To March's Tax Tips & News, our newsletter designed to bring you tax tips and news to keep you one step ahead of the taxman.If you need further assistance just let us know or you can send us a question for our Question and Answer Corner.
We are committed to ensuring all our clients don't pay a penny more in tax than is necessary.Please contact us for advice in your own specific circumstances. We're here to help!
How to Keep Accounting Records
The Taxman is very keen for all businesses and individuals who need to submit a tax return, to keep complete and accurate records. He has recently issued a new leaflet that summarises all the records different types of businesses should keep, and those they are required to keep by law. See:
If you do not keep complete and accurate records of all your income, sales, gains, expenses, and business costs, you will not be able to prove the figures reported on your tax return are correct. If the Taxman challenges the entries on your tax return, and you cannot produce the evidence to back up those figures, he will assume they are incorrect. The Taxman will then think up a more reasonable figure (in his eyes), and look to tax you on that. You may then have to pay the additional tax, interest for late paid tax, and a penalty of up to 100% of the underpaid tax.
You can avoid such a nightmare if you keep accurate and complete records which is exactly why we designed our Purpleforce service. Signing up for our Purpleforce service will guarantee that your records will be tax-man ready at all times.
If you’re not already a client then you can get a quote here.
Filing VAT Returns Online
You may have recently received a letter from the VATman that officially notifies your company or business to file its VAT return online, or face penalties. If your business had a turnover of £100,000 or more in the year ending 31 December 2009 you are legally required to file your VAT returns online, rather than as a paper form, for all periods beginning on or after 1 April 2010. So you can file your VAT return for the quarter to 31 March 2010 on paper, but VAT returns for later periods must be submitted online.
If you don't agree that your turnover was £100,000 or more in the year to 31 December 2009, you need appeal against the VATman's decision within 30 days of the date of his letter. The VATman has not sent a copy of his letter to us, so please forward it on if you have concerns about this turnover threshold. If you want us to submit your VAT returns online on your behalf we will need that letter as it contains some key details for the registration process.
Even if you have already filed several of your VAT returns online, and your turnover is over £100,000, you will still receive the notification letter from the VATman, including the expensive glossy brochure. If your turnover is currently less than £100,000 per year, you will not have to file your VAT returns online until 2011. The Government has announced that all VAT registered businesses will be required to file their VAT returns online from April 2011, but that requirement is not law yet.
If your business first registers for VAT on or after 1 April 2010 you will be required to file all your VAT returns online from your first VAT return, even if your turnover is way below the £100,000 threshold.
Time Runs Out for Tax Claims
For as many years as we can remember individuals have had six years from the end of the tax year to claim most allowances and tax reliefs in respect of that tax year, (some tax claims have to be made within two years). That long claims period was shortened to five years from 31 January following the end of the tax year when self-assessment was introduced in 1996/97, but that change meant the loss of just two months. Now the long claims period is changing to four years from the end of the tax year with effect for claims submitted from 1 April 2010.
Thus claims and elections for the tax years 2004/05 and 2005/06 need to be made by 31 March 2010 and 5 April 2010 respectively. Such claims could include an error or mistake claim where tax has been overpaid, claims for personal allowances for marriage, age or blindness, and a number of capital gains tax reliefs.
Confusingly these new claims periods do not apply to everyone from the same date. If you have only recently come within the self assessment system, but you want to make a claim for an earlier year when you were taxed only under PAYE, you will have a further two years to make the claim. For example, claims from PAYE taxpayers for the tax year 2004/05 run out of time on 31 January 2011.
The long claims period for limited companies is also changing from six years from the end of the accounting period, to four years from the end of the accounting period, for claims submitted on and after 1 April 2010. Thus claims for accounting periods that end between 31 March 2004 and 31 March 2006 all need reach the Tax Office by 31 March 2010.
The period during which the Taxman can normally raise a tax bill for a particular tax year has also been cut back to four years from the end of that year. However, the where the extra tax is due because the taxpayer has made a careless or deliberate error, the Taxman has six years, extending to 20 years for deliberate errors, to raise the tax bill.
Changes to the EC Sales List
If you regularly sell goods to VAT-registered businesses in other countries you will be familiar with the form VAT 101, also known as the EC Sales List. This form has been used to record the cross-border movement of goods for Government statistical purposes. It does not require a payment to be submitted with the form. However, you can be charged a penalty if you don't submit your EC Sales List on time.
For sales made on and after 1 January 2010 the EC Sales List must also record the value of certain services supplied to VAT registered business in other EU countries, as well as goods. The services affected are those where the reverse charge applies, which means the customer charges themselves VAT at their own local rate, the supplier of the service does not add VAT to the invoice. This reverse charge procedure applies to most services supplied to businesses customers across international borders from 1 January 2010.
The EC sales list must be completed monthly if the value of the goods supplied to overseas businesses exceeds £70,000 per year, otherwise the form must be submitted for each calendar quarter, which are not necessarily your VAT quarters. If your annual turnover is less than £145,000, and your overseas sales of goods and services amounts to less than £11,000 you can ask the Tax Office for permission to submit the EC sales list on an annual basis.
You are not given much time to complete an EC sales list, as the paper form must reach HMRC within 14 days of the end of the quarter, so that's by 14 April 2010 for the quarter ending on 31 March 2010. If you chose to submit your EC Sales List online you have 21 days from the end of the quarter to submit the form, which is still not long. We can submit the EC sales list on your behalf, but we need details of all your overseas sales and customers to do so.
March Question and Answer Corner
Q. I've just realised I missed £280 of income off my tax return for 2008/09, which I submitted online in January 2010. What should I do?
A. Although this is a relatively small amount you should correct your tax return for 2008/09. However, before you do so double check that you have also included all the expenses and deductions for that tax year, as it looks bad to the Taxman if you correct your return, or 'amend' it in tax-speak, more than once. As you filed your return online you can also amend it online, just log into the self-assessment online area of the HMRC website and pick your 2008/09 return to amend. You have until 31 January 2011 to do this. You may have some more tax to pay for 2008/09 if your extra £280 of income is not covered by losses, allowances or expenses. You should pay the extra tax due as soon as possible as interest will be charged from 31 January 2010.
Q. I was born in Croatia but I've lived in the UK for 20 years. I recently inherited an apartment in Croatia which is let out. Do I need to pay tax in the UK on those rents, even though I don't bring the money back to the UK?
A. As you were born in Croatia your home country is outside the UK, and you probably have the tax status known as 'non-domiciled'. This is not certain as your domicile for tax purposes depends on a number of matters, including whether you intend staying in the UK in the future. If you are non-domiciled you may be able to ignore your overseas income for UK tax purposes, if the total income and gains left outside the UK each tax year amounts to less than £2,000. However, you must include on your UK tax return any overseas income or gains you bring into the UK, known as a 'remittance'.
Where your overseas income and gains amounts to more than £2,000, you currently have a choice:
- pay an annual £30,000 tax charge and ignore your overseas income (which remains overseas) for UK tax purposes; or
- declare all your overseas and gains on your UK tax return.
This a very complicated area of tax and you should discuss your personal circumstances with us before deciding what to include on your UK tax returns.
Q. My company was late submitting its VAT return and payment for the quarter to 30 September 2009. The VAT office has sent a surcharge notice, but the letter also says I can have the decision to impose the surcharge reviewed. Should I ask for this review?
A. If there were some exceptional circumstances that contributed to the late filing of your VAT return and payment, such as a death of a close family member, or a fire at your company premises, you may well have a reasonable excuse. In this case you should ask for the surcharge to be reviewed, but you need to do this within 30 days of the date of the letter from the VAT office. The reviewer will overturn the surcharge if they agree you had a reasonable excuse for late filing. You should provide a full written explanation of the circumstances that caused the delay, including any independent evidence you have, such as a report from the fire service.
March Key Tax Dates
19/22 PAYE/NIC and CIS deductions due for month to 5/3/2010
31 Last minute tax planning for the 2009/10 tax year. Ensure you use up all exemptions to which you are entitled
The information contained in this newsletter is of a general nature and no assurance of accuracy can be given. It is not a substitute for specific professional advice in your own circumstances. No action should be taken without consulting the detailed legislation or seeking professional advice. Therefore no responsibility for loss occasioned by any person acting or refraining from action as a consequence of the material can be accepted by the authors or the firm.