc it has proved extremely difficult to raise finance.  To rectify this, the Chancellor has announced that RBS and Lloyds Bank Group are to provide £94bn in small business loans backed up by a new service to adjudicate credit disputes.   

 

2.     Entrepreneurs’ relief i.e. a lifetime tax relief on business capital gains has also been doubled to £2m.  Not much has been mentioned about this but it has the potential to be an extremely valuable relief, especially in cases whereby a sole trader or professional has incorporated his own business. 

 From April 2010 a top rate of income tax of 50% now applies on earnings in excess of £150,000. Further, a ½ % increase in national insurance also now applies to all and there is a gradual removal of the Personal Allowance for those earning over £100,000. The ongoing clampdown on tax avoidance also continues.

Given the increases in income tax and national insurance it is vital that small businesses, whether trading as a sole trader or limited company, take advantage of available allowances and to review their tax affairs regularly to take advantage of potential tax planning opportunities.

 

A few impending dates to note:   ·       6 April 2010                     2010/11 Tax Year begins.  ·       19 April 2010                    Final Payment of PAYE/NIC for 2009/10 ·       19 May 2010                     Filing deadline for Employer End Of Year Returns

 

Martin Macario is director of Macario Lewin Ltd. The views expressed are his own.

Macario Lewin sponsors local football team

We are delighted to sponsor the football kits for Lisvane Panthers U10 Orange.  The boys were presented with their kit on Saturday and wasted no time in changing into their new shirts.  

 

Of course, it wouldn't be a Macario Lewin occasion without jelly beans.  

 
 

Good luck Lisvane Panthers from everyone at Macario Lewin. 

Medical professionals take note! Tax Health Plan closes 31 March 2010

HM Revenue and Customs have launched a  disclosure opportunity called a  ‘tax health plan’ aimed at medical professionals, presently only doctors registered with the GMC are within the plan.   This scheme is open until 31 March 2010 and those who now disclose previously undeclared income are offered a reduced penalty of 10%.  Once the window closes those that have not come forward but are found to have unpaid tax liabilities may face penalties of between 20% and 100%.  It follows that come 1 April 2010 HMRC enquiries may be focused on such professionals and their practices.

 

Please feel free to contact us should you have any queries or require assistance.

 

 

Photos from our mince pies & mulled wine day

Thank you to everyone who joined us for some Christmas spirit in our Swansea office on 18 December.

We hope you enjoyed yourselves as much as we did.

Happy New Year to you all x