January 2009 Newsletter

FOREWORD

WELCOME TO PRIME CHARTERED ACCOUNTANTS JANUARY E-NEWS.

Happy New Year!

I didn’t really want to start the first e-news of 2009 on a negative; however, I think the reality is that this year is going to be tough for many businesses.

The first quarter of each calendar year always sees additional pressures placed on businesses, particularly with the 31 January deadline for filing tax returns and associated tax payments. 31st January is also the deadline for filing limited company accounts with 31 March year ends (see below for the increased late filing penalties coming in) and those companies also had to pay their tax bill on 1 January. All this at a time when cashflow can slow down because your customers’ cash is under pressure.

Don’t despair, however, if your cash flow is tight and you genuinely feel that, with a little extra time, you will be able to make the necessary payments to fulfill your statutory and legal obligations, the tax man is here to help! – see below for the special helpline. We’ve also included another article on a way of possibly releasing cash into your business.

Here at Prime, we’re available to offer the financial advice and support you’re looking for, so please do not hesitate to get in touch.

We are also very pleased to tell you that our team has recently expanded following a merger with a very well established and respected Coventry based accountancy practice, Chaplin Hall. John Barrett has been in practice less than a mile from our Coventry office for the last 35 years and has now moved into our offices with his staff. Both John’s and our clients can now benefit from the combined expertise we have from the total Prime staff of about 65 people specialising in all areas of business support.

Laurence Moore, Chairman, Prime Group

Back To Top

Tax payments on account

With profits reducing for many of our clients, it may be that your tax bill for the current year is likely to be less than it was last year. We are only a couple of weeks away from the tax deadline for individuals and many of you will have payments on account to make for the 2008/09 tax year.

In case you are not aware, the payments on account system effectively assumes that your tax bill will be at least as much as last year. Therefore, the estimated amount you are asked for is half of last year’s bill. But, if your tax bill is down because dividends from your company or self-employed profits are less, paying the amount demanded will represent an overpayment on your behalf.

If this is the case, we can reduce those payments on account in order that you do not pay too much.

For more details contact Jan Hornby, our Coventry office Tax Manager, on 024 7655 4310 or Ian Frost, our Solihull office Tax Manager, on 0121 711 6363. Please remember that, if reduced too much, the Revenue will ask you for interest and, if they think that the reduction has been simply done to avoid payment, they may even hit you for some penalties!

Back To Top

Finding it difficult to find the cash to pay tax or VAT liabilities?

The Business Payment Support Service, announced in the Pre-Budget Report 2008, is designed to meet the needs of businesses affected by the current economic conditions. Any business that is worried about being able to meet tax, National Insurance or other payments owed to HMRC, or anticipates that payments becoming due will cause them problems, can get in touch with HMRC to discuss payment options to help them deal with temporary cash flow difficulties on 0845 302 1435.

The service is designed to help all businesses (large and small) that are struggling to pay their tax. The service is primarily available to self-employed people and companies but can be used by anyone who is having difficulty in meeting their tax liabilities. The service covers most taxes and duties including Income Tax, Corporation Tax, VAT, PAYE and National Insurance.

To qualify, the business/individual must be:

• in genuine difficulty
• unable to pay their tax on time
• likely to be able to pay if HMRC allow them more time.

HMRC have stated that ‘…we will look to be flexible and agree time to pay arrangements on a case-by-case basis to bring the businesses’/client’s tax back up to date on a timescale that is reasonable and appropriate to the situation.’

Please do get in touch with the Director who would normally handle your affairs, if you would like help in this area.

Internet link: HMRC guidance

Back To Top

Releasing cash

In these difficult trading times many businesses are looking for a way to obtain cash to provide liquidity and keep the Bank Manager at bay. We have been able to assist a number of clients by utilizing their pension schemes.

Essentially, you need to both own a property (either personally or within the business) and maintain a pension scheme. The pension scheme is transferred to a self invested option and the funds then used (with borrowing of up to 50% of the assets where appropriate) to purchase all or part of the property. The property becomes an asset of the scheme and rent has to be paid but the sale proceeds arrive into the business either directly or via a personal injection (depending on who owned the property in the first place).

If you would like to discuss this in more detail with a Prime financial adviser, please contact Wendy Tipler on 0845 872 2099.

Back To Top

Changes to the advisory fuel rates from 1 January 2009

To reflect the reduction in fuel prices, HMRC have issued new advisory fuel rates for employees driving employer provided cars. These take effect for all journeys undertaken from 1 January 2009, so employers using the advisory rates should advise affected employees and update any expense forms as soon as possible.

For full details of the advisory fuel rates from 1 January 2009, click here.

Back To Top

Companies House Late Filing penalties

Limited companies are required to file a copy of their accounts each year with Companies House. If you file even one day past the filing deadline you will be penalised. The new late filing penalties which will be levied from 1 February 2009 are increasing dramatically!

The new fines for private companies are:

Not more than 1 month	£150 (presently £100)
More than 1 month but not more than 3 months	£375 (presently £100)
More than 3 months but not more than 6 months	£750 (presently £250)
More than 6 months	£1,500 (presently £500 between 6 to 12 months, £1,000 over one year)

Additionally, if you were late filing in the previous year (and the previous financial year had begun on or after 6 April 2008), the above fines are doubled.

The new fines also apply to flat management and dormant companies.

The message is clear. If you are responsible for the management of a limited company, make sure you give yourself plenty of time to prepare and file your accounts, so as not to be liable for any penalties.

Filing deadlines

Companies with accounting periods beginning on or after the 6 April 2008 should note the following changes to the filing deadlines with Companies House:

• Private companies and LLPs - the delivery deadline has been reduced by one month from 10 to 9 months.
• Public companies - the delivery deadline has been reduced by one month from 7 to 6 months.

Consequential changes include:

• Full calendar months for filing periods have been introduced. Where the accounting period ends on a month end date the accounts filing period will end on a month end date - except for the first accounting period.
• Qualifying companies can still file abbreviated accounts.

Please help us to help you in meeting these deadlines, and avoiding fines, by letting us have your records in good time.

Back To Top

VAT

The voluntary disclosure limits changed to £10,000 on 1 July 2008. However, what people do not appear to have picked up is that the new amount relates to any discoveries found after that date.

A recent European Court decision has changed the position regarding VAT in the provision of meals attended by both staff and business contacts. There is now a good argument that, where the meal is necessary to allow the meeting to run smoothly and without interruption, the VAT should be allowed. Backdated claims can now be sent in claiming interest where appropriate.

If you would like to discuss this further, please contact the Director who normally handles your affairs.

Back To Top

Bad debts

If the recessionary trends continue, we are all likely to face bad debts. It is well worth spending some time to sharpen your credit control procedures and we can certainly help you do this. This article offers a few pointers which will ensure you deal effectively with the VAT and tax consequences.

VAT

Unless you are registered to use a special scheme which protects you from bad debts, particularly Cash Accounting, you may have paid over the VAT on sales invoices issued as part of your VAT return. Subsequently, you may have been unable to recover the VAT from your customer.

If that is the case, you are entitled to reclaim the VAT when the debt is 6 months overdue.

In passing, it is well worth converting to Cash Accounting for VAT, if your business qualifies. Presently, the turnover limitations are £1.35m per annum. If your annual turnover is under this amount, registering would provide a possible positive effect on your cash flow. Again, we can help if you would like to consider this.

Tax

Whether your business is incorporated or not, if a customer does not pay your invoice this needs to be recorded in your accounts. Trade debtors should be reduced and transferred to a bad debts account and adjusted for VAT if you are registered.

When you provide us with your accounts data for the current financial year, make sure you provide a list of all the debts you have identified as possible write off's. As long as any claim for bad debts is based on real, specific transactions they should be accepted by HMRC. What you cannot do is transfer an arbitrary percentage of total debts to a bad debts reserve and claim this as a tax write off.

Back To Top

Tax scam

Fraudsters are targeting people with scam e-mails in the run-up to the self-assessment tax returns deadline. HMRC said the e-mails suggested the recipients were due for a tax refund and went on to ask for bank or credit card details. Victims who provided these details faced the threat of their accounts being emptied of funds. The deadline for filing genuine returns is 31 January. Anyone who files late faces a £100 penalty.

HMRC said it was also aware of a growing number of telephone scams in which fraudsters posed as tax officials arranging rebate payments. But it was particularly concerned about the e-mail scam, which thousands of people had received and many more were set to receive in the coming weeks. "This is the most sophisticated and prolific phishing scam that we have encountered," said Lesley Strathie, HMRC chief executive. "We only ever contact customers who are due a refund in writing by post. We never use e-mails, telephone calls or external companies in these circumstances. I would strongly encourage anyone receiving such an e-mail to send it to us for investigation."

Back To Top

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.