Taxfile-Jobseeker’s Allowance

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Unemployment figures are now showing that just over 2 million people in the UK are out of work, this unfortunately means that when you are out of work you are not earning. Fortunately there is an allowance where if you are unemployed and available for work, you could qualify for something called Jobseeker’s Allowance depending on your circumstances.
To qualify for JSA, you must meet the following requirements:
•Be available for work
•Be able to work
•Be actively looking for work
Also you have to be under the state pension age, live in UK and not be working or working for an average of less than 16 hours per week.
There are two types of Jobseeker’s Allowance: Contribution-based and Income-based.
Income-based JSA (IB) is given to you if you are on low income, even if you have not made any National Insurance contributions in the past.
Contribution-based JSA (C) is dependent on your NIC record and is paid for a maximum period of six months. However if you did not earn enough to pay NICs, you many still be entitled to get JSA(C) if you were given NIC credits. This would have happened, if you were earning more than the lower earnings limit (£90 a week in 08/09 and £95 a week for 09/10), if you were unemployed or unable to work because of illness, and in some other circumstances.
If you are unemployed and either 16 or 17, usually you do not receive JSA unless you are forced to live away from your parents and will suffer severely if you don’t receive JSA or if you or your partner are responsible for a child.

If you are on JSA(C), you will receive £47.95 if you are aged 16-24and £60.50 aged 25 and over per week. For JSA (IB), you will receive a maximum weekly rate depending on your circumstances:
•Single people aged 16-24 – £47.95
•Single people aged 25 and over – £60.50
•Couples and civil partnerships (both aged 18 or over) – £94.95
•Lone parents (aged under 18) – £47.95
•Lone parents (aged 18 and over) – £60.50
Your payments might be reduced if you receive income from part-time employment or you will get less if you have savings over £6,000 and if you have savings over £16,000 you probably will not qualify.
In certain cases, a claimant’s Jobseeker’s allowance may be stopped.
One reason would be that you did not actively seek work or sign the Jobseekers Agreement. If this happens, your benefit will be automatically suspended until the date you complete and sign the agreement. Once this has been signed, you are still not guaranteed back all of your benefit, as a decision maker will decide how much you get back, if any.
Other reasons why your Jobseekers allowance could be stopped is if you miss a restart interview, if you voluntarily leave work or refuse a notified vacancy or if you refuse to attend a compulsory scheme or fail to comply with Direction. Doing any of the above could result in you missing a month’s benefit or having to renew your claim, which could take months.

If you wish to make a claim for Jobseekers Allowance, follow this link and it will take you to Job Centre Plus where you can type in your postcode to find your local Job Centre.
Taxfile’s tax agents hope you found this useful, and if you have any more queries regarding Jobseeker’s Allowance why not pop into our offices in South East London and Exeter. Our accountants and tax advisers would be happy to assist.

Disability Living Allowance

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Disability Living Allowance (DLA) is a tax-free benefit for people under 65, including children, who have normally care needs or encounter problems getting about.
Disability living allowance (DLA) is paid at different rates depending on how your disability affects you.
There are two types of disability living allowance:one is the care component and the other is the mobility component. You may be able to get one claim or even be entitled to both.
For the care component there are three types of rates. Lower, middle, and higher. To be eligible for the lower rate, you must need help or supervision for most of the day or be unable to cook a main meal for yourself. For this lower rate you would be entitled to £17.75 per week. If you were receiving the middle rate you would get £44.85 per week, this would be because you would need personal care continually through the day or night. To be entitled to the higher rate you would need help throughout the whole day and during the night as well, the higher rate pays £67.00 per week. Even if you live alone and no-one is actually giving you the care you need, you still can get the care component for Disability Living Allowance.
There are only two types of rates for the mobility component, lower and higher. To get this part of the disability living allowance, you must have difficulty in getting out and about. For the lower rate, you would get £17.75 per week if you need guidance or supervision out of doors or in unfamiliar places. For higher rate of this component, you would be entitled to £46.75. This would be because you are unable or virtually unable to walk, or if you have no legs or feet, also if you get very short of breath after only walking a short distance.
To claim DLA you must have needed help for at least 3 months and be likely to need it for another 6 months. However there are special rules that apply to people that have a terminal illness, this allowing them to get the allowance more quickly and easily. This must be claimed before you reach 65.
If you were to start getting the DLA there is chance it could increase your other benefits such as Council Tax Benefits, Working Tax Credits, Pension Credits, Income support, Housing Benefit and Child Tax Credit. This is because Disability Living Allowance is normally ignored as income for working out these income-related benefits and credits.
To claim for DLA, you can call the benefit line enquiry on 0800 88 22 00,download a form from the governments website or contact your local Jobcentre office or local social security office.
We hope you found this useful, and if you do have any more questions regarding anything to do with Disability Living Allowance, please feel free to pop into our office in South London, Tulse Hill, talk to our accountants and tax advisors in our Exeter office, or send us an email.

Taxfile: Scholarship Income

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By scholarship we mean an exhibition, bursary or any other similar educational endowment. If the holder of the scholarship is receiving full-time education at a university, college or school then the income from the scholarship is exempt from tax.
The rate of payment including lodging, subsistence and travelling allowances is now £15,480 a year, £1,290 a month or £297.92 a week. This rate has increased from £15,000 (rate used up to 01/09/2005) to £15480 (from 01/09/2007 onwards).
Important to note is that this exemption does not apply to payments of earnings made for any periods spent working for the employer during vacations.
If the rate exceeds £15,480 HMRC will look at the arrangements in detail. This is because the level of payment exceeds what might reasonably be described as a scholarship or training allowance. However, an increase in the rate of payment over the qualifying limit, part way through a course, will not affect the exemption applying to any payments for the earlier part of the course
One of the condition to be met by the employee receiving the scholarship, is that he/she must be enrolled at the educational establishment for at least one academic year and must attend the course for at least twenty weeks in that academic year.
Also, the educational establishments must be recognized universities, technical colleges or similar educational establishments, which are open to members of the public generally and offer more than one course of practical or academic instruction.
Very important to know is that the concepts of “earnings” and “scholarship income” are mutually exclusive.
In conclusion, it is important to remember that there are a few factors to consider when dealing with scholarship income:
•the relationship between the payer and the recipient;
•the nature of the course;
•where the course is being undertaken;
•whether it is full time;
• total amount.
So pop in to see us in our office in South London Monday to Friday and even Saturday now!
Any of our tax agents at Taxfile will be more than happy to help if you have any further queries.

Vat Flat Rate Scheme

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The VAT flat rate scheme was introduced on 24th April 2002 and was designed to assist small businesses through calculating VAT payments as a percentage of their turnover.
This scheme was developed to reduce the cost of complying with VAT obligations and the time spent by removing the need to calculate and record output and input tax in calculating the net VAT.
The scheme is optional and available to businesses with a VAT exclusive annual taxable turnover of up to £150,000(£225,000 after 1 April 2009) and total turnover including the value of exempt supply and other non- taxable income does not exceed £187,500(not required after 1 April 2009).
The flat rate percentage depends on the trade sector of the business you are running and it can range from 2% to 13.5%.
To see the category of the business you are falling into and what percentage you need to use follow this link from hmrc. As you could probably notice, the flat rate percentages have been changed since the decrease of normal VAT rate from 17.5% to 15%.
Under this scheme, businesses charge their customers the normal rate for the supply of goods and services.
Although businesses do not need to calculate the VAT on each and every transaction they make, they still need to keep a record of their flat rate calculation showing their turnover, the percentage used and the tax calculation.
As far as capital assets are concerned,for those costing more than £2000 (including VAT), the VAT can be recovered in the normal way as long as they meet certain conditions.
There are a few special categories of businesses like farmers, barristers and florists where special VAT flat rate rules apply. About all this we can explain more in due course.
Taxfile‘s tax accountants in South London and Exeter will first assess your eligibility for the flat rate scheme then will weight up pros and cons and see how beneficial it is for you.
Then finally they will register you within the scheme and offer ongoing support.

Maintenance Payments Relief

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Our blog today is dedicated to some of our clients who wanted to know more about tax relief on alimony or child support payments.This relief is officially known as Maintenance Payments Relief.
Maintenance Payments Relief can reduce your tax bill if you make maintenance payments to your ex-spouse or former civil partner or child.
If you make or get maintenance payments and/or child maintenance payments after 6th April 2000 it will not normally have any effect at all on the tax you pay.
Only people born before 6 April 1935 who make these payments need to think about their tax position.
You do not pay tax on any maintenance payments that you receive.
In order to qualify for this relief that would cut your tax bill there are certain conditions to be met:
•only applies if you pay tax;
•you or your ex-spouse or former civil partner were born before 6 April 1935
•you’re separated or divorced or the civil partnership has dissolved and you’re making the payments under a Court Order, in other words the payments are legally enforceable and your ex spouse or former civil partner can take court action if you don’t make the payments;
•the payments are for the maintenance of your ex-spouse or former civil partner (provided they aren’t now remarried or in a new civil partnership) or for your children who are under 21.
For the tax year ending on 5th April 2009, this relief can reduce your tax bill by the lower of the following two amounts:either 10% of £2,540 (£254) – this will apply where you make maintenance payments of £2,540 or more a year or 10% of the amount you have actually paid – where the amount is less than £2,540.
For the following tax year(2009-10) the Maintenance Payments Relief limit will be £2,670.
Very important to remember is that you cannot claim a tax reduction/relief for any voluntary payments that you make for a child, ex-spouse or former civil partner.
We hope you found this useful and if there are still questions to be answered, please feel free to pop in to see us in our office in Tulse Hill or drop an email. One of our tax agents will be more than happy to assist.

Tax Enquiries: Guilty Until Proven Innocent!

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An enquiry is defined as seeking information, asking, questioning. Self Assessment is a process now/check later regime. According to HMRC,enquiries encompass all work carried out to check returns after processing – from a single enquiry about one entry in a return to a detailed examination of all the taxpayer’s affairs.
Under Self Assessment, taxpayers have clearly defined obligations while HMRC has defined powers in order to make sure that all taxpayers meet such obligations.
There are two types of tax enquiries:
•full enquiries (covering every single aspect of the return) and
•aspect enquiries(dealing with only one or more aspects of the return).
According to HMRC, a full enquiry is one which seeks to address all the significant risks of error in the return, including the risk of the return being fundamentally incorrect whereas aspect enquiries are those which fall short of a full, in-depth examination of the whole return but instead concentrate on one or more aspects of it.
Aspect enquiries, although more limited in scope than full enquiries, should not be seen as any less thorough or investigative.
If no enquiry is made within the allowed period (one year from the day the tax return is received by HMRC, for specific examples follow this link), the return becomes final unless the tax office makes a discovery assessment as a result of the return being incorrect or there was fraudulent or negligent conduct in making the return.
A very small proportion of returns will be taken up for enquiry on an entirely random basis. Most of the enquiries may start because either the return was sent in late, or some figures in the tax return did not match their records or just HMRC received a tip off.
All taxpayers should be aware that there is a chance of their returns being subject to enquiry.
Where a tax return has been selected for full enquiry, the enquiry officer aims to identify and examine all the significant risks of error in the return, including the risk that it is fundamentally incorrect. Also, where the business records do not prove to be as accurate as they should be, the officer in charge will need to look at the private side.
In order to make sure that there is no undisclosed source of income or additional cash coming from somewhere which was not taxed, the enquiry officer uses three main techniques:
•Cash Flow Tests involved with an analysis of drawings;
•means tests which determines the amount of money that is available to a taxpayer for living expenses.
•capital statements dealing with a detailed accumulation of information about capital worth, income of all sorts and expenditure.
Individuals with complex tax affairs investigated by HMRC should seek early help from a professional advisor to guide them through every step of the enquiry from responding to the officer, arranging a meeting to negotiating a settlement.
Taxfile‘s tax agents in South London and Exeter will guide you through this process and try to save you tax, interest and penalties.
Taxfile is happy to announce that we have recently renewed our free-of-charge enquiry protection cover. The insurance will cover the whole costs involved in dealing with your tax investigation so you can give you piece of mind and save you hundreds of pounds at the same time.
So pop in to see us and make the best of it!

Foster Carers and their tax relief

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Fostering is looking after someone else’s children in your own home at a time when his or her family is unable to do so. Foster care relief applies to people who get income from providing foster care to children and young people.
Anyone receiving this type of income is considered by the tax office to be self-employed and therefore liable for tax.
If total receipts from fostering no dot exceed a certain amount, often referred to as qualifying amount, than the foster carer will be exempt from income tax for that year.
A qualifying amount is made up of two elements added together.
One element is the fixed amount of £10,000 per year for each household. Only a proportion of the fixed amount can be claimed if the foster carer is registered for less than a year.
The second element consists of an amount per week for each foster child which varies depending on the child’s age.
If total receipts from fostering exceed the qualifying amount than there are two ways of calculating your tax. One is called the profit method and it is calculated by deducting the allowable expenses from the receipts.
The other one is called the simplified method and is calculated by deducting from the receipts the qualifying amount with no additional relief for expenses. Capital allowances are not available if such a claim is made. The election must be made on or before the first anniversary of 31 January next following the end of the year of assessment to which it relates. If they do not make such an election the will need to calculate their profit in the normal way (the profit method).
As profits from fostering as treated as earnings from self-employment, than National Insurance Contributions will be due (Class2 £2.30 per week and Class4 8% on the profit).
As a foster carer need you to keep good records consisting of total receipts for the year from their local authority, HSS trust or independent fostering provider.You also need to keep a record of the number of weeks that you care for each child placed with you in the year.
Also you need to keep a record of the date of birth for each child.
If your total receipts from fostering exceed the qualifying amount and you are using the profit method than you would need to keep records of your expenses as well.
If you are a foster carer and need help with filling in your tax return, Taxfile‘s tax agents in South London and Exeter are here to help.

Taxfile: 31st October 2008 deadline

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The deadline for submitting the details of your income and gains on your Self Assessment Tax Return is still the 31st January. However HMRC has now brought in place a new “paper form” deadline this year to go with the new-style green forms, the final day for submission of these is 31st October.

Almost all tax returns can be submitted online,but there are a few cases where paper returns would need to be made. In these cases the deadline by which the paper return must reach HMRC is 31st January. These are:
•SA700 – Non-resident Company Tax Return
•SA970 – Trustees of Registered Pension Schemes
Paper returns that have failed to reach HMRC by 31st October will automatically be penalized with a £100 fine.
This is the same for partnership returns, although both partners will have to pay £100 each, and Late Trust and Estate returns result in a £100 charge to either the trust or estate.
If you still haven’t paid the balancing payment due by 31 January by the end of February, you’ll be charged an automatic 5% surcharge on top of the amount still owing. This is in addition to any interest payments.
At Taxfile we only submit your current tax return online as it has proved to be safer, faster and giving you more time.
At Taxfile we have been completing online returns for some time now, this benefiting our clients as they are able to gain extra time to gather all the necessary information to complete their tax returns.
If you have not submitted your tax return yet, come to Taxfile‘s offices in either South London or Exeter to ensure that you do not receive an automatic penalty of £100.

National Minimum Wage

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Minimum Wage is defined as the lowest wage payable to most employees as fixed by law or union agreement.
There are three different rates of Minimum Wage:
•Adults’ rate for workers aged 22 and over
•Development rate for those aged between 18 and 21
•Young people’s rate for those older than school leaving age and younger than 18; you’re under school leaving age until the end of summer term of the school year in which you turn 16.
Almost everyone who works in the UK is legally entitled to be paid the National Minimum Wage.
However, you are not entitled to receive the minimum wage if you are in one of the following categories: a worker under school leaving age, genuinely self-employed,company director, prisoner, share fisherman, apprentice, an au pair,in the armed services or a voluntary worker.
Every year National Minimum Wage rates are being reviewed and if any changes take place they come in force from 1st of October. From 1st October 2008, National Minimum Wage increased from £5.52 to £5.73 an hour for adult workers.
The statutory hourly rate for 18 to 22-year-olds has also risen from £4.60 to £4.77, and for 16 and 17-year-olds has lifted from £3.40 to £3.53. Also the accommodation offset rate increased from £4.30(per day) to £4.46(per day).
It is worth mentioning the agricultural workers as different rates apply to them.
Also Piece workers (known as Output workers) are paid by the number of items they produce or tasks they perform rather than the number of hours they work. Piece workers must be paid at least the minimum wage for every hour they work or a fair piece rate for each piece produced or task performed.
Commission workers are paid entirely or partly on the basis of sales made. These ‘commission workers’ must be paid at least the national minimum wage.
Trainees and staff on probation are entitled to be paid at least the national minimum wage.
Very important to know is that the government is planning to introduce new regulations in April that will impose a £5,000 automatic fine on any employer failing to pay the minimum rate.
Serious cases could lead to a prosecution in a Crown Court where there is no limit to the fine that could be set.
If you suspect your employer is paying you less than the Minimum Wage than Taxfile‘s tax accountants in South London and Exeter recommend you downloading this form in order to make a complaint to the HMRC.

Workers in Construction Industry Scheme

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We recently came across a client who got very confused about becoming a limited company and his tax position.

If people are both self employed and/or employed and they only work part of a tax year on that basis, it is likely that they would not have time and understanding of the implications of becoming an employee of their own limited company to organise their own salary in the first few months of trading.
The situation will then exist that they have a tax return to do for April 5th which has only a part years earnings, which gives rise to a personal tax rebate.
The limited company then has a payroll scheme of its own for future tax efficient drawings.
So year one of setting up a limited company can appear very beneficial (contact Taxfile to set up an ltd as a one stop shop for all your tax needs).
Year two may then give rise to a profit which can be taxed as employee’s drawings (director) and if the director is prudent by leaving a tax reserve in the firm at the year end, then a potential tax efficient dividend may be possible (remember you can choose your year end to be a point when adequate reserves are in hand, you can only change it once in every five years. (Come to Taxfile to make sure you get the best year end solution).
The scheme for the taxing of the directors drawings and the subcontracted workers can be easily administered by the director, if there is a good margin between the gross works done and the labour costs then it is usual to see a favourable set off position at the end of each month.
To sum up, the business may have had 20% stopped on more of the income than the tax it has stopped from the subcontracted worker, this being the case then no tax needs to be handed to HMRC that month, the contractor/director must complete a CIS 300 list every month to state the tax stopped from every verified subcontractor ( HMRC do a great DIY course which is free to attend).
Any surplus tax suffered can be reclaimed back to the company at payroll year end 5th April on the companies p35 (it can take a few months for HMRC to agree the repayment as sometimes they ask for proof of the tax suffered, so good records of the work done and tax suffered are essential), once the tax is rebated then it comes back to the company to bolster the reserves.
The company accountant (come to Taxfile for the best in service from a Taxfile accountant) will then advise you of your corporation tax assuming you have supplied your banking records (preferably quarterly by online bank downloads which can be easily uploaded for analysis) . The corporation tax is due 9 months after the year end, so a good CIS rebate can often cover the corporation tax if the company is a labour only supplier which makes a reasonable margin after retentions.

If you are still confused about the way the Construction Industry Scheme (CIS) works you can always rely on Taxfile’s tax specialists in South London and Exeter to guide you through any potential tax issues.