Tips on saving tax, the latest tax and business news, tax loopholes and useful links

From 1 January 2010, to claim a refund of VAT you have paid in another EU county you must complete an online claim in the UK. You no longer have to battle with a multitude of forms in foreign languages, as the claim can be done entirely in English. The UK tax office will forward your claim to the relevant country, which will process the refund within four months of receipt. You should then receive the payment due within a further 10 days.

To make VAT refund claims in respect of VAT paid in other EU countries you (or your accountant) need to first register to use the Tax Office VAT EU refunds system, which is part of the VAT online service.

The minimum amount of the VAT to be included in each claim has been standardised at €400 per quarter.  For further information see VAT notice number 723A: Refunds of VAT in the European Community.

Arguably it is Adam.  He had a liking for figures and made the first ever “entry”.  However, he soon lost interest after the withdrawal and buggered up the monthly accounts which resulted in the first liability being raised.

Further to our earlier article on this subject, the Taxman has now announced details of a tax amnesty for medical professionals.  After this amnesty expires you can expect him to start using his information to launch investigations where he suspects foul play.

The amnesty offers a relatively low 10% penalty if you disclose by 31 March 2010.

We are often asked what income is taxable (and should be reported on a tax return) and what income is not taxable.  Here is a list of taxable and non-taxable income from the Taxman.

We have been advised that HMRC has identified ‘upwards’ of 800 hospital consultants to be investigated in 2010.  Up until now the motor and travel expense claims have been the primary risk areas identified by HMRC, but the emphasis will change next year.

HMRC has issued formal notices to BUPA, Sun Life and other institutions who pay commission to hospital consultants to identify enquiry cases where the commissions appear to have either been understated or omitted from Tax Returns.

We understand an amnesty may be offered, similar to that available to offshore bank account holders, but watch this space.

I let my accountant do my tax returns because it saves time…
……..sometimes as much as ten years.

Tweeted by @TonyBlackburn

Today’s statement by Alistair Darling was arguably more of a pre-election manifesto than announcing any moves to aid the economic recovery.  However, here is the good and bad news for small businesses:

Good News

• Small company tax rate to remain at 21% rather than increase to the previously announced 22%.
• The tax payment service enabling struggling businesses to spread payment of their tax bills is being extended.
• No changes to the capital gains tax rates (suprisingly).
• Various minor tax breaks for electric cars and vans.

Bad News

• National Insurance is increasing by 1% from April 2011 (a 0.5% increase had previously been announced).  This affects employees, employers and the self-employed where earnings exceed £20k pa.
• The rate of VAT will revert to 17.5% on 1 January 2010.  The Flat Rate percentages will also increase by varying amounts.
• A 50% supertax will be charged on bank bonuses in excess of £25k per employe (some may argue this should be a Good News item!).
• Company cars will become slightly more expensive as the benefit bands have been shifted down by 5g/km of Co2.
• The stamp duty exemption on the purchase of most residential properties has been reduced from £175k to £125k.
• A telephone landline tax of 50p per month per line is being introduced from 1 October 2010 to pay for faster broadband speeds.

Further details on the less common taxes can be found here and changes announced in the April 2009 Budget can be found here.

Below is our summary of the tax consequences of your business sending gifts to customers and staff:

• Gifts to customers of the products or services you normally sell are tax allowable, as long as you are not in the food business.
• Small promotional gifts of any item are also treated as tax allowable for your business if they cost less than £50 each and carry a clear advertisement for the business. However, you cannot get income tax or corporation tax relief for the cost of gifts of food, drink, tobacco and gift tokens of any value.
• A number of gifts worth more than £50 in total should not be made to the same person in any 12 month period.
• If you are VAT registered you can reclaim the VAT on small gifts that cost up to £50 each, including gifts comprising of tobacco and alcohol.
• If the gift cost more than £50 (net of VAT) you must account for the VAT on the item as if you had sold it at cost.
• Gifts to your staff are tax allowable, but your employees could be taxed on the value of the gift as a benefit in kind. In that case you would also have to pay Class 1A NI on the value of those gifts. The Taxman does consider some small items to be trivial benefits, which can be given as tax-free gifts to staff members. Trivial items can include seasonal gifts such as a turkey, an ordinary bottle of wine (not fine vintage or champagne), or a box of chocolates.

If you subscribe for shares in a trading company, and later dispose of them at a loss, you can normally offset the loss against other taxable income (section 131 of the 2007 Income Tax Act).

However, the Taxman has found a wrinkle in the tax legislation such that he thinks subscriber shares issued in joint names (usually married couples) cannot benefit from this offset.  Section 131 applies to shares “which have been subscribed for by the individual”.  The Taxman argues that jointly owned shares are subscribed for by a couple rather than an individual and thus the offset is not available.

A way round this is for one individual to subscribe for the shares and then transfer some of them to their spouse. The spouse is then treated as subscribing for the shares in their own right. 

This is how we recommend shares are subscribed for when effective joint ownership is desired.

The Taxman has set out his charter, pledging to respect taxpayers, provide help and support, and treat them even-handedly.  However, in return he does ask that the taxpayer is honest and fair with him!