Entries from July 2007 ↓

Great news for small businesses!!

The House of Lords has found in favour of the taxpayer in the long running Arctic Systems case. HMRC’s appeal was rejected by the law lords meaning that the dividends paid to Mrs Jones cannot be taxed as income of Mr Jones. No further appeals are possible under UK law.

In the judgment, it was ruled that, although the Jones were creating an arrangement in the nature of a settlement when they subscribed for one share each in their company Arctic Systems Ltd, the exemption for gifts between spouses also applied and dividends paid to Mrs Jones were therefore not income arising under a settlement.

HMRC will now have to review and substantially re-write its guidance on settlements and review its guidance on outright gifts.

If all your earnings are through PAYE employment you may not have to complete a tax return each year. If you left your job part way through the tax year or if your PAYE code is wrong you may have paid too much in tax for the year.

The simplest way to claim your refund is to complete form R40 and send it in to your tax office. This form can also be used if you have paid too much in NI contributions.

NI - most common errors

1. Using out of date NI percentage rates, limits or thresholds.

2. Deducting the wrong class of NI, for example paying Class 1A on a particular item of pay.

3. Deducting the wrong category of NI, for example deducting non-contracted out NI for an employee who is not included in the employer’s contracted-out pension scheme.

4. Arithmetical errors where either manual calculations are needed or where payroll data was input incorrectly.

5. Delays in notifications, for example, where one section delays notifying the payroll section of a change in employee’s circumstances.