Entries from June 2006 ↓

The controversial tax rules known as IR35 have seen many IT contractors hiring unqualified so-called tax experts to advise them on payroll, invoicing, accountancy and tax matters.

But many of these advisers are not qualified to give advice especially in a complex area of legislation such as IR35.

Contractor UK reported that many companies now advertising as ‘tax experts’ are actually unqualified. This could also mean that they don’t carry PI insurance nor do they keep up to date on new tax laws, as qualified accountants must do.

These unqualified ‘tax experts’ are likely to be salesmen, whose sole job is to sell the services of their company, and not the correct solution for the tax payer’s particular circumstances.

When appointing a new accountant we suggest you ask them what professional body they are a member of, what qualifications they have and whether they carry PI insurance to cover any mistakes they might make.

The annual review of Clarence House has revealed Prince Charles paid nearly £3.3m in tax last year.

The BBC reported that Charles, along with his wife Camilla and his sons cost every person in the UK 3.5p in 2005-06.

The accounts also showed that Charles’ private income rose by 6% to more than £14m in 2005-06 on the back of commercial property rent reviews and higher investment returns.

A report by the Centre for Policy Studies has labelled Chancellor Gordon Brown a ‘one-man tax creation industry’.

The CPS found that for every household in the UK, tax had risen in real terms by £6,182 since Gordon took up residency in 11 Downing Street in 1996/97.

Shadow Tory chancellor George Osborne said: ‘The longer that he (Brown) remains in power the more we will see the burden of taxation on Britain’s hard working families rise. It is exactly the wrong approach to competing in the new global economy,’ he claimed.

This year’s budget announced that the employee tax exemption for computers provided by employers for private use (The Home Computing Initiative) was going to be dropped.

What does this mean for the tax position of employers and employees? If there is any ’significant’ private use of an employers provided computer then more paperwork is required in the form of P11Ds. A consequence of this is that employers will need to maintain additional records in order to establish whether significant private use has been made of such a computer.

We are still waiting for guidance from HMRC as to what is significant; all they will say at the moment is:

“Section 316 of the Income Tax (Earnings & Pensions) Act 2003 provides that no income tax will arise on accommodation, supplies and services used in employment duties. This includes computer equipment provided for business purposes where any private use made is not significant. Consequently where employers provide computer equipment to employees solely for them to carry out the duties of the employment at home, HM Revenue and Customs accept it is unlikely that private use of the computer will be significant, when compared with the primary business purpose of providing the computer equipment.”

We will let you know if and when further guidance is published.

This is the date your second payment on account for the 2005-06 self assessment tax year is due. The amount due is normally the same as the 2005-06 instalment you paid on 31 January 2006.

If you want to see a set of tax deadlines, specific to your circumstances, we recommend you use this Business Link facility.

A second company car for a spouse or child can work out to be cheaper than taking the cash out of the business to pay for the car personally.

If the family member doesn’t work for the business you will have to pay the company car tax yourself but if the CO2 emissions are low the tax cost could be substantially less than the tax cost of taking cash out of the company via dividends or salary.

Ask your accountant to crunch the numbers for your circumstances and you might be surprised at the results.

Q. Why do sharks not attack tax advisers?
A. Professional courtesy.

Q. What’s the difference between a tax adviser and an angry bull?
A. The tax adviser charges more.

A recent VAT tribunal case (19276 Colin Hooper) has made it easier for you to buy a personalised number plate for your car and claim back the VAT through your business.

You will have to argue that the reason for the purchase was to promote your business. Hence, if the business name is different to your name you should buy a number plate that relates to the business name rather than your personal name.

If you are owed a tax refund for 2005-06 you will receive the money quicker if you file online.

Submitting a paper return will often result in a wait of several months before the tax return and repayment is processed. However, if you submit your return online a lot of the processing is done automatically and you will usually receive the money direct into your bank account within a couple of weeks.

Other advantages of filing online include automatic calculation of your tax liability for the year and a receipt for submission of the return.