Please note that Taxfile’s opening hours for February and March 2013 are:
Please contact us if you need accounting help or tax-related assistance.
With the tax return deadline being only hours away (midnight 31 January 2014) there is still time to get professional help if you need it – particularly because HMRC often get it wrong according to new research by UHY Hacker Young.
In just one example, HMRC sent a tax bill to a pensioner which demanded over £576k in tax! With an income of only £11k per annum this was clearly incorrect but what if it had been only hundreds of pounds wrong – would the pensioner have noticed and, if so, would he have been confident enough to question it with the might of HMRC?
According to the research, HMRC employees have been making ‘basic’ errors which have led to problems such as people being on the wrong tax code and consequently underpaying or overpaying tax. While underpaying it may sound attractive on the face of it, chances are the system will catch up and then a correction will need to be made later on, leaving the taxpayer with an unforeseen bill to pay – a real blow for cashflow.
While the UHY Hacker Young research cites an error rate in 2013 of 37% in the sample tested, HMRC are arguing that the research is wrong and that their PAYE coding notices are 99% accurate. Either way, when you consider that Read more
On 5 December 2013 George Osborne, Chancellor of the Exchequer, gave his Autumn Statement in Parliament. Key announcements included:
The full speech transcript can be read here or alternatively view the following video recording: Read more
Have you ever wondered what other services the Taxfile group can help you with? Well, find all the answers in the new downloadable brochure, which outlines services undertaken at the various different offices in both South London and Exeter, Devon. From accountancy and bookkeeping for SMBs to simple tax returns for individuals and right through to the most complex of complicated tax issues – we’re here to help and the new brochure gives you all the contact details for each office including address, email, telephone, Skype ID, how to book appointments on-line and, finally, what discounts are available – both to new and existing customers – it’s all there … or rather I should say … it’s all here! (A4 PDF format, less than 1MB).
As a barrister you are treated as self employed by HM Revenue and Customs.
Historically barristers computed their professional profits for tax purposes on a “cash basis.”
Fees were brought into account only when received, and expenses only when paid.
From fiscal year 1999/00, it is required that all professionals including most barristers to compute their profits on a “true and fair view.”
Barristers in their first seven years of practice are still allowed to use the cash basis.
In computing their profits for tax purposes, barristers can deduct certain expenses like:
• Travelling costs from Chambers to court;
• Off street parking;
• Library and periodical subscriptions;
• Postage, printing, photocopying and stationary;
• Professional and accountancy fees;
• Devilling fees
• Chambers’ rent;
• Legal literature;
• Professional Indemnity Insurance premiums;
• Subscriptions (Circuit, Bar Council, Bar Associations)
• Bank charges;
• Use of home as an office;
• Robing room fees;
• Law report subscriptions;
• Staff costs;
• Silk application fees;
• Clothing and cleaning.
According to HMRC, “You should allow a deduction in computing profits for the cost of replacing gowns and wigs and frock coats worn by Queen’s Counsel. You should not, however, allow a deduction for expenditure on `normal clothes’, for example, black coats and pin- stripe trousers worn by male barristers or black dresses and suits worn by female barristers (this follows the decision in Mallalieu v Drummond”
Taxfile‘s tax agents will ensure you keep the necessary records of your income and expenditure and you make the right adjustments with regards the to private use of your expenditure.
Also, our tax accountants in South London and Exeter will make sure you obtain the maximum available tax deduction when calculating your taxable profits.
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.
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.
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!
Registered childminders are people that work in their own homes to provide care and learning opportunities for other people’s children.
Childminders need to declare their income from their self-employment by filling in a self-assessment tax return every year.
Many childminders are members of the National Childminding Association (NCMA).The NCMA had an agreement with with HMRC in terms of allowable expenses that a childminder can have. They agreed that receipts for items of expenditure will not be required for items costing less than £10.
Also they agreed with the HMRC that full-time childminders (40 or more hours a week)can deduct as expenses a third of their heating and lighting costs and 10% of water rates and Council tax. Food and drink provided for children are acceptable and receipts are not required provided that the figures are reasonable.
Probably not everyone is aware of 10% Wear and Tear relief available to childminders. 10% Wear and Tear of total childminding income may be deducted as an expense to cover the wear and tear of furniture and household items. Once a childminder claims this relief, he/she cannot claim for replacing such household items.
Other expenses allowable in calculating the taxable profit are the cost of toys, books, safety equipment, travel fares, NCMA subscription, Public Liability Insurance, stationary, the cost of phone calls for childminding purposes, cleaning, accountancy fee, children gifts,training costs, resources (like paint, arts/craft)and Ofsted Registration fee(Office for Standards in Education).
For more details regarding childminders and their relationship with tax, you can seek guidance from Taxfile’s tax agents in South London (Tulse Hill) and Exeter.
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.