Nicolson Accountancy has been nominated for the 2012 Scottish Accountancy Awards as one of the Top Small Firms in Scotland.
This follows on from their success as runners-up in the British Accountancy Awards in 2011 in the category of Best Independent Firm in Scotland, and underpins their growing reputation in delivering quality advice to a wide spectrum of clients across Scotland and the UK.
Founded by Sue and Angus Nicolson in 2004, the business has grown rapidly over the years, and the firm is now the leading provider of Norwegian Tax services in the UK, as well as providing the full range of accountancy services to a huge range of local, national and international clients all from the Stornoway office.
The firm operates the only BACS Bureau in the islands, allowing client payments to be made electronically, saving time and costs on every payment made.
The client base of well over 1,000 clients includes over 800 Western Isles business and individuals as well as a huge variety of Scottish multi-nationals, numerous Norwegian based employment agencies, the State Oil Company of an ex-Soviet Republic, and an eclectic mix of other clients across the whole of the UK.
The firm has been nominated because of its unique approach to the challenges of geography, which is to bypass the challenge by the use of Google Adwords to deliver growth of over 30% in each of the past four years, resulting in the firm becoming the largest accountancy practice in the islands this year. Sue Nicolson, director, explained the success: “We have sought to deliver a quality service to every one of our clients by using the technology and the personal touch to keep our clients fully satisfied with the service we provide.
We provide HR services to multi-nationals and tax returns for crofters with the same determination to deliver an exemplary service.”
Announcing a new stage in the growth of the firm, Angus Nicolson was able to confirm that the firm has recruited further qualified staff to meet client expectations and added: “The speed of growth has surprised us, but we know that we can continue to see rapid growth over the next five years and we fully expect to double our staff in the next two years as the confirmed work for the foreseeable future is growing every day. This demonstrates that the opportunities exist if you understand them are prepared to deliver a quality service.”
Nicolson Accountancy also operates under a variety of niche brands, including Norway-tax.co.uk and Dutch-tax.co.uk, as well as PayrollScotland – which processes over £30m in payroll every year in the Bayhead office.
The recent dischttp://www.blogger.com/blogger.g?blogID=482728466090655276#editor/target=post;postID=5910929704354960133losure that 6% of individuals with an income in excess of £10m paid less than 10% in tax has stirred a furore.
An examination of the raw data produces an extremely interesting analysis of the tax rates of the highest earners in the UK. (The table may not round to exactly 100%).
Income
£100-£150k
£150-£250k
£250-£500k
£500-£1m
£1m-£5m
£5m-£10m
Over £10m
Above 40%
0%
6%
73%
81%
80%
81%
72%
30%-40%
67%
77%
18%
11%
10%
8%
12%
20%-30%
24%
13%
5%
4%
5%
4%
8%
10%-20%
8%
3%
2%
2%
2%
3%
3%
Under 10%
1%
2%
2%
2%
3%
4%
6%
There are clearly some major political issues about equality and fairness that need to be address, but there are also some very valid reasons for at least some of the results. These need to be addressed from an informed viewpoint and not by knee-jerk reactions that result in adverse impacts in other areas - particularly charitable donations.
Until recently a claim to Seafarers Earnings Deduction was restricted to UK residents only.
This allowance is available assuming seafarers met all the qualifying conditions, which were primarily that over half the time was spent outside the 12 mile limit over a minimum 365 day period.
This was discovered to be in breach of the EU anti-discrimination obligations, and as a consequence the right has been extend to UK taxed income incurred by EU and EEA residents who performed their duties partially in UK waters.
Although time limits have technically expired, in the interest of fairness the Inland Revenue have extended the 2007/08 time limit to 31 July 2012.
If you believe that you have been affected by this change, please contact Angus as a matter of urgency.
With effect from 1 April 2012 the VAT Registration threshold has increased from £73,000 to £77,000 and the De-registration threshold from £71,000 to £75,000.
Traders have to remember that the limits are measured on a rolling quarterly basis, so if your turnover in the past three months exceeded £19,000 then you need to take advice and review the position to determine if you need to register for VAT or not.
Penalties for late registration (or non-registration) are severe, and the Revenue computer now automatically produces lists of traders with a turnover above the limits and no VAT Registration for HMRC to pursue.
Nicolson Accountancy have just won an exclusive contract with Nova Subsea AS, a major Norwegian employment agency who operate across the world.
Our specialist foreign tax service, Norway-tax.co.uk has been appointed as the sole provider of Norwegian tax advice to all the UK contractors employed by Nova.
This innovative approach will result in us making sure that there is full compliance with the requirements of Skatteetaten - the Norwegian Tax Authority - as well as advising on the interaction with UK taxes.
Sue Nicolson said, "Our mission is to ensure that all taxes are minimised and that accurate and timely reporting takes place, and we are looking forward to working with Nova and its employees and contractors in the coming years."
You can join the Flat Rate Scheme for VAT and so pay VAT as a flat rate percentage of your turnover if:
Your estimated VAT taxable turnover - excluding VAT - in the next year will be £150,000 or less. Your VAT taxable turnover is the total of everything that you sell during the year that is liable for VAT. It includes standard, reduced rate or zero rate sales or other supplies. It excludes the actual VAT that you charge, VAT exempt sales and sales of any capital assets.
Generally you don't reclaim any of the VAT that you pay on purchases, although you may be able to claim back the VAT on capital assets worth more than £2,000 - see the section in this guide on claiming back VAT on capital assets for the rules and restrictions.
Once you join the scheme you can stay in it until your total business income is more than £230,000.
The beginning of the new calendar year has brought familiar communication problems for HM Revenue & Customs (HMRC).
Just yesterday, it was widely reported in the national media that HMRC had responded positively to pressure from both the Federation of Small Businesses and MPs and promised it would only be proceeding with ‘a limited number of Business Records Checks pilots’, whilst a further strategic review takes place. In a statement, HMRC said:
‘The purpose of the review is to consider the overall aims of Business Records Checks, examine whether the current approach is the best way of achieving the policy objectives, and identify what changes are needed to ensure that the objectives are achieved.’
HMRC was acting after receiving criticism of the burden it has been placing on small businesses with the launch of its Business Records Check initiative, against a backdrop of a sluggish economy and alleged big business ‘sweetheart deals’ with the likes of Goldman Sachs and Vodafone.
However, our Tax Investigation Insurers, Abbey Tax ReSource Consultancy Team has been in contact with the HMRC Coleraine office over the last two days and discovered the reality is very different. The Unit at HMRC Coleraine makes the appointments and co-ordinates all of the Business Records Checks across the UK for the 120 dedicated staff and, as far as that office is concerned, it is business as usual.
Abbey Tax ReSource Consultancy Team understands an internal HMRC email was sent to the team at Coleraine yesterday, drawing attention to the national statement, but that it did not instruct that any fewer visits should be booked. The Business Records Checks target is for 12,000 visits to be conducted by the end of this tax year; hardly a ‘limited number’ of ‘pilots’!
Furthermore, it is understood that the Coleraine Unit is being visited this Friday by an HMRC Head Office team, to see how the Unit is performing and to check on progress towards the target.
Q – We have just bought a twin cab pick-up for the business. Will the VAT man allow the VAT incurred on the purchase to be reclaimed on the VAT return?
A – Twin cab pick-ups have many of the features of cars e.g. rear passenger seats and rear passenger windows but also commonly have a “pick-up” area to carry loads.
However HMRC accept that any vehicle constructed to carry a “payload” of a tonne (1000kgs) or more is in fact not a car but a commercial vehicle. This is important because VAT incurred on the purchase of a car cannot be reclaimed if it is “available” for private use.
“Payload” is defined as the difference between a vehicle’s kerb weight and its maximum gross laden weight and so check the documentation carefully, as there are a few twin cabs which do not have a payload greater than a tonne.
What is not commonly known however is that it is possible to “lower” a twin cab’s payload by adding certain accessories, thus converting the vehicle into a car? This is most likely to occur with twin cabs with a payload of 1000-1050kg.
HMRC however will ignore any accessory added other than a hard top. They will treat the addition of any hard top as having a generic weight of 45kg. So if the payload of the twin cab was 1010kg, the addition of a 45kg hard top would reduce the payload to 965kg. As such the twin cab would be a car with all the attendant rules restricting recovery of VAT on the purchase.
There is potentially another twist in the tail in respect of trying to recover all of the VAT on the purchase. As these vehicles so closely resemble cars and are quite often used as such, HMRC will not simply accept 100% business use and will often to try and restrict recovery by the extent of private use. There is no set figure for this and every claim will be accepted or not by the fact given to them.
As usual where there is potentially a lot of VAT at risk it pays to take advice.
The Regional Employer National Insurance Contributions (NICs) Holiday
offers big reductions in employer NICs for new businesses who employ staff and
meet certain criteria in specific regions. The scheme is open to new businesses
set up on or after 22 June 2010 in the North East, Yorkshire and the Humber,
the North West, the East Midlands, the West Midlands, the South West, Scotland,
Wales and Northern Ireland. Eligible new businesses can apply for a refund of
NICs that they have already paid.
The NICs holiday scheme is designed to encourage the creation of private sector
jobs in regions reliant on public sector employment by reducing the cost to new
business of employing staff.
Under the three-year scheme, eligible businesses can take a 12-month ‘NICs
holiday’ for each of the first 10 employees they hire in their first year of
business, up to a maximum of £5,000 per employee. This means new businesses who
take advantage of the scheme could save up to £50,000 in total.
We are automatically lodging applications for all clients who are eligible, and we will notify you of the saving nearer the time.
We have a vacancy for an International Tax Accountant to assist us primarily with the preparation and control of foreign tax returns and payroll processing, along with many other activities.
The full details of the vacancy are on our website, and applicants will want to look at www.norway-tax.co.uk and www.dutch-tax.co.uk for an appreciation of what we are doing.
This is an exciting and rapidly growing aspect of our business, and we are seeking an appointee who can meet our needs.
After many tears and much cursing, the computers are talking to each other, and we are now able to file merverdiavgift (MVA or VAT) Returns electronically into the Norwegian tax authority systems.
From January coming, the penalties for late filing of tax returns will increase and the ability to mitigate penalties where no tax is due will be removed.
In 31 January 2012, a late tax return will attract an automatic penalty of £100 (previously the lower of the tax due or £100).
After 3 months, this will increase by £10 per day up to a maximum of £900.
After 6 months, a further £300 or 5% of the tax due will be added.
Whereas in the past you could claim a refund whenever suited you, now you could owe the taxman when you claim a refund.
The answer is simple - submit your Tax Return on time.
D & Mrs E Sherratt v HMRC - TC01179 A DIY Housebuilders Claim was rejected by HMRC on the grounds
that the planning permission prohibited separate disposal of
the house so it did not meet the definition of “dwelling” for the
purposes of the refund scheme. The appeal was dismissed.
It's always important to read and understand the VAT small print to make sure your claims can succeed.
Once again the balance between being a sole trader and incorporating your business as a limited company has come into focus.
In April 2011 the rate of Class 4 NIC paid by the self-employed went up 1% to 9%, meaning that all profits over £7,475 are taxed at 29% whilst small companies are paying tax at 20% on all their profits.
There is obviously a point at which it is more tax efficient to be a limited company - and that threshold is surprisingly low at under £10,000. At profit levels of £20,000 and above the tax saving is over £1,000 per annum and increases at a rate of around 10% of profits in excess of that amount, until you higher higher rates of Income Tax: at which point you should have already incorporated.
There are, of course, some people and business types where this might not be beneficial, or where further advice should be sought. These exceptions will potentially include anyone using farmers averaging; those spreading artistic income; where there are issues surrounding goodwill; and, where there are large claims for capital allowances.
Nevertheless, we will be reviewing all our clients' tax positions, and advising those who can benefit to incorporate without delay.
The Inland Revenue have increased the tax and NI free rate of Approved Mileage Allowance Payments.
From 2011/12 the new rates are:-
For the first 10,000 miles - 45p (up from 40p)
For all subsequent miles - 25p (unchanged)
From 6 April, if you have new employees without a P45 or a P46 you will have to use code 0T, rather than BR. This means that these employees will have no allowances, and although the effect is generally the same for most employees, higher paid employees will pay more tax.
If an employee leaves and you pay him or her arrears of holiday pay etc. then you should also use 0T, on a week 1/month 1 basis for these payments.
Beware, there is a new penalty regime in force for late filing of personal income tax returns for 2011/12.
The current regime is that the penalty for late filing is the lower of £100 and the tax due.
From this year the penalty will not be reduced if the tax payable is less than £100. In addition, if it is more than 3 months late, then a penalty of £10 per day for up to 90 days will apply, and thereafter it is a 5% surcharge.
This means that if you are due a refund, and don't claim it when you should, you could end up losing it all in penalties.
Our advice is very simple: get your Return lodged in plenty of time. We will now be expecting our clients to ensure that we everything required at least one month before the deadline if we are to meet the timescale.
Recent guidance from the Inland Revenue makes it clear that plant hire with an operator is now classed as labour and is subject to CIS deductions.
In future, only pure plant hire without an operator will be classed as materials and not subject to CIS deductions, but where there is any supply of labour associated with the hire of plant - however it might be classed - then CIS deductions will apply.
We are aware that many contractors have been wrongly omitting this from the CIS liabilities, but this area is leikly to see a crack donw in the coming months and years.
We have noticed a large increase in tax enquiries originating from one simple, but highly effective, check being made by the Inland Revenue.
It appears that the computers are now automatically comparing turnover per the accounts compared to turnover per the VAT Returns, and identifying non-registered traders, and those whose figures differ markedly between the two sources of information.
Taxpayers are therefore advised to ensure that the same information is used to compile the accounts and the VAT Returns, so as to minimise the chances of this happening.
Obviously there are some factors that could cause the figures to differ - such as cash accounting for VAT - but the Revenue seem to be looking at the most glaring examples first; where there is a major discrepancy.
Penalties are severe, and if you have made an honest mistake it is best to admit and quantify your error before the taxman does.
If you have a problem of this nature, please contact Angus for advice.
Can you avoid the 28% Capital Gains Tax liability?
In his emergency Budget, the Chancellor announced that the 18% rate for CGT (Capital Gains Tax) would be restricted to only those who are basic rate taxpayers.
However, that doesn't mean that you need to pay 28% on all your gains, if you have some control over your tax affairs, and particularly the timing of income.
The simplest course of action is to ensure that you keep your income below the higher rate threshold of £37,400 for 2010/11, but if this is not possible, then consider making a pension contribution to reduce the taxable income in that year.
Gift Aid payments can also be carried back, if you elect to do so either on the Gift Aid certificate, or more simply, by including the claim on your tax return.
The CGT will then use the unused element of your basic rate band, which can result in a considerable saving, as shown below.
Example
David draws dividends of £40,000 (£36,000 net + tax credit) from his company annually, pays £1,000 in pension contributions, and a £1,000 Gift Aid donation annually.
He makes a taxable gain of £10,000 (after annual allowance) during the year. The gain would normally be taxable at 28% = a tax bill of £2,800.
After taking advice, David reduces his dividends to £30,000, and makes the Gift Aid carry-back election on his tax return. As he is not a higher rate tax payer, no further tax relief is due on his pension.
Details
£
Dividends
30,000
Gift Aid
-2,000
Taxable income
28,000
Basic rate threshold
37,400
Unused basic rate band
9,400
The end result is that £9,400 of the gain is taxed at 18% and the balance at 28%, resulting in a tax saving of £940 on capital gains tax.
If you want to discuss your tax planning opportunities, please contact Angus directly.
From our friends at Abbey Tax, who provide our clients with Tax Investigation Insurance....
HMRC published a Consultation Paper on 17th December announcing that they
intend to start a programme of Business Records Checks (BRCs) that will review
both the adequacy and accuracy of business records within the SME sector. The
timing of the Consultation is not ideal with a closing date for comments of 28th February 2011 but this is something that could potentially affect almost every client and so does require consideration.
As
ever with HMRC Consultations, the die appears to be already cast: the programme
of checks will happen starting in the second half of this year
with HMRC projecting 50,000 reviews annually for the next 4 years. The
Consultation is merely concerned with how to implement the
programme.
Additionally,
the BRC programme will be accompanied by a tariff-based penalty
regime for failure to keep proper records. As practitioners will know,
the maximum penalty for failure to maintain business records currently stands
(and will remain) at £3,000, but the imposition of any penalty – let alone the
maximum - has historically been quite rare. HMRC have said that they do not
intend to have a regime which simply levies £3,000 every time there is a
failure to keep proper records. The implication is that some level of penalty
will be charged, the question is merely howmuch.
Furthermore,
HMRC state in their impact assessment that this initiative will bring in
£600million over the four years. Are we the only cynics who have worked
out that 4 x 50,000 x £3,000 comes to ... wait for it… £600million?!?
We
will continue to update our clients during the consultation process and
thereafter because, of course, the BRC is only Step 1 for clients with Step 2
potentially being an intervention based on the conclusion of the BRC. Clearly,
as well, we will be giving guidance as to how our fee protection insurance will
respond to BRCs and subsequent interventions.
For further information about how this could affect your business, contact Nicolson Accountancy today and we will provide you with solutions.
The new procedures for dealing with and correcting VAT errors often need explaining.
However, they are actually quite straight forward.
You require to complete form VAT652 unless you meet certain qualifying conditions to self-correct.
If all the errors identified in the period are less than £10,000 - or if greater, 1% of turnover at Box 6 in the period in which the error arose - then you can adjust the next VAT Return for the identified errors.
Two key tips:
Ensure that you document the errors and how you are meeting the qualifying conditions for the adjustment, and
If you are using a computerised accounting programme, then ensure that the adjustment is not double counted by your software in both your next VAT Return and the VAT652 form and payment.
Managed Service Companies are expected to come under severe attack by the Inland Revenue over the coming months and years.
These are companies which advertised and operated the administration of a personal company of an individual, for a weekly or monthly fee.
There are currently an extensive number of tax cases at the moment, which if successful, will result in the dividends that directors of the personal companies have drawn being treated as salary. This could result in a very large tax bill for many individuals.
We have been warning about this for a few years, and have refused client requests to manage their affairs in such a way as would put them at risk of an Inland Revenue claim. Where these clients have come to us, we have put ensured that they are administered in a way that does not expose the directors to personal liability, and which is also much cheaper and transparent for the directors.
Directors of these companies need to be aware, that a few years back the Inland Revenue were granted powers to assess the tax due on the directors, even if the company was liquidated some years ago.
We strongly urge anyone who might be in this situation to seek specialist advice promptly to put their affairs in order.
We have been advised by the Norwegian tax authorities that the annual statements showing tax due or tax overpaid will be issued on 22 October 2010.
You then have a period of three weeks to lodge an appeal against any assessments, although in practice this deadline is often waived for non-Residents.
We expect to receive electronic copies of all these statements when they are issued and we will be reviewing them carefully and contacting clients directly over the following week.
We deal with the tax affairs of about 100 clients working in Norway, and if you want more information, please contact Sue.
The Inland Revenue have just announced that they are moving staff from the central agent authorisation team in Longbenton, Newcastle, to "higher priority work".
The new expected timetables are expected to be:
Form
Please allow
Form 64-8 for Self Assessment
2 weeks
All other forms 64-8
6 weeks
Self Assessment registrations
8 weeks
Self-employment registrations
8 weeks
This is hardly helpful for those newly registering as self-employed, and who are concerned to make sure that they meet all the requirements.
We are able to undertake most registrations and authorisations on line, reducing these turnaround times very significantly, so if you are thinking of starting self-employment, come and see us as early as possible, and we will ensure you comply with your obligations.
The ability to file Norwegian Tax Returns electronically on-line has been suspended whilst the submitted returns are processed and refunds or demands issued.
We expect that statements will be issued in September or October, and we should receive notification of the issue of the statement electronically around that time. We will contact clients immediately this information is available.
We expect the portal to reopen after statements have been issued, but in the interim, all returns require to be submitted manually.
The reduction in the Annual Investment Allowance from £100,000 to £25,000 - increased from £50,000 by Alasdair Darling only in March - is a major blow for small business who need to make significant capital purchases, as any fishing boat owner will testify.
However, some more tax planning opportunities have opened up and we have identified two distinct opportunities for new and existing businesses. We will be contacting all clients in then first instance when the finalised legislation is enacted, to suggest ways to save potentially large sums of money.
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With the need to complete P11Ds looming, it is important that all employers understand just what expenses they can pay tax-free without having to make any reports to the Inland Revenue.
The rules are simple, but must be properly applied by the employer to avoid a detailed inspection of all claims for up to six years.
Breakfast rate The employee can receive £5 per day if they leave home before 6am and buys a meal away from home. But, only if they do not usually leave for work before 6am. One meal rate If the employee is away from their home or usual workplace for at least five hours and buys a meal then they can claim a £5 allowance.
Two meal rate If the employee is away from their home or usual workplace for at least ten hours and buys a meal then they can claim a £10 allowance.
Late evening meal If the employee has to work later than 8pm, having worked their normal hours and buys their meal, then they can claim £15; but only if they do not normally work late.
Combined allowances It is entirely permissible to combine allowances. So if you normally work 9-5, and on one day have to work 5am to 9pm on a clients premises, then you are entitled to the Breakfast rate, the two meal rate and the Late evening meal rate or £30 per day.
To apply to pay these allowances, then employers need to complete form P11DX to be allowed by the Inland Revenue to administer the scheme.
With the Standard Rate of VAT changing back on 1 January, Sage users may find the following short movie very helpful in reminding them how to change the VAT Rate on their system.
If you have any questions about your system, then please contact us directly.
In essence the penalties will arise if you are late in making any payments of PAYE, but if there is only one late payment in the year then the penalty will be waived.
The penalty increases with each default up to a maximum of 4% of the PAYE paid late.
Virtually every employer will be affected, so you need to make sure that your procedures are changed to make the payments on time.
We will be working with our clients over the coming months to help you make these payments by BACS on the exact day that they are due.
In the meantime, we are urging employers to make sure that everything to do with employment, contractors and PAYE is fully up to date well ahead of the deadline.
The precise rules, and the very limited grounds for appeal against penalties, are detailed here.
So the long forecast demise of cheques will now happen in 2018. Probably.
It is clear that private consumers are expected to move to the use of cards and other similar methods over the next number of years. Whilst that may be fine for the vast majority, there are still many, many people who do not want or cannot get a debit card.
They will either have to stick to cash; the banks will have to devise new payment methods; or third party providers are going to have to find solutions.
For smaller businesses the situation is potentially much more serious, as we receive the vast majority of payments (by number) by cheque.
How are smaller businesses going to cope with making and receiving payments?
In the expectation of the change, we have been working hard over the past 18 months to develop alternatives for small and medium-sized business, and this concluded the very expensive process with us becoming a BACS Approved Bureau just recently.
There are only 20 or so Scottish based bureau, and we are now able to help our clients by making payments direct out of their bank accounts to suppliers and employees. We will shortly be able to provide debit facilities too, allowing suppliers to collect money due to them from customers.
There is no doubt that this is going to be a growth area over the next few years, and we already process over £20m annually in payments for clients across the UK.
For more information contact Angus, or visit our payroll provider website.
The standard rate of VAT will return to the rate of 17.5% from 1 January 2010.
For most traders the process will simply be a reverse of the steps you took when the VAT rate was reduced to 15%. Our instructions covering the change in December 2008 can be accessed here.
However, there are some potential problems areas, and the following simple guidance can be followed.
The VAT rate that applies is based on the earliest of
The date of the supply of the goods or services
The date on the invoice being issued
The date that payment is received
So if you can persuade your customers to place an order - or even better to pay for the goods -before 1 January 2010 then you can charge them 15% VAT.
There is one anti-avoidance provision that you need to be aware of. If the goods or services are not delivered by 30 April 2010, then VAT at 17.5% should be charged, and an additional VAT only invoice will need to be issued.
If your services are delivered across the change date, then you have overlapping or continuous supplies, and you should contact Angus for specific VAT advice.
All traders who issue quotations should make sure that their paperwork clearly states that VAT will be charged at the relevant rate.
From September 2009, new rules have come into force, as a result of Tribunal decisions, which extend the range of duties which can qualify for SED.
Following the decision in Pride of South America, any duties considered to form part of "exploiting mineral resources by means of a well" were considered to be part of an offshore installation and hence SED was not available.
A recent case, Spowage, has modified that decision with effect from 2008/09 onwards to allow SED where the "exploiting" of "mineral resources" occurs at a distance from the well, and in such a way as to clearly not form part of the well operation.
This means that diving support vessels, pipeline inspection services and similar trades will qualify for SED where they occur away from the wellhead. Clearly activities on or adjacent to the wellhead are unlikely to qualify.
The new format for compulsory filing of Corporation Tax returns from 1 April 2011 will be in iXBRL.
We are proud to be able to confirm that we are already iXBRL compliant and will be able to file all corporate tax returns electronically from that date.
We already file over 90% of Returns electronically, with only Charitable companies and some newly incorporated companies not being filed in that matter.
The Budget has seen the re-introduction of first year allowances (FYAs) for purchases of qualifying plant and machinery. Allowances of 40% will be available to companies, partnerships and individuals carrying on qualifying activities in excess of the annual investment allowance (see below) subject to the following:
the expenditure must be incurred in the year to 31 March 2010 (for companies) and 5 April 2010 (partnerships and individuals).
the expenditure must not relate to specific proscribed assets, including for example, long life assets, cars and assets for leasing.
Unusually, there appears to be no restriction on the amount of the expenditure or the size of business incurring the costs.
The annual investment allowance (AIA), introduced last year, allows businesses (or groups, where related businesses carry on similar activities) to claim a 100% deduction from taxable profits for £50,000 of expenditure on eligible plant and machinery.
Confusingly, the definition of eligible plant and machinery for AIA purposes differs quite significantly from that for qualifying plant and machinery for FYAs.
During 2009 the Bank of England will no longer handle the Inland Revenue transactions.
The bank accounts will in future be operated by the Royal Bank of Scotland and by Citibank.
If you make electronic payments to the Inland Revenue, you will need to update your records to ensure that the payment goes to the correct bank account.
Full details will be being issued in the near future.
We have recently been involved in a dispute with the Inland Revenue over the non-deduction of CIS by a contractor when paying a supplier.
The Inland Revenue asserted that the supplier was a sub-contractors in terms of the legislation and consequently CIS deductions should have been applied.
The Inland Revenue were seeking the tax that should have been deducted as well as interest and penalties.
By quoting specific legislation, we were able to show that to the satisfaction of the Inspector, as the amounts had been fully declared in the accounts of the 'subcontractors', that our client had no additional liability.
Contractors are advised to be aware of their responsibilities in this area, to avoid problems arising in the first place.
From April 2009 there will be a significant change in the structure of National Insurance contributions with a new band introduced.
Description
NI Rate
This year
Next year
Lower earnings limit
No NI payable
First 90 pw
First 95 pw
Earnings threshold ("ET")
No NI payable but earnings recorded
Up to 105 pw
Up to 110 pw
Upper accruals point
Full NI Liability
n/a
Up to 770 pw
Upper earnings limit ("UEL")
Full NI Liability
Up to 770 pw
Up to 844 pw
Employees rate between ET and UEL
11%
11%
Employees rate above UEL
1%
1%
Employers rate above ET
12.8%
12.8%
Obviously it is imperative that your payroll software is updated, but if you don't use a computer program, then why not speak to us about letting us take the strain?
Our costs are very cheap, and the peace of mind we offer is absolute, and if we also prepare your accounts then we can offer an even better deal. Contact us today to discuss your requirements.
The change in the Standard Rate of VAT from 17.5% to 15% is temporary - it lasts from 1 December 2008 to 31 December 2009.
But how do you change your computer system to reflect the change in the legislation from next week?
We have a worksheet available to explain the temporary changes you need to implement to correctly record your VAT liabilities.
At the moment, we only cover Sage and Quickbooks, but TAS Books will be added later this week, and other programs may be added later. If you have specific questions, please contact Angus.
The following letter was received from the Inland Revenue this week:
Following representations, I want to clarify what we are doing in revising our guidance and the treatment of claims.
SED has never been available for people working on 'offshore installations' rather than ships. Broadly, the legislation provides that there are two tests both of which must be met for a vessel to be an 'offshore installation'. A vessel must be involved in the exploration or exploitation of mineral resources and standing or stationary whilst doing so. Construction, construction support, well service and dive support vessels that do not meet either of these tests will continue to be ships for the purposes of SED.
HMRC's revised guidance will reflect discussion with stakeholders about the interpretation of the Pride South America decision to ensure that it is implement in a clear and practical manner. HMRC will publish revised guidance in February 2008.
HMRC appreciates that some people may wonder whether they must submit their 2007-08 tax returns before we publish our revised guidance. All 2007-08 tax returns must be filed within the relevant deadlines.
Anyone who decides that they want to see HMRC's revised guidance before deciding whether they are entitled to claim SED can submit their return without a claim to SED. They can then amend their 2007-08 tax return in the usual way to include a claim to SED. People have 12 months from 31 January after the end of the tax year to correct their tax return. For the 2007-08 return, people have until 31 January 2010 to make an amendment.
If someone wishes to consider making a claim to SED for 2007-08 before the guidance is revised they can refer to the legislation on which HMRC's guidance for SED is based. It is publicly available as follows:
The legislation for SED is in sections 378 to 385 of the Income Tax (Earnings and Pensions) Act 2003
The definition of 'offshore installation' is in section 1001 of the Income Tax Act 2007
A recent tax case that was heard by the Commissioners earlier this year (known as "Pride of South America") has confirmed that the Inland Revenue are widening the definition of what they will classify as offshore installations for Foreign Earnings Deduction purposes.
Construction, construction support, well service and dive support vessels will now no longer be considered ships for a FED claim.
A Tax Return submitted after 14 January 2008 which includes a claim for FED covering a period serving on these vessels types could be investigated by the Inland Revenue.
We are waiting for further information from the Inland Revenue to allow us to better advise our clients, and an update will appear here as soon as the information is available.
There are special rules for directors National Insurance. In practice this only affects the employee contributions, as there is no upper limit on employer contribution, as the table below demonstrates.
Annual lower threshold
£5,435
Annual upper threshold
£40,040
Employees liability below lower limit
NIL
Employees liability between thresholds
11%
Employees liability above upper threshold
1%
Employers liability above lower threshold
12.8%
Before the rules were changed in the 1990’s, directors and other higher paid employees could declare their annual salary in one month, reaching the upper limit and limiting the amount of National Insurance they had to pay. The rules are clearly stated at paragraph 5 in the Inland Revenue booklet CA44.
Using the tables shown above, declaring a salary of £120,000 in one month, rather than £10,000 per month would result in an employees NI liability of £4,606.15 rather than £6,025.80.
The current rules require directors to work on a cumulative basis for their period of directorship. There are slightly different rules if you start or cease to be a director during the year.
Using the above example for Month 1:
Gross salary
£10,000
Lower threshold
£5,435
NI due on
£4,565
Employees NI due at 11%
£502.15
In Month 2 the calculation is slightly different:
Gross salary to date
£20,000
Lower threshold
£5,435
NI due on
£14,565
Employees NI due at 11%
<£1,602.15
Less: Already suffered
£502.15
Due this month
£1,100.00
Which is 11% of the gross salary for the month.
By Month 6 the upper limit is passed:
Gross salary to date
£60,000
Upper threshold
£40,040
NI due on
£19,960
Employees NI due at 1%*
£199.60
Less: Already suffered*
£99.60
Due this month
£100.0
(* Plus £40,040-£5,435 @ 11% = £3,806.55)
In Month 6 this is equivalent to 1% of the gross salary for the month.
Showing the NI liability graphically demonstrates that employers and directors pay the same employees NI, but that directors pay it earlier.
With effect from 1 April 2008, section 1175 and Part 1 of Schedule 9 of the Companies Act 2006 came into force.
This has the effect of removing the special rules regarding the audit of small charities that existed under the Companies Act 1985. For financial years beginning on or after 1 April 2008, small Scottish charitable companies are subject to the external scrutiny requirements set out in the Charities Accounts (Scotland) Regulations 2006.
In practical terms, small charitable companies will be subject to the independent examination/audit thresholds as set out in the 2006 Account Regulations. Only where a charitable company is a large company and over the audit threshold set out in the Companies Act 2006 would they be required to have an audit under that legislation as wellas the 2006 Accounts Regulations.
This change is effective for accounting periods starting on or after 1 April 2008.
The table below shows the external scrutiny requirements for Scottish charitable companies under both the Companies Act 1985 and the new regime under the Companies Act 2006.
External Scrutiny
Companies Act 1985
Companies Act 2006
Independent examination by a qualified person
Gross income £90,000 or less and gross assets of not more than £2.8m
Gross income less than £500,000 and gross assets not more than £2.8m
Accountant's report in accordance with the Companies Act 1985
Gross income more than £90,000 but not more than £250,000 and gross assets not more than £1.4m
Not applicable
Audit
Gross income £90,000 or less and gross assets over £2.8m
or
Gross income more than £90,000 but not more than £250,000 and gross assets more than £1.4m
The impact of the removal of the 10% tax rate has led the Chancellor of the Exchequer to announce that the Personal Allowance will be increased by £600, but the higher rate threshold has been reduced to compensate for this.
New software updates, tax coding notices and reprinted tax tables will be on the way to employers in time to implement the changes in October.
With effect from 1 April 2008, the VAT Registration limit has increased to £67,000 and the de-Registration limit has increased to £65,000.
The limit for correcting VAT errors has changed from £2,000 in any quarter to the greater of £10,000 or 1% of the turnover (up to a maximum of £50,000).
The Treasury have today announced that the 18% flat-rate of Capital Gains Tax will be reduced to 10% on lifetime gains of up to £1m.
Whilst the loss of taper relief is significant for those selling their business, the lifetime limit of £1m should mean that few people in the Western Isles will reach this threashold, and will be unlikely to face the 18% rate.
At present it is unclear if the limit is lifetime or only from 1 April 2008, and if it is the former then there are opportunities for tax planning before that date.
Taxpayers should remember that all gains from all sources will be affected by this limit, and should take advice accordingly.
The period for opening an investigation into a Corporation Tax return will be changed with effect from 31 March 2008.
Returns filed on time will have an inquiry window that expires 12 months after the date on which the Return is filed, rather than 12 months after the latest date for filing. This is to encourage earlier filing.
The rules for late submissions are unchanged. The inquiry window remains open until the next quarter day (31 March, 30 June, 30 September or 31 December) 12 months after the date of submission of the Return.
With effect from 1 October 2007, invoices to businesses in other EU member states must be annotated to include any reason for any VAT exemption or any reverse charge.
For instance, a supply of goods or services to a company in France should include a statement such as, "This an intra-community supply".
Where the supplies are exempt, it should read something like, "This supply is exempt from VAT."
Similar rules also apply for the second-hand margins scheme, the reverse charge and the Tour Operators Margin Scheme.
We are very pleased to announce that we have gained large clients in both the Middle-East and South-East Asia as a result of a drive into highly specialised areas of business.
Said Sue Nicolson, "We have worked closely with some multi-national companies over the past few years developing niche services. As a result of this, we have gained clients on the back of recommendations and the practice is growing rapidly as a result."
The most recent new clients in this particular area were previously advised by a "Big 4" firm, and Nicolson CA expect to need to recruit a number of additional staff as a result of this win.
Notes to editors: Details of the clients and the nature of the services are not being disclosed due to client confidentiality.
HM Revenue and Customs has issued a statement concerning possible disruptions to VAT payments caused by the postal dispute.
In its statement, HMRC said that businesses “must ensure that all reasonable steps are taken to get their VAT Return and any payment to Revenue and Customs on time”.
It continued: “However, VAT Returns and payments that are delayed by postal disputes will be viewed sympathetically.”
On the issue of surcharges for late payments, HMRC said: “There will be no liability to surcharge where the recent postal dispute has been the cause of the delayed payment and you usually pay by cheque.”
HMRC is reminding businesses that VAT returns can be paid electronically using BACS, Direct Credit, CHAPS and Bank Giro. Any businesses wishing to pay this way should contact their banks.
If a return has already been sent through the post along with any payment, businesses are not expected to take a duplicate to their local VAT office, but should wait for the return and payment to be delivered in the normal manner.
Where there is a localised strike or disruption, HMRC said that:“You may, exceptionally, take your VAT Return and payment to your local office. If you do this please ensure that your return and payment are submitted to the local office in the pre-paid envelope which Revenue and Customs has provided with your return. We do not recommend you do this if you wish to lodge a repayment return.”
In the case of repayments, HMRC said that it “will allow affected businesses to fax their repayment returns to VCU”. The fax number is 01702 366839. This facility will be available only until HMRC considers that the need for it has passed. If a business faxes its return, it should not then send in the original.
Businesses experiencing late payments because cheques from customers are delayed in the post “must account for VAT at the normal time”.
Nicolson Accountancy are sponsoring the entire 2012 Volunteer Awards in the Western Isles, along with two individual categories of award.
Nicolson Accountancy has been nominated for the 2012 Scottish Accountancy Awards as one of the Top Small Firms in Scotland.
Our specialist foreign tax service, Norway-tax.co.uk has been appointed as the sole provider of Norwegian tax advice to all the UK contractors employed by Nova.
You then have a period of three weeks to lodge an appeal against any assessments, although in practice this deadline is often waived for non-Residents.
In the expectation of the change, we have been working hard over the past 18 months to develop alternatives for small and medium-sized business, and this concluded the very expensive process with us becoming a BACS Approved Bureau just recently.
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