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Frequently Asked Questions (FAQ's)

Tax Rates

When should I register for VAT ?

The taxable turnover threshold, which determines whether a person must be registered for VAT, will increase from £68,000 to £70,000, from 1 April 2010.

The taxable turnover threshold which determines whether a person may apply for deregistration will be increased from £66,000 to £68,000.

The registration and deregistration limits for relevant acquisitions from other European Union Member States will also be increased from £68,000 to £70,000.

Corporates

When do I need to file my company accounts and pay my corporation tax ?

As a general rule, your accounts must be submitted to Companies House within 9 months of the year end date. For example, if your accounting period ended on 31 December 2009 you will need to ensure that your accounts are submitted by 30 September 2010.

Your accounts and corporation tax return must be submitted to HMRC within 12 months of the year end date. Using the above example this would mean a deadline of 31 December 2010.

Any corporation tax that is due must be paid within 9 months and 1 day of the year end. In other words, if the accounting period ended on 31 December 2009 the tax is due by 01 October 2010.

In some circumstances, for example where you have set up a new company or have changed your year end date then these deadlines may change. Further advice can be obtained from our tax department.

What information do I need to keep for my accounts and how long should I keep this for ?

The following information will be required to enable your accountant to prepare your company accounts:

  • Sales invoices
  • Purchase invoices
  • Bank statements
  • Cashbooks (if a manual system)
  • Wages details
  • Loan account statements
  • Details of assets purchased including hire purchase agreements where applicable
  • A backup of your system (if a computerised system).

All records should be kept for a minimum of 6 years

Should I keep my car in the company ?

The new rules for the taxation of company cars calculate the benefit-in-kind based on the CO2 emissions of the car.

In many cases this means that it is more beneficial to own the car personally but to claim mileage under the Inland Revenue Approved Mileage Rates.

These rates mean that you can claim tax-free mileage on all business miles travelled in your own car during the tax year. The mileage paid to you by the company is allowable for tax purposes which will therefore help to reduce the amount of corporation tax that wil be due.

The current rates are 40 pence per mile for the first 10,000 business miles travelled and 25 pence per mile thereafter.

Remuneration

I've just changed jobs and am paying 'emergency rate' tax. What does this mean ?

If you can't give your employer a P45 from your previous job, you will have to fill in a P46. Until things get sorted out, your employer will have to operate the emergency code on a 'week one' or 'month one' basis.

This works as though it is the start of the tax year and takes no account of any tax-free pay due from the start of the tax year to the date you begin this new employment.

You may pay too much tax for a while but when HMRC allocates your correct code your employer will refund any overpayment.

I am a student and only work during my holidays. Should I be paying tax ?

You will only need to pay tax if you believe that your total income for the tax year will be more than your tax-free personal allowance (£6,475 for the 2010/11 tax year).

If your income will not exceed this total you should ask your employer for form P38(S). This will mean that your employer can pay your wages to you without tax deducted.

A point to note is that your student loan does not count as income for tax purposes.

Can I pay cash to someone who does casual work for me ?

Strictly, all employees, however casual, should be processed through your payroll system.

If the employee is unable to provide you with a form P45 from a previous employment you must ask them to complete and sign a form P46 which should then be sent to HMRC in order that the correct tax code can be allocated.

I use my own car for work - what can I claim ?

If you use your own car for work (excluding home to usual place of work) employers usually reimburse your expenses.

Most pay a set amount to cover your petrol for each business mile you drive. Some also pay fixed sums for wear and tear.

HMRC works on a mileage basis whatever payments your employer makes.

For 2010/11, the maximum amount you can claim tax-free is 40p per mile for cars and vans for the first 10,000 business miles and 25p per business mile thereafter.

Motorcycles and cycles attract a flat rate of 24p and 20p respectively for each business mile.

If all the allowances your employer pays you mean you get a higher payment than this, you pay tax and NI on the excess.

If you're paid less than the statutory amount, you can claim tax relief on the difference against income tax but not NIC's.

You cannot claim the cost of buying the car.

Self-employment

Can I claim anything if I use a room in my home as an office ?

Yes. HMRC will accept a reasonable flat rate per week to account for a proportion of electricity, gas, council tax, water rates etc that relate to the fact that you use a room in your house as an office.

The rate will depend on the size of the property and the amount of business use but as a general rule a weekly rate of £10 - £20 is normally acceptable.

I've just become self-employed. What do I do about tax and NI ?

You must register with HMRC as self-employed within 3 months from the last day of the month in which you started your self-employment.

To register you can telephone the Newly Self-employed Helpline on 0845 915 4515 or send back form CWF1 from the HMRC's leaflet 'Thinking of working for yourself'. Copies of these forms can also be obtained from our office.

Once you have registered HMRC will arrange for you to start paying self-employed NI contributions and will send you a tax return at the appropriate time.

Should I incorporate my business ?

Whilst there has been much information in the press concerning the changes made by the Chancellor in the recent budget, there are still benefits to be had in setting up a limited company.

The corporation tax rates, combined with the beneficial tax rates on dividends, are likely to mean that you will pay less tax under a limited company than you would as a sole trader.

What information do I need to keep for my accounts and how long should I keep this for ?

The following information will be required to enable your accountant to prepare your company accounts:

  • Sales invoices
  • Purchase invoices
  • Bank statements
  • Cashbooks (if a manual system)
  • Wages details
  • Loan account statements
  • Details of assets purchased including hire purchase agreements where applicable
  • A backup of your system (if a computerised system)

All records should be kept for a minimum of 6 years.

Capital Gains Tax

Capital Gains Tax

I've just sold my house. Will I have to pay capital gains tax on the sale ?

You do not normally have to pay tax on the sale of your main residence.

There are circumstances, however, where you may have to pay, for example if you have ever rented out the property or if you are self-employed and use part of your home exclusively for business.

If you are concerned that this may apply to you, further information can be obtained from our tax department.

Personal Tax

Can I prepare my tax return myself ?

Yes.

There are tax guides available from the HMRC website which will assist you in filling in your tax return.

If your personal circumstances are complex it is still advisable to ask your tax advisor to prepare the return for you to ensure that you are claiming all expenses and allowances that you can.

If you want HMRC to calculate your tax for you, your return must be submitted by 30 September.

If you wish you can also complete your return on-line via the HMRC website.

How do I give money to charity in a tax efficient way ?

You can make your gift go further if you donate to charity in a tax efficient way.

You don't pay tax on gifts made through the following schemes:

Gift Aid

Charities can reclaim the basic rate of tax on any gifts you make to them, increasing the value of the gift. For example, a £10 donation through Gift Aid is worth £12.50 to the charity.

For your gift to qualify for Gift Aid, you must pay at least as much tax on your income as the charities will reclaim in the tax year that you make the gifts, and you must make a declaration to the charity that you want your gift to be treated as a Gift Aid donation (the charity will give you the necessary form).

Higher rate taxpayers can claim the difference between the basic and higher rates of income tax on their tax return on any gifts made through Gift Aid.

As Gift Aid involves claiming back tax on gifts made, non-taxpayers are normally excluded. However, tax credits on dividends, which are not recoverable by non-taxpayers, do count as tax paid by the individual.

Payroll giving

If your employer runs a payroll-giving scheme, you can use it to make regular payments to charity.

You simply authorise your employer to deduct an amount from your pay or pension each month. As your gift is deducted from your pay before PAYE tax is applied, you get tax relief at your highest rate of tax without having to reclaim any money through your tax return.

This means a donation of £10 will cost a basic rate taxpayer £8.00, and a higher rate taxpayer £6.