Entries from January 2006 ↓

A carefully prepared business plan is not only the key when seeking finance, it is a valuable business tool.

Click here for an explanation of how to prepare an effective business plan.

HM Revenue & Customs (HMRC) have confirmed that they have decided to petition the House of Lords for leave to appeal against the decision of the Court of Appeal in the case of Jones v Garnett (Arctic Systems Ltd.). This case affects many husband and wife owned contracting companies where one spouse earns the majority of the income.

The Jones v Garnett case concerns arrangements involving a company called Arctic Systems Ltd. and relates to the settlements legislation. HMRC won the original case heard by the Special Commissioners. The appellant (Mr. Jones) subsequently appealed to the High Court, and HMRC also won this hearing. However, HMRC lost in the Court of Appeal and are petitioning the House of Lords for leave to appeal.

The settlements legislation (Part 5, Chapter 5, of the Income Tax (Trading and Other Income) Act 2005) is a long standing piece of anti-avoidance legislation designed to prevent the avoidance of tax by, for example, a higher rate taxpayer transferring their income to someone liable at a lower rate. The legislation applies in a wide range of circumstances, including income from small companies and partnerships but it does not apply to income from those companies and partnerships that have normal commercial arrangements.

Contractor organisation, the PCG, released this press release in response to HMRC’s decision to appeal the case.

If you have stashed away money in an offshore bank account, without declaring the interest to the tax man and you use a credit card to make purchases or withdraw cash over here in the UK, beware!

The tax man (HMRC) has just won a case that will enable him to ask to see any relevant paperwork. If you have not declared these funds in the past you are then likely to be hit with a tax bill.

Special commissioner John Avery Jones, who heard the case, dismissed the argument that taxpayers’ basic rights and EU freedoms were being violated. “Had they associated their credit card with a UK bank account, the UK bank would automatically give the Revenue information about interest earned on that account every year, which is arguably more onerous than under the proposed Notice,” he said. “If the customers are deterred from opening offshore bank accounts and associating credit cards with such accounts …because the customers intend to evade tax I find it strange that it should be argued that the EU fundamental freedoms should assist them.”

The decision can be downloaded in full from the Finance & Tax Tribunals website.

According to Her Majesty’s Revenue and Customs, 306 self-assessment tax returns were filed online Christmas Day 2005.

Who are these people?

I know the films on the TV this year were not up to the usual standard but they can’t have been that bad can they?

As I’m sure you’re all aware from the riveting adverts on TV, the deadline for submitting your 2004/05 self assessment tax returns is only three weeks away (31 January 2006).

When processing tax returns, HM Revenue & Customs has found the ten most common mistakes are:

1. A ‘yes’ tick has been entered in one of the questions 1 to 9 on page 2 of the tax return but the supplementary page has not been forwarded with the tax return.

2. Failure to complete the self-employed pages, particularly on page SE3 from box 3.74 onwards.

3. Detailing information on separate schedules instead of including the information on the return.

4. Entering manuscript notes on the return i.e. “per accounts” and/or “information to follow” instead of entering actual figures on the form.

5. Failure to complete a separate supplementary page for each individual employment.

6. Entering the net figure of employee personal pension premiums instead of the gross figure at box 14.11 of the core return (i.e. claiming insufficient relief where higher rates of tax are payable).

7. Entering the figure of capital expenditure in Box 3.14 of the Self Employment pages instead of the figure of capital allowances (i.e. claiming excessive relief).

8. Failure to complete question 19 of the core return where a repayment is due. We will assume you wish to leave the overpaid amount on your record, to be set against future liabilities - you have the right to choose.

9. Entering your pay in box 1.8 but not entering any tax deducted in box 1.11 on the Employment pages.

And most importantly…..!

10. If you fail to sign the return, it will be rejected immediately.

People needing help or more information from the tax man can visit the official web site for the tax man (see links section) or telephone the self assessment helpline on 0845 900 0444. The helpline is open 8am-8pm seven days a week.

If you purchase a property for your business think about separately identifying the fixtures and fittings (e.g. air conditioning, partitions, furniture). Capital allowances on such fixtures can be claimed against your tax bill. Usually the cost of the building itself cannot.

This strategy may also reduce the stamp duty cost if the revised valuation of the property now falls below the relevant thresholds (£120,000, £250,000 and £500,000). You should ensure that the valuations can be justified however as the tax man may not be too happy with all this tax you’ve saved!