Happy New Year from everyone at Mazuma! 2009 is set to be a challenging time for businesses which is why our aim is to support you through this period of economic uncertainty.
In this months newsletter we talk about January deadlines, director’s loan accounts, bad debts and some exciting new services from Mazuma for the New Year.
Tax deadlines 31 January 2009
If you claim tax credits watch out for the 31 January date. It is the final date for providing your actual earnings details for 2007-08 and renewing your award for 2008-09.
Self Assessment - Two key events:
Unless you make a specific request to reduce the amount due, your payments on account for 2008-09 will be based on your actual payments for the previous year, 2007-08. If you use our Purpleforce service you will soon have management accounts to the end of December 2008 so you should be able to estimate your likely results for 2008-09. If they are lower than the previous years results you can ask for the payments on account to be reduced. Just contact us as soon as possible and we will be able to assist you.
How to Pay
There are several ways to pay any tax you owe:
Direct Payment via Internet or Telephone Banking: you will need the payment amount and your reference number (this is your 10 digit UTR number), then send the payment to sort code: 10-50-41 and account number: 23456000.
By Debit or Credit Card here
By post using the payslip that you've been sent. Make your cheques payable to 'HM Revenue & Customs' and send it to your accounts office.
If you think you won't have the funds to pay the full amount due, you should contact the Tax Office as soon as possible. There is now a new helpline number devoted to these sorts of problems: the Business Payment Support Service on 0845 302 1435, which is open every day from 8am. This service is staffed by tax officers who can arrange to spread your tax payments over a reasonable period. They can also deal with payments of VAT, PAYE, NI and corporation tax.
Overdrawn Directors Loan Accounts
If you borrow funds from your own company or get it to pay personal bills on your behalf, there could be additional tax bills for both you and the company unless you repay that money to the company quickly. If you use our Purpleforce service and get monthly accounts from us then you will be able to asses your position on a monthly basis.
Where the amount you owe to the company exceeds £5,000 at any time in the tax year, and you have paid interest at less than the official rate on this loan there will be an income tax charge on you personally. The official rate has been set at 6.25% since 6 April 2007 in spite of the massive cuts in the Bank of England interest rates since then.
Where the loan is still outstanding nine months after the company's year end the company has to pay a tax charge equivalent to 25% of the loan, known as a 'section 419' charge. When the loan is eventually cleared this section 419 charge can be reclaimed by the company, but only when its next corporation tax bill is due.
What to do
If you do owe your company a significant amount you could either:
1. Use other personal funds to reimburse the amount you owe; or
2. Get the company to pay you a dividend or a bonus that is set again the loan to bring the amount you owe back to zero; or
3. Ask the company to write-off the loan.
Option 1 creates no further tax charges for you or the company, so it's the best in that respect.
Option 2 generates more tax for you, particularly if you already pay higher rate tax. In that case you will have to pay 25% of the net dividend in tax but you won't have received a cash dividend to give you the funds to pay that tax. The company may have to pay you a higher dividend to give you enough cash to pay the higher rate tax due. The company must deduct PAYE and NICs from any bonus it pays, so can often be more expensive and it must have the cash to pay that tax and NI to the Taxman.
Option 3 the loan write-off, is treated as a distribution by the company at the date of the write-off. This is taxed as a dividend in your hands, complete with the 10% tax credit, but it is not actually a dividend. The company cannot claim a deduction against corporation tax for the amount of the loan written-off. The Taxman may also argue that NI contributions are due on the amount of the released loan, as if it was a payment of salary.
If you owe your company money please discuss the situation with us as soon as possible as the most tax efficient solution will vary depending on your circumstances.
Bad debts can be a business nightmare! It is well worth spending some time tightening your credit control procedures. This article offers a few pointers which will ensure you deal effectively with the VAT and tax consequences.
Unless you are registered to use a special scheme which protects you from bad debts, particularly Cash Accounting, you may have paid over the VAT on sales invoices you have issued. If the customer never pays the invoice then you have paid over VAT that you have never received.
If that is the case you are entitled to reclaim the VAT when the debt is 6 months overdue.
It is well worth converting to Cash Accounting for VAT if your business qualifies. Presently the turnover limitations are £1.35m per annum. If your annual turnover is under this amount registering would provide a possible positive effect on your cash flow. There are some fast facts about Cash Accounting in our tax centre on this webiste.
Whether your business is incorporated or not, if a customer does not pay your invoice this needs to be recorded in your accounts.
When you provide us with your accounts data, make sure you tell us about any bad debts to be written off. As long as any claim for bad debts is based on real, specific transactions they should be accepted by HMRC, i.e. you cannot just claim a percentage, the bad debts written off need to be specific to qualify for any relief available.
New Services from Mazuma
In our plight to make dealing with your paperwork easier we have introduced a new service for 2009; Paperforce – Electronic Document Storage.
Here is a service for anyone who feels they are climbing a mountain of paper everyday!
One of the adverse effects of running a successful business is that you handle vast quantities of paper both incoming and outgoing, and this paperwork needs to be kept for a minimum of six years.
Electronic Archiving is the process of scanning documents into an electronic format such as TIFF, JPG or PDF, and storing it in an Electronic Filing Cabinet or EDM system so that it can be accessed quickly and easily using index information or meta data captured from the document itself.
Our document scanning bureau will take your paper mountain, and using industry leading hardware and software processes, will swiftly convert it into easily managed digital documents - accurately indexed and at the fingertips of anyone in your organisation who has authorisation to view them, wherever they are in the world, at any time of the day or night.
You then choose what happens to the original paperwork. It can either be stored at a low cost off-site document storage facility or be securely destroyed in an environmentally friendly way.
At any time you can view, mail, print and use the electronic copies we have created through your own personal secure online portal. You now have access to your documents wherever you are and whenever you want them, 24 hours a day. You do not need to worry about your documents being destroyed by fire, flood or even theft, or your documents taking up precious (and expensive) storage space in your office or home.
Should you need the original hard copy, for example for legal reasons, we can quickly dispatch it to you from our safe storage if you have opted to store rather than destroy it.
If you are already using the Purpleforce service you can upgrade your service, just email us at firstname.lastname@example.org
Tax Diary January/February 2009
1 January 2009 - Due date for corporation tax payable for the year ended 31 March 2008.
19 January 2009 - PAYE and NIC deductions due for month ended 5 January 2009. (If you pay your tax electronically the due date is 22 January 2009)
19 January 2009 - Filing deadline for the CIS300 monthly return for the month ended 5 January 2009
19 January 2009 - CIS tax deducted for the month ended 5 January 2009 is payable by today.
31 January 2009 - Last day for electronic filing of Self Assessment returns for 2008
31 January 2009 - Due date for payment of any balance of self assessment liability for the tax year ending 5 April 2008, plus any payment on account due for the tax year ending 5 April 2009.
1 February 2009 - Due date for corporation tax payable for the year ended 30 April 2008.
19 February 2009 - PAYE and NIC deductions due for month ended 5 February 2009. (If you pay your tax electronically the due date is 22 February 2009)
19 February 2009 - Filing deadline for the CIS300 monthly return for the month ended 5 February 2009
19 February 2009 - CIS tax deducted for the month ended 5 February 2009 is payable by today.
DISCLAIMER - PLEASE NOTE: The ideas shared with you in this newsletter are intended to inform rather than advise. Taxpayers circumstances do vary and if you feel that tax strategies we have outlined may be beneficial it is important that you contact us before implementation. If you do or do not take action as a result of reading this newsletter, before receiving our written endorsement, we will accept no responsibility for any financial loss incurred.