Entries from May 2006 ↓

We’ve heard that the taxman is increasingly asking about the subcontractors that businesses use.

He is trying to deem these subbies to be employees of the business which would mean increased taxes are due.

We recommend you put a written contract in place between your business and any subcontractors which expressly states the type of relationship that is intended e.g. no certainty of continuing work, allows for substitution of the individual, excludes holiday and sick pay etc.

Fortunately the VATman recognises that businesses suffer bad debts from time to time and allows you to claim back VAT relating to those bad debts.

Once the debt is older than 6 months you can claim back the VAT through your quarterly VAT return. If you haven’t done this in the past you can make a claim now for any bad debts incurred in the last 3 years.

All you do is make an appropriate adjustment on the ‘input box’ on your VAT return. If the bad debtor subsequently pays up you do have to make another adjustment to reverse any claim previously made.

The Taxman has set up a new contact point for those taxpayers with offshore assets wanting to come clean.

HMRC state the following - “Following recent media publicity it is apparent that some customers or their representatives wish to contact HMRC to make disclosures in respect of assets held offshore, where there may be unpaid duties.

HMRC is anxious to facilitate such approaches, and have set up a single point of contact to handle your queries.”

This move follows a successful court appearance by HMRC which allowed them access to hundreds of thousands of offshore bank account holders.

A few months ago HMRC stated that they would no longer be accepting payment of tax liabilties at local tax offices.

They have now changed their mind on this and will accept cheques at local offices again. However, you will have to telephone in advance and book an appointment to pay your tax bill this way.

You should also allow a few extra days for the payment to be processed as the cheques will now be transferred from the local office to the Taxman’s accounts offices.

Here’s our guide to some basic VAT planning for small businesses.

Keep your receipts
As you can only claim back the VAT if you have a valid receipt, think of VAT receipts as hard cash rather than boring paperwork.

Keep below the registration threshold
The registration limit is currently a turnover of £61,000 pa and means you would have a lot more paperwork to do and you would have to charge your customers an extra 17.5%. If your business may just stray over this come the end of the year, consider taking a holiday so that you don’t have to register.

Split your businesses
If you operate two businesses and their combined turnover would cause you to have to register, consider splitting them as, say, two limited companies. As long as they are (and are run as) genuinely separate businesses you will then not have to register for VAT.

This is the deadline for employers to provide their employees with P60 forms which summarise their salary etc received in the 2005-06 tax year.

Recently we posted that HMRC were intending to clamp down on taxpayers with offshore bank accounts who don’t declare the foreign interest received to the UK tax authorities.

Well, now its happened. The Taxman has received authority to access hundreds of thousands of Barclays bank account details. That’s more accounts at this one bank than the total number of people in the UK who declare any foreign income!

The Taxman estimates he will get an extra £1.5bn of tax from this little fishing trip. So, are we a nation of tax evaders? Only time will tell but expect HMRC to also attack all the other major banks in the near future.

Often businesses will purchase alot of assets many months before they start trading. You can help your cash flow by registering for VAT immediately and claiming back the VAT on those assets rather than waiting until you actually start trading.

To do this, you should voluntarily register for VAT as an intending trader. You will also need to demonstrate your intention to HMRC using evidence such as:

- details of the assets purchased;
- details of patents applied for;
- copies of contracts agreed with customers;
- agreements to take on trading premises.

It doesn’t matter how long it might be before you will start trading.