Entries from April 2006 ↓

Why not get your businesses to pay your children’s pocket money and claim it as a business expense. If they are 14 years or older your children are allowed to work a small number of hours for you which you will obviously pay them for and then claim a tax deduction for.

Remember to keep a note of their job responsibilities and hours worked. If they do not have any other jobs then they are unlikely to have to pay any tax and you will have a smaller tax bill at the end of the year!

HMRC have said that they will be more strict with PAYE online filing and reject forms if they have minor errors. We list below some of the more common errors made in previous years to help you get it right first time this year.

- avoid using the letter “o” rather than the number “0″;
- use the most recent PAYE code in the format 123/AB12345;
- don’t use leading zeros, e.g. 489L rather than 0489L;
- use accruate forenames, e.g. William rather than Bill;

If you don’t know the employee’s NI number don’t fudge it - leave the box blank and make entries in the date of birth and gender box.

If you don’t know their date of birth enter 1st Jan 1901 in the format 01011901.

This is the last day to settle your employees’ PAYE and Class 1NIC liabilities for the 2005/06 tax year. Interest will start accruing from this day on any overdue payments.

The Government has published the 2006 Finance Bill today. The Bill gives further details on the proposals announced in last month’s Budget speech by Gordon Brown.

The Taxman appears to be increasingly trying it on when enquiring into company tax returns.

They will ask to see copies of the directors’ personal bank statements as a mean of starting a fishing trip. However, you should resist this as the Taxman only has powers to see documents that support the entries made on the company tax return. They will often threaten to issue a formal notice but if you say you will take the matter to the tax court (the Commissioners) it is rare that the Taxman will persist.

If the Taxman has a suspicion that the director has received income which has not been taxed he has to open up a separate enquiry into the director’s personal tax return.

A recent IR35 case has been won by the taxpayer where £60k of tax was at stake going back 5 years.

The Taxman raised the usual arguments re substitution, control, financial risk etc. However, in finding for the taxpayer, the Commissioners concluded the following:

- a written substitution clause could not be discounted merely because it had not been used in practice;
- isolation and independence were not the same thing regarding integration into the end client’s organisation;
- being part of a team does not necessarily mean they fall fould of IR35.

So, another defeat for the Taxman - how long will it be before they scrap this legislation and replace it with something more workable?

Q. What is the difference between a terrorist and a tax inspector?
A. You can negotiate with a terrorist.

Q. How can you tell when a tax inspector is trying to trap you into a confession?
A. His lips are moving.

You may be one of the many investors who have several buy to let properties standing at a large gain as a result of the recent housing boom.

Many investors are now looking to sell some of their properties and invest in either commercial properties or residential ones in a different location in order to increase their yield. However, the tax rules being what they are, this churning will result in a capital gains tax liability which cannot be rolled over into the new acquisitions. So you either have to stump up the tax or hold onto the original properties that may not be what you want anymore.

Let us suggest one ‘opportunity’ that may be of interest. If you manage the portfolio of rental properties yourself it is fair to say that you are undertaking a rental ‘business’. Such a ‘business’ can be transferred into a company tax free and will result in an uplift in the base cost of the properties to their current market value.

The properties can now be sold, by the company, tax free because the sales price will now equal their (uplifted) base cost and hence no capital gain will result and hence no capital gains tax bill!

So, maybe you can buy those trendy new flats you’ve had your eye on, after all.

A recent report by PricewaterhouseCoopers has found that fewer than 1% of companies are implementing all the security measures available to them to tackle such things as identity theft.

One simple thing that we recommend company owners do is to sign up to the Companies House PROOF system which stops just anyone hi-jacking their companies address and using it to run up large bills in the name of the company.

Fears are growing over a new attack on contractors. The current IR35 provisions brought in by the Government in 2000 have not been as successful as was intended in making small businesses pay more tax.

It has emereged that within the numerous press releases issued in the 2006 Budget, the tax authorities said there was ‘evidence of agencies, contractors and employers requiring workers to use corporate structures… thereby avoiding paying tax and national insurance contributions’.

We think the Government are likely to attack the composite or umbrella companies first as they provide an easier and larger target. Such umbrella companies form an intermediary between the contractor and the end client and reduce tax by giving each contractor a share in the umbrella company and paying them via dividends.

However, any attack on these organisations could well indirectly affect contractors who have their own personal service company as the tax legislation involved applies to both types of company.