Entries from December 2005 ↓

HMRC has confirmed that they will no longer be issuing receipts for hand delivered tax returns. Tax payers and accountants alike will be disappointed to hear this news as it is fairly common for tax returns to go missing once delivered to a tax office.

In the past, a HMRC stamped receipt would be accepted as proof of delivery and thus could be used to eliminate late filing penalties. Although HMRC say that they will accept alternative proofs of delivery we find it hard to think of better proof than a stamped receipt!

This is probably more an indirect way of HMRC encouraging the tax paying public to file their returns on line as this means less inputting work for the tax man and an electronic receipt can automatically be emailed.

There are many things to think about when you are planning a new business. Your local business link organisation can help as can an accountant who specialises in new start ups. For more ideas, read this article.

There are many ways to market your web site and for your web site to earn you money. Click here to learn about some ideas including Adwords and Adsense.

The most common area for small businesses that is investigated by the tax man is that of expenses which may have an element of personal benefit as well as business use. For example, travel costs, meals, entertainment, telephone.

The better your record keeping in these areas the less in depth the investigation is likely to get.

However, if the records are too ‘good’ this could cause problems, e.g. if you have documented claims for business expenses 52 weeks per year the tax man may find it hard to believe you never have a holiday or business mileage records that don’t tally with your car’s service history.

If you submit a tax return or receive taxable benefits in kind you should receive a PAYE code each year. In our experience, these are often out of date even before they are printed! This is usually because HMRC assume your remuneration package will be the same as the previous year and any changes notified to them do not get actioned for weeks, if not months, later.

If you receive an incorrect PAYE code, you should phone the tax man (if you write it will take another few months for the letter to be actioned) and explain the error. Make sure you have your NI number handy when you call.

2005 Tax Returns should be filed by 30 December 2005 via the internet if you wish your 2004/05 tax underpayments of less than £2,000 to be collected via a future PAYE code.

Have you recently incorporated your sole trader business? There are tax advantages to attaching a high value to the goodwill of your business on incorporation. However, are you confident you can justify the valuation if the tax man queries it?

Have a look at this case study for more information.

HMRC have revised their opinion on the allowability of expenses for employees who work at home. Further information can be found here.

HM Revenue and Customs has teamed up with The Department of Work and Pensions to tackle the problem of un-registered traders. Click here for further information.

Common sense seems to have prevailed at last in respect of husband and wife owned businesses. The common situation involves a personal service company (e.g. IT contractor) owned jointly by a husband and wife. The husband is the fee earner but takes a low salary to enable dividends to be paid to both the husband and wife. Joint ownership can often reduce the overall tax burden of the business. Previous to this case HMRC would seek to tax the husband on the wife’s dividends as well as his own. However, in Jones v Garnett, the tax payer won which now makes HMRC’s argument difficult to sustain.

The only question that remains is will HMRC appeal?