April 2010 Newsletter

Just when there is a glimmer of hope that the UK is moving out of the recession, businesses and holidaymakers alike have been sent further into a spin, as a result of the recent chaos caused by the ash cloud that formed following the eruption of the Icelandic volcano, Grímsvötn, under Vatnajökull, Iceland’s biggest glacier.

Without dwelling too much on a gloomy situation, the reality for many small businesses is that they are now facing additional problems, with lower than normal profits and escalating costs through lack of business activity and stranded staff being absent from work. However, where there is a cloud (of ash?) there can also be a silver lining, as some businesses have found additional customers at home that couldn’t get their normal supplies from overseas.

Here at Prime, we are great believers of having systems in place that can be accessed wherever you are, so that in the event that something similar happens again, key personnel are still able to have some involvement, where appropriate in the business via remote access and online accounting solutions.

In addition, and given that costs may have suddenly increased, we’ve included within this e-news some useful information that may help you reduce costs, particularly taxes faced by your business.

As always, if there is anything included that you would like to discuss in more detail please do not hesitate to contact us.

Most businesses are able to claim an Annual Investment Allowance (AIA) on the first £50,000 spent on plant and machinery. This provides immediate 100% tax relief on qualifying expenditure.

The allowance is to increase to £100,000 from 1 April 2010 for a business within the charge to corporation tax and from 6 April 2010 for a business within the charge to income tax.

As the chargeable accounting periods of many businesses will span the operative date of change, a pro rata calculation of their maximum entitlement will be required.

Please do contact us if you would like advice on how this increased allowance will affect your business.

HMRC are advising businesses that from 1 April 2010 all cheque payments by post will be treated as being received by HMRC on the date when cleared funds reach HMRC's bank account. This change does not affect any cheque payments made by Bank Giro.

Affected businesses will need to ensure that they allow enough time for the payment to reach HMRC and clear into HMRC’s bank account. This needs to happen no later than the due date shown on their VAT return.

From 1 April 2010 it will be mandatory for all VAT-registered traders with a turnover of £100,000 or more, plus any newly registered traders (regardless of turnover), to submit their returns online and pay electronically. For guidance about electronic payment methods use the second link below or please do contact either Colette White or Steve Moorcroft on 024 7622 0208.

Internet links: HMRC guidance | HMRC how to pay VAT

An announcement from the European court is good news for businesses hoping to recover VAT overpaid on goods distributed as business gifts and trade samples.

For advice on claiming a VAT refund, please contact Colette White or Steve Moorcroft on 024 7622 0208.

As part of the drive to increase tax revenues HMRC is reducing your personal tax allowance of £6,475 in 2010-11, if your taxable income exceeds £100,000.

They will knock £1 from your allowance for every £2 your income exceeds £100,000. Your personal allowance will be eliminated when your earnings reach £112,950.

The extra tax you will pay on that £12,950 of your earnings is 40% of the £12,950 plus 40% of the lost personal allowance (£6,475 x 40%), a combined 60% tax charge. If you take into account the extra 1% NIC charge, a not inconsiderable 61% marginal rate!

Accordingly anything you can do to reduce your income back below £100,000 will save you up to 61% in reduced tax and NIC.

Careful planning of capital expenditure to make use of the AIA as mentioned elsewhere in this newsletter could be the key; or perhaps a salary sacrifice or increase in pension contributions? You could also consider a gift aid donation.

Planning is obviously critical so please do contact us if you would like us to design a strategy to safeguard your tax allowance, should it be under threat.

The What car website has some very useful information including finding which cars are more efficient as company cars, road tax bands and a host of other facts and figures that are car-related.

HMRC have released new guidance for employers about forthcoming changes to EU rules regarding national insurance for people moving around Europe for work. The rules apply from 1 May 2010. To read the guidance in full, please use the link below. Alternatively contact Monima Simpson-Smith on 024 7622 0208 for assistance.

Internet link: HMRC NIC guidance

HMRC have the necessary power under existing tax law to publish the details of taxpayers where it is established that they have committed ‘deliberate’ tax offences. HMRC have confirmed that they will apply this provision for tax periods starting on or after 1 April 2010 and for offences which are committed on or after this date.

Internet link: HMRC press release

From 6 April 2010 the official rate of interest applying to interest-free or low interest loans made to employees will be 4%. The current rate is 4.75%. Employees are generally liable to tax on a benefit equal to the amount of interest, calculated at the official rate, where the balance of the loan exceeds £5,000 at any point in the tax year.

Internet link: HMRC beneficial loan interest rate

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