1. CALENDAR
January 31 - Final date for lodging
complete Self-Assessment Tax Return to avoid an
automatic penalty
January 31 Self-Employed taxes
(including Class 4 National Insurance) due:
a) Balancing Payment - ("Mop up") for previous year
b) First instalment for current year (an arbitrary
figure)
c) Entire amount of Tax on Untaxed Sources of Income
(e.g. Rents, Interest, Pensions)
Interest is chargeable on late payment
March 31 - National Insurance (Class 2 due) until being phased out (after Class 4) [The law states
that Contributions are required to be paid for every
"Earnings week". Payment is either: Quarterly (by
cheque) or by monthly Direct Debit.]
July 31 -
Self-Employed taxes (including Class 4 National
Insurance) due: until being phased out after Class 4
National Insurance.
Hint: In the first year of self-employment no one knows what
the
"Earnings" are. If it is a short year then the small
earnings limit may not have been exceeded. Therefore it
is suggested that, with the agreement of the authorities
no payments are made until after the next April.
April 6 Tax Returns issued.
Prior to this issue, our practice will issue its Tax
Return Worksheet, and explanatory letter. All forms of
Income (Earned, Secondary Employments, Additional
Business' Commencements, Investment, Dividends, Rents
Received) must be fully shown.
Any changes in Personal details (Changes of
Marriage/Single Status, Personal Pension Contributions,
Mortgages) must be stated on our worksheet.
Capital Gains Disposals - These must be shown. (Although
for some years, the official tax return does not record
Buying-in costs, until the Asset has been sold, it is
prudent to advise Accountants of these)
The law states that the Tax Return must be returned
fully completed to the HM Revenue & Customs by the
following 31 January. Automatic penalties are levied
once this date has passed and the form has not been
FULLY lodged. Our practice requests that all forms, etc.
are sent to us BY JULY 31 ANNUALLY.
This ensures that the data is fresh in the mind, and
minimises the costs of tax compliance. However, it is
conceded that not all the vouchers and
certificates that are an essential part of this
task are received by clients by that date. A higher fee
is often charged for tax returns processed long after 31
July annually.
· Collate all of these and send on to Accountants to
ensure that this important aspect of your obligations is
centralised.
April 19 - Where Employees are taken on the Annual Wages Return
(form P35) must be completed. After 6 April 2013,
Real Time Information was introduced, and so filing of
this Form would likely have been made. The Wages Year
Ends on April 5 for all Employed Persons. (Remember that
Self-Employed can chose their own Year End)
Fines and Penalties are automatically made by the HM
Revenue & Customs for failure to lodge the Forms by
their due date.
July 31 - Self-Employed taxes (including Class 4 National
Insurance) due:
Second instalment for current year (an arbitrary figure)
Interest is chargeable on late payment
Self-assessment Tax Calculation (the "Tax Bill") might be
issued direct to the Taxpayer
For our practice's clients that are up to date, we would
have advised them what tax figures to expect, and when
payable.
* Accountants should also receive a copy of the
calculations, where the form authorising (64-8) this has
been sent to the HM Revenue & Customs. But this does not
always happen in practice, so it is best to check. Where
lack of notification of change of address (Taxpayer's
Accountants, even the HM Revenue & Customs) occurs,
obviously problems can arise.
………… (variable date) - (Financial) Accounts are due for
preparation Do not delay in providing ALL
information to Accountants. Normally a free ABC Accounts
Book will be sent to clients around on week prior to
their year-end, so that continuity for the next year can
be made.
2. WRITING UP BOOKS
2.1 ALL entries on the Bank Statements must be shown in the
(free ABC) Accounts Books. Omissions will, if discovered
by the HM Revenue & Customs, lead to suspicion - and
probably - inflated tax bills
2.2 Spouse's Wages - Where, say, a person does not have any
other paid job, and assists in the other's business,
then it is permissible to pay a Wage that is tax
deductible. However the amount must be reasonable
(commercially) taking into account the duties involved.
It must also be correctly recorded. If in any week the
amount exceeds the National Insurance (lower) threshold
then National Insurance must be applied, even if no tax
limit threshold has been reached. Registration of a
Payroll Scheme to reflect this expense is recommended.
Check with Accountants at the end of March annually for
these limits and application to YOUR tax position.
What can I claim for?
2.3 Expenses - These can only be claimed as being tax
deductible if they are in the words of the law "laid out
for the purpose of the business". There are three types
of expense:
Revenue Expenditure - The day to day BUSINESS expense
(e.g. Stock, Rent, Electricity, Gas, Telephone, Petrol,
Insurance, Road Tax and a long list of others). The test
is "could you justify that the money was laid out for
your particular business." Beware that if it is
"tarnished" with an element of personal choice (or use)
then HM Revenue & Customs would disallow it as "duality
of purpose". That is why office workers cannot get suits
of clothing allowed, but a builder's overalls are tax
deductible as special clothing rather than for decency.
Meals are a human necessity not a business one so these
cannot be tax deductible. Receipts should be kept of all
recorded business expenses as without them, on an
investigation, HM Revenue & Customs could allege that
"no proper records have been kept". However reasonable
estimates could be made in certain circumstances.
Nevertheless it has been known that HM Revenue & Customs
would disallow the CONSISTENT recording of
unsubstantiated round sum entries.
Capital Expenditure - Money laid out for a long-term purpose
(e.g. Business Plant, Equipment, Motor Vehicles, and
Repayments of Business Loans - all capable of lasting
more than at least one year). Special tax reliefs called
Capital Allowances are allowed for this. But they are
not 100% of the money laid out. Often 18% written down
annually.
Drawings - Money WITHDRAWN from the "business" for the
private purpose of its owner. These are commercially
legitimate, and without these, one's living expenses
could not be met. Therefore if they were not taken, HM
Revenue & Customs would want to know how living expenses
were met - or assume that not all business receipts were
recorded in the books.
[Wealth warning: To take too much in Drawings/Owners
Wages could commercially damage the business.]
"Expenses” is often a term popularly applied to money taken
from a business account. But its tax implications can be
interpreted in more than one way, as has been shown
above.
2.4 Cash Drawn from the business.
Cash for expenses is essential for day-to-day
expenditure. It is sensible to "Cash" a cheque/Cash Card
(say weekly) for this. However where Cash is taken from
the business for Private/Living purposes, the Cash Drawn
from the business must be enough after recording the
business expenses to allow for this.
2.5 VAT (Value Added Tax) - If the business is VAT
registered, any proposal made by HM Revenue & Customs
should immediately be confirmed with Accountants. If a
business starts without the necessity to be VAT
registered, and subsequently grows, regular monitoring
of its TURNOVER must be made to ensure that no VAT Late
Registration Penalty is encountered. Registration is
done directly between HM Revenue & Customs and the
Trader, although Accountants can register a client
online. Previously HM Revenue & Customs did not
recognise Accountants registering their clients. Even so
where clients have requested us to help in a
professional capacity in filling out the forms and
posting them on, we are happy to do so. We have even
(twice) beaten Customs at the VAT Tribunal (in 1986) for
its unfair tactics in allegations against two separate
clients
2.6 Separate Bank Accounts - If using a Business Bank Account
and a Private Bank Account ensure that monthly transfers
are adequate to balance the "Household Budget", and that
any other Bankings into the Private Account are
identified as to the "Nature of the Source". Otherwise
the HM Revenue & Customs would regard them as
"undeclared income".
2.7 Multiple Bank Accounts - These have so often proven to be
the downfall of many clients in their business and
record keeping that to use other than one business and
one private bank account plus a round pound saving
account is the recommended limit of bank accounts. The
ABC Multi Accounts Book has been designed to attempt to
cater for this. But without the services of a suitably
trained Bookkeeper, preparation of a set of Financial
Accounts has ceased to be economical.
2.8 Savings Accounts (e.g. Building "Society") - It is
strongly recommended that this should be opened so as to
make provisions to meet your statutory liabilities of
Tax and National Insurance(s), when these fall due. HM
Revenue & Customs charges interest from the due date
when payment is not met on time
3. TAX AND FINANCIAL PLANNING (Check with Accountants first)
3.1 Vehicles/Plant - Consider changing before the end of your
Accounting Year. But this is always dependent upon the
"Cash Flow" position. Clients who did not over commit
themselves in times of recession, found that their
businesses did not fail on this score
3.2 Pension - Payment can be made on a regular monthly
standing-order basis with a "Top Up" of a single premium
around March annually.
3.3 Any problems - Please feel free to ring Accountants
during usual office hours for any query. Short telephone
calls are not charged to clients. If they become long,
or technical, a time entry will be made. Emails are
welcomed, but please bear in mind that these will be
treated in the same way as “stamped” post, and will, of
necessity, unlikely be replied to instantly – Good
accountants are busy people, they do have other clients.
3.6 Delivery of Books Again during office hours this can normally be
done. But it is strongly recommended that a
prior telephone call be made first (see below 3.6
Personal visits). There is no detailed checking of
clients' books on receipt. Detailed checking occurs when
the job is commenced. Parcel post (with Compensation
fee) can often prove to be efficient and economical.
Acknowledgement of receipt of books is normally issued
together with a further "have you thought of" list of
commonly omitted items.
3.7 Use of post/Royal Mail - Clients are requested to note
that by writing at least their names on the reverse of
all envelopes, rapid identification of clients' files
can be made. The Royal Mail has also refused to deliver
under-stamped items. Often clients send in un-necessary
papers such as HM Revenue & Customs Booklets, etc. that
add weight to the package.
3.6 Personal visits - It would be appreciated that if a
personal visit is considered, that the courtesy of a
prior telephone call be made. Unscheduled visits do tend
to disrupt the workflow. Visits to clients' premises are
often undertaken, and so your journey - and time - could
be wasted.
3.7 Accountants Fees - These are based upon time and
expertise. Time records are maintained and interim fee
notes are raised when a disproportionate amount of time
has accrued. All fees are payable at the time of
presentation.
If the foregoing arrangements are faithfully kept to,
fees can remain economical. A standing order facility
exists to help clients budget for fees, if requested.