April 2007 Newsletter

Top 5 Business issues

The Institute of Quality Assurance (IQA) asked UK business leaders which business issues they felt would be most critical over the next three years. The top five issues that chief executives and business owners across the UK identified as most pressing were: 

• Strategy development and execution
• Competitiveness in local, national, EU or global markets
• Financial stability and profitable growth
• People development and retention
• Innovation in products, services and processes

Prime can have valuable input into the consideration of these key issues and can act as a critical friend or confidential independent sounding board to bounce ideas off. If we can help, contact us in Coventry on 02476 220208 and in Solihull on 0121 711 2468.

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Getting prepared for the new financial year

6 April is the first day of the new tax year, when you'll be sent your self-assessment tax return (SA100) form or notice to complete a return (SA316) (Clients of Prime will also receive our checklist telling them the information we need to prepare their tax return).

It's worth taking the time now to prepare the information you need to complete the returns immediately, rather than waiting till the last minute and risking heavy penalties.

You should also take the opportunity to take stock of your paperwork as the new financial year begins, getting rid of clutter and making sure the records and information you'll need when you come to fill in your tax return are filed logically and securely.

Here's a quick list of where you can find out about the key changes to thresholds and limits announced in last week's Budget that will impact on your tax affairs:

• The Prime website contains a useful summary of the changes to tax and national insurance compared to last year so that you can see what has changed.
  
• HMRC also has a number of Budget 2007 pages, providing links to detailed explanations of what has changed. 
  
• A snapshot summary of the Budget can also be found on our website 
  
• It's also worth visiting HMRC's dedicated web pages on tax self-assessment for guidance through the process of completing your tax return and paying the monies due.

Our specialist tax departments are waiting to help you with your tax return, contact Sarah Nickols in Coventry on 02476 554310 or Jan Hornby in Solihull on 0121 711 2468.

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VAT Cash Accounting – New Limits Bring Cash Flow Advantages

As we mentioned last month, from the 1 April 2007 HMRC have announced significant changes to the cash accounting scheme. As a result many more businesses may be eligible to join the scheme and benefit from cash flow savings.

The changes set up much more generous turnover limits for registration:

• The annual turnover limit below which businesses can start to use the scheme will increase from £660,000 to £1.35 million
• The annual turnover limit above which businesses must leave the scheme will increase from £825,000 to £1.6 million.

Normal VAT liability is calculated as the difference between the VAT added to sales invoices, and the VAT included in purchase invoices. A cash flow problem can arise if sales invoices have not been paid when the due date for payment of the VAT is reached.

An election to adopt cash accounting allows a business to pay over VAT only when it has received payments from its customers - likewise it can only claim back VAT when suppliers are paid.

Businesses that have significantly more money owed to them by customers than they owe to suppliers will see a cash flow advantage by changing to the cash accounting scheme.

The initial calculations can be complicated depending on the sophistication of your accounting system. If you would like us to review your circumstances and set up the revised system for working out VAT due or refundable, please call a Prime partner on 024 7622 0208 or 0121 711 2468.

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Filing deadlines and warning about taxman’s advice

This is the time of year when it is important to note some key deadlines. All employers must lodge their year end return, the P35, by 19th May and P11D forms for all employees receiving benefits or reimbursed expenses must be filed by 6th July. Dispensations can be obtained from the Inland Revenue in connection with the completion of P11Ds, which can cut down on paperwork. If relevant, Form 42 must also be filed by 6th July.

For assistance with P35 filing contact Monima Das on 02476 554321 and for help with P11Ds and Form 42, contact Sarah Nickols in Coventry on 02476 554310 and Jan Hornby in Solihull, on 0121 711 2468.

Not surprisingly, automatic penalties await those who miss these deadlines!

HMRC have issued their usual guidance and a list of things to check for in the year end paperwork. Unfortunately there are some errors in the guidance with regard to the national insurance limits used. Use these links to access the original guidance together with the changes. E10-errors and E10-booklet.

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National Insurance sting next year …

There has been a lot of publicity about the announcement that the government propose to reduce the basic rate of income tax from 22% to 20%. This change is due to take effect from 2008/09 and not from 6 April 2007.

There is, however, a significant sting in the tail for those with earned income.

For 2007/08 the lower and upper earnings limits (UEL) increase by inflation so that employees will pay 11% NI on earnings between £100 and £670 per week. Employees continue to pay contributions of 1% on earnings above the UEL.

For 2008/09 there are significant proposed changes to the limits between which NI contributions are payable when the UEL will be increased by £75 per week above indexation.

The upper profits limit for Class 4 NI for the self-employed will also be increased in 2008/09 by £75 per week above indexation.

In 2009/10 UEL will be aligned with the point at which the higher rate of income tax becomes payable.

The government claims the increases in national insurance are aimed at simplifying the tax system but it comes at quite a cost to employees and the self-employed.

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Sage updates warning

If you use Sage accounts software 2007 (version 13) please make sure that you have downloaded all the updates – the reports update is quite a large one and printed reports may be incorrect if it has not been installed.

To check whether you are on the latest version 13.02 - go to the main tool bar & select ‘Help’ and then ‘About’.

If you need any further help with this, ring Colette White in Coventry on 02476 220208, Clare Howden in Solihull on 0121 711 2468 or Nick Ballard our Group IT Manager on 02476 554312.

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Are you paying unnecessary tax?

Millions of adults are throwing away substantial amounts of cash in unnecessary tax, according to the annual TaxAction report from unbiased.co.uk.

The report states that:

• More than 8 out of ten adults will waste £7.9 billion this year, its highest level for 15 years
  
• The amount lost in inheritance tax (IHT) is set to increase to more than £1.5 billion this year, yet the report says that 43 per cent of this could have stayed in the taxpayer's pocket
  
• Personal tax contributions have soared over the last 20 years to reach £149 billion this year but three quarters of taxpayers admit they do not make the most of tax efficient choices to shield more of their money from the taxman
  
• Overall, the average adult will unnecessarily lose £160 in tax in 2007 but simple steps can help to cut the amount paid out. Non-taxpayers could save by claiming back tax on bank and building society accounts and further could be saved if taxpayers transfer their savings to non-taxpaying spouses
  
• £2 billion is lost each year in unclaimed tax credits with more tax lost by people filling in self-assessment tax forms incorrectly. Almost £400 million could be kept out of the taxman's hands by sheltering savings and investments within the annual ISA allowance while £510 million could potentially be saved by transferring assets between spouses to make the most of Capital Gains Tax allowances

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Contact Prime if you need specific advice on these issues.

Please log onto our website regularly to check for new news items and factsheets.

Disclaimer
This newsletter is published for the information of clients and other recipients of our email newsletters. It provides only an overview of the regulations in force at the date of publication, and no action should be taken without consulting the detailed legislation or seeking professional advice. Therefore no responsibility for loss occasioned by any person acting or refraining from action as a result of the material contained in this newsletter can be accepted by the firm.